The EIC Fund as Europe’s biggest deep tech investor in 2023 — scale, structure and open questions

Brussels, July 6th 2023

Summary

›In Q1 2023 the European Innovation Council Fund became the largest venture capital investor in European deals by amount invested.
›Since launch in 2020 the EIC Fund has approved 268 investments totalling €1.407 billion with 147 signed agreements; after a 2022 restructure it approved 128 investments worth over €786 million.
›The Fund provides equity from €500,000 to €15 million per company to complement EIC Accelerator grants up to €2.5 million, and aims to crowd in private capital with an intended leverage.
›Decisions on investments are taken by an external AIFM, AlterDomus, with the EIB as investment adviser and EISMEA coordinating grant and accelerator processes.
›EIC investment guidelines introduce staged scenarios, compliance checks, protections for EU strategic interests and the option to acquire blocking stakes or undertake secondary share purchases when required.
›Key open questions include transparency of deal terms, market distortion risks, follow on and exit policies, and how strategic security safeguards will be applied in practice.

The EIC Fund as Europe’s biggest deep tech investor in 2023

In the first quarter of 2023 the European Innovation Council Fund, commonly called the EIC Fund, registered a milestone. Measured by volume of capital deployed into European deals, it became the largest venture capital investor in Europe for that period. The announcement by the European Commission highlights the Fund’s rapid scale up since it was launched in 2020 and since its internal restructuring in September 2022. The EIC Fund provides equity to deep tech start ups and scale ups and works alongside the EIC Accelerator grant scheme to create blended finance packages.

Scale, scope and the headline numbers

The Commission reported the following headline figures in July 2023. Since 2020 the EIC Fund has approved 268 investments for a total of €1.407 billion. Of those, 147 had reached signed investment agreements at the time of the announcement. Following a restructure in September 2022 the Fund approved 128 investments worth over €786 million. The EIC Fund’s target sectors include information and communication technologies, biotechnology, healthcare, energy, space, agriculture and related deep tech fields. Equity support generally ranges from €500,000 to €15 million per company, with higher amounts permitted in justified cases.

Metric	Figure / Range	Context
Total approved investments since 2020	268	Approved investment decisions recorded by EIC Fund
Total approved amount since 2020	€1.407 billion	Sum of approved investments
Signed investment agreements	147	Agreements signed with companies
Since Sep 2022 (post restructure) approved investments	128	Approvals after internal restructuring
Since Sep 2022 approved amount	€786 million	Approvals after internal restructuring
Typical equity range per company	€0.5 million to €15 million	Higher amounts possible in justified cases
EIC Accelerator grant	Up to €2.5 million	Grant component that can be combined with equity

How the EIC Fund fits into the EIC ecosystem and who runs it

The EIC Fund is the equity arm of the European Innovation Council. It is closely integrated with the EIC Accelerator grant programme which sits under the European Commission work programme for the EIC. The Agency that operates the EIC programme is EISMEA, the European Innovation Council and SMEs Executive Agency. The EIC Fund’s investment decisions are taken by an external alternative investment fund manager or AIFM.

External fund manager and decision making:AlterDomus Management Company S.A. acts as the external AIFM responsible for investment decisions in practice. The AIFM uses the EIC Fund Investment Guidelines when evaluating and approving deals. The AIFM is the formal decision maker on investments and divestments for the Fund compartment.

Role of the European Investment Bank:The European Investment Bank (EIB) serves as investment adviser to the EIC Fund. In that role the EIB performs or coordinates due diligence steps, guides legal work and supports transaction structuring. The EIB also supports valuation and risk assessments used by the AIFM.

Role of EISMEA and the EIC Accelerator selection process:EISMEA runs the EIC Accelerator selection process. Applicants submit a short proposal, a video pitch and a slide deck for initial assessment. Successful candidates submit a full application and may be invited to interviews with an EIC jury. The Accelerator awards can be grant only, grant plus an indicative investment, or in some cases investment only.

Blended finance and what the EIC actually offers

The EIC Fund is designed to complement the EIC Accelerator grants. The Accelerator provides lump sum grants for innovation activities up to €2.5 million. The EIC Fund adds equity or quasi equity to bridge financing gaps that are too risky or too early stage for private investors alone. The Commission described the 2023 offer for the Accelerator as approximately €1.13 billion in grants and equity investments across programmes, with €525 million earmarked for next generation strategic technologies such as energy storage, quantum, semiconductors, resilient agriculture, cancer biomarkers and space technologies.

Blended finance defined:Blended finance in this context means combining public grant funding for technology development with public equity or quasi equity investment aimed at de - risking innovations so that private capital will follow. Instruments can include direct equity, preferred shares, convertible notes, SAFEs and other hybrid instruments.

Instrument	Typical use case	Typical terms mentioned
Grant (EIC Accelerator)	Development activities TRL 6-8 and market readiness	Lump sum up to €2.5 million
Quasi-equity (convertible loans / SAFEs)	Very early stage where valuation or investor traction is not settled	Convertible loan often with 18 month maturity; interest and conversion discounts discussed in guidelines
Direct equity	When co-investors and market terms are available	Minority stakes targeted; 10% to 20% typical; €0.5m to €15m investment size

Investment strategy, eligibility and safeguards from the Investment Guidelines

The EIC Fund Investment Guidelines published alongside EIC materials set out how the Fund intends to operate. Those guidelines are technical and lengthy. Below are the key policy points that matter for innovators, investors and observers.

Target stages and sectors:The Fund targets pre - seed, seed and early stage SMEs and, exceptionally, small mid - caps. It favours deep tech and radical innovations with strong IP potential across sectors identified by the EIC, including energy, health, digital, space and advanced materials.

Geography and legal domicile:Eligible companies must be established and operating in EU Member States or Horizon Europe associated countries. The Fund may invest through a holding company in the appropriate jurisdiction where justified by the Adviser and AIFM.

Investment size and stake targets:Typical EIC Fund investments range from €500,000 to €15 million per company and target minority stakes in equity investments, generally aiming at 10 to 20 percent. The Fund can however acquire blocking stakes or take majority positions where required to protect European strategic interests in a specific case.

Protection of European strategic interests:Where the Commission flags a project as touching strategic areas, the Fund may be required to take measures to protect EU interests. These measures can include acquiring a blocking minority, negotiating shareholder agreements that prevent transfers to non - eligible countries, or secondary share purchases to secure European ownership of IP and company control.

The Investment Guidelines also articulate a staged, pragmatic approach to investing when private co - investors are not yet available. The approach groups potential investments into buckets that reflect investor readiness and the presence or absence of co - investor interest.

Buckets and staged approaches explained:Bucket 0 covers deals rejected after due diligence due to fraud, ineligibility or material adverse changes. Bucket 1 covers companies that are not yet investor ready where the Fund may provide convertible quasi - equity in an initial tranche and equity later, contingent on milestones and co - investment. Bucket 2 addresses situations where co - investors are interested and the Fund aims to co - invest matching the Fund amount and seek leverage. Bucket 3 covers situations where private investors offer to fund the full round; the Fund may still participate to secure strategic protections or reserve capacity for follow - on investments.

Co-investment and leverage targets:The Fund explicitly seeks to crowd in private capital. The guidelines set an ambition of significant leverage, with an objective of around 1:3 leverage across an investee company’s lifecycle. For direct equity the Fund looks for at least 1:1 matching by other investors in the same round, preferably Qualified Investors who add sector know how and networks.

Due diligence and compliance:KYC, AML, sanctions screening, tax and other compliance checks are mandatory. Due diligence covers governance, IP, market, financials and technology readiness. Failure to pass these checks can trigger rejection of the investment or termination of existing grant agreements.

Follow-on investments and exits:The Fund may make follow on investments in existing portfolio companies where needed to secure strategic interests or to avoid otherwise unfavourable terms. The Fund aims to be a patient investor with a typical time horizon of 7 to 10 years and up to 15 years in general. Exit routes include IPO, trade sale and secondary transactions and the Fund signals it will generally seek to exit alongside lead private investors.

How to apply to the EIC Accelerator and the practical process

The EIC Accelerator operates a two stage application process with streaming and batching. Applicants submit a short proposal at any time and are assessed in monthly batches. Successful short propos als are invited to prepare a full application and, if ranked highly, to interview with an EIC jury. The Commission provides feedback timelines: for the short proposal stage applicants typically receive feedback within about 4 weeks; full proposals are batc hed on fixed dates and interviews are scheduled periodically.

Step	What to submit	Timescale / notes
Step 1	Short proposal (12 pages), pitch deck (up to 10 slides), 3 minute video pitch	Submitted at any time and batched monthly; ~4 weeks for feedback
Step 2	Full proposal (20 page form), detailed pitch deck, implementation plan, financials, LOIs, FTO analysis, 3 minute video	Submitted to periodic cutoffs; expert remote evaluation then interview with technology expert
Step 3	Face to face or online EIC jury interview	Interview week follows remote stages; 2-3 weeks for final decision after interview
Step 4	Grant signature and start of investment due diligence if equity component awarded	Blended finance negotiations run in parallel; investments decided by AIFM and EIB due diligence

Applicants can apply at any time for Step 1 by sending a video pitch, slide deck and short proposal. If the short proposal gets a GO they may submit a full application at one of the cut off dates. The Commission stated the next cut off at the time was 4 October 2023. Successful candidates may receive a Seal of Excellence if they meet thresholds but cannot be funded immediately, which can help them find national or regional funding.

Governance, transparency and compliance issues to watch

The Commission materials and the EIC Fund Investment Guidelines contain many safeguards typical for public funds. Those include exclusion criteria, AML and sanctions checks, EU data protection regimes and obligations to publish certain portfolio information. The guidelines also include more interventionist powers where the Commission designates a project as concerning strategic European interests. These powers include taking blocking stakes, secondary share purchases and restricting transfers to entities or persons from specified jurisdictions.

Transparency of deal terms and disclosure:The EIC Fund will publish basic information about investees such as name, location, and amounts invested. However the detailed commercial terms of investments and shareholder agreements are often confidential. That opacity is standard in VC markets but it reduces public oversight when public capital is being deployed at scale.

Market distortion and crowding out concerns:Public patient capital supporting risky deep tech is a legitimate policy tool. The risk is that public equity at attractive terms can displace private capital or alter market pricing. The EIC Fund aims to avoid such distortion by matching and crowding in Qualified Investors, and by generally targeting minority stakes. But the guidelines also allow the Fund to take larger stakes to protect strategic interests, which increases complexity and the need for strong ex ante and ex post governance.

Security and geopolitical safeguards:The guidelines explicitly contemplate protecting European interests in strategic areas. That can mean restricting investment exits or enforcing transfer limitations when a company faces acquisition offers from entities controlled by nationals of non - eligible countries for the purposes of a specific Commission award decision. The legal and operational mechanics of such measures will be tested in practice and may raise questions about compatibility with standard investor protections, cross border investment rules and international trade obligations.

Implications, risks and questions for the innovation ecosystem

The EIC Fund is now a material actor in European deep tech financing. Its scale and integration with the EIC Accelerator give it leverage to mobilise private follow on capital and to provide early stage de - risking that is often missing in European markets. That is positive for founders who struggle to finance long development cycles in deep tech.

At the same time, the Fund raises legitimate questions that will determine its long term effectiveness:

1. How transparent will deals be?:Beyond high level portfolio disclosures, the public will want to understand valuation terms, preferential rights, exit terms and how often the Fund uses blocking stakes or other market interventions. Clearer reporting on leverage achieved and co - investor ratios will help assess market effects.

2. Will public equity crowd out private investors or change incentives?:The Fund stresses crowding in Qualified Investors and aims for leverage. In practice the balance between catalysing private investment and competing with it will depend on deal pricing, the Fund’s willingness to be a long term minority holder and its coordination with private lead investors.

3. How will strategic security safeguards be implemented?:The guidelines list measures to protect EU strategic interests, including blocking stakes and secondary purchases. Applying these tools will require careful legal design to avoid undermining investor confidence while protecting critical technologies.

4. What about exit discipline and reuse of capital?:The Fund describes a patient horizon but must also demonstrate timely exits so funds are recycled for new innovations. Exit timing, alignment with co - investors and rules for secondary sales need to be transparent to ensure capital is used efficiently.

Practical takeaway for founders and investors

Startups should treat the EIC Accelerator and EIC Fund as a combined offer: grants can finance development work and the Fund can provide tailored equity or quasi equity when private investors are scarce. Applicants must be prepared for KYC, sanctions and tax checks. Investors should expect the Fund to prioritise co - investment with Qualified Investors but also to act more interventionist in specific strategic cases.

For policymakers and market participants the EIC Fund is a live experiment in how public equity can be combined with grants to accelerate deep tech. The outcome will depend on governance quality, clarity on interventions to protect strategic interests and the Fund’s success in catalysing private follow on capital without crowding it out.

Where to read more

Key source documents include the EIC Fund investment guidelines, the EIC Accelerator guidance and the EIC work programme in force for the relevant year. Practical application details such as batching dates and cut offs are published on the EIC and Funding and Tenders portals. Interested founders should consult EISMEA and national contact points listed on the Commission portal for hands on support.

The EIC Fund as Europe’s biggest deep tech investor in 2023 — scale, structure and open questions

The EIC Fund as Europe’s biggest deep tech investor in 2023

Scale, scope and the headline numbers

How the EIC Fund fits into the EIC ecosystem and who runs it

Blended finance and what the EIC actually offers

Investment strategy, eligibility and safeguards from the Investment Guidelines

How to apply to the EIC Accelerator and the practical process

Governance, transparency and compliance issues to watch

Implications, risks and questions for the innovation ecosystem

Practical takeaway for founders and investors

Where to read more

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