The EIC Fund, which will provide equity from €0.5m to €15m to breakthrough innovation companies selected for EIC Accelerator blended finance support (grant and equity), has become an official entity.
This is the first time the European Commission will make such direct equity investments in companies, with ownership stakes expected to be in general from 10% to 25% in start-up companies.
The European Investment Bank, as advisors of the EIC Fund on behalf of the European Commission, will manage the ownership stakes of the European Commission.
The EIC Fund fills the funding gap at the start-up stage where the EU venture capital market underperforms compared to the global venture capital market.
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth said:
“The EIC Fund – the first of its kind – will help our most innovative start-ups and SMEs rapidly bring their innovative products to European and global markets, while growing their companies and talent within the EU. Currently so much economic growth and jobs potential is lost because with these companies are seen as too high-risk for the private venture capital market.”
Ambroise Fayolle, EIB Vice-President for Innovation said:
“Start-ups drive high skilled job creation and growth. They are key to Europe’s competitiveness, our capacity to innovate and our strategic technological leadership. Unfortunately, there is a substantial market failure in Europe that makes it difficult for them to get funding. The COVID-19 crisis is also taking its toll as many start-ups now face even greater constraints than before. That is why we are glad to support the EIC Fund which comes just as it is most needed and which will help Europe’s start-ups to scale-up and reach the next level.”
Since the start of the EIC Accelerator Pilot in the autumn of 2019, a total of 102 start-ups and SMEs active in all technology intensive sectors (health, digital, energy, etc.) have been pre-selected for equity financing for a total of nearly €400m.
Further companies will be preselected by the EIC Accelerator Pilot in July (in Green Deal areas) and November.
These companies are being subject to due diligence by the European Investment Bank (EIB), which acts as the investment Advisor to the EIC Fund.
From 2021, the EIC Fund will be financed by the EIC to be established under Horizon Europe – the EU Research and Innovation Framework Programme (2021-2027).
Depending on the demand and quality of proposals, it is expected that at least one third of the EIC budget, currently proposed at €10bn, will be in the form of equity managed by the EIC Fund.
Furthermore, the EIC Fund will increase financing for high-impact innovation by crowding-in private investment, co-investing with venture capital funds, national promotional banks, corporate venture funds and other private investors.
In addition to equity funding, EIC Accelerator-supported companies receive grant funding of up to €2.5 million and have access to mentoring, business coaching and matchmaking with investors, corporates and likeminded entrepreneurs.