Frequently Asked Questions

Frequently Asked Questions

  • The Fund Manager looks for companies that have the ability or potential for long-term stable growth. As this is influenced by a number of factors, the Fund Manager will consider different aspects before deciding which company meets the criteria and objectives of any of its capital funds.

    Among other things, it looks at the existence of the legal conditions for investment, the company’s past operating results, its professional and financial background, the long-term viability of the products and services that are the focus of its activities, the qualities and professional-financial preparedness of its management and its willingness to cooperate.

  • The fund manager is a financial investor and does not provide incubation or acceleration services after the investment. It provides capital to help the company achieve its short and medium-term goals, based on a jointly agreed business plan, and provides business and professional support to the company if needed.

  • Depending on the energy invested and the level of documentation, it typically takes 3-6 months to prepare an investment, provided the company has a clear business vision, prepared management, well-developed plans and adequate market knowledge, and a strong and clear commitment to raising capital..

  • A positive investment decision does not necessarily require revolutionary innovation, as the fund manager’s portfolio also includes a number of companies that create opportunities for long-term growth by developing non-innovative products and services. A well thought-out business strategy, implemented by a well-prepared, experienced and competent management team, can deliver stable growth in almost any market.

  • Yes, the capital funds under the Fund Manager’s control, with the exception of Irinyi II Enterprise Development Venture Capital Fund, which invests exclusively into companies in the Central Hungarian regions, are looking for companies with growth potential in all seven Hungarian regions.

  • Any domestic micro, small and medium-sized enterprise may apply to the Fund Manager, provided that the following exclusion criteria are not met: (a) it derives more than 50 percent of its turnover from agricultural activities, (b) it is engaged exclusively in commercial activities without independent production and manufacturing, (c) it is engaged in commercial real estate development.

    In addition, it is important to highlight that the Irinyi II Venture Capital Fund for Enterprise Development aims to finance the growth of enterprises in sectors that are to be prioritised in the Irinyi Plan, and therefore, companies active in the automotive and specialised machinery, health, chemicals, ICT, green economy and energy, wood, food and defence industries are the main beneficiaries of this capital programme.

  • The fund manager looks for companies at slightly different stages of their life cycle through each of its equity funds, but generally those with stable growth potential, whether they are start-ups or have been operating for several years. The fund manager does not invest in ideas and neither does it incubate. It looks primarily for companies whose product or service has already been validated by the market. Consequently, the objective is to provide venture capital to companies primarily in the growth or start-up phase.

  • Capital investments should be primarily for development purposes, to contribute to the growth of the value of the company in a truly value-creating way, and the investments made by the capital funds of the Fund Manager have been and are typically for such purposes.

    The capital invested by the fund manager may not be used for purposes other than those previously agreed, unless the then co-owner investor agrees. In particular, the resources may not be used to finance (a) corporate reorganisations, (b) loan redemptions, the financing of member loans, (c) discharge of obligations towards third parties, (d) activities that are morally or legally incompatible with environmental and social needs.

  • Typically, a return on equity of 10-20% per year is expected, depending on the industry and risk rating. While this is higher than the advertised rates for debt financing schemes, it does not require bank collateral. The expected return (rate of return) is determined by the fund manager for each investment decision on an individual basis, taking into account the risks of the industry and the growth potential of the company.

  • A model investment offer (term sheet) setting out the key points of the cooperation is available on the capital funds’ website, so that the company can read the terms of the investment before it indicates its need for capital.

    As the fund manager’s equity funds are always invested in minority (up to 49%) shareholdings, the acquisition of a stake does not carry any direct management rights. Although it does not intervene in the operational management of the company, it monitors the achievement of the business objectives in the form of monthly and quarterly reports.

    On certain issues, the equity fund has a veto right. Such matters typically involve both the fund manager and the business plan, e.g. change of ownership, change of senior management, significant borrowing, sale of assets above a certain threshold, and require the fund manager’s approval.

  • The operational role of the fund manager is mainly limited to monitoring, focusing on the protection of investment rights, and it is not involved in day-to-day decisions. It takes an active role only in the event of a threat to the capital investment.

  • The fund manager’s exit strategy varies from fund to fund, but typically plans for an investment period of 3-5 years, up to a maximum of 7 years. Exits are made at a pace and in a manner agreed with the founders in advance, with the objective of putting the business on a long-term growth path. After the investment period, the fund manager typically sells its equity stake in the funds to the founders. However, the fund manager does not exclude the possibility of selling to a (strategic) investor, in line with the founders’ intentions, and one of its funds has an explicit objective to increase the number of IPOs.

  • Yes, the founders can make an offer for the investor’s share of the company at any time. Whether the investor is forced to accept the offer depends on the scheme of cooperation.

  • At any given time, it can occur that a company may not be able to meet the targets set in its business plan in the short term for various external or internal reasons. In such cases, the investor and the founders, with the involvement of the management, develop scenarios to ensure the viability of the business and a return for the investor. These scenarios could include the launch of new markets, products, a partial or complete change of management or even the closure of the investment.

    More details are available in the public term sheet.

  • Quarterly monitoring over an average 3-5 year term allows you to anticipate when the expected return on an investment is in doubt. There is still time to act together, to make the business plan and operations more efficient and to help ensure that the returns are finally achievable. If, at the end of the planned life of the investment, the original owner’s (founder’s) offer for the stake is significantly below the minimum expected, the fund manager may consider selling the company to a third party at market price, in agreement with the owners.

  • No, equity investments of capital funds may not be used to buy shares in an existing company, the fund manager acquires a stake only by raising capital. The capital increase may be made by means of a capital increase (where part of the cash contribution made available is in the form of a share capital increase and the rest is invested in capital reserves).

  • In contrast to borrowing, equity does not require classical collateral and thus does not hinder further debt financing, nor does it limit the amount of the tender guarantee that can be provided. An additional advantage is that the repayment of the capital injection does not burden the company’s cash flow during the investment period. If the company has previously used the services of a financing bank, the company will also prefer a capital partner to a new bank financier related to the conpany and will see the strengthening of the company’s capital structure as a positive development.

  • Yes, and presumably on better terms than without a capital partner. Banks will give preference in their loan assessment to companies with a stronger capital structure. Another advantage of capital is that it does not take away collateral and thus improves the prospects of getting a loan. Capital investment also does not prevent access to soft or subsidised loans.

  • Yes, but only taking the limitation purpose of the aid titles into account. For example, the maximum amount of EU funding allocated under the de minimis heading is EUR 200,000 over 3 financial years, and no more than this can be granted to an enterprise through tenders and capital investment from the funds allocated under this heading. It is also important to note that, in principle, capital investment cannot be used to finance own resources, and that the eligibility of funds obtained through tenders should be examined.

  • Yes, there are several examples of cooperation with angel investors or private investors among our portfolio companies. In the case of investors who (also) use EU funds, it is necessary to take into account the accumulation of aid in accordance with the EU legislation in force.

  • If the company is not sure whether it meets the criteria set by one of the fund managers’ capital funds, or even if it meets the criteria of several capital funds at the same time, it is still worth contacting the fund manager’s staff via with questions or to present the company’s growth objectives (download the application form here). Once they have received the key details of your business, they will contact you to discuss the next steps.

  • Many businesses are concerned that they would lose their SME classification under the EU nomenclature in the event of a significant capital injection, and would be deprived of tenders or tax breaks. In line with Annex 1 of Regulation (EU) No 651/2014, the status can be maintained through a capital investment if the investment does not exceed €1.25 million (i.e. approximately HUF 390 million).

  • This is mainly guaranteed by the regulations required and approved by the Supervisory Authority and the rules for the use of the Széchenyi Capital Fund’s domestic and EU-funded resources. The Fund Manager plans to invest in hundreds of companies through its capital funds, each of which operates in a different sector and in different markets. The publicly available term sheet sets out the rights and powers that the fund manager may exercise, none of which imply that the fund manager seeks to take full control with appropriate cooperation.

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In figures

Széchenyi Funds are a leading capital investment partner for domestic enterprises. We aim to improve the competitiveness of the Hungarian economy, to help develop innovative industries, to enable domestic SMEs to go public, and to achieve economic development goals.

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