Europe is good at producing promising tech companies. Turning them into global ones is another matter. The EU now wants to bring more long-term money into the stage where many of them struggle to scale.
The European Commission and the European Investment Bank (EIB) are launching a new framework to channel more long-term capital into European technology companies. So far, 13 institutional investors are set to join the European Institutional Investors Pact.
The initiative under the EU Startup and Scaleup Strategy aims to tackle one of the European tech sector’s persistent problems. Companies can often raise money in the early stages of growth, but later need far larger investments to expand. This is where Europe is still short of capital, according to the Commission.
Talent, ideas and ambition — Europe has all of these. Now we are making sure our innovative companies can grow, scale and lead on the global stage.
— Ursula von der Leyen, European Commission President
“Talent, ideas and ambition — Europe has all of these. Now we are making sure our innovative companies can grow, scale and lead on the global stage,” European Commission President Ursula von der Leyen said.
From startup to scaleup
The new pact is designed to make it easier for pension funds, insurers, banks and other large investors to access European venture capital and growth funds. For technology companies, that could mean better access to money once smaller startup investments are no longer enough. They may need fresh capital to expand rapidly, enter new markets or continue developing their products.
The Commission and the EIB also want successful companies to be able to grow globally without having to move their next stage of expansion outside Europe.
The pact has two main strands. The Commission will lead a forum where institutional investors can discuss investment policies and regulatory issues with the EU.
The EIB Group, meanwhile, will set up an investment platform to help investors find suitable European funds and companies. It will also provide market information and help investors sell their stakes later on.
Billions of euros at play
The new framework is also intended to channel institutional capital into two major European investment initiatives.
The European Tech Champions Initiative 2.0 is expected to mobilise up to €80 billion, according to the Commission. Its first phase, launched in 2023, backed 15 mega-funds and 47 scale-ups, including 15 unicorns — startups valued at more than €1 billion.
Our goal is clear: to provide Europe’s institutional investors with a single, credible entry point into innovation financing.
— Nadia Calviño, President of the EIB Group
The second initiative, the Scaleup Europe Fund, targets €5 billion. It will invest in later-stage technology companies working across areas ranging from artificial intelligence and semiconductors to robotics, energy, space and biotechnology.
Why the EU is pushing it
Brussels has long been trying to stop European technology companies from either remaining small or looking outside Europe for capital. The new pact shouldconnect Europe’s large pools of long-term investment with companies that have the potential to grow at scale.
The pact is voluntary, however, and does not by itself guarantee that tens of billions of euros will flow into European companies. Its main aim is to make it easier for investors already interested in European technology to find the right opportunities.
“Our goal is clear: to provide Europe’s institutional investors with a single, credible entry point into innovation financing,” said Nadia Calviño, President of the EIB Group.
The Commission is therefore looking beyond simply helping new startups get off the ground. It also wants successful ones to have enough capital to grow into major European companies.
