1. At the time of applying for the Serbia Ventures AI program (hereinafter: program), does the Applicant need to be registered in the SEC and SBRA as an alternative investment fund management company?
This is not necessary at the time of applying. In order to apply, the Applicant needs to be registered at the SBRA in the legal form of a limited liability company, without any specific requirements regarding the company’s industry code. In order for the Applicant to ultimately receive the funds from IF under this program, the Applicant must be fully registered and licensed by the Securities and Exchange Commission and SBRA as an alternative investment fund managing company and then incorporate and license their venture capital fund.
2. What is the minimum and what is the maximum amount of funds that the Innovation Fund (hereinafter: IF) can give per each winner?
There isn’t a formally set minimum amount, while the maximum amount the IF can award per each winner is 5M EUR. This amount is based both on the figure which the Applicant requests from the IF and which the IF finally approves following the evaluation phase for each Application.
3. What is the minimum and what is the maximum amount of funds that the Innovation Fund (hereinafter: IF) can give per each winner?
The program doesn’t stipulate a minimum amount of funds needed to set up a VC fund. The Applicant needs to demonstrate that their proposed fund size, whatever that may be, can operate in an efficient and sustainable manner which can provide a good return on investment for all partners in the VC fund.
4. Can the Applicant be a company registered in the SBRA as a subsidiary / branch of another company or fund located abroad?
No. According to Serbian Company Law regulations, a subsidiary or a branch does not have the status of a legal entity and thus doesn’t meet the corresponding eligibility criterion relating to this aspect of the program.
5. What does the Applicant need to do to satisfy the requirement of investing at least 150% of funds it receives from the IF into Serbian companies? Which models are acceptable?
At least 150% of the amount which the IF invests into the Awardee’s VC fund must be allocated for initial and follow-on investments in seed and series A startups in Serbia that operate in the field of biotechnology. This includes investing into entities which the recipient of the investment (the Serbian startup) has incorporated in other geographies for practical fundraising reasons (e.g., a company founded in Delaware, USA, whose ultimate owners are the same owners as those of the Serbian startup entity whose value proposition the venture fund plans to invest in). The rationale is that the funds may be deployed by the VC fund to the startup’s US entity to stimulate further fundraising, while the US entity will transfer the funds to Serbia to fuel the startup’s operations.
6. Who evaluates the applications for this program?
The IF will hire an independent three-member investment commission in the form of professionals with international knowledge and rich practical experience in the venture capital industry.
7. How does the IF define the key LP or anchor investor?
The program doesn’t have a formal definition of the key LP or anchor investor.
8. Does the Applicant have to be 100% owner of the alternative investment fund managing company, bearing in mind that this managing company could manage several AIFs?
The company which applies for this program, and whose application is approved for funding, must become the alternative investment fund managing company licensed in Serbia and then it must incorporate and license a venture capital fund in Serbia in order to ultimately receive the funds from the IF. The Applicant could theoretically take on additional co-owners in its structure and can manage several AIFs in line with the appropriate legal frameworks and requirements.
9. Can we apply with one company and then start another company to implement this program if we are approved for funding?
No. A company applying for the program must become an alternative investment fund management company. It is not possible to establish another company to implement the program.
10. Does the Applicant need to be registered in the list of registered bidders in the SBRA before submitting the application or before signing the financing agreement?
No. This registration is done before the signing of the financing agreement, after the IF notifies the Applicant that their application has been approved for funding.
11. How and in what dynamic does the IF distribute funds within this program?
The IF distributes the funds based on capital calls made by the alternative investment fund managing company, in line with the dynamics and conditions set out in the LPA.
12. Can we set up a type of venture capital fund which is not incorporated as a legal entity?
No. The program requires that the Awardee sets up a venture capital fund as a legal entity.
13. Is there a predefined form in which commitments by LPs need to be provided?
No. Commitments from LPs will be ultimately defined through the limited partnership agreement between the respective managers and financiers of the fund. The IF doesn’t insist on a specific type of commitment and allows for different types of commitments to be secured in the application phase (letters of intent, correspondence, etc.).
14. Is there a defined amount of money which the Applicant needs to contribute to the VC fund?
The alternative investment fund managing company’s contribution must represent at least 1% of total capital raised.
15. Regarding the expected hurdle rate, is there any indicative number predefined by the IF?
The IF doesn’t have a predefined hurdle rate within the structure of the program. The Applicant needs to propose a hurdle rate for their fund and justify this rationale. The hurdle rate differs based on the industry which the VC fund plans to compete in and its associated risks, especially since there are various strategic industries and fields of interest.
16. Will the final income distribution be solved by pari-passu or in a different way?
This will be ultimately decided among all the partners through the corresponding partnership agreements, but the general attitude of the IF is to use the pari-passu approach.
17. Can we set up a fund which will operate in a master-feeder fund relationship model?
The Law on Alternative Investment Funds does not define the master-feeder relationship. If the structure proposed in the Application includes decision-making and resource-sharing with an outside venture capital fund or alternative investment fund managing company in a way that can be perceived as a master-feeder relationship, the Applicant needs to demonstrate the ability of the alternative investment fund managing company and the venture capital fund which are to be founded in Serbia to operate in an independent and sustainable fashion.
18. At the time of submission, is there a minimum paid-in capital that the Applicant needs to have?
The program doesn’t have any specific requirements in this regard. However, minimum capital requirement is prescribed by the Serbian Securities Commission and these are mandatory conditions, which the Fund manager must fulfill, but only once it applies for the license.
19. In case the managing company will have other founders in its structure (in addition to the VC fund management team) who will manage another type of fund (e.g., real estate), can the mandatory 1% of the total VC fund's capital which needs to come from the managing company actually come only from the founders who are directly managing that specific fund, and not the managing company itself?
Yes, this is possible. Minimal contribution must come from general partners (as named in the Application), who are at the same time founders of the alternative investment fund managing company.