Guindos Said to Plan Israeli-Style Venture Program for Spain
Spanish Economy Minister Luis de Guindos is setting up a program to back entrepreneurs, drawing on Israel’s strategy of using public money to inject equity into start-ups, a person familiar with the plan said.
The Madrid-based state bank, the Instituto de Credito Oficial, with financing from the European Investment Bank, will match the investments of so-called business angels under the plan set to be announced in the next two weeks, said the person, who asked not to be named because it’s yet to be completed. The program may mobilize as much as 6 billion euros ($7.8 billion) a year by 2017 and will have 20 million euros to invest from the start, he said.
The plan is part of an effort to counter the harshest austerity program on record. By boosting economic output, De Guindos aims to make it easier for Spain to pay down its debts while sustaining social programs and to demonstrate to European leaders a commitment to refitting the economy.
Euro region governments are weighing the conditions they may set for Spain to tap bailout funds and trigger European Central Bank bond buying. Spain has already received a 100 billion-euro rescue for its banking system.
Spanish officials argue that the government is already doing everything it can to boost growth and trim the deficit so there is no point imposing additional measures.
The seed capital mechanism draws on a business angels program run by the European Investment Fund, the EIB’s funding arm for small- and medium-sized businesses, which started operating in Germany in March. Professional investors will be able to draw down funds to match their investments with few additional hurdles once they are accredited by the program.
De Guindos’s advisers also traveled to Israel earlier this month to consult with their counterparts there and were advised to begin the program with a relatively small amount of capital before scaling it up. ICO has 800 million euros available for equity investments in early-stage companies.
A spokeswoman for the Economy Ministry who asked not to be named in line with government policy declined to comment.
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