“The initiative is an impressive example of what we can achieve together to strengthen Europe’s economic and industrial sovereignty.”
(Photo: Bloomberg)
Brussels, Paris Germany and four other EU countries are providing a total of four billion euros in state venture capital to prevent promising tech companies from leaving Europe. The first contracts of the “European Tech Champions Initiative” will be signed on Monday in Brussels, as the Handelsblatt learned from several sources familiar with the topic. This means that the fund of funds based at the European Investment Bank (EIB), which is intended to help advanced start-ups from the EU to achieve a decisive growth spurt, can start work in a timely manner.
Germany, France and Spain are each providing one billion euros as start-up financing, and Italy and Belgium are also making a financial contribution. Later, other member states and private donors will also participate in the fund. The goal is to equip it with a total of ten billion euros.
The “European Tech Champions Initiative” goes back to France’s EU Council Presidency in the first half of 2022. At the time, it was said from Paris that Europe had to become independent of the USA and China when it came to future digital technologies. To do this, the EU also needs its own “technology giants” that can compete with the big global tech companies.
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The French Ministry of Finance confirmed on request that France would provide one billion euros for the fund when the contract was signed on Monday. “The initiative is an impressive example of what we can achieve together to strengthen Europe’s economic and industrial sovereignty,” said Finance and Economics Minister Bruno Le Maire to the Handelsblatt. “In this way, European tech companies can contribute even more to innovation, growth and job creation in the European Union.”
The federal government had also promoted the project from the start. Berlin wants to use it to tackle the financing problems that European start-ups face during the critical growth phase. Finance Minister Christian Lindner (FDP) complained last year that the EU was losing precisely those tech companies “with the highest growth potential” due to the lack of its own venture capital.
If tech companies want to scale up their business after a successful start-up period, they have to raise tens of millions of euros on the capital markets. So far there has been a lack of European venture capitalists who can muster such clout. More mature start-ups therefore often turn to investors outside of Europe, who then often decide on the future location of the company or the location of a possible IPO.
The fund is also likely to be a good fit for Europe’s tech industry for another reason: it has recently become more difficult for start-ups to raise fresh venture capital. Investors have become more cautious about financing rounds, and in view of rising interest rates, institutional lenders are investing more in lower-risk government and corporate bonds.
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The European Investment Fund (EIF), the venture capital arm of the EIB, plays a key role in building the fund of funds. This should contribute at least 500 million euros to the capital and take care of the management of the fund of funds. It is planned that the funds from the fund of funds will initially flow to private equity and venture capital funds based in the EU, which in turn will then invest in European start-ups in the critical growth phase.
The hope is to mobilize additional private investments with the state billions as leverage. According to reports, other EU members could also make specific commitments for the fund of funds this year. However, the initiative is met with skepticism, especially among smaller member states. There they fear that in the end it will be mainly tech companies from France and Germany that will benefit from the state-filled venture capital pot.
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