Taking action to fill the funding gap for European startups, the European Investment Bank (EIB) has taken new steps. During a recent meeting with EU finance ministers in Luxembourg, the EIB outlined its “Action Plan,” which seeks to strengthen Europe’s capital markets and provide more investment opportunities. Its focus is preventing European startups from looking to the United States and other countries for financial backing.
The backbone of this plan is advancing venture capital and private equity markets within the European Union. Thus, the EIB supports innovative startups, including unicorns, growing without moving. Expanding the European Tech Champions Initiative (ETCI), launched in 2023, was a major step in delivering late-stage capital to promising European companies. By early 2024, ETCI had already received €1 billion in investments.
Three key steps to boost Europe’s tech scene
The EIB’s new funding strategy includes three main pillars for making Europe’s tech sector more competitive on a global scale. The first is to expand the ETCI to support smaller, developing tech companies that are ready to scale. The fund seeks to raise €6 billion worth of capital to help companies with high growth potential. Since its operation, the ETCI has funneled big investments into areas like automation, robotics, cybersecurity, and health tech.
Another critical step is increasing equity and venture debt. This will specifically target companies transitioning from startup to scale-up (the startup scale-up). Such investments are crucial as they allow companies to expand their operations and stay in Europe with the necessary capital. The EIB is also designing a new exit platform to facilitate tech startups’ going public or acquiring and staying in (the) EU.
According to EIB Group President Nadia Calviño, the “Action Plan” is designed to help European innovators “scale up their business” while directing savings into productive investments. In her statement, Calviño emphasized that the new measures would help ensure that “European companies born in Europe stay in Europe.”
Europe’s innovation challenge
Former Italian Prime Minister Mario Draghi warned last month of the urgency of the EIB’s funding plan. In the report commissioned by EU President Ursula von der Leyen, Draghi highlighted Europe’s struggles in turning the promise of innovation into a successful business. While the region has robust ideas, he said Europe fails to match them to the global players, especially the United States.
This struggle is reflected in the data. Few European companies have found their way to the top 50 technology firms in the world, and none have come close to a market cap of €100 billion in recent decades. Considering that the number of US tech companies with more than €1 trillion in value is six, by comparison. A troubling puzzle piece is that European unicorns are moving to the US, and almost one-third have moved – from 2008 until 2021.
This is the subject of the new plan put forward by the EIB. The potential exists for Europe to keep its innovative companies at home instead of watching them cross the pond across the Atlantic with expanded support for late-stage capital and more exit options.
ETCI’s one-year milestone: Celebrating success
As it shies at its first year, the European Tech Champions Initiative is already showing signs of progress. ETCI is investing almost €1 billion in hopes of unlocking up to €6 billion in funding for tech ventures across the continent. The funds it supports include Atomico Growth VI, which is dedicated to cyber and other high-tech industries, and Keensight Nova VI, which is looking to invest in cybersecurity, the health sector, and robotics.
Roger Havenith, Deputy Chief Executive of the European Investment Fund, praised ETCI’s success, stating that these investments are set to “generate more than €5 billion” for Europe’s tech ecosystem. ETCI aims to use these funds to support entrepreneurs, fuel innovation, and help solidify Europe as a growing tech hub.
However, new EIB measures could be the game changer that European startups need to keep afloat as they struggle to raise funds and scale up. The EU hopes to prevent the next generation of European unicorns from heading overseas by offering financial support and better market conditions.
Image credit: EIB
