- Upper Silesian Fund SA is a key organization of the business environment in the Silesia Province, which carries out specific tasks under the economic development policy of local government.
- Upper Silesian Fund SA has experience in the field of financial instruments targeted at SMEs, as well as in the organization of consulting and training services for SMEs.
- Upper Silesian Fund SA made a diagnosis of the state of the economy in the Silesia Province, based on which it notices the insignificant activity of high-risk funds in the region focused on financing innovative projects at an early stage of development.
Upper Silesian Fund SA will build new financial instruments in the form of venture capital funds in partnership with other entities in the Silesia Province.
Upper Silesian Fund SA diagnosed the state of the economy in the Silesia Province based on its own observations and information obtained from other entities in the region. As a result of this diagnosis, Upper Silesian Fund SA intends to develop new support models for enterprises in the Silesia Province, among others, as part of projects co-financed from European funds in the years 2019-2023.
Upper Silesian Fund SA recognizes the uneven distribution of capital support instruments, including venture capital, on the territory of the Republic of Poland – there is an excessive concentration of this type of organization in Warsaw, Krakow and Wrocław, and to a negligible extent in the Silesia Province. In this context, Upper Silesian Fund SA is considering options for building new high-risk financial instruments in partnership with other entities in the Silesia Province.
The analysis shows that there is a risk that market conditions will cause VC funds, funded from domestic and EU instruments, to be directed to the same target group, which will negatively affect the availability of this offer on the Silesian market. As a result, the funds will compete for the same investment projects with a high probability of lack of implementation on the Silesian market. Problems with the supply of private capital may also stop the diversity of VC funds in Poland, and thus the continued lack of active and effective VCs in the Silesia Province.
Market imperfections related to the VC market indicate mainly the need for financing young, innovative enterprises and the problem of financing R&D works, at virtually every level of enterprise development and regardless of the amount of capital necessary. At present, due to the relatively large scale of financing enterprises in the seed stage in Poland, the problem of financing has shifted towards enterprises seeking capital for production and development of sales, which are still ahead of the first commercial sales. Due to the technological nature of the enterprises, these enterprises are seeking capital in the amount between PLN 4,000,000 and PLN 10,000,000. The effect of this is the lack of financing alternatives on the Silesian market. Despite the guarantee of significant funds for the development of the VC market, their structure by instrument and the time of their distribution do not support effective allocation, which can be seen in quantitative terms of projects financed in this formula in the Silesia Province. In Silesia there is a gap in both areas, i.e. in the scope of systematic support for the development of Start-up enterprises and development financing of enterprises at the stage of growth.
The use of capital instruments that ensure the development of public-private forms of financing, leading to the commercialization of research and development projects with the participation of capital funds (VC), becomes key. The application of this solution (VC investments) establishes the repayable nature of public support, which is to generate increased private expenditure on financing R&D activities. As a result of the involvement of commercial partners (VC funds), it is expected that greater compatibility of R&D directions with market expectations will be ensured, resulting in better prospects for effective commercialization of R&D results. The diagnosed capital gap applies to enterprises at all levels of development, and this is associated with the risk of implementing R&D works and the lack of capital resources dedicated to such investments.
As part of updating the assumptions regarding the capital gap in high-tech projects with the R&D component, a professional agenda implementing advanced financial engineering solutions dedicated to SMEs from the Silesia Province should be established. Therefore, the activity of Upper Silesian Fund SA in the area of financing enterprises at every stage of development requires a coherent investment policy using repayable instruments and venture capital. This will stimulate the capital and financial market in Silesia, and thus increase the competitiveness of domestic and foreign entities in the region, i.e. at the same time the inflow of investment capital.
In addition, we also note the need to focus support on capital investments in projects within the Smart Specializations catalog or experimental and groundbreaking projects that are used to develop new specializations, and thus – to build a strong technological base in Silesia.
The goals of created products and financial instruments will include increasing the availability of financing for innovative activities, supporting the development of companies in the early and subsequent stages of development and internationalization of their activities. Equity instruments, on the other hand, will be focused on increasing the availability of financing for innovative SMEs, and in addition on increasing investment commitment for innovative companies. These financial instruments will allow for wider intervention leading to the development of the entire ecosystem and investment activation of business and their networks in Silesia, including shaping financing standards; by implementing capital entries in the investment model – public and private sectors. Public capital can play a role here not only as a leverage, but also as an impulse – at the stage of creating the fund – encouraging private investors to participate in capitalization. The involvement of public funds as the first contribution at fund level would play the role of a “magnet” attracting private capital.
The launched program supporting the development of the financial and capital market and limiting the scale of the capital gap is currently the biggest challenge of this type in Silesia. Such a strategy will involve significant public funds and a significant number of stakeholders, posing a serious challenge to the coordination and implementation processes. Without the active participation of the Upper Silesian Fund as the initiator and leader, the processes of implementing individual instruments will be all the more difficult because the benefits (creation of management teams, acquisition of investment experience, construction of project acquisition channels, strengthening of investment readiness, promotion and development of knowledge about the VC market) will be time consuming and thus regional development distant in time.
The new strategy of Upper Silesian Fund SA will bring huge benefits for the region in relation to the modernization needs of the economy and VC markets. Upper Silesian Fund SA, by implementing modern financial engineering instruments covered by facilities and smaller investment restrictions with significantly higher investment limits and very good management teams, has a good chance of building a portfolio very quickly and achieving high returns. Upper Silesian Fund SA is an entity predestined to act as a manager and operator of funds returning from Financial Instruments (available under RPO WSL 2007-2013 and 2014-2020), which is administered by the Silesia Province Board.
In addition, there are opportunities to raise funds from other sources:
- Norwegian funds – a loan program to strengthen value creation and sustainable growth, innovative support for green technologies and “blue” growth. The concept of the entire program is being prepared; the entity responsible for its implementation is the Polish Agency for Enterprise Development. The program amount is EUR 100,000,000.
- The COSME program – in addition to warranty support, offers the Capital Instrument for Growth allowing equity financing for funds implementing venture capital investments in SMEs in the expansion and growth phase. EIF financing at 7.5-25 percent the capital of the financial intermediary is a maximum of EUR 30,000,000.00.
- The InnovFin Equity Program implemented by the European Investment Fund – capital support for VC funds, Business Angels; Fund of funds – “technology transfer vehicles” – enabling up to 25 percent capitalization of such a fund.