The European Investment Bank (EIB), over the next three years will channel ecu 125 million from its annual surpluses into venture funds investing in early-stage technology companies in Europe.
Dubbed the European Technology Facility, this initiative forms part of the EIB’s special growth and employment action programme. At its launch, which coincided with the European Employment Council meeting in November, EIB President Sir Brian Unwin said technology-related SMEs “are the enterprises that will be the main source of jobs and innovation in the future”.
The European Technology Facility will be managed by the European Investment Fund (EIF), which has been mandated to invest the EIB money in venture capital funds primarily interested in early-stage companies or other vehicles providing equity or other forms of risk capital for industrial or service-sector SMEs developing or using advanced technologies. The ETF is targeting independently managed private sector venture funds rather than public sector regional development vehicles. A maximum commitment of ecu 12.5 million per fund has been set, and the ETF monies may constitute no more than 25% of any one vehicle.
The establishment of the ETF substantially increases the EIF’s importance as a player in the European venture fund market. Last year, it allocated up to ecu 75 million for a venture fund of funds programme (EVCJ, December 1996/January 1997, page 7), and to date has invested ecu 23 million in eight early-stage and technology-focused vehicles, among them Sofinnova Ventures, MTI3, Alta Berkeley V, Capricorn Ventures and the Prelude Trust.
This investment programme and the ETF are both intended to catalyse a flow of private sector funds into the venture capital market and thereby stimulate job creation throughout the EU. Together, they could leverage between ecu 500 million and ecu 800 million in new investments, according to Gerbrand Hop, chairman of the EIF’s financial committee. The focus on independently managed funds provides a further acknowledgement at EU level that commercial criteria are more effective in creating growth enterprises than “soft” public sector development programmes.
The ETF is designed to run until the end of 2000. In order to reach full investment, at least 10 new European venture funds targeting a minimum of ecu 500 million will have to be launched during the next three years.
Pe Verhoeven of the EIF commented: “There is a growing venture fund market and we do not foresee any lack of investment opportunities for the ETF”. That fund raising on this level does not seem entirely unrealistic is a measure of how much the climate for early-stage funds has improved in recent years.