EIB and EIF sign new agreement for developing venture capital facilities in Europe

The European Investment Bank (EIB) is raising to EUR 250 million its allocation to the European Technology Facility (ETF), set up in 1997 and managed by the European Investment Fund (EIF). As a fund of funds, the ETF invests in specialist venture capital funds supporting the creation and development of high-tech, growth-oriented SMEs in the European Union.

The new ETF management agreement was signed on 22 October in Paris by EIB President, Sir Brian Unwin, and the Chairman of the EIF's Financial Committee, Mr Gerbrand G. Hop, at the annual Forum organised by the European Investment Bank.

While, under the ETF, priority is given to SME start-ups, measures targeting development capital towards innovative companies, especially in regions in which the venture capital industry is less established, may also be included. ETF operations take the form of acquisition of minority stakes (maximum 25%) of EUR 5 to 10 million in venture capital funds.

The EUR 85 million deployed so far under the first tranche of EUR 125 million allocated to the ETF have been invested in 19 venture capital funds, themselves having total capital of over one billion euro. It is anticipated that the funds benefiting from the ETF will invest in more than 1 000 SMEs over the course of their investment periods. The ETF could leverage a total of some EUR 2 billion in new investment.

EIB support for growth and employment

The ETF is a component of the "Amsterdam Special Action Programme" (ASAP), launched by the EIB in 1997 with a view to stepping up its support for job-creating investment projects. Under ASAP, the EIB seeks in particular to bolster venture capital facilities for SMEs. To date, some EUR 750 million has been committed for operations involving virtually all the EU countries, making the EIB a major source of venture capital finance in Europe.

The aim of ASAP is also to underpin job-creating investment in the fields of health, education and urban renewal. The EIB has committed nearly EUR 8 billion in support of 60 projects or programmes in these sectors, the majority located in assisted areas and some taking the form of public-private partnerships.

The EIF: a market player

The European Investment Fund is a major player on the European venture capital market, on which it has been active since 1996. In tandem with the funds managed on behalf of the EIB, the EIF is investing some EUR 80 million from its own resources. It also administers on behalf of the European Union a facility more specifically designed for investment in more recently established or regional venture capital funds with a higher risk profile. The EIF has a total of some EUR 500 million at its disposal for investing in venture capital and promoting the development of this industry in Europe. Created in 1994, the EIF is the youngest of the European financial institutions. Its shareholders are the EIB (40%), the European Union (30%) and a group of 75 financial institutions from within the EU (30%).

As well as venture capital operations, the EIF provides guarantees for major infrastructure projects in Europe and for portfolios of loans to small and medium-sized enterprises.