Slovenia’s economy has demonstrated resilience and adaptability, with a projected GDP growth rate of 2.3% in 2024, up from 1.6% the previous year. Inflation has stabilized at around 2.8%, and unemployment is at a historically low rate of 3.7%.
These indicators reflect a robust and investment-friendly economic environment, supported by the country’s strategic location, skilled workforce, and well-developed infrastructure. However, despite these positive economic indicators, Slovenia has long lagged behind the European average in terms of venture capital (VC) and private equity (PE) investment. Recognizing this gap, the Slovenian government has embarked on a mission to increase equity financing through strategic initiatives. A key player in this effort has been the Slovenian Export and Development Bank (SID Bank) in cooperation with the European Investment Fund (EIF).
In 2017, SID Bank and the EIF launched the Slovenian Equity Growth Investment Programme (SEGIP), with each partner investing EUR 50 million. This initiative aimed to provide equity and quasi-equity financing to growth-stage Slovenian SMEs and mid-caps, addressing a critical market gap in equity financing. Initially, two local alternative investment fund managers (AIFMs) were selected to manage the funds, one of which acquired the other at the end of last year. The objectives of the SEGIP were not only to fill the equity financing gap but also to develop the overall equity financing environment and attract private investors to Slovenian scale-ups. The success of the SEGIP is reflected in its ability to raise further funds. The AIFMs have secured an additional EUR 85 million from private investors. Building on this success, SID Bank and the EIF extended the program by a further EUR 120 million through the SEGIP Top-Up Programme. This extension enabled the creation of four new funds, including a technology transfer VC fund, a VC fund for start-ups, and a PE fund focused on family business succession. To support these new funds, the SEGIP partners raised a further EUR 220 million, with each partner contributing half. The final size of these funds will depend on the ability of the AIFMs to attract private investors.
The SEGIP and its Top-Up Programme represent a significant step forward in strengthening the Slovenian VC and PE sector. These efforts will not only support SMEs and mid-caps in their growth phase but will also help to attract private investors and thus stimulate further economic development. With Limited Partnership Agreements in the final stages, new investments will start soon, signaling a promising future for equity financing in Slovenia.
Slovenia’s growing attractiveness has been recognized not only by SID Bank and the EIF but also by foreign PE investors. This is evidenced by notable transactions in the last couple of years.
The relationship between Slovenia’s economic status and PE investment is symbiotic. Economic stability and growth prospects have attracted increased inbound investment, with foreign PE firms eyeing Slovenian assets due to the country’s strategic location and competitive advantages. At the same time, Slovenian PE firms are becoming more active in outbound investments, seeking opportunities in neighboring countries and beyond, driven by a desire to diversify portfolios and tap larger markets.
Current trends in the Slovenian PE market are influenced by economic factors and investor sentiment, with a notable shift toward the technology, renewable energy, and healthcare sectors. This focus on sustainable investment is in line with global environmental, social, and governance (ESG) criteria. However, challenges such as the relatively small size of the market and occasional delays in regulatory implementation pose potential hurdles.
Slovenia is at a critical juncture in its economic development, with significant potential for PE investment. The stable economic environment, favorable regulatory environment, and strategic location make Slovenia an attractive destination for investors. However, addressing the challenges of a small market and ensuring effective implementation of reforms will be crucial to sustaining growth. As Slovenia continues to integrate into the wider European and global economy, the interplay between economic conditions and PE investment will evolve, presenting both opportunities and challenges. For legal professionals and investors, keeping on top of these developments is essential if they are to realize the full potential of this dynamic market.
By Sasa Sodja, Partner, and Gasper Hajdu, Attorney at Law, CMS Slovenia
This article was originally published in Issue 11.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
