Five EU member states and the European Investment Bank Group (EIBG) have come together to support a pan-European scale-up initiative, opening a new chapter for Europe’s high-tech sector.
In view of opening access to capital for Europe’s tech start-ups in late-stage development, representatives from Italy, Germany, France, Belgium and Spain joined the EIBG in signing the European Tech Champions Initiative (ETCI) mandate.
The ETCI is a fund of funds that’ll pool public resources from these five countries and the EIBG to make investments into large-scale venture capital (VC) funds.
This injection into VC capital will, in turn, provide the financing needed by European technology companies to grow beyond the borders of the continent.
To this end, Spain, France and Germany each committed €1billion during the initial subscription period, while Italy has committed €150million and Belgium €100million. The EIBG has deployed a further €500million, thus bringing the fund’s total to €3.75billion at this stage.
The mandate for the ETCI, which is to be managed by the EIGB’s European Investment Fund (EIF), was signed in Paris last week during a summit organised under the French Presidency of the European Council.
“Innovative businesses need to be able to find the equity capital they need right here in Europe” Marjut Falkstedt, chief executive of the EIF said. “As manager of the ETCI, we will be using our scale and expertise to nurture a sustainable late-stage growth ecosystem capable of supporting homegrown innovation.”
Capital limitations and the European market
Amid the economic downturn, late-stage companies have never had such an appetite for capital. And the more of it they’re able to receive, the further their ambitions will go.
Europe’s tech start-ups often lack sufficient capital to compete on a global scale, which forces them to relocate overseas. Closing this scale-up gap could create a large number of highly skilled jobs and boost growth.
The ETCI intends to bridge existing gaps in financing availability for late-stage start-ups, particularly for those with their eyes on raising amounts above €50million.
What’s more, the fund of funds will help create an asset class for European institutional investors looking to diversify their portfolios, thus closing the loop and maintaining a continuous flow of funding to European scale-ups.
Further down the line, participants hope that this self-sustained capital will cultivate Europe’s high-tech landscape and promote home-grown innovation and entrepreneurship.
“European tech is booming. In 2021, the European VC market set a new record, with around €100billion invested, according to estimates,” explains Werner Hoyer, president of the EIBG. “That is nearly three times the 2020 figure of €35billion and 10 times what was recorded in 2015.”
“The EIBG has played a role in enabling this growth; the ecosystem for innovative start-ups is there,” Hoyer continues. “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 importance of late-stage development
“The EIBG 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 EIBG financing can crowd in other public and private funds and provide European companies with the needed resources to scale up their business.”
Werner describes supporting Europe’s technology firms in their late-stage development as “essential for safeguarding the EU’s strategic autonomy.”
“Europe has strong innovators, but it needs to improve the environment for companies to transition from start-ups to credible competitors and market leaders. ETCI highlights our commitment to financing innovation and the rollout of technologies that will help secure a sustainable future for Europe,” Werner concludes.