ЕU Commission’s First Direct Equity Investments in European Startups
The European Commission has announced its first direct equity investment in an European startup, the French company CorWave. The Commission is in the process of finalizing deals with another 41 highly innovative small and medium-sized startups.
The investments are made through the new European Innovation Council (EIC) Fund and equity financing of around €178 million will be invested to develop and scale up breakthrough innovations in health, circular economy, artificial intelligence, proptech, and other areas.
In return for the investment, the EC will receive between 10% and 25% of the company ownership, and in case of successful exits, the returned funds will be reinvested in further innovative projects.
This first of its kind intervention in direct equity investment of the EC is important because it uses combined financial support – grants and equity investments and aims to overcome the shortage of venture capital in Europe for companies in their early development stages. There are many innovative companies in Europe, but on the way to the market, they experience a shortage of capital and often remain small or move outside Europe, the EC announced in a statement.
Established in June 2020, the European Innovation Council (EIC) Fund is a breakthrough initiative of the Commission to make direct equity and quasi-equity investments of between €500.000 and €15 million in European start-ups and SMEs. In its current stage, the Fund makes investments in combination with grants, as part of blended finance under the EIC Accelerator Pilot. The allocated maximum funding (grants and equity) can reach €17.5 million.