European Innovation Council Fund: first equity investments of €178 million in breakthrough innovations

This article is brought to you in association with the European Commission.

The Commission has announced today 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%.

Under the EIC Accelerator a total of 293 companies have already been selected for funding worth over €563 million in grants since December 2019. Among those, 159 companies have been selected to additionally receive the new equity investments from the EIC Fund. The 42 companies announced today are the first of this group to successfully pass the evaluation and due diligence process. The other 117 companies are in the pipeline to receive investments pending the outcome of the relevant process. 

CorWave: first EU company to sign investment agreement with the EIC Fund

The highly innovative French company CorWave was the very first to receive a direct equity investment. CorWave’s mission is to bring a new standard of care to patients with life-threatening heart failure. The €15 million EIC Fund investment has played a critical role by mobilising additional investors to unite behind the French SME, which led to a €35 million of investments in the fourth stage of start-up financing for CorWave.

This sizeable venture will enable CorWave to successfully bring to the market and scale up its innovative medical solution “Left Ventricular Assist Device” (LVAD), which will significantly improve the lives of those with advanced heart failure, reducing by half severe complications and the need for rehospitalisation, while at the same time improving significantly their quality of life. CorWave’s high-growth potential will also translate into high-quality jobs in the EU.

Next steps for beneficiaries

The investment agreements with the other target companies are now being finalised, and will be announced shortly. A few examples of this first round of investments:

• Hiber (The Netherlands): an international satellite and communication company that provides global and affordable Internet of Things connectivity;
• XSUN (France): a solar aircraft company that designs energy-independent drones to be fully autonomous so they can operate without any human intervention;
• GEOWOX LIMITED (Ireland): a technological company that provides automated property valuations, leveraging high-quality open data and machine learning models;
• EPI-ENDO PHARMACEUTICALS EHF (Iceland): a pharmaceutical company focused on developing a proprietary portfolio of drugs to address the huge global burden of chronic respiratory diseases.

These first investments are preceded by a thorough evaluation by external experts, a due diligence process overseen by the external practitioners and investors on the EIC Fund Investment Committee, and a final decision by the EIC Fund Board of Directors.

Background

Established in June 2020, the European Innovation Council (EIC) Fund is a breakthrough initiative of the Commission to make direct equity and quasi-equity investments (between €500.000 and €15 million) in the capital of start-ups and SMEs. It is first of its kind in terms of EU intervention in direct equity-type investments. In its current stage, it makes such investments, in combination with grants, as part of blended finance under the EIC Accelerator Pilot. The allocated maximum funding (grants and equity) can reach €17.5 million.

The EIC Fund aims to fill a critical financing gap faced by innovative companies when bringing their technologies from high technology readiness levels to the commercialization stage. The Fund will help to fill this financing gap at the start-up stage where the EU venture capital market still underperforms compared to the global venture capital market. Its main purpose is not to maximise the return on the investments, but to have a high impact by accompanying companies with breakthrough and disruptive technologies in their growth as patient capital investor.

The Fund aims to support equality and gender balance, and to highly contribute to sustainability with a particular focus on health, resilience and the green and digital transitions. Its role has become even more important today, as the coronavirus crisis had a very strong impact on many SMEs in the EU, including many innovative startups.