Innovative start-ups in emerging Europe received a boost on April 10 when the European Commission and the European Investment Fund (EIF) launched a Pan-European Venture Capital Funds-of-Funds programme (VentureEU) to boost investment in innovative start-up and scale-up companies across the continent.
Six participating funds will receive EU support in their mission to invest in the European venture capital market. Backed by EU funding to the tune of 410 million euros, the funds aim to raise up to 2.1 billion euros of public and private investment. In turn this is expected to trigger an estimated 6.5 billion euros of new investment in innovative start-up and scale-up companies across Europe, doubling the amount of venture capital currently available.
Commission Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, said: “In venture capital, size matters! With VentureEU, Europe’s many innovative entrepreneurs will soon get the investment they need to innovate and grow into global success stories. This means more jobs and growth in Europe.”
“VentureEU will increase the amount and average size of venture capital funds. It will help our high-potential start-ups stay and grow in Europe, taking full advantage of the Single Market,” added Elżbieta Bieńkowska, Commissioner for Internal Market, Industry, Entrepreneurship and SMEs.
Pier Luigi Gilibert, Chief Executive of the EIF, said: “VentureEU is an important addition to the European equity scene. Whilst we have supported more than 500 funds to date, this is the first time that the EU has created such a unique programme. EIF is proud to be part of this initiative.”
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 euros in the EU compared to 39.4 billion euros in the US.
Moreover, VC funds in Europe are too small – 56 million euros on average compared to 156 million euros 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 euros – including 67 million euros of EIF own resources: 200 million eruos from the Horizon 2020 InnovFin Equity, 105 million euros from COSME (Europe’s programme for small and medium-sized enterprises), and 105 million euros 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 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 and mid-caps from a range of sectors such as information and communication technologies, 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 European Commission and rolled out via six professional and experienced fund managers ensuring a fully market-driven approach. It is hoped that this will attract more investments and significantly increase the availability of VC funding for start-ups and scale-ups throughout the EU.