There is a proposal in the European Union to provide a $3.9 billion financial support to the startups in the “Valley of Death.” This is with the objective of encouraging entrepreneurs and investors to translate their innovative ideas into a reality, and one day topple the tech giants throughout China and the United States of America.
Traditional capital venture firms are often not interested in investing in startups that are based on innovation and risky research to turn the scientific breakthrough into a consumer product, and this is what the European Commission’s Director for Research and Innovation, Jean-Eric Paquet believe.
He further said at the Slush technology conference in Helsinki, and it’s “the famous innovation value of death.”
This is a massive initiative to reduce the investment gap, which is always there in the Valley of Death. The aim of the proposed European Union funds to provide grant and equity to young startups those who are in the initial stage of research, it is so-called deep technology. The diverse technology sectors include Artificial Intelligence, Biotechnology, and Manufacturing, Jean-Eric further said at the conference.
This project of financial support from the European Union will be formally launched in the year 2021, and this will be governed by the European Innovation Council. However, it is expected that the final size of the investment will be changed in accordance with the budget talks happening with the member states of the European Union.
Even before this proposed program, the European Union has been backing tech companies by giving them support in the form of grants via the European Investment Fund. They invest in capital firms those hesitate in innovation-driven start-ups.
“We are hoping to make a big, big impact with this European Innovation Council,” Paquet said. “We are emulating indeed to an extent the positive features of traditional VCs.”
Over the last decade, the venture capital in European tech has soared significantly, as investors look for alternatives to the two big technology hubs, the US, and China. Also, there has been a massive trade war going between the US and China.
A recent venture capital firm Atomico study reported that the capital invested in European companies have gone from $15.3 billion in 2015 to $34.3 billion today. So, this is a massive leap suggesting the European companies in the years to come will be having a fierce battle with tech giants across the globe.
The pilot phase of the European Union’s initiative to financially support the startups commenced with EIC investing 600 million Euros in a pursuit to test the appetite of innovation of entrepreneurs, combined with grant and equity support, Paquet said. The pilot phase will be based on 50 to 100 projects, providing insight data to the European Union to plan a course of action.
The funds of EIC will take care of external experts who will be required to conduct due diligence and find the right startups to invest-in when the project of the EU moves from the pilot phase to actual funding.
Some investors have already given their approval to the EU plans of supporting startups in the Valley of Death.
“The European Commission’s approach to investment in deep tech is, in my view, very thoughtfully designed, laser-focused on areas that are not yet viable for venture capital investment,” said Sarah Cannon, a San Francisco-based partner at Index Ventures, a venture capital firm that has invested in European companies, such as payments firm Adyen NV and mobile game maker Supercell Oy.