European Innovation Council (EIC)

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The European Innovation Council (EIC) is a finance initiative by the European Union designed to help young and small businesses commercialize their products by providing a mix of grants and equity.
What are the main aims and objectives?

The overarching aim of the program is to support high-risk, high-reward innovations that hold the potential to create new markets or substantially disrupt existing ones. The main objectives of the EIC are:

  • Fostering Innovation: To promote the development of high-risk, high-impact innovations that can create new markets or disrupt existing ones.
  • Supporting Scale-ups: To assist startups and SMEs in scaling up game-changing innovations and technologies within the European market and beyond.
  • Facilitating Access to Finance: To provide financial support, such as grants and equity investments, to innovators, entrepreneurs, small companies, and researchers.
  • Encouraging Ecosystems: To create a conducive environment for innovation by connecting innovators with stakeholders, investors, and others in the ecosystem.
How does the program work?

The EIC provides several funding mechanisms for startups, SMEs and researchers to utilise in the process of bringing their innovations to market. They include:

EIC Pathfinder

The EIC Pathfinder program is an initiative that provides support to research teams to explore bold ideas for radically new technologies. It is specifically designed to foster high-risk, high-gain research that encourages visionary thinking, potentially leading to technological breakthroughs. The program offers grants of up to €3-4 million to support early-stage development of future technologies up to the proof of concept. This program is open to scientists, entrepreneurial researchers, research organizations, startups, high-tech SMES and industrial stakeholders. It also supports interdisciplinary collaborations aiming to open up new avenues for future technological advancements.

EIC Transition

The EIC Transition program is aimed bridging the so-called “valley of death” between the lab and marketplace by helping convert high-risk high-potential technology from research into innovation activities. Grants of up to €2.5 million are available to validate and demonstrate technology in an application-relevant environment and develop its market readiness. This program builds on the technologies that emerge from the Pathfinder program.

EIC Accelerator

The EIC Accelerator program supports individual startups and spinout companies to develop and scale high-impact innovations with the potential to create new markets or disrupt existing ones. The program provides a mixture of grant funding (up to €2.5 million) for innovation development costs and equity investments (through the EIC Fund) for scaleup costs. In addition to funding the accelerator provides coaching, mentoring, networking opportunities, access to investors and support for intellectual property management.

The EIC Fund

The EIC Fund is the venture arm of EIC which underpins the EIC accelerator through equity investment from €0.5 million to €15 million for selected breakthrough innovation companies. The main goal of the fund is to make “impact investments’ rather than seeking to maximize returns and it usually targets minority ownership stakes, around 10% that can rise up to 25%. Additionally, the program aims to encourage the participation of other investors to share risks by expanding the network of capital providers of co-investments and for follow on funding.

Eligibility criteria is tailored for each program but in general the EIC supports ideas from any area of technology or business sector, including novel combinations of technologies and business models. Support is available from feasibility to development to scale-up stages. EIC support is available to innovators from all EU Member States, countries associated to the EU Horizon 2020 programme, and to innovators from all parts of the world who establish their activities in Europe.

What is the overall cost?

The EIC has a total budget of €10.1 billion.

How was it implemented?

The EIC pilot (2018) 

This first pilot introduced bottom-up calls for SMEs (previously this support was restricted to predefined thematic areas) and changed the way applications are evaluated by introducing face to face interviews with a panel of experienced innovators.

It also brought together various instruments (SME instrument Fast Track to Innovation, Future and Emerging Technologies, Horizon Prizes) in a single place with an overall objective to support market-creating innovation. Finally, it introduced initiatives to strengthen mentoring and coaching opportunities for EIC beneficiaries. The budget for this pilot was €778 million in 2018.

The Enhanced EIC pilot (2019/2020)

Building on the initial pilot, it introduces targeted calls for future and emerging technologies (Pathfinder), Programme Managers for flexible management of the portfolio of projects, and an option to apply for blended finance (a combination of grant and equity) under the EIC Accelerator Pilot (previously this program was called "SME Instrument").  

  • ‘Pathfinder’ funding for projects: this program aimed to support creating novel breakthrough technologies from the research base.
  • Programme Managers: This call consisted on finding a first set of program managers with leading expertise in a number of future and emerging technology areas provide practical support for projects funded by the Pathfinder.
  • EIC Accelerator Pilot: The main focus of the EIC Accelerator was on market-creating innovations that shape new markets and generate jobs, growth and higher standards of living. ‘Accelerator’ funding was designed  to support startups and SMEs develop and scale up innovations to the stage where they can attract private investment. Under ‘accelerator’ funding companies were able to access blended financing (grants and equity) of up to €15 million. Within one year, a total of 293 companies had been selected for funding worth over €563 million in grants.

The budget for this pilot's provisions increased to €1028 million in 2019 and €1228 million in 2020.

In January 2021 The European Commission made its first direct equity or quasi-equity (i.e. blended with grants) investments into startups, backing 42 companies from around Europe, with €178m invested in total. A senior commission official told reporters that the move marks a “paradigm shift” for European funding, away from grants, and is aimed at helping companies compete with their American and Asian counterparts. 

The EIC is part of a wider ecosystem that the EU is developing to give Europe's entrepreneurs every opportunity to become world leading companies. It responds to data showing while Europe is known to generate a high number of startups, it was still falling behind its global competitors in terms of the size of its venture capital (VC) market and other measures. Policymakers observed that as a result startup companies often remained small or relocated elsewhere.

What impact has been measured?

Analysis of the pilot found that it supported:

  • Over 430 projects on Future and Emerging Technologies, involving over 2700 partners. These projects have generated over 3000 peer reviewed scientific articles, over 600 innovations, and over 100 patents.
  • Over 5700 startups and SMEs, who then raised over €5 billion in follow up investments (3 euro for every euro from the EU budget) and on average, more than doubled the number of employees in a 2 year period

The most recent impact report of the EIC was published in 2022 and reflects the impact of the 1600 innovative companies and 500+ technology projects funded by the EIC from 2014-2021 including its predecessor programs. The report found that the EIC has:

  • Incentivised over €10 billion in follow on investments
  • Achieved a combined portfolio valuation of €40 billion including 12 unicorn and 112 centaur company valuations
  • Provided €100 million to commercialize ground-breaking ideas through the first set of EIC Transition calls.

However, the impact assessment does not use control groups to measure the direct impact the EIC had in helping its participants achieving follow on investment and growth.

What lessons can be learned?

Since the European Commission had no direct experience in venture capital, there is a mixture of optimism and concern with regards to the EIC's intent to start its equity program. One worry is that while public investment in small tech companies can help get new products to market, it can also crowd-out private investment. See more, here.

CURATED BY

Cristina Fernandez

Director for Knowledge + Programming
Global Entrepreneurship Network
United States