The European investment climate in 2023 was challenging yet ripe with opportunities, particularly in the tech area which was one of the key interests for investors. The European tech investment scene was marked by strong support for innovation, digital transformation, and sustainable growth. The European Investment Fund (EIF) shines a spotlight on this, through its extensive operations in the region, as detailed in their freshly released 2023 Annual Report.
Zubr Capital, a private equity firm that specializes in investing in rapidly expanding companies in the TMT sector, provides a review of the EIF’s report, taking into account EIF’s similar reports from 2019 and operational plans for 2024-2026, with a specific emphasis on Innovation and Digitalisation as EIF’s major areas of interest.
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Investing in Digital Transformation: Key Insights from EIF’s 2023 Annual Report
Continuing the trend from previous years, EIF yet again played a pivotal role in fostering enterprise growth and development in 2023, as reflected by the impressive figures. A grand total of €14.9bn was deployed by the EIF, which in turn made available €67.3bn to small and medium-sized enterprises (SMEs) across the region, supporting over 350,000 such businesses.
Looking at the bigger picture, these investments greatly influenced the dynamism of the broader economy, with €134.6bn expected to be mobilized. To break it down, the biggest share came from the Competitiveness & Growth sphere with €52.5bn, followed by Sustainability & Green Transformation contributing €47.7bn. Other significant contributions included Social Impact, Skills, and Human Capital, which accounted for €5.9bn.
Figure: Distribution of EIF Investments Across Economic Spheres in 2023
Source: based on the EIF 2023 Report
Turning our gaze towards Innovation and Digitalisation, it stood strong with €28.5bn investment. This sphere, already being one of the top three investment interest areas, indicates the continued emphasis on tech-driven development in the region.
Decoding the Trends: European Tech Investment Landscape Through EIF’s Annual Reports
While the importance of innovation and digitalisation support is universally recognised, it’s equally crucial to illuminate specific areas of strategic relevance for the EU and Member States through the lens of European Investment Fund (EIF) activities. By scrutinising the EIF reports from 2019 to 2023, we can understand the dynamic evolution of relevance that different tech areas have undergone each year. Notably, 2023 unveiled new territories of strategic importance that are worth our attention.
For several years, sectors such as AI, blockchain, language and machine learning, automation, data/analytics, B2B software, the Internet of Things (IoT), Software as a Service (SaaS), cybersecurity, and fintech have been fervently embraced by the innovation community. Interestingly, these areas have consistently held the limelight in EIF’s activities throughout these five years, demonstrating the prowess of EIF’s predictive analysis.
The COVID-19 pandemic has undeniably left its mark on the European investment ecosystem. This situation made the health tech and life sciences sectors more relevant than ever, and this focus has remained a cornerstone for investors even in 2023.
Highlighting Europe’s strategic autonomy, recent years have seen rising relevance in new areas. In 2023, ICT and deep tech saw significant growth supported by the EIF, underlining their importance. Europe’s burgeoning space industry also plays a pivotal role in the new space economy.
Billion Euro Milestone: The European Tech Champions Initiative and its Impact on Tech Investment
The European Investment Fund’s (EIF) new venture, the European Tech Champions Initiative (ETCI), is an exciting addition to the landscape. Celebrating its first birthday, ETCI acknowledges an impressive €1 billion in investments within its first year.
The ETCI has played a key role in funding various technology fields, contributing to the evolution of Europe’s digital and technological landscape. The organization has supported four funding schemes to date, each targeting different sections of the tech industry. Specifically, the initiative poured resources into Atomico Growth VI, a fund that allies with innovative tech entrepreneurs in Europe on their road to expansion. Furthermore, FSI II was also backed – a fund that supports the development and broadening of medium-sized Italian businesses. Another substantial investment was made into Keensight Nova VI, a fund that centres on sectors like cybersecurity, automation, robotics, enterprise software, med tech, and healthcare services.
ETCI’s new plan highlights the escalating significance of the technology industry as a potential investment field. The expectations for these investments are substantial, hoping to gather over €6 billion to power Europe’s digital evolution and support the expansion of its tech scene.
Paving the Way Forward: EIF’s Strategic Plans for European Tech Investment
As revealed in the EIF’s Corporate Operational Plan for 2024-2026, the European Investment Fund is setting ambitious targets for the tech industry in Europe. Despite navigating uncertain times, the EIF plans to continue its steady activity, targeting a level of EUR 14.0bn in 2024, demonstrating the prudence of EIF management even in light of eager demand for their equity and debt products.
InvestEU and RCR remain key EIF funders, expected to expand into defence and security. Higher budgets and additional funding from Norway and Iceland bolster investment efforts.
In 2024, it’s predicted that stock market operations will surpass the debt/guarantee sector for the first time. This is largely due to the European Tech Champions Initiative (ETCI). The ETCI is also expected to gain from extra donations and specialized co-investment tools. Combined with other fresh initiatives EIF aims to boost investment in the tech sector while diversifying its funding activities.
Through the EIF’s Lens: The Evolution and Future of European Tech Investments
Reflecting on the European investment climate through the lens of EIF’s activities, it’s clear that EIF’s activities in 2023 demonstrate a growing commitment to tech investment in Europe, particularly innovation and digital transformation. The persistence in tech sectors like AI, blockchain, automation, and cybersecurity indicates their continued relevance. The rise of ICT, deep tech, and the space industry illuminates Europe’s evolving strategic independence. The European Tech Champions Initiative and EIF’s future directions promise a promising future for the tech industry and the broader European economy.
You can read the full EIF Annual Report here and read Zubr Capital’s analysis here.
