SIF EQUITY co-investment operation is when an investment is made by the Fund, alongside a private co-investor, in a deal by deal approach. This operation is carried out at the same time and under the same terms and conditions by both parties, and entails the Final Recipient, Co-investor and the SIF entering into and signing a shareholders/investment agreement, which establishes the relationship between the parties involved.
Companies in commercial form that are classified as SMEs implementing SISEI (i.e., already accredited by the EMPIS). They should be in the seed, growth or expansion stage. They should also have significant growth potential and a clear revenue generation model linked to social impact.
Applications to SIF EQUITY must be submitted by the co-investors, who must correspond to:
- Institutional venture capital firms, namely those provided for under article 1 of the Legal Framework for Venture Capital, Social Entrepreneurship and Specialised Investment, appended to Law No. 18/2015, of 4 March;
- Other natural persons or organizations that, whether operating permanently in Portugal or not, are legally accepted to invest in companies in Portugal.
The co-investor who is the preferred contact will be the main interlocutor with the SIF’s Managing Entity.
So, in addition to indicating his personal details as co-investor, all information related to the Beneficiary Entity must also be submitted. The preferred co-investor will also represent the SIF in the day-to-day management of the Beneficiary Entity and will be responsible for reporting (financial statements, quarterly reports, attending meetings, etc.) to the SIF’s Managing Entity, as well as other issues that may arise in the future.
To co-invest with the SIF, the co-investor may not apply to other public instruments or have received financing from European Structural and Investment Funds (ESFI) to co-invest with the Fund.
Up to 10 years. However, the SIF grants a call option to co-investors, who may exercise it in the first 6 years from the date of the investment (see FAQ “Which are the exit strategies and how does a call option work?”).
To apply to the SIF EQUITY, co-investors must fill in and submit the online application form. The application form may only be submitted if all mandatory fields have been filled in and the respective documents uploaded.
Applications may be submitted continuously and will be assessed in the order they are received.
The co-Investors must have already taken an investment intention decision regarding the investment operation. They shall in accordance with their usual methodologies, assess the Business Plan/Projects submitted by SME’s or entrepreneurs. It shall be incumbent upon SIF to assess the eligibility of investment operations pursuant to European standards and the regulatory standards of the SIF.
All terms and conditions must be met, and documentary evidence provided if requested during assessment of an application or monitoring of the investment. Read the terms and conditions here.
Applications shall be assessed based on the following criteira:
- Co-Investors’ experience and track record in investments and social impact projects that contribute to the Sustainable Development Goals;
- Alignment of the project with the UN 2030 Agenda for Sustainable Development Goals;
- Weight of private investment in the project, regarding to the total amount of the proposed operation;
- Number of jobs created by the project;
- Number of local or regional partners involved in the investment operation, i.e., social sector organisations, companies, incubators, accelerators, other investors (such as social impact investors, venture capital and private equity investors, social investment funds).
Follow this link for more information about Eligibility and Selection Criteria.
The SIF’s Investment Committee will assess the Co-Investors and Beneficiary Entity/Investment operations. All of the selection criteria will be assessed, including their overall merit, whether positive or negative, taking into account the initial analysis made by the Managing Entity.
Only applications that the Investment Committee considers to have positive merit regarding both Co-Investors and Beneficiary Entity/Investment operations (cumulatively) will be approved for co-investment by the SIF.
SIF grants a call option to co-investors that can be exercised during the first six years from the date of the investment, under the following terms:
* If the call option is exercised by the end of the 4th year, an Internal Rate of Return (IRR) of 3% must be ensured for the investment made by the SIF;
* If the call option is exercised during the 5th and 6th year, an IRR of 5% must be ensured for the investment made by the SIF;
IRR should be determined using the following formula (calculated on a daily basis):
CF is Cash Flow (investment channelled to an SME and reimbursement of investment)
t is IRR
The co-investor who is the preferred contact will be notified and will be informed of the reasons why the application was not approved, and the application process will be concluded.
The application may be submitted again, provided the issues indicated in the notice have been resolved. In this case, the application process will start again and a new submission number assigned.
After an application is approved and the co-investor indicated as preferred contact is notified, the Investment and Shareholders Agreements will be signed.
If the Beneficiary Entity has not been incorporated yet, the SIF’s Managing Entity will notify the Co-Investor of the need to incorporate a company and to submit the following documentation:
- Declaration of the commencement of activity;
- Tax and Social Security clearance certificates;
- SME certification.
The SIF’s Managing Entity must receive an evidence of the Co-Investor transfer (bank statement in the final Recipient’s name) in order to transfer the financing amounts to the Beneficiary Entity.
In the modern day world, financial entities are called upon to ensure that proceeds arising from or in connection with or destined to criminal or suspicious activities are not placed, circulated in or integrated into the financial system, for the purpose of avoiding that the executors of such criminal activities from benefiting of or continuing their unlawful operations.
For this reason and even though neither co-investors nor the Beneficiary Entity are clients of PME Investimentos (the Managing Entity of the SIF), it has been established that failure to comply with the market and legal standards applicable in this respect shall entail the immediate rejection of the respective application.
Therefore, it is imperative that the Know Your Customer (KYC) forms provided with the application form are properly filled in, signed and uploaded on the application platform together with the requested documentation.
If you have any additional questions regarding this issue, please do not hesitate to contact us at PME Investimentos.
The KYC forms that need to be completed in full to be able to submit your application are available below.