The EU has appointed an external fund manager, Alter Domus, to lead its flagship deeptech investment scheme, after startups promised funding have been waiting on it for months.
This means that Alter Domus, a Luxembourg-based firm — not an individual investor — which specialises in private equity and real estate and infrastructure investments, will decide which startups receive equity funding.
Since 2021, the European Innovation Council (EIC), an EU body, has been offering grants, blended finance and equity investments to Europe’s deeptech startups. It stresses that such investment is strategic for the EU’s so-called “technological sovereignty” — a grand push to shore up the continent’s role in cutting-edge tech like microchips, quantum computing and groundbreaking climate solutions.
It offers grants of up to €2.5m and equity investments of up to €15m per company, for a maximum stake of 10 to 20%. Over seven years, it wants to invest €3.5bn in around 500 to 700 deeptech companies. So far in 2022, it has been Europe’s most active deeptech investor by number of deals.
The problem is that many of the selected companies, especially those that qualified for equity investment, have waited months to receive funding, which has put some on the brink of bankruptcy. While the EIC has been slowly moving forward with the payments of grants, only one company has received equity backing since the launch of the programme, out of more than 100 selected for such payout.
The Commission says that the delays were caused by “restructuring” the fund — and the lengthy, bureaucratic process of recruiting an external fund manager. But people familiar with the matter say the main issue is that some Brussels officials have started to doubt that the Commission has the relevant experience and resources to convincingly pull off this new VC role.
Alter Domus will now make the final decision on investments in high-risk startups, while the selection process will still be done by the EIC and due diligence will be carried out by the European Investment Bank.
The EIC will remain responsible for providing grant support and business acceleration services to the selected companies.
The first investment decisions are expected to be taken during October with other investment decisions completed in the coming months.