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European Commission and EIF’s new Venture Capital Fund of Funds vehicle to unlock at least €3 billion of funding for small businesses

8 November 2016

- Latest initiative in Commission’s Capital Markets Union action plan
- Commission to commit an extra €400 million
- Over 1,300 European start-ups and SMEs could receive investment

The European Commission’s launch today of a new Venture Capital Fund of Funds programme has the potential to attract over €1.6 billion to support the growth of Europe’s small businesses, says Invest Europe.

Space ventures, tech start-ups and budding engineering firms could all benefit from this investment, according to the trade association, in the Commission’s latest initiative in its Capital Markets Union action plan to promote European innovation and economic growth.

The Venture Capital Fund of Funds will invest into a portfolio of venture capital funds across the continent. The Commission will commit up to €400 million in fresh funding as a cornerstone investor to secure at least three times that amount of investment from other sources. The venture capital funds will then back a range of small businesses and entrepreneurs across Europe, providing funding and active management to fulfil their potential.

The Commission is calling for independent fund managers to come forward to manage the funds under the new programme. A total of €400m of new EU money is available for these funds of funds and the Commission is willing to provide up to €300 million of capital to a single fund. The EU’s investment will be capped at 25% of the vehicle’s total investor commitments.

“The Commission’s Venture Capital Fund of Funds is the initiative the industry needs to attract more private investment to support more of Europe’s most talented entrepreneurs and innovators,” said Michael Collins, Chief Executive of Invest Europe.

“It will allow more global investors to access Europe’s thriving start-up scene, helping more of our world-class small businesses develop into household names and helping investors to secure the returns they need in a low yield environment."

The aim of the vehicle is to attract major global investors, such as pension funds and insurers, into the market. The average venture capital fund in Europe is around €65 million, which is simply too small to absorb the minimum investments these global investors are able to make.

Last year, European venture capital invested €3.8 billion into close to 2,800 companies, according to Invest Europe’s data. However, while venture capital funds in the United States raised €25 billion from investors in 2014, in Europe the total was a fifth of that at €5.3 billion, despite being economies of a similar size.

In a recent publication, Invest Europe forecast that an EU-backed fund of funds initiative would enlarge existing venture capital funds and could unlock at least €3 billion of funding to benefit over 1,300 more small businesses.*

“Public funding bodies, like the EU, can act as a catalyst in making the private financial markets work better,” said Nenad Marovac, Invest Europe Venture Capital Platform Chairman and Managing Partner and CEO, DN Capital, a European Venture Capital firm. “This pan-European public-private partnership will broaden the narrow pool of capital available to European venture fund managers, boosting fund sizes and increasing investment in the SMEs and start-ups that need funding to grow.”


*Taken from the Invest Europe policy publication: Accelerating Innovation & Delivering Growth: Using a EU guarantee to Attract Private Sector Investors to the European Venture Capital Industry, July 2015


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