The European Union is supporting small innovative firms with direct equity investments for the first time, blending them with previously approved grants through the EIC’s new program. Its fund is buying ownership stakes of up to 25% in startups to support projects in areas like healthcare, circular economy and the energy transition.
The European Commission announced the first round of direct equity investment through the new European Innovation Council (EIC) Fund and revealed 42 innovative startups and small and medium-sized enterprises (SMEs) will get EUR 500,000 to EUR 15 million each in exchange for partial ownership.
The combination with grants that the selected beneficiaries already received through the EIC Accelerator Pilot makes it a quasi-equity investment. The fund is expected to get stakes of 10% to 25% in the startups and SMEs, according to the press release. Maximum blended investment is EUR 17.5 million per firm.
Funding round attracts private investors as well
The round is worth EUR 178 million. The beneficiaries are developing innovations in healthcare, circular economy, advanced manufacturing and other areas.
The first that signed the agreement under the scheme is CorWave from France, which is developing an implantable heart pump. At the same time, the SME raised EUR 35 million from other investors. The deals for the remaining 41 startups from the first round are being finalized, EIC said.
One of the named beneficiaries is Xsun. Also a French company, it designs fully autonomous drones that use their own solar power.
Combining grants and equity
Another 117 companies may receive equity investments. They develop solutions from recycling mixed plastic waste, construction waste and components for photovoltaics to sustainable materials and high-efficiency energy technology.
EIC is signing deals with 42 firms and another 117 are in the pipeline
For instance, Brite Hellas from Greece is working on an 80% transparent solar glass panel for greenhouses. Swedish-based Modvion builds wooden wind turbine towers while Aquila Bioscience from Ireland has a biodecontamination technology for non-toxic removal of biological agents, including the coronavirus.
“Europe has many innovative, talented startups, but too often these companies remain small or relocate elsewhere. This new form of financing – combining grants and equity – is unique to the European Innovation Council. It will bridge the funding gap for highly innovative companies, unlock additional private investments and enable them scale up in Europe,” European Commissioner for Innovation, Research, Culture, Education and Youth Mariya Gabriel said.
EIC is patient capital investor
Under the EIC Accelerator, a total of 293 startups have been selected in the past year for grants, worth over EUR 563 million in total. The fund was established in June with the aim to assist in the commercialization stage and be a “patient capital investor,” EIC said. It also focuses on the green and digital transitions.
Of note, EIC has just signed a memorandum of understanding with the European Institute of Innovation and Technology (EIT) on upgrading their cooperation in supporting the best European entrepreneurs, education institutions and research organizations, under the umbrella of the Horizon Europe program.