Commission and EIF start selecting Pan-European Venture Capital Fund-of-Funds promoters
Brussels, 7 February 2017
The European Commission and the European Investment Fund (EIF) have started selecting promoters of one or more private-sector led, market-driven Pan-European Venture Capital Funds-of-Funds. 17 applications were submitted by the 31 January 2017 deadline.
Carlos Moedas, Commissioner for Research, Science and Innovation, said: "This is a milestone on the way to setting up a Pan-European VC Fund-of-Funds, which will significantly boost levels of investment in new generations of highly innovative European firms and help them achieve their global ambitions. The excellent response demonstrates that our initiative is very timely, and that the market is looking at it with high interest."
Pier Luigi Gilibert, EIF Chief Executive, said: “The response has been very encouraging and indeed beyond expectation. We now look forward to selecting the best promoters and soon seeing the Pan-European VC Fund-of-Funds investing in European start-ups. Our work in support of the VC ecosystem has produced very positive results, attracting more investments and creating jobs, and we are confident that this new initiative will add to these results and significantly contribute to economic development across Europe.”
Commissioner Moedas set out his ambition to create the Pan-European VC Fund-of-Funds Programme in June 2015, and announced the launch of the call for applications on the EIF's website at last November's Web Summit in Lisbon.
The selection of promoters is conducted both by the by European Commission staff assisted by independent experts and by EIF. The funding available will be allocated in order of merit to the selected promoters. EIF will complete the contract negotiation, formal approval, contract commitment and signature procedures.
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, through EIF, 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. As each EU investment is capped at 25%, the selected promoters must raise the remainder from other sources. This means additional investments to VC of around €1.6 billion, which is a major boost, as the total of VC funds raised l in the EU in 2015 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 (up to €100 million). EIF participates in these schemes with its own resources.
The Pan-European VC Fund-of-Funds Programme aims 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.