This is the post number four of a series that explains the revised EIC Investment Guidelines. We focus on Methods as well as Investment Strategies.

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.

Updated: 1st March 2022

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.



Insight on:

Methods and Investment Strategies


In general, the EIC Fund will evaluate projects in sight of equity investment to the valuation set by the market.

Valuation methods may vary depending on the business modelsmarkets and sectorstechnology and other aspects to consider.

Even though no standard practice exists, investors commonly use some methods. As the official documents report, they are:

  • Multiples of Earnings: for a start-up, it is usually considered a Times Revenue Method (sometimes applied on an expected value). It indicates a business’s maximum worth by assigning a multiplier to its current revenue. Multiplier benchmarks vary according to industry, economic climate, and other factors.
  • Fair Market Value: it reaches the value of a company by comparing it either to similar businesses that have sold previously or to a peer group of comparable companies listed on the stock markets.
  • Book Value: it considers the value of the business’s equity by taking into account the market value of the assets, intangible assets, minus total liabilities (eventually adjusted if there is a relevant swing in the cost of debt).
  • Price of recent investment: it takes account of the valuation used in a recent previous investment in the company. Then, it estimates the current valuation based on the value creation from that reference point.
  • Discounted Cash Flow: it values a business based on its projected cash flow discounted by a factor (usually the average cost of capital). The result is the present value. It is more often applied to companies in growth or mature stage as cash flow generation is needed.
  • Other asset-based methods: among several other asset-based approaches there is the “liquidation value”.


Please note that these methods are market references for valuation purposes and tools for companies in their negotiations with potential investors.

Often, these negotiations are time consuming and interfered by intangible factors such as bargaining power, which will significantly influence the valuation.

Here, you can find some FAQ about EIC Investments.


Equity / Equity-type Investments

An emerging business may use different types of instruments to funds its growth.

The financial instruments used by the EIC Fund will take the form of equity or quasi-equity investments. In this case, there are a standard equity and a quasi-equity instrument. They are as follows:

  • Common shares: they represent an ownership interest in a corporation, including an interest in earnings and dividends. They may be voting or non-voting and may be divided into classes with special voting privileges assigned to each class. In the venture capital (VC) market, founders as well as management team usually hold common shares.
  • Preferred shares: they represent a hybrid in the sense that it is an equity interest with debt-type features, such as seniority at dividend payments and liquidation proceeds. VC funds usually hold preferred shares.
  • Convertible instruments: as convertible loans/bonds/notes, participation rights, SAFEs, etc. with a convertibility feature attached to an attractive debt instrument for the issuing company, they postpone dilution until the company’s next equity funding round. They offer flexibility to investors allowing them to shift the risks and rewards of their investment to some point in the future after the initial investment.
  • Other equity-type instruments appropriate to achieve the objectives of the EIC Accelerator.


The EIC Fund will invest patient capital. There is a long average perspective on return on the investment (7-10 years), with a maximum of 15 years generally. Such level of return is assessed on a case-by-case basis.

Likewise, the exit strategy for each company is set on a case-by-case basis. They take into account the specificities of each business plan, industry, expected holding period as well as the development of the companies compared to the initial milestones set. Exit routes may include initial public offerings (IPOs), management buyouts, secondary sales or liquidations.

It is implicit that EIC Fund’s main objective is to “impact investment” rather than to maximise return on the investment.

Here you can find a list of some of the beneficiary companies for Equity Investments.

As the website states, the following steps precede all investments:

  1. thorough evaluation by external experts,
  2. due diligence process that the EIC Fund Investment Committee oversees, and
  3. final decision by the EIC Fund Board of Directors.


Lastly, to learn more about the EIC Revised Guidelines, check out our previous articles on:

Types of innovation;

Characteristic of investment; and


methods and investment strategies

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