Commission and EIF seek Pan-European Venture Capital Fund-of-Funds managers
Brussels, 8 November 2016
Are you an independent fund manager with a strong track record of attracting private investment and picking winners? The European Commission and the European Investment Fund (EIF) are today inviting applications for setting up and managing one or more private-sector led, market-driven Pan-European Venture Capital Funds-of-Funds.
Venture capital (VC) plays a key part in supporting growth and offering entrepreneurs an option to raise funding in Europe as well as overseas. However, Europe's VC funds are relatively small, and EU VC investment is largely concentrated in a few Member States. A Pan-European VC Fund-of-Funds can help increase the scale of VC funds in Europe and the industry's footprint across all Member States, as well as attract private investors. As part of the Capital Markets Union (CMU) Action Plan, the new Pan European VC Fund-of-Funds supports the aim to unlock market-based finance for SMEs and increase cross-border investments.
Carlos Moedas, Commissioner for Research, Science and Innovation, set out his ambition to create a Pan-European VC Fund-of-Funds in June 2015, and launched the call for applications at today's Web Summit in Lisbon.
Commissioner Moedas said: "There's far less venture capital in Europe than in the US, and funds don't have the scale or geographic scope to grow companies from early stage to mid-cap and from mid-cap to global players. The Pan-European VC Fund-of-Funds initiative tackles this problem head-on. It will lead to higher levels of investment in new generations of highly innovative European firms."
The call for managers interested in applying to run the Pan-European VC Fund-of-Funds can be found on the EIF's website. The deadline for applications is 31 January 2017.
The Pan-European VC Fund-of-Funds is a priority action under the Commission's Capital Markets Union (CMU), and complements other actions to boost VC in Europe, notably proposed expansion of the European VC Funds (EuVECA) regulation and proposals to address the bias in the tax system towards debt over equity. It was first promoted by Commissioner Moedas in his June 2015 speech 'Open Innovation, Open Science, Open to the World'.
The EU will provide cornerstone investments of up to €300 million in one or more independently managed VC Fund-of-Funds, up to a maximum budget of €400 million for all Fund-of-funds. The selected fund manager(s) must raise at least three times as much from other sources (the EU investment is capped at 25%). This means additional investments to VC of around €1.6 billion, which is a major boost, as the total of VC funds raised last year in the EU was €5 billion. The EU investment combines resources from Horizon 2020's InnovFin Equity scheme (up to €200 million), EFSI (up to €100 million) and COSME (where up to €100 million is foreseen).
The objectives of this initiative are to:
- Increase the size of VC funds in Europe: the average VC fund size is around €60 million compared to €120 million in the USA, which means that companies cannot raise larger follow-on investments in Europe.
- Increase private investment in VC: currently, public funding represents over 30% of the total VC investment in Europe, which is much higher than in the USA. At least 50% of investments raised by the Fund-of-Funds must be from private capital, and the Fund of Funds will be independently managed.
- Overcome fragmentation: most VC funds now only operate in one Member State. The Fund-of-Funds must operate across at least five European countries.
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