First equity investments in breakthrough innovations

The Commission has announced the first round of direct equity investment through the new European Innovation Council (EIC) Fund. 42 highly innovative start-ups and small and medium-sized businesses (SMEs) will together receive equity financing of around €178 million to develop and scale up breakthrough innovations in health, circular economy, advanced manufacturing and other areas. Among them, the French company CorWave is the first EU company in which the EIC Fund is investing.

Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth said: “Europe has many innovative, talented start-ups, 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.”

The equity investments, ranging from €500.000 to €15 million per beneficiary, complement the grant financing, which has already been provided through the EIC Accelerator Pilot to enable companies to scale up faster. This is the first time the Commission has made direct equity or quasi-equity investments, namely equity investment blended with a grant, in start-up companies, with ownership stakes expected to range from 10% to 25%. Continue reading “First equity investments in breakthrough innovations”

EU calls for a Next Generation EU strategy for SMEs

COVID-19 has been a tsunami for SMEs. The EU’s proposed new SME strategy, which predates the crisis, fails to cope with the huge challenges that have since jumped to the fore, says the European Economic and Social Committee (EESC) in a recently adopted opinion.

COVID-19 has dealt a very serious blow to SMEs across Europe, many of which risk being swept out of business in its wake.

How can the new EU strategy for SMEs, which was put forward before the pandemic and has not been overhauled since, help the sector cope with the aftermath, asks the EESC in an opinion on the European Commission’s draft strategy adopted at its September plenary.

“What we really need at this point in time is a sort of ‘Next Generation EU strategy’ for SMEs, putting together all there is for SMEs under the huge umbrella of loans and grants from the Recovery plan for Europe to mitigate the negative effects of the lockdown, social distancing and health security measures and help businesses recover quickly”, says opinion rapporteur Milena Angelova.

SME organisations to cover the last mile

SME organisations ought to have a pivotal role in the successful implementation of the strategy, as they can ensure that the needs of all different groups of SMEs are met and can shape any follow-up measures that may be needed.

Instead, the strategy mainly relies on existing national SME envoys, a new EU SME envoy and the Enterprise Europe Network.

But the EESC points out that the network of national SME envoys, which represent Member States’ authorities in charge of SME policy, is not fully operational in all Member States. It also stresses that, as SME envoys come from the administration, they need to stay in constant contact with SME organisations and listen attentively to their advice, if they are to play a useful role. Continue reading “EU calls for a Next Generation EU strategy for SMEs”

Commission and European Investment Fund unlock €8 billion in finance for 100,000 small and medium-sized businesses

The European Commission has unlocked €1 billion from the European Fund for Strategic Investments (EFSI) that will serve as a guarantee to the European Investment Fund (EIF), part of the European Investment Bank Group. This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, for an estimated available financing of €8 billion. Today’s announcement fulfils the commitment in the Commission Communication of 13 March to bring immediate relief to hard-hit SMEs, with money able to flow already in April. It is part of the package of measures announced by the EIB Group on 16 March designed to rapidly mobilise support for Europe’s SMEs and mid-caps.

One of the immediate economic consequences of the coronavirus pandemic is the sudden lack of liquidity affecting small and medium-sized businesses. These companies are typically the most affected in a crisis, and it is essential to support them with adequate liquidity so they can survive the crisis. However, in a situation of liquidity crunch banks are not incentivised to lend SMEs money due to the sudden increase in perceived risk. That is why EU guarantees supporting these loans are necessary. As of today, the EIF is offering to the market dedicated EFSI-backed guarantees to contain the impact of the pandemic on small and medium sized enterprises and small mid-cap companies. Continue reading “Commission and European Investment Fund unlock €8 billion in finance for 100,000 small and medium-sized businesses”