The EU is launching a EUR 3.75 billion fund of funds to assist expertise start-ups increase

Five EU member states and the European Investment Bank (EIB) group have launched a new fund to support the growth of promising European late-stage tech startups and boost the continent’s innovation competitiveness.

The so-called European Tech Champions Initiative (ETCI) aims to tackle the problem of insufficient late-stage financing, especially for companies seeking more than 50 million euros in capital.

Boosting European investment

“Europe’s tech startups often don’t have enough capital to compete globally and are forced to relocate abroad. Closing this growth gap could create a large number of high-skilled jobs and boost growth,” ECTI’s founders said in a statement.

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“The European Investment Bank estimates that around 75% of European high-tech companies are acquired by non-European investors – mostly Americans and Chinese – at late stages of development,” Nick Swan, serial entrepreneur and founder of SEOTesting, told TNW. “For the fund to be successful over the long term, it needs to stem the trend of EU tech startups pushing to relocate abroad. It will also be instructive to see if UK companies start considering relocating to the EU to access this large pool of funding.”

The ETCI has so far secured a total budget of 3.75 billion euros. Spain, Germany and France have each pledged €1 billion, Italy €150 million and Belgium €100 million. The EIB Group has provided a further EUR 500 million. The financing capacity is set to increase further in the future.

“This initiative is a powerful example of what we can achieve together to strengthen the EU’s economic and industrial sovereignty,” noted Bruno Le Maire, French Minister of Economy, Finance and Industrial and Digital Sovereignty.

The ETCI will not subsidize startups directly, but will act as a fund of funds. In other words, it will deepen Europe’s scale-up venture capital (VC) funds “by bridging gaps in funding availability”. In doing so, it will help European institutional investors to diversify their portfolio while ensuring a steady flow of capital to the continent-based scale-ups.

“Much of this has to do with European strategic autonomy, which the continent’s leaders need to think about. By strengthening the financial capacity of existing venture capital funds (and thereby indirectly funding scale-ups), they can ensure that European companies are not taken over by non-European investors, generally from the US and China”, Michaela Jeffery-Morisson , CEO and Founder by Ascend Global Media (the company behind the Women in Tech World Series), to TNW.

“There’s real value in supporting local talent,” added Jeffery-Morisson. “This gives European tech companies the freedom to focus on what they are doing and not be distracted by where the money should come from. And this will also enable the development of a distinctly European tech ecosystem with its own unique culture.”

The way forward

While the ETCI represents an exciting and promising opportunity for innovative entrepreneurs across the continent, financial support alone may not be enough.

Less bureaucracy and easier access to funds are key, Oana Jinga, co-founder and CMO of previously EIC-funded Dexory, told TNW. “Startups need to act fast – the main benefit of innovation is being first! Lengthy and time-consuming processes are quickly discarded for other options as they hold back these high-growth companies,” she explained.

Speaking to TNW, Lena Hackelöer, CEO of Sweden-based Brite Payments, identified two other requirements for domestic innovation: cultivating a “startup-friendly environment” and implementing regulations that “support” tech companies and “set clear boundaries”. .

With the approval of the first investment applications under the ETCI, potentially starting as early as next week, it is becoming clearer how the process will work in practice.