Innovation & Digitalisation
Getting a good idea out of the lab, off the drawing board and into the markets is one of the greatest challenges in business. Getting it to scale is yet another. With the steadfast support of our partners, we have been making every effort to channel financing in the direction of innovative entrepreneurs and small businesses at the earliest stages of their development, supporting disruptive technologies that will shape the digital world of tomorrow.
From artificial intelligence to space, industrial technologies to cybersecurity, this has been a year in which we have directed financial support towards sectors that will not only define our future, but also play a key role in Europe’s strategic autonomy, supporting jobs, growth and constituting key chapters of tomorrow’s economy.
At the same time, we’ve been reaching out to traditional businesses who are investing in the digitalisation of their business model, driving the digital transformation, and worked closely with several Member States to help build and nurture local risk capital ecosystems.
2022 has also seen the beginning of a renewed effort on scale-up financing, with the Tech Champions initiative being set up and gathering pace with a view to launching early next year, aiming to generate the large funds and ticket sizes that are needed so that bright ideas can not only be born in Europe, but grow, scale and flourish in Europe.
Innovation & disruptive technologies
This year has seen a strong focus not only on innovation in general, but also on a series of so-called enabling sectors. This entails support for specific sectors like life sciences, defence, space, industrial technologies and semiconductor technologies, that are able to contribute to European competitiveness, facilitating access to finance for enterprises, projects, initiatives and innovators operating in these fields.
Drawing from Europe’s powerful academic and research base, innovative businesses have the potential to lead the change that we are seeing across society and the economy. The deep tech sector in particular showed resilience throughout the 2022 turmoil, with strong performance and a very promising outlook. Bridging the gap between ground-breaking research and promising start-ups is one of the EIF’s main aims when investing in funds active in this early stage segment.
One such transaction is our €40m investment into the €165m German seed-stage fund Vsquared Ventures II, that invests in disruptive technology companies throughout Europe.
In the Netherlands, we invested €28m in FORWARD.one Fund II. The Fund will focus on early-stage hardware technology companies based mainly in the Netherlands, looking at industrial technology which is transforming the way that things are done in key industries, like quantum computing, biomanufacturing, and robotics for electric vehicles.
We also invested €45m supported in OTB Fund II, a €150m Polish early growth fund investing in B2B ICT companies with a strong deeptech angle in the CEE region. The fund focusses its investments on tech companies developing innovative scientific breakthroughs across four key sectors: enterprise artificial intelligence automation, space technology, fintech and cybersecurity, and climatech solutions.
In Austria, we invested €55m in Speedinvest IV, a fund focusing on deep tech, fintech, industrial tech, digital health, marketplaces and SaaS. The fund is managed by a team known to be one of the most founder-friendly and operationally-supportive seed stage VCs in Europe, and a reference player in Austria and the wider European early stage market. Our support ensures that SMEs active in sectors vital to the digital future of the European economy and society are given the financial means to fulfil their growth aspirations.
And in Finland, we backed Inventure VC IV with a €30m commitment. The fund focusses on B2B SaaS, fintech, deep tech, marketplaces, and consumer sector start-ups, supporting innovative entrepreneurs through their growth journey and helping them scale to the next level.
In the area of space technologies, we formalised institutional cooperation with France’s Centre National d’Études Spatiales through the signature of a memorandum of understanding, with a view to exploring ways of supporting SMEs, mid-caps and projects with relevance for space activities. The memorandum of understanding, signed at Europe’s Spaceport in French Guiana, follows the launch of the EU’s CASSINI initiative, which aims to mobilise over €1bn and is intended to support the development and growth of start-ups in the fast-growing space sector, encouraging private investment.
The initiative supports the diversification of players in the ecosystem by focusing on the development of disruptive technologies, implementing new partnership models and co-investing with the industry.
In the field of artificial intelligence, the EIB AI Co-Investment Facility, a €150m joint EIB/EIF equity instrument, aims at improving access to finance for AI companies and thus boost the EU’s efforts to remain at the forefront of the technological revolution and to ensure competitiveness. In June, three co-investments were made in Coachhub, an AI-enabled B2B SaaS platform offering personalized coaching services, Everdrop, a consumer goods company focusing on sustainable and plastic free household cleaning products, and Convelio, a digital freight forwarder specialised in goods like art, antiques and luxury furniture.
On the life sciences front, we invested in more than €400m in 13 funds, spread across the EU from Italy to Spain, Germany, Benelux, France and the Nordics. More than half of these funds had gender relevant criteria with representation of female partners, which is an unprecedented achievement in that regard. At the same time, just under half of the funds were first time teams, bringing new strategies and impulses to the still largely underfunded European life sciences market, where we continue to act as a backbone of the ecosystem.
While we maintained our support for the historically stronger represented sectors of biotechnology and medtech, a number of new teams were brought to the market that operate in the digital health industry, including Sofinnova Digital Medicine, YZR Capital Fund I and XGen Venture Life Science Fund amongst others. Taking a differentiated approach to investors investing in the adjacent wellbeing sector, these fund managers typically have a background in life sciences, with highly relevant expertise spanning from the functioning of national healthcare systems, approval paths for reimbursements, and clinical validation of data, with all of these contributing to a specific value added brought to the underlying portfolio companies and eventually to society.
“The deep tech breakthroughs of the next decade will shape our societies well into the next century. It is therefore essential for Europe to lead from the front in shaping these revolutionary technologies and their real-world applications.”
David Dana
EIF
Supporting European Tech Champions
The European Tech Champions Initiative aims to provide financing for Europe’s high-tech companies in their later-stage development, when the time comes to scale up their business from a start-up status to a more developed venture. In such phases, investee companies typically seek to raise amounts of over €100m on the private markets. A lack of European funds specialising in this segment makes it difficult for companies to pursue their plans or forces them to seek capital outside Europe.
The EIB Group has been mandated to manage the ETCI. In concrete terms, the EIF will act as advisor, manager and administrator of a multi-investor fund-of-funds structure which will invest, inter alia, in late-stage/growth private equity and venture capital funds run by asset management companies established and operating in Europe and investing scale-up financing mainly in European technology companies. By mobilising additional private investors alongside initial public commitments, the aim is to foster the growth phase of innovative European technology actors and further develop the European financing ecosystem.
Building on the commitments already secured, the aim is to achieve a total fund size of €3.75bn at this first stage. The size of the fund is expected to grow further with future commitments.
We also intensified our support of the European venture capital (VC) growth segment, highly dominated by non-European firms. This year, we have signed a €150m commitment into the first generation of EQT Growth, a truly pan-European growth-stage VC fund that has reached a final size above €2bn, making it the largest first-time growth VC fund to be raised in Europe.
From research to commercialisation
One of the greatest challenges in the innovation space is getting a great idea out of the lab, off the drawing board, and into the marketplace. This transfer of technology into the business world, adding the commercial dimension to any undertaking, is often costly. This is why the EIF works with partners across Europe to make financing available to target this particular instance in the development of small businesses.
In Spain, a standardised NPI mandate with Institut Català de Finances (ICF) was set up in October for an amount of €45m. This mandate will support Fons d’Inversió en Tecnologia Avançada (FITA), a fund that will target technology transfer investments to support the commercialisation of scientific achievements and research linked to Catalonia. Commitments from private investors will also be sought, with a view to attracting the local investment community to technology transfer as an asset class in the longer term and achieving a target size of €55m.
In Italy, together with CDP Venture Capital we co-invested in Indaco Bio, a new venture capital fund specialising in financing technology transfer processes in the life sciences sector and dedicated to the development of new drugs and therapies. This investment is the first concluded since we signed a partnership with CDP Venture Capital in September 2021, via the Technology Transfer Fund, enabling joint investment of up to €260m to support fund managers focusing on tech start-ups who are bringing to market cutting-edge technologies conceived in universities labs and research centres of excellence.
Supporting the digital transformation
In line with the EU’s Digital Agenda and the drive towards a digital future, the EIF has been using its arsenal of financial instruments to nourish the European digital tech scene on the one hand, and help traditional businesses digitalise their business models on the other. A series of investments were made in this direction in the course of 2022.
In particular, €130m were invested in Kreos VII, a German venture debt fund with a target size of around €1.2bn and exclusive focus on digital tech, and €40m into Verdane Edda III, a fund focusing on private equity growth investments in the ICT sector in the Nordics and Germany. Verdane Edda II has a target fund size of €750m and its focus is on software, digital consumer and sustainable society.
Turning to Italy, this time in the areas of digital and health, the EIF invested €50m into FSI II, which is focusing on growth transactions in the mid-market segment with a target fund size of €1.5bn.
In October 2022, the EIF sealed a €50m guarantee agreement with Erste Croatia that will help Croatian entrepreneurs to implement more sustainable, climate-friendly technologies and operating practices. It will also support innovation and digital transformation by enhancing access to finance for research and technologically driven companies.
Finally, we also completed our first InvestEU-backed transaction in Austria: a €90m guarantee amount signed with UniCredit Bank Austria will improve SME access to finance in two key areas: €50m dedicated to innovation and digitalisation, and €40m to support the green, environmentally-friendly and sustainable transformation of companies. Both will work towards achieving the EU objective of green and digital transitions across the continent.
“We look out for new light bulbs, new cars or a new internet every week. Finding and backing transformative entrepreneurs and technologies is our dedicated mission. Once committed to a partnership, we will do whatever it takes to help accelerate and scale your vision, unlocking all possibilities of the seemingly impossible.”
Vsquared Ventures
Building local risk capital ecosystems
Apart from supporting innovators and businesses looking to digitalise their business models, an important part of the EIF’s role is building up financing ecosystems. In particular, certain local equity financing ecosystems often need support from public resources to get going. Several EU Member States have chosen to dedicate resources, including RRF resources, to set up venture capital funds that will focus their investments on the digital, innovation and life sciences space.
The Cyprus Equity Fund is the first equity mandate signed between the EIF and the Republic of Cyprus. The mandate is structured as a direct award of €30m to the EIF, financed predominantly by the national Recovery and Resilience Plan of Cyprus and reflows from the JEREMIE programme of the 2007-2013 programming period. These resources will be invested into a generalist VC fund targeting innovative enterprises and start-ups in their (pre-)seed and early stages of development. This will be the first VC fund deployed in the country with the support of public resources. The selection of the underlying fund is currently underway, and signature is expected in Q1 2023.
RRF Bulgaria Equity is a €180m mandate financed by the Bulgarian Recovery and Resilience Facility. The Republic of Bulgaria entrusted the EIF with this mandate to provide equity financing for growth, innovation and investments in climate neutrality and digital transformation to the Bulgarian undertakings that have been most affected by the long-lasting negative economic impact of the COVID-19 crisis. The EIF-managed fund of funds will invest in country-focused or regional funds and facilities that will, in turn, support technology transfer projects, SMEs and mid-caps to foster innovation and the transition to the knowledge economy.
Together with the government of Romania, we launched a new fund-of-funds to support local businesses with access to equity finance leveraging EU resources. The Romania Recovery Equity Fund of Funds (REF), with an allocation of €400m, will invest into underlying funds which in turn will make financing available in the form of equity and quasi-equity for SMEs and mid-caps, including start-ups, companies in early, advanced growth and expansion stages, and infrastructure projects focused, among others, on renewable energy and energy efficiency.
Over in Ireland, the Irish Innovation Seed Fund (IISF) is the first joint initiative between the EIF, Enterprise Ireland and National Treasury Management Agency. It is a €60m equity investment programme set up under the NPI standardised programme, targeting funds in pre-seed and seed stages of development across several sectors including ICT, life sciences, social impact and climate. The aim is to sign up to 2-3 VC fund managers including new and emerging teams for the benefit of enhancing and widening the local Irish VC funding landscape.
The collaboration with EIF shareholder SID Banka under the Slovene Equity Growth Investment Programme (SEGIP) was reinforced in March with a €98m top-up. The top-up, which will bring the aggregate size of the mandate to €220m, will address two new investment windows focusing on early-stage venture capital, and private equity for businesses with succession issues. The objective of these two new windows is to continue to develop Slovenia’s equity investment market, which still has a lot of growth potential.
Work under the Asset Management Umbrella Fund (AMUF) and the Sustainable Development Umbrella Fund (SDUF) continued throughout the year, as we strive to crowd in more private capital to further develop the European venture capital and private equity ecosystem. This year we attracted more than €400m from private investors, including the likes of Alphabet International Ireland (Google) and Bristol Myers Squibb, as we move to add more corporate and institutional clients to the family of AMUF/SDUF investors.
In 2021, total funds raised by PE firms located in Europe increased by 7%, compared to the year before, to a new all-time high of €117.7bn – European Small Business Financial Outlook 2022
Qualinx: small size, low cost, low power, always on
Location
Delft, Netherlands
Financial Intermediary
Forward.One
SME
Qualinx
Sector
semi-conductors
Number of employees
12
Financing purpose
product development
EIF financing
InvestEU; DFF
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