Innovation & Digitalisation
This year was defined by innovation and digitalisation developments, chief among them the emergence of artificial intelligence and the subsequent proliferation of AI-powered platforms and technologies, and a landmark regulatory agreement at EU level in December.
However, artificial intelligence was just one chapter in 2023’s story of innovation and digitalisation across the EU’s 27 Member States. Addressing the scale-up gap has been a pivotal challenge, one that the EIF and the EIB, along with our shareholders, have addressed head on with a bespoke and particularly ambitious instrument, the European Tech Champions Initiative, aimed at nurturing our thriving tech ecosystems and making sure that great ideas can be born, grow and flourish here.
Developments in information and communication technology (ICT) and deep tech domains are pushing the boundaries of innovation and defining what tomorrow will look like. In that regard, we have strengthened our support for our best and brightest innovators, who are shaping the future of a digitally integrated and digitally sovereign Europe.
The New Space sector also represents an important element of this year’s story of innovation, as a surge of space ventures catalysed investments in this exciting and transformative ecosystem. In pursuit of European strategic autonomy, we signalled our commitment to supporting Europe’s New Space industry and also the life sciences sector, with a number of key investments.
In parallel, market-building efforts continued in collaboration with local actors, as we push towards a conducive environment for innovation, digitalisation and sustainable growth across Europe.
Tackling the scale-up gap
In order to ensure that Europe remains an attractive place for hi-tech European businesses to create and innovate, a place where promising technology entrepreneurs are supported with the necessary access to finance during all stages of their growth, the European Tech Champions Initiative (ETCI) was launched in early 2023. Following the launch, a more than 25 proposals were received, with the first investments materialising in the course of the year.
FSI II was the first investment (€150m) under the new ETCI instrument, an Italian fund focusing on scaling technology and health companies through growth capital investments.
This was followed by a second investment - in Keensight Nova VI. The €100m investment into this French growth stage VC fund which targets European information and communication technology (ICT) and life sciences companies will help achieve the target size of €2.2bn. Keensight is one of the few EU-based fund managers that has raised and deployed a fund size of €1bn.
Health & Life Sciences
The COVID-19 pandemic underscored the importance of health and life sciences, which remain high priority areas for the EIF, the EIB and indeed the EU. This has been reflected in our investment activity this year with a series of investments into life science funds that are looking to make a difference.
We renewed our partnership with Leuven’s Centre for Drug Design and Discovery (CD3) by investing €35m in CD3 IV, a technology transfer platform in partnership with the University of Leuven. With a size of €70m, the fund focuses on drug discovery and developing projects, primarily at the pre-clinical stage. It will be active mainly in Benelux, with a focus on Belgium.
We also signed the first ever investment in a Portuguese life sciences VC fund (Biovance Capital Fund I), in line with our strategy to support first-time and emerging teams, particularly in peripheral Europe, thereby reducing geographical disparities in the European LS VC ecosystem. The investment was made in partnership with Portuguese NPI BPF.
On the private investor front, our Sustainable Development Umbrella Fund (SDUF) Health compartment reached a €195m final closing size in December 2022, close to its target size of €200m. The SDUF Health Compartment, focusing on life sciences, issued its second annual SFDR periodic disclosures, offering stakeholders a comprehensive view of its investment profile and the social characteristics it promotes, reflecting the core purpose of being an SFDR Article 8 fund.
EIF Private Equity Mid-Market Survey 2023
ICT & deep tech
In a changing industrial landscape, we have been working with our partners to ensure that European businesses with ground-breaking ideas find the financing they need to develop, commercialise and eventually scale their products and services. From AI and blockchain to ICT, deep tech and beyond, this year saw a continuation of our support for fund managers intent on backing ambitious innovators whose ideas will form the pillars of tomorrow’s economy.
In France, we invested €20m (target fund size €60m) in Hardware Club Fund II. Managed by a French team, this pan-European fund builds on the work of the Hardware Club, a platform set up to provide a community for start-up founders to overcome bottlenecks through a knowledge sharing network. The platform also facilitates strategic partnerships to provide support for specific issues like manufacturing, distribution, and supply chain management. The fund, founded to be able to invest in members of the Hardware Club community, focuses on early-stage innovative hardware technologies and related software solutions.
We also invested €25m into Market One Capital II, a VC fund dedicated to pre-seed and early-stage ICT investments primarily in Poland.
The fund focuses on marketplaces, thereby helping to strengthen the EU’s digital independence and strategic autonomy vis-à-vis its digital transition.
And we invested €25m in Radix Fund I, a VC fund focusing on early-stage ICT investments in Central and Eastern Europe that aims to raise €60m. This investment is supporting the emergence of a new VC team, with a focus on deep tech in the CEE region.
Finally, we committed €15m to MCC (Mediocredito Centrale) VC Fund I, a VC fund (target size: €35m) dedicated to early-stage technology companies in blockchain and artificial intelligence in Central and Eastern Europe. The EIF is both a cornerstone investor and a key to reaching the minimum viable fund size for this first-time team in an underserved and innovative market segment.
Committed
€2.8bn
into 78 VC funds this year
New Space
The European space industry has established itself as one of the most important and relevant industries for the future of Europe’s strategic autonomy. Nevertheless, the New Space economy remains a relatively nascent equity ecosystem in Europe, where specialised funding and private sector involvement are particularly scarce. With this in mind, we have continued to make a series of investments in specialised funds that are helping Europe’s New Space industry to grow.
In particular, we made two co-investments in Germany’s Isar Aerospace, a launch service provider for small and medium-sized satellites. The co-investments were made alongside two venture capital funds: HV Holtzbrinck Ventures Fund VIII and Vsquared Ventures Opportunities I.
€180m committed to the New Space industry
We also invested €60m in Alpine Space Ventures Fund. Managed by a German team and with a strong focus on the DACH region, this pan-European fund invests in early-stage space technology companies. The Fund will focus on companies active in a range of areas, from launch and landing systems as well as satellites and drones to satellite data exploitation for earth observation and navigation.
EIF Venture Capital Survey 2023
Navigating the digital transition
As businesses, and the economy in general, continue to adapt to an increasingly digital future, we have sought to establish partnerships that will make financing more accessible for SMEs in all sectors of the economy in order to help them successfully navigate this digital transition, relying, more than anything, on InvestEU resources.
One such initiative involved a portfolio guarantee agreement with SG Equipment Finance, which is expected to make available €25m for innovative Czech and Slovak companies. The new lending is aimed at supporting some 130 research- and innovation-intensive businesses, offering financial support for the uptake of digital technologies as well as the digital transformation of enterprises.
We have also supported alternative lenders, providing financing customised to the business model of innovative companies.
One such transaction involved Aegon Investment Management in the Netherlands, an asset manager that offers traditional and alternative investment solutions to its institutional, wholesale and retail clients. An initial commitment of €25m in June, generating a portfolio of around €36m was met with strong demand, resulting in a request for a top-up later in the year.
Another transaction that met high demand was with our shareholder Bpifrance, where an initial agreement for a loan portfolio guarantee volume of €100m was increased by €50m in order to continue supporting French SMEs and small mid-caps in their innovative endeavours and digital transformation.
Building local risk capital ecosystems
A large part of our activity as a public actor in the European equity ecosystem involves market-building efforts. By partnering with governments, regions and other relevant actors such as NPIs, and combining national and EU resources like RRF, ESIF funds and InvestEU, we continued to take bold steps across the continent, lending the necessary support to emerging managers, helping to mobilise private resources, and generating a more vibrant investment ecosystem—all within the framework of the public policy objectives that define our raison d’être.
Partnering with our shareholder, the Croatian Bank for Reconstruction and Development (HBOR), we launched CROGIP II, a €52m investment programme targeted at fast-growing Croatian businesses. Aimed at boosting private equity investments in Croatia, the programme will catalyse additional private-sector investments as well as support the emergence of fund managers focussing on the Croatian market. The programme is not restricted to any particular sector, although there is a 25% focus on climate action and environmental sustainability.
But our efforts in Croatia did not focus only on the growth stages. In September, we signed a new funding agreement with the Croatian government, the Croatian Venture Capital Initiative 2 (CVCi 2), setting up an €80m fund-of-funds initiative focused on investments in innovative Croatian SMEs with high growth potential through accelerators and venture capital funds.
The new programme will provide a further boost to the vibrant venture capital and innovation ecosystem in the country as a follow-up to the successful €35m CVCi 1, which enabled the creation of Croatia’s first institutional-grade venture capital fund, including a separate acceleration compartment that has supported over 100 generally pre-revenue stage start-ups to date.
In Cyprus, the first equity fund that we established with the Cypriot government has taken off, with the selection of the fund manager, 33 East, taking place in Q4. 33 East Fund is a venture capital fund that will provide early-stage capital to technology companies either based and active in Cyprus or planning to expand their operations to the country. The fund’s target size is €37.5m, of which €2.5m will be earmarked for pre-seed ideas, while €35m will go to venture capital.
In March, the Luxembourgish government, the Société Nationale de Crédit et d’Investissement (SNCI) and the EIF launched the Luxembourg Future Fund 2 (LFF 2), the successor initiative to the existing LFF 1, which had reached the end of its active investment period. With €200m in total financing commitments split between SNCI (up to €160 million) and the EIF (up to €40m), LFF 2 will provide additional support for innovative projects in Luxembourg. It boasts an enlarged investment scope, now also including hybrid debt-equity investments, enabling the financing of more mature innovative businesses, and co-investments in specific companies.
Also in March, the Czech Republic mandated the EIF to manage an RRF-funded €55m fund-of-funds focused on equity financing for early-stage Czech start-ups and spin-offs developing digital technologies. It will invest in three VC funds with specialised strategies: a pre-seed co-investment fund, a fintech fund focused on applications of distributed ledger technologies (DLT) benefitting from a new regulatory sandbox, and a technology transfer fund commercialising research from leading Czech universities in the field of artificial intelligence. Overall, this initiative will contribute to the digital transformation of the national economy and the development of the increasingly robust Czech venture capital market.
€883m First ETCI commitments
Lunar Outpost: technology in space, impact on earth
Location: Foetz, Luxembourg
Financial Intermediary: Orbital Ventures
SME: Lunar Outpost
Sector: space
Number of employees: 10
Financing purpose: product development; improving facilities; growing team
EIF financing: InnovFin Equity; EGF
Share this page on social media: