The European Commission and the European Investment Fund (EIF) have launched a venture capital programme aimed at resolving the size problem that has deterred many investors from allocating to the asset class.
Through the VentureEU programme, the EU will fund six venture capital funds-of-funds to the tune of €410m with a view to the funds raising up to €2.1bn from public and private investors.
The Commission said this was expected to unlock €6.5bn of new investment in innovative start-up and scale-up companies across Europe, doubling the amount of venture capital currently available on the continent.
Developing venture capital in Europe is part of the Commission’s Capital Markets Union (CMU) plan.
InvestEurope, the European venture capital association, said the aim of the programme was to attract global investors such as pension funds and insurers that currently found European venture capital funds too small.
The average venture capital fund in Europe was currently around €65m, according to the association, but funds needed to be able to raise at least €150m to attract large private investors.
“For the last eight years, Invest Europe has advocated using public money in new ways to bring in more private capital and facilitate the next stage of venture capital’s evolution in Europe,” said Michael Collins, CEO of the trade body. “It is a great step forward for investment in European innovation that this is now becoming a reality.”
The Commission said the average size of European venture capital funds was €56m compared with €156m in the US, but agreed that they were too small.
Commission vice-president Jyrki Katainen said: “In venture capital, size matters.”
The six funds are to be managed by Aberdeen Standard Investments, Axon Partners Group, IsomerCapital, LGT, Lombard Odier Investment Managers and Schroder Adveq.
The underlying funds will focus on at least four European countries each and invest in a range of start-ups and small and medium-sized companies in sectors such as information and communications technology, life sciences, and energy.
The EU’s investment in VentureEU will be managed by the EIF.