Investment Targets. While the Fund is open to investment in all sectors, it is particularly interested in SMEs involved in the largest and fastest growing sectors of the Georgian economy: agribusiness and tourism. The GRDF will judge the attractiveness of proposed investment opportunities based on the quality and experience of the management and/or owners, their competitive advantage and market position, and their prospect for dynamic growth, among other factors that contribute to a strong partnership. Investments will typically range between $500,000 and $3 million and will target businesses that generally have less than 250 employees and less than $5.5 million in revenue. GRDF investment will finance a variety of growth-oriented activities, such as the purchase of new technologies, accessing export markets, and expansion of production. 

Risk Capital and Partnership. The GRDF invests in and partners with companies by providing Risk Capital, a form of financing tailored for small, expansion-stage businesses and up until now not readily available in Georgia. The fundamental characteristic of Risk Capital investments is the sharing of some portion of both the risk and the rewards of the investment between the Fund and the Investee. In other words, in exchange for taking higher risks and acting as a partner to the enterprises in which the GRDF invests, the Fund will also participate in the profits of the Investee.  While Risk Capital investments often consist of the purchase of preferred or ordinary equity shares, they may also include debt instruments coupled with participatory features.  Such debt may have lower collateral requirements and/or longer maturity dates than that required by commercial banks, with repayment largely tied to the projected cash flows of the business. This tailor-made timing with respect to the repayment of the debt can be achieved through the coupling of debt with equity structures, accelerating interest rates, and/or royalties. Because the Fund’s success is tied to that of the Investee, the identification of ambitious and qualified management willing to engage in a close partnership with the Fund is a prerequisite to any investment. An important element of the partnership will be the operational and strategic support provided by the Fund Manager and the selective use of a $2 million MCG technical assistance facility designed to further encourage enterprise growth. 

The Fund Manager. The GRDF is managed by SEAF, a global investment firm focused on providing growth capital and operational support to businesses in emerging markets. Based in Washington D.C. with a European office in Amsterdam, the Netherlands, SEAF’s experience managing 30 similar investment funds in more than 25 emerging market economies has shown that risk capital investment in SMEs is a profitable and commercial market mechanism, but also one that has significant, positive developmental results. Investors include a cross section of public and private institutions, including several of the international finance institutions, local pension funds, insurance companies, banks and family offices.  SEAF will leverage its investment experience, management expertise, and global network to profitably grow businesses, increase profits, and generate returns for the GRDF.

Fund Capitalization. The GRDF was established and capitalized by Millennium Challenge Georgia (MCG) (www.mcg.ge). MCG’s mission in Georgia was developed through an intensive public consultation process, the results of which indicated that Georgia’s key constraints to economic development included lack of physical regional infrastructure and investment opportunities for SMEs.  MCG was established by the Government of Georgia with funding from the Millennium Challenge Account, a new mechanism established by the United States Government for providing aid to countries that that fight corruption, support rule of law, invest in the health and education of their people, and adopt open markets. The MCA is managed by the Millennium Challenge Corporation (www.mcc.gov).