ETCI 2: Europe Aims to Mobilize €80 Billion for Tech Scale-Ups

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Europe is getting serious about growth capital: The second edition of the European Tech Champions Initiative (ETCI 2) is meant to channel up to €80 billion into more than 1,500 European tech scale-ups. Fundraising is already in its final stretch, a spokeswoman for the European Investment Bank (E.I.B.) confirmed to the German business daily Handelsblatt. The fund’s first formal close is expected before the end of the year. After that, it can start investing, even though further commitments will still be possible.

€15 Billion as Leverage

At the heart of ETCI 2 is a fund of funds with a target size of up to €15 billion, roughly four times as much as its predecessor. The E.I.B. Group itself is contributing up to €1.25 billion, and the initiative is backed by the governments of all 27 E.U. member states, according to the E.I.B.’s announcement at the launch in the summer. Private investors such as Danske Bank, Banco Santander, BBVA, AltamarCAM, Azimut, Green Arrow Capital and the Compagnia di San Paolo foundation are also on board. “The partnership launched today is all about scale and speed,” said Nadia Calviño, the president of the E.I.B.

The fund of funds does not invest directly in start-ups. It allocates money to more than 100 growth funds, including up to 45 mega-funds with more than €1 billion each. For the first time, mid-sized funds of €300 million or more are also eligible. The average investment per company is expected to be about €200 million.

What the Money Is For

According to the European Investment Fund’s project page, ETCI 2 targets highly innovative companies in the growth phase, mainly in these areas:

• A.I. and deep tech: Artificial intelligence and research-intensive technologies.
• Life sciences: Biotech and medical technology.
• Security and space: Cybersecurity and space technology.
• Fintech and clean tech: Financial technology and climate-friendly technologies.

In addition to the fund of funds, there is a dedicated investment platform that allows pension funds, insurers, foundations, family offices and banks to invest in European tech funds in a structured way. The stated goal is to mobilize more private capital for European tech funds, so that large growth rounds can also be financed in Europe.

What ETCI 1 Delivered

The first ETCI fund launched in 2023 with €3.9 billion, about €1 billion of which came from Germany. The capital went into 15 mega-funds, which, according to the E.I.B., helped produce 12 E.U.-based unicorns. One example is the Rome-based cybersecurity start-up Exein, which recently closed a funding round with ETCI participation at a valuation of $1.7 billion (about €1.5 billion). Trending Topics covered the initiative when it was first announced in 2022.

National Initiatives and Criticism

ETCI 2 is designed to complement national programs such as France’s Tibi initiative, Germany’s WIN initiative and the European Commission’s Scaleup Europe Fund. There was fundamental criticism of state-backed multibillion-euro tech funds, however, as early as the announcement of the first ETCI. Dries Faems, a professor at WHU Otto Beisheim School of Management, argued at the time that there was no clear market failure to justify the use of taxpayer money. Public investors, he said, would also be likely to shift toward safer bets after early failures, and political interests could influence how the money is distributed. It would make more sense, he argued, to integrate the digital single market and create regulation that rewards risk-taking.