Over 60% of the InvestEU guarantee supports high-risk financing for startups, scale-ups, and innovative technologies.

More than 60% of the InvestEU guarantee is used for financial products and beneficiaries with a high-risk profile, including equity and quasi-equity investments in startups, scale-ups, and innovative technologies, according to the European Commission. Nathalie Berger, director at DG GROW and future chair of the InvestEU Steering Board, says that this model must be maintained and expanded in the future European Competitiveness Fund so that growing European companies can find capital in Europe.

In short, over 60% of the InvestEU guarantee is used for high-risk products and for beneficiaries facing greater difficulties in attracting capital. A significant portion of the financing is provided in the form of equity and quasi-equity, often through funds that invest in innovative startups and scale-ups. InvestEU also finances projects that aim to bring green and innovative technologies from the initial phases to commercialization and scaling. The Commission states that one of Europe's problems is the lack of capital for companies that have surpassed the startup phase and need to grow rapidly. In the successor to InvestEU in the European Competitiveness Fund, the Commission proposes increasing the provisioning rate from 40% to 50% to allow for support of riskier investments.

One of the central functions of InvestEU is to intervene where the risk is high enough that private investors do not provide capital in the necessary volume or conditions. The Commission states that more than 60% of the program's guarantee is currently used for such products and recipients.

This component includes equity and quasi-equity investments, which are different from a traditional loan. Instead of just providing credit to a company, the investor can provide capital or instruments that have characteristics similar to equity and accept a greater exposure to the future performance of the company.

InvestEU largely uses financial intermediaries, including investment funds that select innovative startups and scale-ups and provide them with capital for development. The program can also support infrastructure projects or technologies that are at a stage where commercial risk remains high.

For innovative companies, the problem is not always the lack of a viable product or technology. The difficulty can arise after the initial phase, when the company needs much larger sums for industrialization, expansion into other markets, hiring, and increasing production.

This stage, in which a startup tries to become a scale-up, is one of the areas where Europe has recurring funding difficulties. In the BUDG-ECON debate, MEPs explicitly raised the issue of promising companies that cannot find sufficient capital in the EU and end up relocating their activities or seeking funding in other markets.

Berger presented keeping these companies in Europe as one of the objectives of the future instrument. The Commission wants the successor to InvestEU to be able to reduce the risk of private investments and attract capital to growing firms without them being forced to seek funding outside the Union.

The current InvestEU already includes thematic products for this category. EIB and other partners use equity and quasi-equity for the green transition and innovation, focusing on companies that are trying to move from the initial development phase to commercialization and scaling of technologies.

The Commission states that these instruments can cover funding gaps in high-risk technologies that are at the market entry stage or in the scaling process, including in areas related to the green transition.

However, InvestEU does not invest alone in all companies. The European guarantee is used to share the risk with the EIB, EIF, national promotional banks, international institutions, and private funds that actually provide the capital.

This is the mechanism by which a relatively limited public guarantee can support a larger volume of investments. If part of the risk is absorbed by the EU guarantee, a fund or financial institution can accept projects that it would otherwise consider too risky.

At the same time, this logic obliges InvestEU to find a balance between risk and viability. The program is not designed to finance firms without economic prospects, but companies that can become viable and competitive but cannot find sufficient capital due to risk, market maturity, or other funding difficulties.

The Parliament briefing shows that this distinction is not always simple. Some growing companies may be classified as "Undertakings in Difficulty" based on historical financial results, even if their future prospects are good and private investors are interested.

In these situations, a company that is investing heavily for growth may appear weak in traditional financial indicators and may face difficulties in accessing European instruments just when it needs capital for expansion.

InvestEU partners have discussed the possibility of more flexible assessment methods, including clearer differentiation between equity and grants and the use of criteria that better reflect the company's future prospects.

The issue is relevant for the future European Competitiveness Fund, where InvestEU is expected to be integrated as the main guarantee and financing instrument for a wide range of European policies.

The Commission proposes a budget guarantee of up to 70 billion euros for the future instrument and an increase in the provisioning rate from 40% to 50%.

Provisioning represents the part of the guarantee's value for which the EU budget sets aside resources for potential losses. A higher rate offers greater protection to the budget when the program supports projects with a riskier profile.

Berger directly linked the increase from 40% to 50% to the goal of financing SMEs, startups, scale-ups, and innovative industries. The Commission wants the future program to be able to take on higher risks without jeopardizing the stability of the guarantee mechanism.

This orientation is also related to European competitiveness. The Commission sees the lack of growth capital as one of the reasons why some innovative European firms relocate their development center or ownership to markets where access to financing is easier.

In this context, the stated goal of the future instrument is for firms to be able to start, grow, and remain in Europe, including when their development involves large investments and longer periods before achieving profit.

InvestEU was built to mobilize investments that would not have occurred under the same conditions without public intervention. This principle, called additionality, is essential in the case of startups and scale-ups, where the risk can be high even if the commercial potential is significant.

The share of over 60% allocated to high-risk products shows that a significant part of the program is already oriented towards this area of the market.

The future European Competitiveness Fund is expected to take the model further, with a larger guarantee and a more consistent budget buffer. The stake will be whether this additional capacity can transform the lack of growth capital in Europe into a less frequent problem for innovative companies.