Acta Oeconomica 47. (1995)
1995 / 3-4. szám - Karsai Judit: Open and Hidden Channels of Venture Capital Financing in Hungary
10 REVIEWS 371 Magnitude of the Hungarian venture capital industry Taking into account the varied nature of institutions dealing with venture financing, it is no wonder that there are no official statistics concerning the magnitude of the domestic venture capital industry. An estimation of the overall capital strength can only be based on the scarce statements found in domestic publications and analyses published mainly abroad. In 1994 the European Venture Capital Association (EVCA) pioneered the issue of a publication introducing Central and Eastern European venture capital firms. (The survey was financed by the PHARE Program of the European Union.) It discloses that three foreign funds own 80 percent of the ECU 265 million venture capital represented by the Hungarian Venture Capital Association. The publication, however, warns that this amount does not include the banks’ compulsory conversion of debt to shares in the framework of reorganizing their clients (EVCA 1994, p. 14). The most detailed report on the magnitude, participants and investments of the Hungarian venture capital industry was published in the February 1995 issue of Business Central Europe (Meth-Cohn, Simpson and Papp 1995). (The study refers to the Hungarian and the European Venture Capital Associations as sources of data.) According to this article, Hungary’s venture capital industry has funds of around USD 300 million, being the largest among the neighbouring ex-socialist countries. This leading role is not accidental. Nascent private enterprises had already appeared in the 1980s, thus both the state and the banks had time to gather some experience with investments, and the various country funds fared ill in stock-exchange investments more than once. Owing to the relatively longer history of the industry, foreign funds have domestic managers today, which is not typical in the neighbouring countries. In the meantime, the state has also established some venture capital companies as well. According to the article, the First Hungary Fund has the largest fund (USD 120 million), of which it has invested the largest portion by far (USD 100 million). Second is the Hungarian-American Enterprise Fund with a fund of USD 60 million and USD 47 million capital invested. The regional development funds of the Hungarian Investment and Development Bank (MBFB) have the third largest amount (USD 26 million). Although there is no data concerning their investments, they finance smaller start-ups. The next two are foreign-owned private companies: Venture Capital Hungary (USD 20 million) and Euroventures (USD 17 million), with invested capital of USD 6 and USD 8 million, respectively. As far as the number of financed companies is concerned, the leader is the government-backed Covent Ltd., established with USD 6 million to finance innovations. In addition to the above companies, the article mentions the government-backed Multinova Lie. (USD 2.4 Acta Oeconomica 1995