The European Union is set to become a shareholder in select startup companies, as announced by the European Commission today. The move is an attempt by the organization to retain talent and innovative technologies by promoting interest from investors, rather than have startups leave for more competitive markets like the United States.
The first round of equity investment targets a total of 42 startups and small and medium-sized enterprises (SMEs), and it will grant a total of €178 million to those companies. Each business will receive between €500,000 and €15 million, resulting in a 10-25% equity for the EU. This way of funding is in addition to existing grants, which didn't involve the EU becoming a shareholder of the companies. In fact, this is the first time the EU is doing equity investments like this.
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education, and Youth, commented on the move:
“Europe has many innovative, talented start-ups, but too often these companies remain small or relocate elsewhere. This new form of financing – combining grants and equity – is unique to the European Innovation Council. It will bridge the funding gap for highly innovative companies, unlock additional private investments and enable them scale up in Europe.”
The first company to sign an agreement with the EU for this purpose is France-based CorWave, which developed a device that assists those with severe heart failure. The EU invested €15 million in the company, which it claims helped gather funding of €35 million in the fourth stage of financing. Other companies are planned to benefit from the measure in the near future, such as Hiber, a Dutch satellite company that provides "global and affordable" Internet of Things connectivity. Should the move work out as the EU hopes it to, the region could set itself up to compete with other tech superpowers on a level playing field.