The initiative is historic because the EU has never before invested money in exchange for pure equity stakes. All the companies currently in the process have previously been granted EU funding of up to €2.5 million, something that the European news site Sifted has reported on.
So far, 42 of the total 159 companies have received an investment. Eight of the companies on the list are Swedish startups.
Strict requirements for companies
One of those that has also secured investment is the Uppsala-based life science company Ilya Pharma, which is developing a drug for faster wound healing. Evelina Vågesjö, CEO and co-founder, describes the process as having developed them into an even more mature and professional company.
– Before the decision was finalised, we underwent a very thorough review that has been ongoing throughout the autumn, where several experts in a range of different fields have examined the company. It is the most comprehensive due diligence I have ever been involved in.
Ilya Pharma has had an open issue which they are now closing where several of the investors have a long-term horizon.
The company’s aim is to deliver the first electric aircraft for regional air travel by 2026. According to Anders Forslund, this will require action from the EU.
– It is absolutely essential to bridge the gap between research and producing actual products. We know what needs to be done to reach climate targets, but so far it has been unclear what the major investments for this should look like. Therefore, we are very pleased to be able to build up the infrastructure for this at an early stage. An effort similar to the one made during the Cold War is needed for aviation, but with the climate as the threat.
Do you see any limitations with the funding?
– Of course EU funding comes with a certain burden regarding reporting, but it is largely good and as it should be.
Hired a CFO
For Handiscover, the review is complete and their case will be presented to the EIC's investment committee before a final decision is made. Handiscover is a community-based booking site dedicated to people with special needs and disabilities to help find accessible holiday accommodation.
The company's founder, Sebastien Archambeaud, talks about an educational process that led them to hire a CFO.
– For smaller companies that haven't previously brought in venture capital, the process can probably be quite demanding, but even for us who have come a bit further, it has been educational and developing, he says and continues:
– Another advantage is that we have gained a small insight into the evaluation templates that the European Investment Bank, EIB, uses when they look at companies raising significantly larger sums for, for example, Series B and C rounds. A concrete effect of this is, among other things, that we have hired a CFO, a role we did not previously have in the company.
Many startups – but few succeed
The purpose of the investments is primarily to strengthen the competitiveness of European companies against their counterparts in America and Asia, but also to solve a specific problem: Europe generates a large number of startups, but few of them succeed in taking the next step. According to the Commission itself, the VC market is three to four times smaller in Europe compared to the USA.
The problem is very much applicable to Swedish startups.
We generate a great many innovations and Swedish startups, but scaling them up leaves a lot to be desired, said Minister for Enterprise Ibrahim Baylan at the Techarenan Summit event in the panel discussion on Sweden as a platform for the world's best entrepreneurs.
A third purpose is also to attract private investors by reducing the risks. Especially in the deep tech sector, where returns normally take longer to materialise than in other industries.
Want to transform the entire aviation sector
A deep tech company on the EIC's list is the Swedish company Heart Aerospace, which is developing electric aeroplanes. They were previously selected from among 2,000 applicant companies and received funding from the EU's Green Deal, as well as an investment offer.
– It is an honour to have been chosen like this by the EU. Partly because it gives us the opportunity to reach our goals faster, but also because it is proof of our quality, says Anders Forslund, founder and CEO of Heart Aerospace.
– This is our first truly major institutional investor and it is exactly the right step in the company's development right now. We are entering Phase II clinical development and we engage around 50 people weekly in the team, we are no longer a startup. Another advantage once you have got a foot in the door of the EU's various investment programmes is that it constantly generates opportunities for various types of follow-on investments, says Evelina Vågesjö.
The company’s aim is to deliver the first electric aircraft for regional air travel by 2026. According to Anders Forslund, this will require action from the EU.
– It is absolutely essential to bridge the gap between research and producing actual products. We know what needs to be done to reach climate targets, but so far it has been unclear what the major investments for this should look like. Therefore, we are very pleased to be able to build up the infrastructure for this at an early stage. An effort similar to the one made during the Cold War is needed for aviation, but with the climate as the threat.
Do you see any limitations with the funding?
– Of course EU funding comes with a certain burden regarding reporting, but it is largely good and as it should be.
The Swedish companies on the EIC's list:
Invoier
Fintech company using AI technology to help businesses get better prices for their invoices and assess risk. Based in Stockholm.
Colzyx
Medtech company based in Lund focusing on wound healing.
Handiscover Sweden
Booking site that guides disabled people to hotels and accommodation with solutions for their needs. Based in Malmö.
Gleechi
Stockholm-based robotics and VR company.
Modvion
Cleantech company from Gothenburg that builds wind turbine towers using modules made of wood.
TADA Medical
Medtech company that has developed a solution to prevent injuries when intravenous lines are accidentally disconnected. Based in Stockholm
Ilya Pharma
Life science company from Uppsala focusing on wound healing.
Heart Aerospace
A deep-tech company developing electric aircraft for regional air services.
The article is published in full on Techarenan.se, 2021-01-11:
https://www.techarenan.news/2021/01/11/eu-investerar-svenska-startups-equity-investment-andelar-i-bolagen-2021/
About Invoier:
Invoier provides solutions for company financing and has developed Sweden’s only marketplace for invoices. The purpose is to enable market-based pricing for financing and growth of small- and medium sized businesses, as well as a new type of investors get access to this market. The technical base of the offer consists of a unique AI engine that will anticipate both if and when an invoice will be paid. Invoier was founded in 2020 in Stockholm and is financed by the EU and KTH and operates with permission of the Swedish Financial Supervisory Authority and the Swedish Authority for Privacy Protection. Read more about Invoier