The Investment Guidelines have been updated to provide more clarity to applicants and to reflect recent changes in the management of the EIC Fund and will remain in place until the end of 2022.

 

The general article here:
https://www.andriotto.com/revised-eic-investment-guidelines-available-2022/

PDF available HERE

Updated: 1st March 2022

Check out our previous article about the “types of innovation” here:

In the next articles, we would like to introduce some of the main points discussed in the document that might be of interest for any project that needs investors.

Today,

Insight on:

Characteristic of Investment

As reported in the document,

The EIC Accelerator supports innovators and entrepreneurs. Starting at the earliest at TRL 5 down to TRL9, the support aims at bringing their innovation to market deployment and scale-up. Adding to a grant component for TRL 5 to 8 activities, representing up to 70% of these activities’ costs, the investment component may be tailored and take different forms. It may consist of convertible instruments (i.e. loans/bonds/notes and other similar instruments such as participation rights and SAFE), a combination of such quasi-equity instruments and direct equity, or direct equity, initially covering seed stage up to growth equity rounds – to support the innovator along its journey from concept to scale up, evolving and increasing as stages of maturity and TRLs are achieved (milestones). Without prejudice to possible follow-on investment and the provisions of the Work Programme, which may provide for a higher amount in specific cases, the awarded initial investment component will range between EUR 0.5 and EUR 15.0 million.

What exactly is the TRL? We already talked about it in this article:

Basically, the TRL (acronym for Technology Readiness Level) is a method for understanding the maturity of technologies during the acquisition phase of a program. Enabling consistent and uniform discussions across different types of technologies, it allows precise development follow up: the TRL spans from level 1 up to level 9 – which is the most mature stage.

The European Commission advised EU-funded research and innovation projects to adopted it in 2010 and thus, in 2014 in the EU Horizon 2020 program extended to the Horizon Europe.

Establishing each company’s TRL level is vital for the success of the project itself to be recognized as eligible for the funds.

Leveraging in alternative investments

The EIC Accelerator focusses on innovators and entrepreneurs, and complements the Single Union financial instrument (InvestEU), which is investor and financial intermediary driven.

The InvestEU Programme supports sustainable investment, innovation and job creation in Europe. It aims to trigger more than €372 billion in additional investment over the period 2021-27. Built on the successful model of the Investment Plan for Europe, the Juncker Plan, it will bring together, under one roof, the European Fund for Strategic Investments and 13 other EU financial instruments.

To know which “windows” – main policy areas – that the Programme supports and which are the benefits involved, check our this link.

The EIC Accelerator aims at directly de-risking selected operations in order to better bridge these two worlds and crowd-in investors. For that purpose, the EIC Accelerator is designed to fulfil the role of initial or first risk-taker, where needed.

When investing direct equity, hence for this section excluding the investments in form of quasi-equity instruments, the EIC Fund will systematically seek co-investment from and syndication with other investors, at least on a matching basis 1:1 (and seeking a leverage effect of 1:3 throughout the investment horizon), and even alternate investors.

 

Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth said:

 “Europe has many innovative, talented start-ups, but too often these companies remain small or relocate elsewhere. This new form of financing – combining grants and equity – is unique to the European Innovation Council. It will bridge the funding gap for highly innovative companies, unlock additional private investments and enable them scale up in Europe.”

 

It will aim to crowd-in significant and fit-for-purpose additional or alternate funding needed to successfully develop an innovation, deploy it to the market and scale-up, whilst ensuring its sustainability. In addition to enhancing the impact of the Union support and contributing to stimulate the overall European investment ecosystem, bridging with and crowding-in qualified investors at the earliest stage is essential for the success of the investee companies and their innovation.

More than funding only, “qualified investors” can add critical value to a company: they also have the knowledge, the expertise, the teams and the networks of contacts needed to help investee companies reinforce their teams and business strategies, and achieve a successful commercialization and scale up in the specific verticals, in accordance with their high-growth potential and ambition.

 

In fact, the Commission is assessing lessons learnt from the EIC pilot phase and is being advised by the EIC Board to identify the best options to implement EIC equity investments. The objective is to put in place a sustainable and efficient instrument to make investment decisions, attract qualified investors and manage investments following the best market standards while addressing the EU policy goals. The long-term EIC Fund management approach is expected to be ready for the 2023 EIC Accelerator calls and to remain in place until the end of the current Horizon Europe programming period in 2027.

 

Also, depending on the starting stage of the operation and its nature, investors may include Business Angels, Venture Capital funds, Impact investment funds, Family offices, Venture debt funds, National Promotional Banks and Institutions (NPBIs) or corporate venture arms.