Five EU member states and the European Investment Bank (EIB) Group have launched a new fund to support the late growth of promising European tech startups and boost the continent’s innovation competitiveness.

The so-called European Tech Champions initiative (ETCI) is trying to address the issue of late-stage funding shortfalls, especially for companies seeking more than €50 million in capital.

Stimulating European investments

“European tech startups often don’t have enough capital to compete on a global scale and are forced to move abroad. Closing this scaling gap could create a large number of highly skilled jobs and stimulate growth,” said the founders of ECTI in a statement. rack.

“The European Investment Bank estimates that about 75% of Europe’s high-tech companies are acquired by non-European investors – mainly American and Chinese – at a late stage of development,” said Nick Swan, serial entrepreneur and founder of SEO Testing, told TNW. “For the fund to be successful in the long run, it will need to curb the trend of European tech startups pushing to move abroad. It will also show whether UK companies are considering moving to the EU to access this huge pool of funding.”

The ETCI has so far raised a total budget of €3.75 billion. Spain, Germany and France have each pledged €1 billion, Italy €150 million and Belgium €100 million. The EIB Group has provided an additional €500 million. The financing capacity is expected to increase further in the future.

“This initiative is a striking example of what we can achieve together to strengthen the EU’s economic and industrial sovereignty,” said Bruno Le Maire, French Minister of Economy, Finance and Industrial and Digital Sovereignty, noted.

The ETCI will not directly subsidize startups, but will instead operate as a fund of funds. In other words, it will deepen Europe’s scale-up venture capital (VC) funds “by bridging gaps in funding availability”. In this way, it helps European institutional investors to diversify their portfolio while ensuring a continuous flow of capital to the continent-based scale-ups.

“A lot of this has to do with European strategic autonomy, something that leaders on the continent need to think about. By increasing the financial capacity of existing venture capital funds (and thus indirectly financing scale-ups), they can ensure that European companies are not taken over by non-European investors, mostly from the US and China,” Michaela Jeffery-Morisson, CEO and founder of Take off global media (the company behind it Women in Tech World Series), told TNW.

“It’s really valuable to support homegrown talent,” added Jeffery-Morisson. “This gives European technology companies the freedom to focus on what they are doing and not be distracted by where the money will come from. And this will also allow a distinctly European technology ecosystem to develop with its own unique culture.”

The way forward

While the ETCI is an exciting and promising opportunity for innovative entrepreneurs across the continent, financial support alone may not be enough.

Reduced bureaucracy and easier access to funds are key, Oana Jinga, co-founder and CMO at previously funded by EIC Dexory, told TNW. “Startups need to be able to move quickly – the main advantage of innovation is to be the first! So lengthy and time-consuming processes will quickly be rejected for other options, as they hold back these high-growth companies,” she explains.

In conversation with TNW, Lena Hackelöer, CEO of Sweden-based UK paymentsidentified two more requirements for homegrown innovation: cultivating a “startup-friendly environment” and implementing regulations that “support” tech companies and “set clear boundaries.”

With the approval of the first investment applications under the ETCI, which may start as early as next week, it will become clearer how the process will work in practice.