New impetus for venture capital

New impetus for venture capitalA new programme has been launched to channel investment in venture capital funds. The objective is to spur on European small to medium enterprises to help them to increase in size to the point where they become attractive and competitive propositions in the world market.

It comes from VentureUE, a joint programme from the European Commission and the European Fund of Investors.

The hope is that from this platform, the selected SMEs will be able to attract large investors to further enhance their development. It is perhaps an interesting side note to consider that an American SME receives six times more investment than a European one; the average size of seed capital funds in Spain is 65 million euros, compared to 156 million euros in the USA.

Playing catchup

What this means is that the number of so-called unicorns – companies with a valuation of more than 1,000 million – is much lower in Europe. In the USA last year, the figure was 109 compared to 26 in Europe.

Specifically, this new program will distribute 410 million euros between the selected parent companies. These are Spanish Axon Partners Group, British Aberdeen Standard Investments, Isomer Capital, LGT, Lombard Odier Asset Management, and the Swedish Schroder Adveq. From there, they will start up their own investment vehicles within a year, aiming for a combined value of 2,100 million euros.

Through each of these initiatives, the managers will invest directly in venture capital funds that will then be invested in small to medium enterprises covering various sectors. Among others, they will include health sciences, biotechnology and energy efficiency.

A new look

The advent of this new injection of capital will mean that Spanish and European funds will become far more attractive for both private and institutional investors. This has already been borne out by the fact that the programme has brought in private investment to the tune of around 200 million euros. Of other investment, 200 million euros has come from the EU’s Horizon 2020 program, 105 million from the Cosme Plan, and 105 million from the European Investment Fund.

This is also not the first initiative that the European Commission has developed to assist this type of investment; in March, a programme for facilitating access to investors of many different sizes was launched.

Also, Spain has had a similar financing programme in place for some time – the Fond-ICO Global. This is currently in the process of selecting managers for its tenth round, and sourced private capital during the crisis which helped SMEs to access financing. Although it was initially aimed at larger projects, for a few years it dedicated part of its resources to smaller investment projects both in venture capital and technology transfer.

For more information, please contact corporate law firm Argali Abogados

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