EU to inject €3.75B into venture capital funds to help companies scale up

The EU this week launched a €3.75 billion fund of funds to inject much-needed capital into Europe’s most promising tech companies.

The European Tech Champions Initiative (ETCI) will “support the birth and growth of new European unicorns,” or companies valued at $1 billion or more, said Werner Hoyer, president of the European Investment Bank (EIB), at the launch on Monday night.

The fund will invest public money, provided by the EIB and five EU member states, in venture capital funds that will support late-stage growth phase companies. The hope is that an initial €1 billion of funding will leverage €10 billion of investment in European scale-ups.

On the drawing board for over a year, this is Europe’s latest attempt to help its companies compete on a global scale, building on the Pan-European Scale Up Initiative, which France spearheaded last year when it held the presidency of the EU council.

Today, Europe’s start-ups struggle to find sufficient capital to scale up their operations and compete on the global stage. Many move to the US, where investment is easier to secure. For Europe, this means loss of its industry and talent – and a threat to its technology sovereignty. 

To counter the threat, the European Commission last year set out to mobilise €45 billion from private investors to help deep tech start-ups scale up, in commissioner Mariya Gabriel’s European Innovation Agenda. The new fund will contribute to the effort.

“It’s vital these tech companies stay in the EU,” said French finance minister Bruno Le Maire, one of the leaders of the initiative. “We need to catch up with the US and China. We don’t want our best companies to continue to develop outside Europe.”

He highlighted a competitive tech industry as a key to Europe’s ambition to create a green economy and counter the impact of the US’ $738 billion green tech spending package, the Inflation Reduction Act.

Le Maire believes more money for start-ups is the solution. France, alongside Germany and Spain, has vowed to put €1 billion into the fund of funds. “These start-ups need more funding. Until now, these late-stage funding needs have been poorly addressed by EU-based funds,” he said.

But it’s not just about injecting money, but rather giving industry a strategic boost, according to Germany’s finance minister Christian Lindner. “We will boost Europe’s global competitiveness, boost Europe’s technological sovereignty, and boost our ability to transform our economies. I’m deeply convinced that this and not ever-larger spending packages is the most reasonable way to go,” he said.

The new programme joins the likes of other EIB-supported innovation initiatives aimed at helping EU start-ups scale up. Earlier this year, the EIB took over part of the management of the EU’s own venture capital fund set up under the €10 billion European Innovation Council (EIC).

The EIC Accelerator takes money from the EU’s Horizon Europe and puts it directly in promising high-risk tech start-ups through a combination of grants and equity investments.

The two schemes are complementary, a Commission spokeswoman told Science|Business, with the new initiatives “provid[ing] support to companies at a later stage, with bigger investments.”

But how the two will work hand in hand is yet to be assessed. “ We are looking forward to discussing operational synergies between EU funding instruments for innovation, such as the EIC and [the European Institute of Innovation and Technology], and the European Tech Champions Initiative,” the spokeswoman said.

The European Investment Bank will contribute €500 million of EU money to the new scheme, alongside investments from five member states: Spain (€1 billion), Germany (€1 billion), France (€1 billion), Italy (€150 million) and Belgium (€100 million). But the hope is the fund will grow further as more funds are committed to the scheme.