A new chapter is opening for Europe’s high-tech sector. The EIB Group (“EIBG”), composed of both the European Investment Bank (“EIB”) and the European Investment Fund (“EIF”), has expressed its interest in supporting the the pan-European Scale-up Initiative launched today in Paris by EU Member States during a summit organized under the French Presidency of the European Council.
The pan-European Scale-up Initiative aims to provide crucial financing for Europe’s high-tech companies in their late-stage development, when they want to scale up their business from a start-up status to a more developed venture. In such phases, investee companies are seeking to raise amounts of over €100 million on the private markets. A lack of European funds specialising in this segment makes it difficult for companies to pursue their plans or forces them to seek capitals outside Europe.
EU Member States are keen to develop a European ecosystem for late-stage investment rounds and have mandated the EIB Group to manage the European Tech Champions Initiative (ETCI). In concrete terms, the EIB Group will manage a multi-investor fund of fund structure that will help to develop a European ecosystem. The aim is to foster the growth phase of innovative European technology companies by mobilising additional private investors alongside initial public commitments.
The EIB Group will initially commit up to €500 million in aggregate resources for the launch of the ETCI.
The EIB Group’s support to the Initiative could take the following forms:
- as adviser, manager and administrator, under a mandate, of a multi-investor fund of funds (“FoF”) which would invest inter alia in late-stage/growth private equity and venture capital funds managed by asset management companies headquartered and regulated in Europe, and investing mainly in European scale-up technology companies;
- by way of a financial contribution to the ETCI;
- on a case by case basis through additional support for European companies fitting the scheme.
The European Investment Bank Group’s support to the Scale-up Initiative will build on its strong experience in creating financial ecosystems, with a particular focus on venture capital (VC) funds and fund of funds, as well as providing venture debt financing towards individual companies, notably in strategic sectors such as clean technology, biotech and digital innovation.
President Werner Hoyer said:“European tech is booming. In 2021, the European Venture Capital market set a new record, with around EUR 100 billion invested, according to estimates — that is nearly three times the 2020 figure of EUR 35 billion and ten times what was recorded in 2015. The EIB Group has played a role in enabling this growth; the ecosystem for innovative start-ups is there. We must now make the same effort to help innovative ventures to grow beyond the start-up stage. The most promising European innovative companies see their growth held back by the difficulty of raising sufficient capital from funds based in Europe. The EIB Group welcomes EU Member States’ decision to address this specific market gap and is delighted to receive a new mandate to boost investment in Europe’s high-tech sector. We will use our expertise to create an ecosystem where EIB Group financing can crowd in other public and private funds and provide European companies the needed resources to scale up their business”.
Alain Godard, Chief Executive of the EIF, added:“The launch of the scale-up initiative is a key evolution in EU’s efforts to provide the necessary finance to European start-ups and young tech companies. Innovation is the key feature of the green and digital transitions, and new technologies are very much part of this innovation focus. The EIF has been at the forefront of financing Europe’s SMEs and venture capital markets since its foundation in 1994. We are eager to play our role in this fundamental scale-up initiative”.
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. In 2021, The EIB Group, including EIB and EIF, reached a record €94.89 billion of financing, of which a record €20.70 billion wad dedicated to Innovation, digital and human capital.
The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.
During the pandemic, the EIF and the European Commission launched a scale-up initiative, the European Scale-up Action for Risk capital – ESCALAR, which is a EUR 300 pilot programme focusing on providing finance for the scale-up companies. ESCALAR has been using EFSI resources to address the financing gap experienced by high growth European companies (scale-ups).