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The European Innovation Council (EIC) Fund, Europe’s most lively deeptech investor, is now doing two offers every week, says its head, Michiel Scheffer.
339 startups have been backed by the EIC Fund since 2021, to the tune of €391.6m.
The EIC Fund, which has €3.5bn to speculate over seven years, struggled with a fee backlog when it launched — leaving a number of startups quick on money whereas they waited for promised funding to reach — however that has now been resolved, says Scheffer.
And meaning its board members can as a substitute begin worrying about what sorts of applied sciences it must be investing in to make sure Europe stays a worldwide chief in innovation — and then assist develop these corporations into enterprise giants.
“My mission is [for] Europe to regulate our personal future and to have what we want,” Scheffer tells Sifted. “Europe has been a number one continent. It’s in our DNA to have the ability to excel — and it’s irritating to not be capable of do this.”
Europe’s strategic priorities
In Scheffer’s view, Europe has three important strategic priorities, the primary being extra vitality autonomy by way of renewables.
“We’ve to speculate considerably in Europe in various vitality sources that aren’t weather-related,” he advised Sifted on the EIC Summit in Brussels in March. “We’ve solar and wind [power], but it surely’s extremely cyclical.”
We additionally want extra innovation round vitality storage, he provides. “Both with batteries, or different techniques.”
Subsequent up on his strategic wishlist to share with the European Fee: supplies. “We’re extraordinarily depending on imported supplies,” he says, seeing an enormous alternative to develop bio-based supplies, drawing on Europe’s power in agriculture.
Third up: taking a management function in quantum. The EIC has already invested in 22 quantum corporations — and want to strengthen that portfolio additional, says Scheffer.
“We need to transfer from a portfolio to extra of a value-chain strategy — and even consolidation,” he provides. That would contain serving to EIC-backed startups purchase up different corporations, he says, or encouraging just a few of them to merge, and even for a company to take over a number of of them.
“Consolidation of portfolio is one thing that we, the EIC, as a shareholder can promote.”
Positive, he says, it’s a bit early for most of the corporations within the portfolio to be fascinated with an exit. The EIC Fund, which has been investing since September 2022, expects to attend 5 to seven years, if not longer, for a return on its capital — however he expects the EIC to play this function sooner or later.
His crew will look into put public listings extra firmly on the roadmap for EIC startups: “We’re going to look within the second half of the yr in advising how the IPO market may be promoted for EIC portfolio corporations.”
Cash, cash, cash
Portfolio corporations want much more than EIC funding to develop and thrive, nonetheless.
“We do loads [to] crowd in funding,” says Scheffer — encouraging other forms of traders to again deeptech corporations. “We expect we should always try to squeeze our affect in the marketplace… And we additionally have a look at regulation and advise the Fee altering regulation to make it simpler for VCs or bigger traders to put money into longer-term ventures.”
He’s additionally a fan of the EU’s STEP — the Strategic Know-how for Europe Platform — which hopes to bolster vital applied sciences like deeptech, biotech and local weather tech, and was conceived of as Europe’s reply to the US’s Inflation Discount Act. The scheme has struggled to get the funding, nonetheless, that its supporters hoped it could entice from member states.
“We’re going to advocate doing a pilot STEP — hoping that member states will see it as successful and we’ll be capable of give it extra money in two or three years,” he says.
Scheffer thinks governments must do their bit too. “We’ve to animate far more public procurement,” he says. “The French Military has not too long ago determined to do huge public procurement in computing. And so they have mobilised at the very least 5 of our beneficiaries.”
Ignorant VCs
Touchdown contracts with industrial giants and governments is essential for a lot of deeptech startups — and having landed EIC funding helps them get a foot within the door, says Scheffer: “It helps them to have the stamp of recognition.”
However to realize buy-in from slow-moving and large organisations it additionally helps to have “at the very least one or a number of traders that know the market”, says Scheffer.
“We see increasingly more that our champions have VCs which can be sectoral literate — they know the industries they put money into, they usually open doorways.”
Having generalist VCs is much less useful, he provides. “We see a shift of agnostic VCs — not linked to a expertise — and I feel agnostic is nearly ignorant.”
That isn’t Scheffer’s solely gripe with VCs.
“I would love them to be extra cross border,” he provides. “They need to realise that typically you may get extra worth for cash by investing in a Greek or Portuguese firm,” he says, including that VC funds may study from the EIC’s rigorous due diligence processes.
“Our procedures take a while, however they’re thorough — I feel VCs may study from our procedures.”
Not chasing unicorns
The EIC is, after all, not a VC — and is working to a really totally different mannequin.
“As with every public funder, we go extra for the societal impression,” says Scheffer. “A unicorn is a ‘good to have’.”
Of its portfolio corporations, 42% are at present in well being, 38% in trade and house (together with superior manufacturing, quantum, {hardware} and semiconductors) and 21% in local weather tech. Of the businesses backed by the EIC Accelerator, 19% have a feminine founder.
In contrast to VCs, which usually count on only a handful of startups to be knock-out successes, the EIC hopes nearly the entire corporations it invests in will likely be profitable.
“It is rather possible that the failure [rate] will likely be someplace between 5-10%,” says Scheffer.
“The American VCs have a mannequin the place you will have just a few unicorns, a small center and big disasters. And public funds are inclined to have a Guassian curve — just a few successes, an enormous bulk of them will grow to be okay SMEs and a small pot of corporations that by no means materialise — so we solely do one spherical of funding they usually by no means develop. After which you will have some outright failures.
“That’s a advantage of being a bit slower in paying out; you’ll by no means lose loads within the failure as a result of the complete quantity was by no means disbursed. So we promised possibly €50m, however we put in solely €2.5m.”
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