2020 has been the year of remote working, distance learning and telecommunication technology. Advances in the deep tech, life sciences and healthcare sectors have accelerated and lockdowns have driven the expansion of digitalisation.
The EIF’s commitment to championing innovation and backing companies that are inspiring and driving transformational change remains unwavering.
Strong market demand for guarantees for innovative SMEs continued throughout 2020, as our guarantee facilities extended to include digital technologies and support businesses in their digital transformation.
Building on our commitment to support policy sectors of strategic importance, we have made pioneering investments in the artificial intelligence, blockchain technology and space sectors and taken a bold stance in the life sciences sector, aiming to support Europe’s innovative entrepreneurs as we transition to a greener, digital economy, while striving to maintain Europe’s competitive position in the global arena.
Driven by EFSI, KfW and RCR
Since early 2020, the EC and the EIF have made available additional resources through initiatives under the EFSI Equity and InnovFin Equity instruments to further support innovations and novel technologies that aim to sustain the technological sovereignty of the European economy.
KfW, through the new short-term German CMF mandate, as well as the ERP mandate from the German Federal Ministry for Economic Affairs and Energy (BMWi), has been the second largest provider of equity resources in support of innovation during 2020.
And the EIB’s Risk Capital Resources (RCR) mandate, the EIF’s largest long-term equity mandate, has also played a key role in supporting funds active in the fields of ICT, life sciences and agri-tech. (see also Competitiveness & Growth Chapter)
With these initiatives, together with the EC, KfW, and the EIB, we have been stepping up efforts in areas of strategic relevance for the EU and Member States, including artificial intelligence (AI), blockchain (BT), space technologies and life sciences.
Artificial Intelligence & Blockchain Technology
The development of artificial intelligence/blockchain technology (AI/BT) has been one of Europe’s top priorities in the field of innovation in 2020. Europe is already home to a leading AI/BT research community and a hub for exciting start-ups specialised in this industry.
The InnovFin AI/BT pilot, launched in late 2019 has made it possible for the EIF to invest into venture capital funds whose strategies target AI/BT activities, as well as co-invest alongside equity funds into these start-ups.
In the course of 2020, the EIF committed EUR 93m of the pilot programme in more than 10 equity agreements with venture capital funds. These efforts could generate up to EUR 1.3bn in financing for the sector. In particular, it will support early- and growth-stage companies active in the development of products and services including language and machine learning, automation, data/analytics, B2B software, the Internet of Things (IoT), smart cities, Software as a Service (SaaS), cybersecurity, fintech, and BT including Distributed Ledger Technologies (DLT).
In November 2020, the signature of the AI Co-Investment Facility, a EUR 150m joint EIB/EIF equity instrument targeting companies in the field of artificial intelligence, was further evidence of the Group’s commitment to fostering innovation.
With deployment beginning in 2021, the co-investment facility will allow the EIB Group to invest alongside funds backed by the EIF in companies active in the AI sector and in technologies that directly complement AI, such as blockchain, IoT and robotics.
Complementing the AI/BT pilot, this new facility is part of a larger initiative of the EIB Group and the EC to support the development of Europe’s digital future and a leading European tech sector.
Nethone: Honing the net
InnovFin Equity, EFSI
R&D, product development
Number of employees
“Consider how much was spent by banks on physical security over decades: armed guards, vaults, alarms. The same volumes are now online, but how much are we investing in online security? It’s not comparable to physical security!”
Launching into space
The InnovFin Space Equity Pilot is a EUR 100m pilot programme specifically dedicated to support the innovation and growth of European SMEs operating in both upstream and downstream space technologies. Launched in 2019 and backed by EFSI, the pilot programme is expected to be fully deployed by early 2021, investing in four venture capital funds, which support companies commercialising new products and services in the space sector, and in one co-investment.
Primo Space, an Italian early-stage tech investor, was the first fund selected by the EIF. It achieved first closing this year at EUR 58m, including a EUR 36m contribution from the EIF. Primo Space will invest at proof-of-concept, seed and other early-stage projects or companies with particular focus on technology transfer and will foster the commercialisation of breakthrough innovations in the space technologies in Italy and Europe.
This was followed by a second closing at EUR 144m achieved by UnternehmerTUM VC Fonds III, which included EUR 9m from the pilot programme. The fund will focus on companies in the early stages, including pre-seed, seed and series A, active in deep tech sectors encompassing mobility, enterprise software, and industrial technologies.
The third fund was Orbital Ventures (EUR 31m contribution from the EIF), a Luxembourg-based early-stage fund that focuses on both downstream (communications, cryptography, data storage and processing, geolocation, earth observation) and upstream (space hardware, materials, electronics, robotics, rockets, satellites) space technologies.
InnovFin resources also made it possible for us to sign a direct co-investment worth up to EUR 20m in ICEYE, a highly specialised Finnish company that develops its own synthetic-aperture radar (SAR) sensor technologies suitable for small satellites. Its imaging service that covers selected areas every few hours, both day and night, helps solve maritime, disaster management, insurance, finance, security and intelligence challenges.
An additional investment expected to be signed in early 2021 will mark the full deployment of the EUR 100m pilot programme, making a total of more than EUR 300m available for the new space industry.
Focussing on life sciences - SDUF
Access to innovation is increasingly needed to keep pace with new technologies in a broad range of industries and life sciences in particular. At the same time, the successful evolution of innovative businesses is very much dependent on the existence of a solid ecosystem where strategic relationships can be developed and pursued beyond mere investments.
The pandemic has put the spotlight back on the life sciences sector and investors have been looking more closely at it as a worthwhile niche.
In June, the EIF set up the Sustainable Development Umbrella Fund (SDUF), an umbrella structure combining investment themes with a higher strategic and policy orientation, and its first compartment, SDUF-Health.
The aim of SDUF-Health is to crowd-in resources from public and private investors - typically corporate investors - operating in the pharma and med-tech industry, and invest them into European life sciences venture capital funds whilst fostering stronger collaboration between these funds, investors, industry and entrepreneurs.
This is particularly important in Europe, where the fragmented life sciences ecosystem has often impeded collaboration between start-ups and corporates. SDUF-Health aims to contribute towards the development of a more integrated European life sciences ecosystem in the aftermath of COVID-19, creating greater resilience and readiness in the face of similar future health-related challenges.
The EC made an anchor commitment through EFSI to SDUF-Health, which reached first closing at EUR 75m in late December.
This enhanced collaboration and investment capacity is expected to boost Europe’s life sciences ecosystem, support breakthrough technologies, ensure products and services are commercialised and scaled in Europe, and help attract talent and innovation from beyond our borders.
“The story of this year is life sciences. It is the life sciences sector that is going to get the world back on its feet.”
Apateq: Innovative wastewater treatment
InnovFin SMEG, EFSI
development of new installations; working capital
Number of employees
“The point is that we need to get away from the linear economy and target a circular economy. We need to use technology to be able to re- use the same water.”
Uncapped guarantees - InnovFin SMEG
Strong market demand for uncapped guarantees for innovative SMEs and small mid-caps continued throughout 2020, the last year of the InnovFin SME Guarantee Facility (InnovFin SMEG), with a large number of new applications, requesting record-breaking volumes of support, substantially higher than the available budget. The demand above the instrument’s capacity reached more than EUR 4bn.
As at end 2020, 257 guarantee agreements were signed, enabling over EUR 30bn of financing to around 27,800 innovative SMEs and small mid-caps across 42 countries. This included the first SME supported in Switzerland under this programme.
In 2020, InnovFin SMEG extended its focus to digital technologies and the digital transformation of enterprises, and also introduced COVID-19 support features, which have also been massively over-subscribed. In this respect, an amendment offer to all financial intermediaries brought these improved terms quickly into action, facilitating a rapid rollout of much-needed support.
2020 also saw the first transaction with a financial intermediary from the insurance sector under InnovFin SMEG, namely LähiTapiola in Finland. With diversification benefits for the group, its specialised lending entity employs their investment capacity for the benefit and support of innovative companies across Finland. The EIF expects the insurance sector to be of increasing importance in the financing of SMEs in the future.
As the EU transitions towards a digital and greener future, we have teamed up with the EC to offer support to companies that are specifically tackling the challenge of digitalisation. This has been achieved through a pilot initiative financed through the COSME LGF programme, but also by adding inclusion criteria to the InnovFin SMEG programme in order to include support for businesses undertaking digital transformation.
One of the landmark transactions under the COSME LGF Digitalisation Pilot signed in 2020 was with Bpifrance, the French national promotional institution, expected to unlock EUR 715m of affordable financing for French companies, opening new opportunities for them to increase their digital footprint and help with their digital transformation. Bpifrance’s new guarantee product (France Num Loan Guarantee) has a strong focus on very small enterprises (maximum loan amount of EUR 50,000), a guarantee rate of 80% and no obligation on the SME to provide any additional hard collateral.