The EU Commission and European Investment Fund launched a Venture Capital Funds-of-Funds programme Tuesday to boost investment in innovative start-up and scale-up companies.
The EU executive says Europe can do better at turning that excellence into success stories, despite boasting a ‘wealth of talent, world-class researchers and skilled entrepreneurs’. Access to risk capital for innovation plays a key role.
The Commission and the EIF announced six participating funds to receive EU support in their mission to invest in the European venture capital market.
Backed by EU funding to the tune of €410 million, the funds are aiming to raise up to €2.1 billion of public and private investment. In turn this is expected to trigger an estimated €6.5 billion of new investment in innovative start-up and scale-up companies across Europe, doubling the amount of venture capital currently available in Europe.
“With VentureEU, Europe’s many innovative entrepreneurs will soon get the investment they need to innovate and grow into global success stories,” said EC vice-president Jyrki Katainen: “This means more jobs and growth in Europe.”
Venture capital (VC) is vital to a well-functioning Capital Markets Union, but remains underdeveloped in Europe. In 2016, venture capitalists invested about €6.5 billion in the EU compared to €39.4 billion in the US.
Moreover, VC funds in Europe are too small – €56 million on average compared to €156 million in the US. As a result, these companies move to ecosystems where they have better chances to grow fast. The number of companies reaching the “unicorn” status of more than $1 billion market valuation at the end of 2017 was 26 in the EU compared to 109 in the United States and 59 in China.
VentureEU will provide new sources of financing, giving European innovators the opportunity to grow into world-leading companies. Around 1,500 start-ups and scale-ups are expected to gain access across the whole EU.
The EU will provide cornerstone investments of up to €410 million – including €67 million of EIF own resources: €200 million from the Horizon 2020 InnovFin Equity, €105 million from COSME (Europe’s programme for small and medium-sized enterprises), and €105 million from the European Fund for Strategic Investments (EFSI) – the so-called Juncker Plan. The rest of the financing will be raised by the selected fund managers primarily from independent investors.
The six EU supported funds will take stakes in a number of smaller investee funds and cover projects in at least four European countries each. These investee funds will help finance small and medium-sized enterprises (SMEs) and mid-caps from a range of sectors such as information and communication technologies (ICT), digital, life sciences, medical technologies, and resource and energy efficiency.
The EU investment in VentureEU will be managed by the EIF under the supervision of the Commission and rolled out via six professional and experienced fund managers ensuring a fully market-driven approach. This will attract more investments and significantly increase the availability of VC funding for start-ups and scale-ups in the EU.