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I-TEC - Encouraging venture capital into innovation and technology investment

The European Commission and the European Investment Fund (EIF), on the initiative of Commissioner Edith Cresson, have launched a pilot scheme to boost the investment of private capital in technologically innovative SMEs.

The I-TEC scheme aims to tackle one of Europe's major b...
The European Commission and the European Investment Fund (EIF), on the initiative of Commissioner Edith Cresson, have launched a pilot scheme to boost the investment of private capital in technologically innovative SMEs.

The I-TEC scheme aims to tackle one of Europe's major barriers to innovation, the lack of capital for these companies. By assisting these enterprises to find capital, their job-creating potential will be realised, and Europe's competitiveness can be improved. The scheme, which was foreseen in the Innovation Action Plan published in November 1996, was given added prominence by European leaders at the June 1997 Amsterdam European Council, which called for additional efforts to encourage high technology projects involving SMEs.

Currently, existing European venture capital sources face difficulties in investing in high technology SMEs. Two reasons are: the difficulty in assessing the prospects of such companies; and the length of time in which the venture capitalists will need to take a hand in the management of these companies. To help overcome these problems, I-TEC will contribute up to 50% of the costs incurred by venture capital funds in the initial appraisals and in the hands-on management of high-tech SMEs.

The scheme will be open to European venture capital funds, selected by the EIF, which agree to dedicate at least 25% of their newly raised capital to early stage investment in technologically innovative SMEs. Through this support, the Commission aims to build a lasting capability for appraisal and management of early stage investment within venture capital funds.

The Commission is to contribute ECU 7.5 million from the budget of the INNOVATION programme to I-TEC. The EIF, which is an EU financial institution that guarantees investments in infrastructure projects and SMEs, will act as an advisor to the Commission in the selection and assessment of venture capital funds. The EIF is already building up a portfolio of investments in venture capital funds focusing on early stage and technology SMEs. To date, some ECU 17 million has been invested by the EIF, with up to ECU 75 million available for similar investments in 1997 and 1998.

Source: European Commission, Service du Porte-parole

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