Innovation Norway, the Mission of Switzerland to the EU, and SwissCore joined forces for an event to discuss how to unlock capital for deep tech investments.
SwissCore, the Mission of Switzerland to the EU and Innovation Norway gathered representatives from the financial and the research and innovation (R&I) sectors in Brussels for an event to discuss how to mobilise untapped capital for deep tech investments and how to build trust among the European Innovation Council (EIC), Venture Capitalists and Institutional Investors.
European Innovation Agencies were present for the annual policy event of the TAFTIE network, the European Network of Innovation Agencies, which in 2024 was under the Presidency of Innosuisse, the Swiss Innovation Agency. The Chair was handed over to the Finnish counterparts, Business Finland, and we commend Annalise Eggimann (former CEO of Innosuisse until summer 2024) and her team for the excellent presidency.
The presence of high-level representatives from innovation agencies was the perfect occasion to organise a briefing to engage with stakeholders on the topic of deep tech start-ups and scale-ups and exchange views on the limitations and opportunities of existing funding and regulatory mechanisms. After the welcome words of the Ambassador from the Mission of Switzerland to the EU, Rita Adam, Dominique Gruhl-Bégin, appointed CEO of Innosuisse since summer 2024, set the scene pitching why Switzerland is one of the most innovative countries in the world. The Swiss are strong in all the essential levers: 1) industry-academia collaborations, 2) vibrant R&I ecosystems, and 3) competitive excellence. She emphasised the importance of aiming for excellence through collaboration in the future, focusing on later-stage development such as Public-Private Partnerships (PPPs) to increase public funding support and de-risk large projects, and finally using both ARPA-style projects (a more agile and mission-oriented approach to support disruptive innovation modelled on the American Defense Advanced Research Projects Agency (DARPA)) to create urgency in specific sectors while in parallel, continuing to invest into incremental innovation, as the latter contributes to the innovation culture. This is particularly true for Switzerland, as SMEs significantly contribute to the innovation culture.
Emily Sinnott, Head of Division Policy and Strategy, from the European Investment Bank (EIB) gave insights on how to identify the financing gap for innovative companies. She elaborated on the results presented in the EIB’s report on the ‘Scale-Up Gap’. The scarcity of EU investors able to provide financing at the scale-up phase pushes many EU companies to seek funding abroad and, at exit, look for foreign buyers or get listed on foreign stock exchanges. The gap roots in the lack of financing of large-scale and later-scale start-ups, the regulatory framework, and the fragmentation of the Single Market. One striking figure demonstrating the financing gap is the cumulative capital raised since establishment by scale-ups: while after 10 years, EU- and London-based scale-ups cumulated slightly more than $300 million on average, San Francisco-based scale-ups are above $600 million. Emily Sinnott also presented the EIB Group’s support in the lifecycle of a company, covering the value chain from seed funding to mature firms using direct via the EIB, or indirect via the European Investment Fund (EIF) investment vehicles. Some of the recommendations in the EIB’s report found their way into the Draghi report, for instance increasing the EIB Group’s capacity to take on more risk and finance innovative start-ups and scale-ups, but also better coordinating with the EIC and National Promotion Banks.
The growth journey from a scale-up perspective was presented by Jurgita Miseviciute, Head of Public Policy and Government Affairs at Proton, a start-up born at CERN in 2014, which became a leading provider of privacy-focused and secure tools thanks, among others, to their end-to-end encrypted email service (Proton Mail). After 10 years of activity, the Swiss-based company is now active in the global market, with 100+ million users spread across 180+ different countries and 500+ employees. In a sector with fierce competition, notably amid Big Tech players, privacy and end-to-end encryption are part of Proton’s success story. Proton could grow exponentially thanks to support via grants from the Swiss and European sides. Jurgita Miseviciute mentioned two crucial steps: first, with the support from the Fondation Genevoise pour l’Innovation Technologique (FONGIT), and then from the SME Instrument under Horizon 2020, predecessor of the EIC Accelerator under the current Framework Programme Horizon Europe. The former helped to set a strategic direction for the new start-up, particularly thanks to the advisory services provided by Antonio Gambardella, FONGIT’s Director, who is now a Board Member of Proton. The latter, an EU grant of roughly €2 million, was instrumental in de-risking Proton Drive’s technology development. After a successful crowdfunding at the very early stage, Proton also benefitted from Venture Capital at the beginning of their journey but, after a few years, decided to stay financially autonomous to safeguard Proton’s mission and values. Hence, shareholders are mostly the company’s employees. By using a subscription-based business model, Proton is a profitable company in a highly competitive sector, showcasing the utmost importance of targeted external funding for strategic purposes while remaining aligned with its core values.
During the final part of the event, potential solutions for the sector were discussed in a panel with diverse stakeholders: Keith Sequeira – Head of the EIC Unit from the European Commission, Piotr Michałowski – Investment Advisor from the lending side of the EIB, Martin Bresson – Director of Investor Europe, an umbrella organisation representing the VC and Private Equity sector, Eva Camerer – Director of Strategy at Innovation Norway, and Otto Bruun – Scientific Advisor from the Swiss national government. As the new College of Commissioners prepares to begin its mandate, with the next Framework Programme (FP10) on the horizon and the development of the next Multiannual Financial Framework (MFF) underway, we can expect lively continued discussions in the coming months on the topics we have addressed: Trusted Investor Network from the EIC pooling resources from investors and create this trust in the investment process of the EIC, EIC STEP Scale-Up Call to provide equity-only funding from €10 to €30 million with €300 million per year until the end of Horizon Europe, a boosted EIC Fund to support more promising start-ups, EIB Venture Debt as one of the most patient capital that one can find on the market, proposal for a Savings and Investments Union as a revamped version of the Capital Market Union, which is still in the making, the possible creation of a 28th regime as a pan-European legal status for start-ups allowing them to incorporate in one country and operate across the Single Market and facilitating the access to a more significant portion of the potential 440 million EU customers, and finally more efficient PPPs to make business cases out of the R&I projects thanks to the uptake of solutions by large corporates or even public innovation procurement. Some of these initiatives are already being implemented, while others remain under consideration and must be discussed among Member States. However, the panel showed a strong consensus on the need for rapid enforcement of these measures to strengthen the sector and address the various gaps facing the EU.
As Dominique Gruhl-Bégin mentioned during her closing remarks, “we need to remember that we are in a global innovation race and while we are progressing, others are progressing as well”, so our collaboration efforts should continue. The dialogue at the European level has now been set in motion, and the EU – including its stakeholders from Member States, R&I or financial sectors – should follow with actions.