European Funding Financial institution develops new financing plan to maintain startups within the EU

The European Investment Bank (EIB) is considering new measures to close the funding gap for European startups and prevent their migration across the Atlantic.

At a meeting with EU finance ministers in Luxembourg yesterday, the EIB presented its “action plan” aimed at strengthening Europe's capital markets, investment and competitiveness.

A key pillar of the plan is to increase support for the EU's venture capital and private equity markets to enable the expansion of innovative start-ups and unicorns.

This includes three different measures, starting with the expansion of the European Tech Champions Initiative (ETCI). Launched in 2023, ETCI is a fund of funds that provides late-stage capital to European companies. Investments amounting to 1 billion euros have been completed by February 2024.

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The EIB also plans to support equity and venture capital investments for scale-ups and will work towards creating a new exit platform to facilitate acquisitions and IPOs for technology startups.

“The action plan discussed with ministers will help European innovators grow their businesses and help turn savings into productive investments,” EIB Group President Nadia Calviño said in a statement.

Calviño added that the measures will promote innovation and job creation and ultimately “ensure that European companies born in Europe stay in Europe.”

Europe's innovation gap

The EIB's proposed plan comes a month after Mario Draghi sounded the alarm about the EU's inability to commercialize innovation.

In a report commissioned by EU chief Ursula von der Leyen, Draghi warned that the bloc was falling well behind competitors such as the United States.

“The problem is not that Europe lacks ideas or ambitions,” said the former Italian prime minister.

“But innovation is blocked at the next level: we fail to convert innovation into commercialization.”

According to the report, only four European companies are among the world's 50 largest tech giants. Furthermore, no EU-based technology company has achieved a market capitalization of more than 100 billion euros in the last half century. This is in stark contrast to the US, where there are six such companies valued at over €1 trillion.

To further illustrate the EU's challenges, the report also showed that between 2008 and 2021, almost a third of European unicorns relocated abroad, with the majority moving to the US.