On 8th April, the Commission is launching ESCALAR, a new investment approach, developed together with the European Investment Fund (EIF). With this step, the Commission is delivering on one of the actions announced in the new SME strategy to improve access to finance for SMEs. It will support innovative companies during, and after, the crisis.
At a glance:
- Focus on support of venture capital and growth financing for promising companies.
- The investment approach will provide up to €300 million aiming to increase the investment capacity of venture capital and private equity funds.
- Estimated results – investments of up to €1.2 billion, or four times the original investment, to support promising companies.
What is ESCALAR?
ESCALAR aims to address some of the issues, caused by the COVID-19 crisis, by strengthening the availability of venture capital and growth financing in Europe. Venture capital, a form of financing of start-ups that have been deemed to have high growth potential, and growth finance are vital to a well-functioning Capital Markets Union, but remain underdeveloped in Europe, especially in the scale-up phase.
ESCALAR call is a pilot phase for 2020 with the objective that ESCALAR, based on this experience, becomes a mainstream European financial instrument, alongside the existing financial instruments after 2020, within the next multiannual framework (2021 – 2027). Analysis and selection of the funds is managed by the EIF.
The initiative is giving investors the possibility of a higher return, as the return for the ESCALAR shares is both partially subordinated and capped. This can help fund managers raise more private funds to increase their funding capacity and better meet the large financing needs of European scale-ups, especially in difficult times.
What ESCALAR will provide?
In this phase, ESCALAR will provide up to €300 million backed by the European Fund for Strategic Investments (EFSI). This will aim to increase the investment capacity of venture capital and private equity funds, triggering investments of up to €1.2 billion, or four times the original investment, to support promising companies.
Interested fund managers can participate in the scheme by responding to the open Call for Expressions of Interest published by the EIF.
ESCALAR aims to support fund closing by committing up to 50% of the size of the fund. It targets both new funds focusing on financing scale-ups, as well as existing funds wishing to support high potential companies from their portfolio to further develop their growth.