Our Executive Directors Victoria Hristova and Pavel Lisev presented the role of the Fund of Funds as the state leading institutional investor in the country in the video podcast of "24 chasa" from the "Europe for Bulgaria" episodes.
"Our main mission is to address market mismatches - to finance viable projects that are difficult to attract market-based funding because of their higher risk profile," said Pavel Lisev in the conversation and listed the advantages of financial instruments as a mechanism to support companies. The instruments allow for a more sustainable management of public resources, with financial discipline and alignment of interests. Other advantages are the possibility of attracting private capital to the public capital (the so-called "leverage effect"), as well as the recycling of the resource.
"We see ourselves as a mediator between public and market approaches. Our team has the detailed and combined expertise to be able to do this successfully," said Victoria Hristova. When asked whether financial instruments discipline businesses as opposed to grant instruments, she emphasised the instruments' strength - to create sustainability in companies. "According to the data we collect, the companies we support are still viable and operating successfully five years later. Certainly, the direction of the European Union is also to direct more and more resources to financial instruments."
Victoria Hristova and Pavel Lisev also talked about the main achievements of FMFIB in the previous programming period. More than 3 200 projects have been supported through our 15 instruments. The resource has been 100% implemented in the Bulgarian economy and the recovered funds will be reinvested in local businesses. "It was important to us that the mandates given for the financial instruments were structured correctly. This made us relevant to the needs of the market and we were able to support companies even when they were in the greatest need during the Pandemic," Hristova said.
In the new multiannual framework, the Fund of Funds will manage double the amount of assets - over €1 billion. Pavel Lisev drew attention to their distribution in different financial instruments. The largest resources will be concentrated in the Competitiveness and Innovation in Enterprises Programme. Resources will also be substantial under the Regional Development Programme, so that infrastructure projects can be implemented through our urban development funds. "For the first time in the new period, an instrument is set under the Education line, as well as under the Research, Innovation and Digitalisation for Smart Transformation programme - the Technology Transfer Fund, which aims at smart transformation activities and will actually be the link between science and business," explained Pavel Lisev. Funds will be available for business digitalization, in-house innovation and development, projects on Industry 4.0 stages, for transition to circular models in the economy - energy and resource efficiency, etc.
The portfolio will again be diversified and will focus on a variety of sectors, including public-private partnerships in urban development.
The first funds that will be available on the market are those under the "Entrepreneurship Fund", for which a competition for financial intermediaries has already been held "320 companies were supported in the previous period and it is important for us to create sustainability by again quickly providing available funds for additional support to companies already growing with our resources, as well as for many new ones", explained Victoria Hristova.
For the instruments targeting municipalities, the priorities are in integrated urban development and integrated territorial strategies. Municipalities will be the main applicants for the funds, but funds are also available for private projects and public-private partnerships. Pavel Lisev commented that the resources of these funds will be directed where people feel the real impact of this programme. More than 125 urban projects have been supported so far and among them there is an EU awarded project.
The conversation also touched on the role of the Fund of Funds in the transition to a circular economy and the means for implementing energy and resource efficiency systems. Combinations between financial instruments and grant funds will be possible here, Lisev recalled. The Education Programme is expected to support more than 220 start-ups - both with debt instruments - loans and equity financing. "The funds are for startup projects of students and PhD students and aim to secure the link between academia and knowledge, as well as the entry of new young entrepreneurs into the labour market," Victoria Hristova explained and recalled that the Fund of Funds has supported youth entrepreneurship over the years, giving as an example our annual competition - "Best Student Startup of Bulgaria", in which this year there was a record number of applications - nearly 160. The Education Facility is still being structured and we expect to sign this mandate soon.
The funding will again cover the lifecycle of companies from idea to actual mature businesses. The amount of funding will range from €25,000 to €1 million for developments at the conceptual level, and up to €3 million for companies at an advanced stage.
For more on what opportunities will be available to companies in the next multiannual framework - watch the video podcast here.
