Parliament to investigate issues plaguing European Innovation Council

The European Parliament is looking into the governance issues plaguing the European Innovation Council (EIC), Horizon Europe’s new fund for start-ups and innovators, which it believes could be undermining the objectives of the fund.

“The idea behind the report is to get the debate about the future of the EIC out in the open and provide the Parliament's perspective on it,” said Christian Ehler MEP, Horizon Europe rapporteur, who is leading the charge.

Ehler was instrumental in shaping the EU research programme and its newest addition, the EIC, but is now worried the policymakers’ vision for the start-up fund is not translating to reality. “As co-legislator we have a duty to ensure the Commission implements the legislation we approved,” he said.

The EIC is the EU’s first fund to put money directly into risky deep tech companies as part of its EIC Accelerator. It is the policymakers answer to the EU’s failure create an environment in which start-ups can grow and scale-up. The direct equity investments were held to be a great success when they were introduced during the programme’s pilot phase in 2019, but ran into problems at the start of Horizon Europe.

The key problem is that the Commission decided it had neither the time or expertise to manage the fund and delegated it to the European Investment Bank (EIB). That decision was met with a backlash from member states which had negotiated different rules for the EIC,  but in February they caved in and allowed the Commission to proceed with transferring management to EIB.

Despite the agreement, things have not run smoothly since, reportedly, due to internal fights within the Commission over how to proceed, and the time required to complete negotiations with EIB. That will take until 30 June, according to the EIC’s latest statement.

All this has held up funds promised to companies selected for EIC backing last year. Those who were to receive ‘blended finance’ – a mix of grant and equity funding – following the June 2021 cut-off date were particularly hard hit, receiving no money, grant or equity, almost a year after applying for funding.

Despite the delays, the Commission keeps putting out calls, adding more companies to the funding backlog. Today, the Commission announced 61 companies out of 71 in the latest €382 million funding round are set to receive equity funding, promising the money will come some time in autumn.

In mid-May, following months of delays, Ehler threatened to push for the EIC Accelerator to lose its funding if the Commission did not tackle the problems.

All this will feed into the report, as well as feedback from stakeholders, which Ehler wants to be submitted by 14 June.

“What topics we will cover will partly depend on the input we receive from stakeholders,” said Ehler. “However, we will certainly look at the internal struggles of the Commission which cause the current delays in implementation of the EIC Accelerator, the management structure of the EIC fund in relation to the mission of the EIC, as well as the functioning of the programme managers.”

Parliament’s industry, research and energy committee ITRE will contribute to the report, to be drafted by Ehler over the summer. The committee will then vote on the report before it up for a vote in a plenary meeting in Parliament.

The aim of the initiative is to ensure the Commission is clear about how the Parliament expects the legislation to be implemented. MEPs expect EU bureaucrats to pay full attention. “That should help the Commission to stay within the bounds of the legislation. That is why the Commission will have to take this seriously,” said Ehler.

The Commission declined to comment directly on Ehler’s initiative, but reiterated a number of points it has made previously, noting blended risk finance is new to the Commission and the EIC, and promising once teething troubles are over things will go much quicker in subsequent rounds.

At present the Commission is finalising decisions on the award of grants and equity to companies selected during the 2021 cut offs. “Significant progress,” is expected during June, a Commission spokesman told Science|Business.

Handing over management of the fund to EIB will “not impact the risk-taking approach of the EIC,” the spokesman said. “The outcome will remain support for high-risk projects that are not yet sufficiently attractive for private investors.”