The European Commission is partnering with the European Investment Fund, to announce the first two investments from the EUR 100 million COVID-19 equity financing RE-FIT facility for tech companies across Europe and Horizon 2020 Participating Countries.
The investment into the MoreVC III RE-FIT Fund will target seed and series A tech companies in the Deeptech/ICT agriculture, renewable energy, shipping, industrial automation, cybersecurity, and AI sectors. EIF’s USD 18m (EUR 15m equivalent) investment via the RE-FIT Facility will allow Israel-based MoreVC III to provide additional liquidity to portfolio companies significantly impacted by COVID-19. EIF is also investing EUR 12m into the Dutch RE-FIT SET Side Fund II, which targets early-stage companies operating in the smart energy space in Europe. The SET Side Fund II is a side fund to the EUR 60m SET Fund II.
RE-FIT was established in 2020 as a response measure to the COVID-19 pandemic. It aims at alleviating the impact of the COVID-19 crisis on the venture capital market and in particular, mitigating the increased cash burn of the portfolio companies while strengthening their capital base in light of potential solvency issues. The EUR 100m equity facility, available for InnovFin Equity beneficiaries, is part of the package of measures announced by the EIB Group’s response on 16 March to further support Europe’s SMEs and mid-caps.
Mariya Gabriel, European Commissioner for Innovation, Research, Culture, Education and Youth, said:“The Venture Capital markets are a key part of Europe’s investment ecosystem, contributing to innovation, jobs, and growth across the EU. For this reason, I am pleased that the EIF is making the first investment under the RE-FIT Facility, which will result in the much-needed supplementary liquidity for innovative SMEs.”
EIF Chief Executive, Alain Godard, said:“Without additional RE-FIT Facility financing, many finance providers would face difficult funding decisions, resulting in some viable portfolio companies being left in the short term without further support. I am pleased that we are beginning to roll out the EUR 100m RE-FIT facility with our investments into MoreVC III and SET Fund II. We expect to sign additional agreements with funds across Europe to support companies impacted by COVID-19.”
Jack Levy, Co-Founder, and Partner at MoreVC IIIsaid:“We are grateful that the EIF and European Commission conceived of the RE-FIT Facility as a means to strengthen funds like ours, and are thrilled to have been the first to partner with them for our third fund. COVID-19 accelerated the success of some of our portfolio companies due to the increased urgency of digital transformation across industries. Nevertheless, other portfolio companies lost precious time to market due to customers retrenching in 2020 as well as the disruption to international travel which continues to this day. This facility will enable us to maintain our fund’s original diversification strategy without giving up on certain companies prematurely and is welcome to our portfolio companies and LPs alike.”
Wouter Jonk, Co-Founder and Managing Partner at SET Ventures said:“RE-FIT is a welcome instrument to further enhance the success of our portfolio companies by helping to ensure funding is available when needed, especially for larger funding rounds. EIF and the European Commission did well to provide this facility to our innovative portfolio companies active in the energy system transition.”
The EIF expects to support additional agreements to be signed with financial intermediaries across the EU and Horizon 2020 Participating Countries concretely in Finland, Germany, Israel, Poland, the Netherlands, and Spain by the end of 2022.
These announcements come at a time when both institutions are exploring future cooperation in the context of the next Multi Financial Framework with a view to continuing meeting financing needs emerging in this nascent VC market.
The RE-FIT Facility aims at providing InnovFin Financial Intermediaries with the additional investment capacity necessary to support portfolio companies negatively impacted by the COVID-19 crisis. Such top-up is necessary to mitigate increased cash burn due to the COVID-19 crisis, which puts pressure on revenues, investment plans, employment preservation, and company liquidity. RE-FIT is an initiative deployed in the context of InnovFin Equity, aimed at alleviating the impact of the COVID-19 crisis on the venture capital market and in particular, the increased cash burn at the level of the portfolio companies.
The EIF is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized businesses by helping them to access finance. EIF designs and develops both venture and growth capital, guarantees, and microfinance instruments that specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research, and development, entrepreneurship, growth, and employment.