European Commission updates EIC Fund investment rules to include defence activities and STEP scale-up financing

Brussels, August 27th 2026

Summary

›The European Commission published an updated version of the EIC Fund Investment Guidelines covering investments made under the EIC Accelerator and STEP Scaleup.
›Key changes add defence and dual use activities, reflect larger STEP investments, and tighten alignment on safeguards, TRL expectations, follow-on finance and IP handling.
›The update clarifies investment processes, ranges, diligence steps and scenarios for co-investment, while reiterating the Fund’s crowding-in objective at roughly 3.5x leverage.
›The guidelines apply to Accelerator and STEP beneficiaries; separate guidance for the Scaleup Europe Fund compartment will follow after its establishment.

What the August 27, 2026 update changes and why it matters

On 27 August 2026 the European Innovation Council and SMEs Executive Agency (EISMEA) published an updated set of EIC Fund Investment Guidelines. The document explains how the EIC Fund approaches investments and divestments for companies selected under the EIC Accelerator and the EIC STEP calls. The update formalises several policy shifts that have been evolving across 2025 and 2026 work programmes and public announcements.

Headline changes in the guidelines

Compared with the previous version the guidelines make four practical adjustments that applicants and potential co-investors need to note. First, they explicitly include defence and dual use activities to reflect recent amendments in the EIC work programme and the launch of STEP defence calls. Second, they reflect larger per-company investments introduced under STEP Scaleup. Third, they add more explicit treatment of investment safeguards aimed at protecting EU strategic interests. Fourth, they tighten alignment on technology readiness levels, follow-on investments and intellectual property expectations.

Defence and dual use inclusion:The updated guidelines now cover activities that are defence or dual use in nature. This change mirrors earlier work programme amendments that opened the Accelerator and STEP to technologies with potential defence applications. The STEP Defence Scale Up strand explicitly targets critical defence technologies and offers equity investments for companies operating in areas such as air and missile defence, drones and counter drones, semiconductors and other strategic fields. The guidance stresses eligibility for firms in EU Member States, associated EEA countries and Ukraine, while flagging national clearance and additional safeguards where third country ownership could raise security concerns.

Larger STEP investment envelopes:Where the Accelerator investment component historically ranged up to about €10 million, STEP Scaleup investments are larger. The guidelines and related work programme documents set equity-only STEP investments in the EUR 10 to 30 million range per company. Calls allocate specific budgets to the STEP instruments for 2026 and beyond, reflecting the intention to catalyse much larger follow-on rounds.

How the EIC Fund now frames its investment approach

The updated guidelines restate the EIC Fund’s role as a strategic, patient, impact-oriented investor that aims to catalyse private capital while supporting high risk deep tech ventures. The guidelines explain the investment instruments, eligibility constraints, due diligence and the scenarios under which the Fund will invest. They also set out the Fund’s approach to monitoring, follow-on funding and exits.

Feature	EIC Accelerator (blended/equity component)	EIC STEP Scaleup (civil)	EIC STEP Scaleup Defence
Typical investment instrument	Grants plus equity or quasi-equity (convertible instruments possible)	Equity-only for STEP; convertible/quasi-equity may be used in Accelerator	Equity-only
Investment size per company	Approximately EUR 0.5M to EUR 10M	EUR 10M to EUR 30M	EUR 10M to EUR 30M
Target TRL at application	TRL 5 to 9 for investment component with grant building up earlier TRLs	TRL 5 to 9; focus on scaling and market deployment	TRL 5 to 9; scale strategic defence tech
Target total round to be catalysed	Varies; crowding-in objective encourages co-investment	Target rounds EUR 50M to EUR 150M or more	Target rounds EUR 50M to EUR 150M or more
Budget examples	Part of EIC work programme grants and equity allocations	STEP 2026 budget cited as EUR 300M (guidance note context)	STEP Defence 2026 budget cited as EUR 100M (guidance note context)
Geographical eligibility	EU Member States and Horizon Europe associated countries	EU Member States, associated EEA countries, Ukraine	EU Member States, associated EEA countries, Ukraine; extra checks on third country ownership
Key added requirements	Stricter alignment on IP, TRL justification and safeguards	Precommitment letter from investor covering minimum portion of round in STEP guidance	Additional national security and control checks; exclusion clauses for entities with problematic control

Key process features and technical concepts explained

Technology readiness level (TRL) expectations:The guidelines use TRL as a shorthand for the maturity of technology. They generally expect investment-stage projects to be at TRL 5 to 9. That means the EIC Fund will concentrate on technologies that have been validated in relevant environments through prototypes and are approaching market deployment. Earlier-stage research remains within the remit of Pathfinder and Transition grants rather than the equity arm.

Forms of capital and quasi-equity:The Fund may use direct equity and a range of quasi-equity instruments including convertible loans, SAFEs and preferred shares. Convertible instruments are used in particular for cases where de-risking is expected before a full equity round. The guidelines describe tranche-based investments where an initial convertible instrument may be followed by an equity tranche once milestones or a qualified round are achieved.

Investment 'buckets' and scenarios:The guidelines use a pragmatic categorisation to explain how investments are executed. 'Bucket 0' covers fatal due diligence findings where no investment follows. 'Bucket 1' covers companies with addressable shortcomings where the Fund may invest with staged or convertible financing and mandatory mentoring. 'Bucket 2' concerns cases with investor appetite where the Fund seeks syndication and matching. 'Bucket 3' covers cases where private investors would provide the full round but the Fund might still co-invest to secure strategic protections or a blocking position if required by the Commission award decision.

These distinctions are operational. They guide whether the Fund will be a patient anchor, a staged de-risker, or a minority co-investor aligned to a private lead.

Due diligence, compliance and exclusions

The guidelines expand on due diligence steps. Core checks include anti-money laundering, know-your-customer, tax compliance, sanctions screening and reputational risk. Due diligence covers management quality, cap table and UBOs, IP ownership, freedom to operate and technical validation. Adverse findings can lead to rejection, suspension, termination or even cancellation of previously awarded EIC support.

Exclusion list and ethical constraints:The Fund will not invest in activities that contravene Horizon Europe ethical principles or EU law. The guidelines list exclusions spanning forced or harmful child labour, activities illegal under host or international law, pornography, certain hazardous materials, destruction of critical habitats, tobacco-focused business models, and lethal autonomous weapons without meaningful human control. Defence-related investments are allowed where explicitly covered but remain subject to additional safeguards.

Governance, roles and visibility

The guidelines reiterate the multi-actor governance model. The European Commission and EISMEA manage the grant component and selection. The EIC Fund is a separate vehicle supported by the EIB as investment adviser and an external AIFM (fund manager) that executes investment decisions under the Fund’s statutes. The EIC Fund Board, Advisory Committee and Investment Committee exercise oversight. The EIB participates in due diligence and investment advice while the external fund manager runs day-to-day portfolio management.

Transparency and publicity:Investment agreements include clauses that permit the Compartment to communicate certain information about invested companies, such as name, locality, investment amount and general business description. The Fund's public reporting emphasises leverage ratios and portfolio counts but also raises questions among observers about granular exit economics and effective returns.

Follow-on investments, monitoring and exits

The Fund describes a lifecycle approach. It will monitor milestones closely and use tranche payments tied to milestone achievement. Follow-on investments are possible subject to Commission approval, remaining eligibility under the programme, and available budget. The Fund positions itself as a patient investor, with typical investment horizons described at seven to ten years and a maximum of fifteen years in some cases.

Exit routes:Planned exits include IPOs, trade sales, secondary sales and, where necessary, write downs. The guidelines also contemplate mechanisms to protect EU interests on exit such as pre-emptive rights, share sale arrangements and, in rare cases, disposal of an interest for a symbolic price to ensure European ownership retention in sensitive cases.

Contextual data and performance claims

The updated guidance sits against a public narrative about the EIC Fund as a major European deep tech backer. Since 2020 the Fund reports more than 360 portfolio companies and a leverage metric of roughly EUR 3.5 in additional capital for each euro directly invested. The Trusted Investor Network reported 111 signatories with combined assets under management above €300 billion in 2025 and early 2026 communications. The Scaleup Europe Fund remains a separate vehicle under the EIC umbrella with a private manager expected to be selected through a call process run in late 2025 and early 2026.

Implications and risks to watch

The guidelines are operationally informative but raise policy and market questions. Opening the EIC Fund to defence and dual use technologies changes the political and reputational profile of an EU innovation instrument that previously focused primarily on civilian deep tech. That shift requires robust, transparent safeguards and clearer public reporting lines to reassure stakeholders that national security checks, procurement rules, and export controls are properly integrated.

Other areas to monitor include:

Crowding-in versus market distortion:The Fund emphasises a crowding-in objective and cites a leverage metric. That outcome is plausible in many cases. However public capital acting as an early anchor can also change deal terms and valuations in ways that favour existing shareholders or lead investors. The guidelines try to calibrate market terms and emphasise minority stakes but the proof will be in execution and co-investor behaviour.

Defence investment and transparency risk:Investing in defence-related technologies poses extra classification, national security and export control complexities. The guidelines add rules about third country control and exclusions but leave much of the national-level gating to implementation. Civil society, some EU member states and investor groups will demand clarity on how sensitive technologies are screened and monitored.

Intellectual property and industrial policy:The Fund emphasises keeping IP and economic value in Europe where possible. That is consistent with the EU push for strategic autonomy. Yet detailed practice around licensing, spin-outs, and exits will determine whether this objective is achieved without creating distortions or undermining companies' ability to attract global partners.

Practical guidance for applicants and potential co-investors

If you are preparing an application or considering co-investment alongside the EIC Fund, pay attention to: the TRL justification and milestone plan; the expected equity instrument and tranche structure; cap table transparency and UBO disclosure; any national security or export controls that may apply to defence or dual use elements; and IP ownership and freedom to operate materials. For STEP applications the call materials require precommitment letters and evidence of investor interest for the targeted large rounds.

Action for applicants/investors	What to prepare
TRL and milestone narrative	Clear technical milestones and TRL progression, realistic timelines, and metrics that can be audited at tranche points
Cap table and UBO disclosure	Full cap table, shareholders agreements, identify UBOs and any third country ties that might trigger national vetting
IP and FTO	Freedom to operate analysis, patent ownership documentation and licensing terms
Investor precommitments for STEP	Signed letters of commitment from lead investor(s) showing minimum share of target round and syndication plans
Compliance and KYC	AML, sanctions, tax and registration documents and readiness to provide additional contracting information

Where to find the guidelines and what comes next

The EIC published the updated guidelines on 27 August 2026 and made the full document available for download. The update applies to companies selected for the EIC Accelerator and the EIC STEP Scaleup calls. Separate investment guidelines for the Scaleup Europe Fund compartment will be released after that compartment’s establishment and operationalisation. Interested applicants should consult the EIC work programme materials and the Funding and Tenders portal for STEP and Accelerator call details and deadlines.

For investors the Trusted Investor Network and the EIC co-investment matchmaking platforms remain the entry points to review deal flow and syndication opportunities. For policymakers the central questions remain how to balance strategic autonomy, sectoral industrial policy and market functioning while ensuring transparency and accountability for public investment in early-stage and strategic deep tech.

Bottom line

The updated investment guidelines are a pragmatic attempt to align the Fund’s operations with an expanded policy agenda that now includes strategic and defence-relevant technologies and larger scale financing through STEP. They contain sensible operational detail about instruments, due diligence and exit planning. The critical test will be implementation: whether the EIC Fund can mobilise private capital without skewing valuations, preserve European value and IP, and manage the political and security sensitivities that come with defence-related investments. Applicants and co-investors should read the updated guidance closely and budget time for the additional compliance, disclosure and investor engagement steps that the document formalises.