SEAF launched our SEAF Macedonia Fund in July 1998, with the United States Agency for International Development (USAID) as our first investor, to provide expansion capital to a vital part of Macedonia’s newly independent economy. Although Macedonia peacefully broke away from the former Yugoslavia, its economy grew slowly in the years following its secession. Equity capital and other risk capital for SMEs was virtually non-existent and even loans from the commercial banks were rare, with generally prohibitively high interest rates and collateral requirements. Yet despite the inhospitable environment for SMEs, small businesses accounted for 34% of Macedonia’s total employment and 37% of the nation’s GDP in 1997. Recognizing the potential for development in Macedonia’s private sector, SEAF launched SEAF Macedonia as the first venture capital vehicle in the country.
The Kosovo War in 1999 and the subsequent Macedonian civil war two years later created a volatile political and economic climate in Macedonia. Despite the severity of the situation, our portfolio companies continued their operations and in some cases even grew. SEAF’s local team also remained in Skopje during the conflicts, consistently supporting its portfolio companies and continuing to pursue sound investments in high-growth potential SMEs throughout the country. In the face of these significant challenges, SEAF Macedonia’s results were outstanding, with SEAF’s portfolio companies at one stage accounting for 3% of Macedonia’s GDP. From 1998 to 2004, SEAF Macedonia invested in 14 companies across 14 unique industries including a leading newspaper, a wireless internet provider, and an HVAC manufacturer.
The gains on USAID’s investment in SEAF Macedonia were redeployed into a small, SEAF-managed investment fund, a local Center for Entrepreneurship and Executive Development (CEED) office, and a contribution to SEAF’s follow-on regional fund, the SEAF South Balkan Fund.