Ref. Ares(2017)1216894 - 08/03/2017
Commissioner Carlos Moedas
Meeting with Members of the European Round Table of
Industrialists (ERT)
Berlaymont
12 September 2016
17:00 – 18:00
Main contact person:
Cabinet Member:
,
,
RTD colleague at meeting: Name, , RTD-
Person responsible:
unit, office
Back up (in case of absence): Name, ,
RTD-unit, office
link to page 4 link to page 4 link to page 4 link to page 5 link to page 10 link to page 11
Table of Contents
0. AGENDA OF MEETING / PROGRAMME OF EVENT
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1. STEERING BRIEF
4
1.1 Scene setter
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1.2 Objectives
4
1.3 Line to take
4
2. SPEAKING POINTS
5
3. DEFENSIVE POINTS
10
4. CURRICULUM VITAE
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5. BACKGROUND INFORMATION
11
5.1 Heading
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6. FACTS AND FIGURES
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6.1 Horizon 2020 Country profile (if applicable)
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6.2 FP7 Country profile (if applicable)
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6.3 Heading
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7. SOCIAL MEDIA
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8. ANNEXES
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8.1 Heading
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KEY MESSAGES
The Commission, the Council- as expressed at its last Competitiveness
Council1 - and the Parliament2 agreed that Digital Revolution has opened
up new opportunities and on the necessity that an adequate regulation.
ERT is a very good proof of how cooperation among private actors is an
essential key enabler for such development and represents a tremendous
influence on potential growth and job creation.
Europe must increase its efforts for a clear and coherent legal framework
able to break down digital barriers to facilitate start-ups to grow fast and
to remain in Europe.
Strengthening our European dynamic ecosystem for entrepreneurs is my
driving force of my mandate, as I have made open innovation, open
science and open to the world the three priorities, so that more start-ups
can succeed from Europe and in Europe.
Many instruments, under Horizon 2020, are influential factors to soften
start-ups' systemic problems, thought incentives and grants.
1 See Council of the European Union, Competitiveness Meeting, 26 and 27 May 2016.
2 See relevant supporting analyses prepared by Parliament’s policy departments for the committees on Internal
Market and Consumer Protection, Foreign Affairs, Employment and Social Affairs, Economic and Monetary
Affairs, Industry, Research and Energy, and Culture and Education.
http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/568994/IPOL_BRI(2016)568994_EN.pdf
1. STEERING BRIEF
1.2 Objectives
To re-affirm the key role of start-ups within the Research and Innovation Policy
To explain how the RTD instruments support start-ups within Digital Economy, by
focusing on three key aspects:
o Facilitating access to research and innovation grants
o Making start-ups ecosystems more dynamic by responding to structural gap
(resources and knowledge) as well as ecosystem deficiency (access to finance
when high-risk projects)
o Bridging gap between feasibility of high-risk projects and market constraints
Asking ERT members their concrete proposals in better supporting European start-ups in
their particular challenges in facing their bottlenecks.
1.3 Line to take
Europe has many examples of start-ups in all parts of Europe and we need to celebrate
them more.
Our future prosperity requires more start-ups to 'scale up' into world class businesses.
The Commission fully understands the need for policy changes as evidenced for
example by the initiatives on the Digital Single Market and Capital Markets Union.
2. SPEAKING POINTS
High-growth young firms play a critical role contributing substantially to
intra-industry labour productivity growth. An increasing number of so-called
'unicorns' (start-ups valued at over $1 billion) are home-grown in Europe3.
Cooperation between industry and academia has intensified. Digital
technologies have been instrumental in the growth of start-ups.
Their leverage effect on net job creation is very important. For example, in
Sweden and Spain, the Start-ups ratios on net job creation are, where in any
given year, for every existing 100 jobs, start-ups will add between 5 to 7
new jobs4. That means that young SMEs are primary source of job creation.
These two elements combines lead to the conclusion that Europe shall work
for better regulation, which helps unleash the full innovative potential of
our start-ups and people. Moreover, Europe's ability to attract inward
investment requires pro-innovation regulatory context.
The Commission has confirmed the importance of innovation through its
different instruments t to better face their systemic barriers and to avoid
that innovation in Europe remains marginal by providing a high-quality and
cost-effective regulatory framework to fast growing firms.
Start-ups are very much dependent on bank lending and equity. In the Euro
Zone, loan rejection rates as well as interest rates remain in the Eurozone,
ecosystemic barriers for start-ups. Start-ups particularly cannot tap capital
markets due to their size, scant credit information and regulatory
obligations. Alternative financing mechanisms like venture capital, private
equity and other non-bank channels play a very limited role especially for
3 http://techcrunch.com/2015/11/02/identikits-of-the-european-unicorns/#.kqukio:KC9i
4 OECD Science, Technology and Industry Scoreboard 2015 Innovation for growth and society, p193.
EU start-ups and SMEs. Private funding for start-ups in the EU is very
limited.
Stronger efforts are put in place by the European Union to provide better
conditions for financing of start-ups. In the context
of the Investment Plan
and t
he Capital Markets Union5, the European Union aims at improving their
access to finance.
The European Innovation strategy implemented through Horizon 2020 is
responding to this by also distinguishing more clearly the respective roles of
company size and sector orientation.
Under Horizon 2020 Programme, many instruments already provide a
tailored-made support to start-ups, either through collaborative projects,
the SME instrument, and finally the different financial instruments. This
overall combination of instruments provides better structural conditions to
start-ups to drive their high-risk projects into the market.
Start-ups are a volatile group of enterprises: on average 40% of start-ups
exit within the first three years of activity. The challenge Europe faces is an
insufficient amount of venture capital available for high-growth scale-ups.
European venture capital funds are financing too many start-ups with too
little money. And dedicated growth venture capital funds are too few in
Europe.
As a consequence, companies at the scale-up stage cannot call on deep and
sophisticated capital markets to raise the capital they need. The main
problem is the high fragmentation of the EU venture-capital industry along
national borders.
5 {COM(2015) 468 final}
A.
Opportunities for start-ups under the assess to finance tools
Financial instruments have the objective to ease and strengthen access to
finance (debt and equity) for innovative SMEs and small midcaps with the
objective:
o To leverage between 2014 and 2020:
Up to €9 billion of loans;
Up to €1.8 billion of early stage investments;
o To make concrete synergies with the European Structural and
Investment Funds (ESIF) in order to offer joint portfolio guarantees or
joint securitisation operations for the benefit of R&I-intensive SMEs
and small midcaps in the context of the SME Initiative.
Key results achieved up to now (as of end of February 2016) are very
positive:
o With the InnovFin SME Guarantee product, launched with the EIF in
June 2014:
41% of the target to leverage €9 billion of loans for innovative
SMEs and small midcaps has already been achieved by the end
of December 2015 (i.e. €3.96 billion of expected maximum
portfolio of loans) [15 Member States covered; 31 agreements
with intermediaries];
62% of the target has been achieved by February 2016 (i.e.
€5.57 billion of expected maximum portfolio of loans);
In the fall of 2016 at the latest, the full objectives will already
be reached [with an almost full geographical spread (33
Member States or Associated Countries) and around 80
Agreements]
o With the InnovFin SME Venture Capital product, launched with the
EIF in June 2015:
13% of the target to leverage €1.8 billion of early stage
investments for innovative SMEs and small midcaps has already
been achieved (i.e. €237 million of expected investments out of
which €52.7 million of EU investments) [4 operations signed –
out of which 3 multi-countries; out of which 3 VC Funds and 1
Business Angels Fund];
52% of the target are expected to be achieved by the end of
2016 already according to EIF pipeline (i.e. €937 million of
expected investments out of which €219 million of EU
investments). [10 additional operations under appraisal, out of
which 8 VC and 2 BA Funds]
o Under the Uncapped Guarantee product of the SME Initiative
launched with COSME, the EIF and the EIB on January 2015:
3 agreements have been signed with Spain, Malta and Bulgaria,
all have chosen Horizon 2020 InnovFin SME Guarantee as a
financing partner.
According to 'European Startup Monitor"
6, 21.2% of European start-ups are
in the start-up stage and have succeeded in generating revenue. The
following Instrument is for them in particular to consolidate their growing
phase:
B. Opportunities for start-ups under the SME Instrument
In Phase 1, the highest number of evaluated projects is in ICT (ODI), with
4172 projects representing 29% of all evaluated proposals. In Phase 2, ICT
(ODI) yields a number of evaluated projects with 1340 projects out of 4738 –
6
See: http://europeanstartupmonitor.com/fileadmin/presse/download/esm_2015.pdf
representing 28%.7. So, demand is there and it is up to Europe to succeed even
better.
Analysis provided by Venture Radar8 on companies selected for funding
under SME Instrument presents the following results: out of 1.640 selected
SMEs, 8% raised €692 million of private investment in total. This represents an
average of € 5,2 million per company. Phase 1 companies gathered € 214
million and Phase 2 SMEs, €478 million (69%).
C. Optimisation of result by complementarity with national schemes
According to "The 2016 Startup nation Scoreboard 2016"9 published by the
European Digital Forum, In terms of dedicated policy frameworks for start-ups,
18 EU member states have a national strategy in support of start-ups. This
normally falls within broad policy actions such as a digital strategy (Belgium,
Germany, Ireland and Luxembourg), SMEs and entrepreneurship (Croatia,
Malta, Portugal and Spain) or the broader reform agenda (Czech Republic).
69% of European start-ups do not achieve unbroken revenue growth between
years two and three of their existence, according to a World Economic Forum
report10. Exit strategy shall be enhanced at policy level.
The European Union is increasing investment alongside EU member states in
large public-private venture capital funds of funds.
7 All following data is provided by EASME, June 2016.
8 Data was collected and provided by Venture radar in March
2016 www.ventureradar.com
9 See:
http://www.europeandigitalforum.eu/index.php/component/attachments/attachments?id=311&task=view
10 World Economic Forum,
Enhancing Europe’s Competitiveness: Fostering Innovation-Driven Entrepreneurship
in Europe (Geneva:World Economic Forum, 2014).
http://www3.weforum.org/docs/WEF_EuropeCompetitiveness_InnovationDrivenEntrepreneurship_Report_20
14.pdf
3. DEFENSIVE POINTS
A) SME Instrument
1)
Are start-ups really targeted within the SME-Instrument?
Only SMEs are eligible to such instrument and may apply, as a single for-profit SME or as a
consortium of for-profit SMEs. All applicants need to be legally established in the EU-28 or
in a country associated to Horizon 2020. Other partners, such as research providers or larger
companies, can be involved as third parties, usually in a subcontracting relationship, and do
not need to be established necessarily in the EU or countries associated to Horizon 2020.
B) Financial instruments
2) There are no support for exit strategy in Europe?
Because of the diversity of rules in EU member states, venture-capital managers bear high
costs in raising funds across Europe. The result is EU venture capital funds are relatively
small, and thus have less capital to support growing businesses. That is a reality that we
cannot deny. However, the instruments put in place under Horizon 2020 are building up an
opposite trend. Also, the European venture-capital sector has become increasingly reliant on
public-sector institutions for the past decade. That should also change. Increasing of
involvement of private investors is essential, and ERT actions and involvement is a good
proof of it.
5. BACKGROUND INFORMATION
Innovation Support Schemes: some characteristics
┌--------------------------I N N O V F I N
-----------------------
A
C
E
---┐
F
Startup Europe
SME Instrument
SME VC
SME Loans
WHY
1. Market failure type
asymmetric info
asymmetric info
asymmetric info
asymmetric info
strengthen European
crowd-in private €,
crowd-in private €,
encourage lenders to
2. Policy goals in addition
startup ecosystem
tackle Soc. Challenges
structure VC industry
support R&I
support start-ups and
support single firms
force-feed small, fast
3. Innovation is more likely to happen
connect them to support
through early stages of
fish, & help them
help minnows expand
if you
systems & networks
innovation cycle
grow
SMEs pre-seed, seed,
4. Entity type / stage
SMEs
SMEs post-start-up:
WHO
start-ups
start-up; some
supported
(single-firm focus)
single firms
growth; singletons
5. Quality of team / promoter /
yes: by EIF re fund, &
yes by EIF re bank, & by
no
no
beneficiary is assessed face-to-face
by fund re firm
bank re firm
grant €50k phase 1
VC ~ €2.2 early, €7m
WHAT
6. Funding type
none
loan €25k to €7.5m
€0.5-2.5m phase 2
growth –1st round
7. Innovation stage
early
early to close to market
early
early to growth
7.
a) TRL
not specified
at least 6 for phase 2
not specified
not specified
8. Innovation type
tech (ICT) /services (Web)
business-driven
technological
all types
from incremental to
high novelty [sic];
towards the
from incremental to
9. Innovation degree
disruptive (sector
foundational [sic]
disruptive pole
disruptive
variance)
10. Interplay with private capital
attract networked capital
strong so far
strong
strong
network & support
coaching, investment-
11. 'Smart' funding available
mentoring
some banks mentor
actions
readiness training …
EU + ACs
EU+ACs: KPIs to avoid over-concentration on
HOW
12. Geog. implementation
EU +ACs
NW Europe: see Notes
13. Intermediation levels
in cooperation with NGO
1 - EASME
2 - EIF, then fund
2 - EIF, then bank
14. Redirection possible
n/a
yes (phase 1=>2)
yes (not untypical)
unlikely
15. Investment write-off possible
n/a
yes (grant)
yes (not untypical)
yes (guarantee)
16. Connects to networks
very strong emphasis
yes (phase 3)
no
no
17. Short-/long-term balance
short
short
medium
can be long
18. Supply matches demand
yes
no
yes so far
just (with EFSI help)
funds, first-come,
banks, first-come, first-
19. Competitive level
n/a
very high
first-served
served (see note F.19)
bottom-up within ICT &
bottom-up, within
20. Bottom-up vs. top-down
mixed
bottom-up
Web focus
hi-tech focus
21. Alignment of interest
evaluators: no
evaluators: no
fund managers: yes
loan officers: yes
22. Speed of tangible outcome
fast
fast (time to grant)
slowish
fast
Overview of Financial instruments for SMEs and Start-ups
In 2014, the European Commission, together with the European Investment
Bank and European Investment Fund launched "InnovFin – EU Finance for
Innovators", a series of Horizon 2020 complementary financing tools (covering
both debt and equity financing) and advisory services supporting R&I
promoters, such as universities, research centres, and companies - from the
early stage to growth stage, all throughout the innovation lifecycle.
The EU financial contribution to InnovFin, coming from the Horizon 2020
Access to Risk Finance Programme is expected to reach almost EUR 3 billion for
the period 2014-2020. It is projected to leverage around EUR 25 billion of
financial support corresponding to an expected total investment of around EUR
50 billion.
InnovFin SME Guarantee targets R&I-driven SMEs and small midcaps
requiring loans of between EUR 25 000 and EUR 7,5 million. A loan of more
than EUR 7,5 million can be considered on a case-by-case basis. The European
Investment Fund (EIF) implements this facility by providing direct guarantees to
financial intermediaries (such as banks and non-bank lenders), who extend the
actual loans to final beneficiaries. The guarantee covers up to 50% of
intermediaries' potential losses (up to 80% in the case of the SME Initiative
additional participation mechanism described below). EIF also offers counter-
guarantees to financial intermediaries (such as guarantee institutions)
providing risk protection to banks or other entities extending loans to R&I-
driven SMEs and small midcaps.
InnovFin SME Venture Capital improves access to risk finance by early-
stage R&I-driven SMEs and small midcaps through supporting early-stage risk
capital funds that invest, on a predominantly cross-border basis, in individual
enterprises. SMEs and small midcaps located in Member States or in Associated
12/15
Countries are eligible as final beneficiaries. The European Investment Fund (EIF)
makes and manages equity investments into risk-capital funds. EIF is able to
invest in a wide range of financial intermediaries, including those cooperating
with business angels. The funds concerned make VC and quasi-equity (including
mezzanine capital) early-stage investments in enterprises, which are mainly
SMEs. In the case of multistage funds (i.e., covering both early- and growth-
stage investments), funding can be provided pro rata from this facility and
COSME's growth-stage equity facility, EFG. A pilot sub-facility focuses on co-
investments with business angels in the ICT domain.
The
SME Initiative uses funds from COSME, Horizon 2020 and European
Structural and Investment Funds (ESIF) combined with resources from EIB and
EIF. The initiative enables Member States and regions to channel significant
amounts of ESIF through InnovFin SME loan Guarantee. Member States and
regions may choose to deliver part of their operational programmes by
allocating national or regional programme contributions in this way, with
disbursements geographically linked to contributions. The initiative can take
the form of joint portfolio guarantees or joint securitisation operations for the
benefit of R&I-intensive SMEs and small midcaps.
SME Instrument
Horizon 2020 provides financial support covering the entire innovation
cycle, from conceptualisation-to-market. The European Commission launched
an unseen portfolio of new opportunities for SMEs; which definition
encompasses start-ups.
Horizon 2020 promotes start-ups participation across the board, but in
particular in the industrial leadership and societal challenges pillars. 20% of the
total combined budget for all societal challenges (SC) and the enabling and
13/15
industrial technologies (LEITs) will be allocated exclusively to SMEs. In addition,
the new SME-Instrument innovation activity is receiving 7% of the combined
budget SCs & LEITs.
In the SME Instrument, half of SMEs participating in Phase1 have less
than 10 employees. A majority are start-ups, in particular in domain of short-
term innovation cycle (such as ICT).
In Phase 1, the grant size is fixed to €50.000 for all selected projects –
while in Phase 2, the average amount in 2014-2015 period was €1,7 million.
14/15
7. SOCIAL MEDIA
Hashtags
#H2020
#Competitiveness
#Innovation
#investors
#ScaleUps
#StartUps
#InvestEU
#EU_EIC
Related corporate accounts
@EU_H2020
@innovationunion
15/15
Document Outline
- Commissioner Carlos Moedas
- Meeting with Members of the European Round Table of Industrialists (ERT)
- A. Opportunities for start-ups under the assess to finance tools
- Financial instruments have the objective to ease and strengthen access to finance (debt and equity) for innovative SMEs and small midcaps with the objective:
- o To leverage between 2014 and 2020:
- Up to €9 billion of loans;
- Up to €1.8 billion of early stage investments;
- o To make concrete synergies with the European Structural and Investment Funds (ESIF) in order to offer joint portfolio guarantees or joint securitisation operations for the benefit of R&I-intensive SMEs and small midcaps in the context of the SME Ini...
- Key results achieved up to now (as of end of February 2016) are very positive:
- o With the InnovFin SME Guarantee product, launched with the EIF in June 2014:
- 41% of the target to leverage €9 billion of loans for innovative SMEs and small midcaps has already been achieved by the end of December 2015 (i.e. €3.96 billion of expected maximum portfolio of loans) [15 Member States covered; 31 agreements with i...
- 62% of the target has been achieved by February 2016 (i.e. €5.57 billion of expected maximum portfolio of loans);
- In the fall of 2016 at the latest, the full objectives will already be reached [with an almost full geographical spread (33 Member States or Associated Countries) and around 80 Agreements]
- o With the InnovFin SME Venture Capital product, launched with the EIF in June 2015:
- 13% of the target to leverage €1.8 billion of early stage investments for innovative SMEs and small midcaps has already been achieved (i.e. €237 million of expected investments out of which €52.7 million of EU investments) [4 operations signed – out...
- 52% of the target are expected to be achieved by the end of 2016 already according to EIF pipeline (i.e. €937 million of expected investments out of which €219 million of EU investments). [10 additional operations under appraisal, out of which 8 VC ...
- o Under the Uncapped Guarantee product of the SME Initiative launched with COSME, the EIF and the EIB on January 2015:
- 3 agreements have been signed with Spain, Malta and Bulgaria, all have chosen Horizon 2020 InnovFin SME Guarantee as a financing partner.
- According to 'European Startup Monitor" , 21.2% of European start-ups are in the start-up stage and have succeeded in generating revenue. The following Instrument is for them in particular to consolidate their growing phase:
- B. Opportunities for start-ups under the SME Instrument
- In Phase 1, the highest number of evaluated projects is in ICT (ODI), with 4172 projects representing 29% of all evaluated proposals. In Phase 2, ICT (ODI) yields a number of evaluated projects with 1340 projects out of 4738 – representing 28%. . S...
- Analysis provided by Venture Radar on companies selected for funding under SME Instrument presents the following results: out of 1.640 selected SMEs, 8% raised €692 million of private investment in total. This represents an average of € 5,2 million...
- C. Optimisation of result by complementarity with national schemes
- According to "The 2016 Startup nation Scoreboard 2016" published by the European Digital Forum, In terms of dedicated policy frameworks for start-ups, 18 EU member states have a national strategy in support of start-ups. This normally falls within ...
- 69% of European start-ups do not achieve unbroken revenue growth between years two and three of their existence, according to a World Economic Forum report . Exit strategy shall be enhanced at policy level.
- The European Union is increasing investment alongside EU member states in large public-private venture capital funds of funds.
- 5. BACKGROUND INFORMATION
- Overview of Financial instruments for SMEs and Start-ups
- In 2014, the European Commission, together with the European Investment Bank and European Investment Fund launched "InnovFin – EU Finance for Innovators", a series of Horizon 2020 complementary financing tools (covering both debt and equity financing)...
- The EU financial contribution to InnovFin, coming from the Horizon 2020 Access to Risk Finance Programme is expected to reach almost EUR 3 billion for the period 2014-2020. It is projected to leverage around EUR 25 billion of financial support corre...
- InnovFin SME Guarantee targets R&I-driven SMEs and small midcaps requiring loans of between EUR 25 000 and EUR 7,5 million. A loan of more than EUR 7,5 million can be considered on a case-by-case basis. The European Investment Fund (EIF) implements ...
- InnovFin SME Venture Capital improves access to risk finance by early-stage R&I-driven SMEs and small midcaps through supporting early-stage risk capital funds that invest, on a predominantly cross-border basis, in individual enterprises. SMEs and s...
- The SME Initiative uses funds from COSME, Horizon 2020 and European Structural and Investment Funds (ESIF) combined with resources from EIB and EIF. The initiative enables Member States and regions to channel significant amounts of ESIF through Inno...
- SME Instrument
- Horizon 2020 provides financial support covering the entire innovation cycle, from conceptualisation-to-market. The European Commission launched an unseen portfolio of new opportunities for SMEs; which definition encompasses start-ups.
- Horizon 2020 promotes start-ups participation across the board, but in particular in the industrial leadership and societal challenges pillars. 20% of the total combined budget for all societal challenges (SC) and the enabling and industrial technol...
- In the SME Instrument, half of SMEs participating in Phase1 have less than 10 employees. A majority are start-ups, in particular in domain of short-term innovation cycle (such as ICT).
- In Phase 1, the grant size is fixed to €50.000 for all selected projects – while in Phase 2, the average amount in 2014-2015 period was €1,7 million.
- 7. SOCIAL MEDIA