Within the revised EIC: investment guidelines offer comprehensive insights into the investment process, providing valuable information to applicants, selected firms, and potential co-investors. This guidance elucidates each step of the investment journey.
It includes the strategy and conditions under which the EIC Fund will make investment and divestment decisions and provides an updated definition of a qualified investor and a description of possible investment scenarios. The Investment Guidelines ensure that the EIC investments meet the objectives to support high potential startups and SMEs to accelerate their scale up and crowd in private investors.
What you should definitely know: EIC Fund investment process (pdf)
The EC selects and awards proposals with an investment component, then channels them to the EIC Fund for an initial assessment. Following this initial assessment, the cases will be categorized in accordance with the various possible investment scenarios (“buckets”) [Step 1].
The EIB, in its role of Investment Advisor, will undertake financial due diligence (unless performed by co-investors, please refer to Investment Scenarios section under section 3.3). In parallel, KYC-compliance checks will be performed on the target companies. [Step 2].
The EIB, in its role of Investment Advisor, will discuss potential draft financing terms with the beneficiary and co-investors (if any), or advise the company in case of alternate investors. The EIC Fund will review due diligence and the EIB’s structuring proposal [Step 3].
The EIC Fund will decide on financing operations [Step 4], which will either approve (sometimes with conditions), including the amount and terms, or reject the operation [Step 5].
Once approved by the EIC Fund, the EIB, as Investment Advisor, oversees transaction legal documentation.. [Step 6].
The EIC Fund will do the monitoring, milestone disbursements, reporting and exit [Step 7].
Investment decisions must align with these guidelines and fall under EIC Fund authority.
The revised EIC Investment Guidelines draw from the 2019-20 pilot and apply to post-2021 Accelerator-funded companies. During this period, the Investment Guidelines ensure business continuity and support to innovators. During this transition phase, the Commission will appoint an external alternative investment fund manager (AIFM) to manage the EIC Fund. After the transition phase until the end of 2022, a long-term EIC Fund management approach will be established.
The European Investment Bank (EIB) has been the investment adviser of the EIC Fund over the pilot phase and will continue playing the same role during the transition phase. A new EIB advisory agreement ensures ongoing due diligence, investment decisions, and portfolio management.
What are the next steps?
The Commission is assessing lessons from the EIC pilot phase. The EIC Board advises on implementing EIC equity investments.
The goal is an efficient, sustainable instrument for investment decisions. It aims to attract investors and meet EU goals. The long-term EIC Fund management will be ready for 2023 EIC Accelerator calls. It will continue until the Horizon Europe programming period ends in 2027.
Some background information
EIC pilot phase (2018-20) was launched in 2018, incorporating existing instruments under the Horizon 2020 programme, in particular the SME instrument and Future & Emerging Technology (FET) programme. These funding schemes in a single work program directly support innovators across Europe.
The EIC pilot phase, together with the existing instruments, supported:
Over 430 projects on Future and Emerging Technologies, involving over 2700 partners. These projects have generated over 3000 peer reviewed scientific articles, over 600 innovations, and over 100 patents.
Over 5700 startups and SMEs, who have raised over €5 billion in follow up investments (3 euro for every euro from the EU budget) andon average, more than doubled the number of employees in a 2 year period
The Current situation
The EIC Accelerator blended finance support offers a unique combination of grants (up to €2.5 million) and investment in equity or quasi-equity (between €0.5 million and €15 million or more in certain cases through the EIC Fund).
The EIC Fund is a dedicated fund for investing in companies selected by the EIC Accelerator. Since its creation in June 2020, the Fund has invested in 78 deep-tech companies all across Europe. An additional 63 deals are approved for investment in the coming months. The total approved investment amount for companies selected during the pilot phase (2019-2020) is €637 million.
Around €3.5 billion of the EIC’s budget will go towards the EIC Fund for 2021-2027.
Considering the EIC pilot experience, the EIC Fund might invest in around 600 start-ups and SMEs by 2027. This would make it Europe’s largest venture capital deep-tech investor.
The EIC aims to be a catalyser and strives for larger investment rounds. During the pilot, the EIC achieved a multiplier of 2.6-2.8 of private investments to the EIC’s public investments. Depending on the company and the innovation, co-investors alongside the EIC Fund may include Business Angels, Venture Capital funds, Impact investment funds, Family offices, Venture debt funds, National Promotional Banks or corporate venture arms.
Therefore, it is good for companies to verify the revised EIC investment guidelines.
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