The new 125 million ECU European Technology Facility (ETF) for investing in venture capital funds supporting high growth and technology-oriented small and medium-sized enterprises in the European Union, was established in Luxembourg yesterday. The ETF is being set up by the European Investment Bank (EIB) which is providing the 125 million ECU and the European Investment Fund (EIF) which will manage the new facility.
The ETF management agreement was signed by EIB President Sir Brian Unwin and EIF's Financial Committee Chairman Gerbrand G. Hop on the eve of the special European Employment Council meeting in Luxembourg. The European Investment Fund will invest the 125 ECU million drawn from the EIB's annual surpluses over the next three years in specialised venture capital funds that support the creation and development SMEs. Together with increased lending in the sectors of health, education, urban renewal, environment and Trans European Networks, the new facility forms a key part of the EIB's "Amsterdam Special Action Programme" in response to the request to the Bank from the Heads of State and Government at the Amsterdam Summit in June.
Sir Brian Unwin said: "I welcome this facility, which is a key element in our special growth and employment action programme. The Amsterdam Summit recognised the important role of the EIB and the EIF in creating employment through investment opportunities in Europe. The new facility merges the expertise and resources of the EIF and the funds of the EIB in a major effort to channel equity into technology related SMEs to stimulate employment through investment-led growth. These are the enterprises that will be the main source of jobs and innovation in the future."
Under the European Technology Facility the EIF is mandated to invest in venture capital funds or other vehicles that provide equity or other forms of risk capital for SMEs developing or using advanced technologies in industry or services, with a priority for SMEs in early stage development. The EIF will take minority positions to a maximum of 25% of the capital of any venture capital fund with a maximum in ECU of 12.5 million per investment. The main target will be funds managed by independent management companies in the European Union. Direct investments in SMEs are not authorised.
Eligible SMEs should, at the time of the initial investment, have net assets not exceeding 75 million ECU and employ fewer than 500 people. However, high priority will be given to funds investing in smaller SMEs to improve their competitiveness and innovative capacity, and their ability to create jobs.
The EIF has been active in the venture capital market since 1996, when its shareholders, the EIB, the European Commission and 76 financial institutions of the European Union, authorised the EIF to take equity participations for up to 75 million ECU. So far the EIF has concluded eight transactions totalling 23 million ECU in France, Germany, Belgium, the UK and Scandinavia. In order to maximise the leverage of ETF investments on individual funds, the EIB or the EIF may seek to encourage other partners to co-invest alongside the ETF in EU venture capital funds. The EIF itself may also, where appropriate, invest its own funds.
With the ETF's 125 million ECU and its own funds of 75 million ECU, the EIF will become an important player in Europe's venture capital market. According to Gerbrand G. Hop, Chairman of EIF's Financial Committee, the European Technology Facility could leverage around 500 to 800 million ECU in new investments. "As a public/private partnership the EIF is ideally placed to play an important role as a catalyst in the venture capital industry to stimulate job creation throughout the European Union", he said.