While VC funding in Europe has slowed, the European Innovation Council (EIC) has stayed bullish. Via the EIC Fund, it has become the continent’s biggest deeptech investor, outspending private VCs and backing hundreds of startups across quantum, AI, health, biotech and space, according to Sifted data.
The EIC has completed over 300 investment rounds in startups and SMEs under Horizon Europe, the ambitious EU research and innovation framework programme for 2021-2027, including 60 rounds in 2024 alone. The Fund has also attracted more than €4bn in co-investment in direct equity rounds, primarily from private investors — this equates to over €3.50 of additional investment for every euro of EIC Fund's direct investment since it was established in 2020.
“The EIC has been instrumental in accelerating the growth trajectory of startups,” says Bindi Karia, innovation expert, venture partner and EIC ambassador. “Over 70 EIC-backed companies have attained 'centaur' status with valuations exceeding €100m, and six of these companies are valued at over €500m.”
The EIC Fund has invested alongside over 600 VCs, corporates and strategic investors, including the 25 largest VCs in Europe.
“On average, EIC-backed companies experience a 50% increase in both employment and turnover within two years of receiving an EIC award,” adds Karia. “Through EIC business acceleration services, 230 business deals have been facilitated with corporates, investors, procurers and other partners.”
Crowding in investors
As part of its offering, the EIC has a Trusted Investor Network with over 100 investors to accelerate co-investments and build a deeptech investor community.
One such investor is VC Amadeus Capital Partners. Hermann Hauser, director at the investment company and also a board member of the EIC Fund, describes the EIC’s role in keeping Europe competitive in frontier technologies as “catalytic”.
“The EIC is not allowed to make an investment in a European deeptech company unless at least 50% of the money comes from the market,” explains Hauser. “This means that the EIC really acts as a catalyst to crowd in the market, rather than crowd out the market.”
Such businesses that have received backing include French chipmaker SiPearl, which has been supported via the EIC Accelerator with a grant and an EIC Fund equity investment. The company is building high performance, energy efficient processors for supercomputing and AI, and recently closed its €130m Series A round with EIC Fund participation.
The EIC is not allowed to make an investment in a European deeptech company unless at least 50% of the money comes from the market.
Another is Finland-based IQM Quantum Computers, a quantum computing company specialising in superconducting technologies. The startup has been supported with an EIC Accelerator grant and an EIC Fund equity investment and recently closed its $320m Series B round — the largest Series B ever in the quantum sector and in Europe.
Paving the way
Competing on a global stage with the US and Asia in frontier technologies is a challenge to Europe. While the continent is creating high-growth startups at an accelerated speed, it still has some way to go in supporting such businesses to blossom to their full potential.
“The good news is that our university system has an IP output which is comparable to the US — and we actually produce more startups in Europe than the US,” says Hauser. “The problem that we do have is on scaleups’’.
“The regulatory and business environment in the EU is still not sufficiently conducive for bringing innovative products, services and solutions to users at the necessary scale,” says Karia.
“As a result, many innovative companies end up seeking venture capital and expanding opportunities outside Europe. Around 60% of all global scaleups are based in North America, in contrast with only 8% in the EU. The share of the EU in the global share of venture capital raised is only 5%, compared to 52% in the United States or 40% in China.”
People always lament the fact that we're way behind Silicon Valley, but if we compare Europe to where we were ten years ago, we are catching up.
Hauser: “That's why we are now raising a multi-billion Scaleup Europe Fund with the EIC. We hope to have the first closing some time early next year.”
As part of the EIC Fund, the Commission will collaborate with private investors to launch this privately managed and co-financed fund, with a focused investment strategy aimed at bridging the financing gap of deeptech scaleup companies.
Karia says Europe produces world-class research in quantum, photonics, AI safety and materials, but rarely can convert that science into scalable ventures. The issue, she tells Sifted, isn’t ideas, but translation infrastructure — technology transfer offices, patient capital, venture capital appetite to pre-product market fit, low traction, regulatory friction and risk appetite.
“We have the talent and the science — what we need is more capital with even more conviction and more investors willing to underwrite uncertainty, not just risk,” she adds. “This is definitely changing, but it certainly explains why we’re not quite there yet.”
Hauser agrees: “People always lament the fact that we're way behind Silicon Valley, but if we compare Europe to where we were ten years ago, we are catching up. Things are moving in a very positive direction, but we've got a long way to go.”
