European Scale-up Action for Risk Capital (ESCALAR) kicks off: First ESCALAR project signed with Swedish equity fund manager eEquity
The first transaction under the joint European Commission and European Investment Fund (EIF) “European Scale-up Action for Risk capital” (ESCALAR) pilot programme, backed by the Investment Plan for Europe, has been signed. The first project concerns eEquity IV fund, which will support scale-ups and high-growth SMEs and small mid-caps in several EU Member States, with a focus on the Nordics.
eEquity, a digital growth equity investor in the Nordics, announces the final close of eEquity IV, which will invest growth capital in disruptive European internet businesses. The fund benefits from a SEK 376 million (€ 37.5 million) participation through the EIF, backed by the Investment Plan for Europe, representing the first investment under the new ESCALAR programme. The investment strategy of eEquity focuses on e-commerce and internet retailing with global reach. The new fund aims to invest equity tickets of SEK 30-150 million (€ 3-15 million) in up to 12 European SMEs.
The European Commission and the EIF have designed ESCALAR with the purpose of making commitments to private equity funds that invests in scale ups in Europe. EIF has made a commitment of SEK 376 (€ 37.5 million) from the ESCALAR programme to eEquity IV. The final fund size of eEquity IV is SEK 1.6 billion (€ 160 million) compared to eEquity III of SEK 750 million (€ 75 million). The commitment by EIF to eEquity is the first of its kind in Europe.
Commissioner for Internal Market Thierry Breton said: “The EU supports European high-growth companies to increase access to risk capital they need to grow. This is even more pertinent now when the coronavirus crisis further deepened the financing needs for scale-ups. The high number of applications for the ESCALAR pilot programme and this first signature prove that with this instrument we are filling a market gap for the benefit of high-growth businesses.”
“We cannot let Europe fall behind its global competitors when it comes to creating new and globally leading innovative companies. More than elsewhere in the world, Europe’s high-growth companies are struggling to find the finance and risk capital they need to scale up and compete. The coronavirus outbreak has only made this situation more challenging,” added EIF Chief Executive Alain Godard. “That is why I’m pleased to announce our first transaction under the European Scale-up Action for Risk capital initiative to address this financing gap and support the European champions of tomorrow.”
Patrik Hedelin, Managing Partner at eEquity, comments: “We are very pleased with the fund size of eEquity IV which allows us to support more entrepreneurs for a longer period of time and to continue to develop eEquity as a firm. We are proud of the commitment from the EIF and their strong belief in our sector-focused business model. eEquity will build further on the success of being a sector fund for digital growth and e-commerce companies. Based on the sector focus within digital business models, it has been proven highly valuable for entrepreneurs to obtain access to the considerable knowledge and experience both within eEquity and the existing portfolio companies. ESCALAR’s investment will allow eEquity to better support high growth companies in the e-commerce and online sectors through increased investment tickets and participations in later funding rounds, leveraging on the success of the predecessor fund, which is currently at 40% IRR.”.
The EIF participation in eEquity IV represents the first transaction under the joint European Commission and EIF European Scale-up Action for Risk capital (ESCALAR) pilot programme that is backed by the Investment Plan for Europe. The investment support from ESCALAR provides additional support to the fund’s portfolio companies through larger follow-on rounds and supports the diversification of the portfolio. eEquity has made several investments in vertical digital native brands such as NA-KD, iDeal of Sweden, TwistShare, Aim´n and PS of Sweden that are all domiciled in the Nordics but are selling globally in approx. 60-100 countries monthly. There are significant ongoing disruptions across the value chain throughout all product verticals, which will revolutionise the way we live our lives, which in turn continuously open up new possibilities for digital, data driven and scalable companies. eEquity IV has already made six investments where all companies are experiencing strong organic growth and profitability. Since inception eEquity has done 37 platform investments and 20 exits. Legal advisers to eEquity in the fund-raising process have been Aikin Gump in London. Background Information:
The new European Scale-up Action for Risk capital (ESCALAR) is a pilot programme launched by the European Commission and managed by the EIF, using resources of the Investment Plan for Europe to address the financing gap experienced by high-growth European companies (scale-ups). For this pilot programme, ESCALAR will have a total investment envelope of EUR 300m. ESCALAR invests in funds with an investment focus on scale-ups. It can support both new funds needing to achieve a larger critical mass to support such companies in their future portfolio, and existing funds seeking additional capital to make follow-on investments in scale-ups in their existing portfolio. ESCALAR aims to strengthen the availability of venture capital and growth financing in Europe.
The Investment Plan for Europe focuses on boosting investment to generate jobs and growth by making smarter use of financial resources, removing obstacles to investment, and providing visibility and technical assistance to investment projects.
The ESCALAR call for expression of interest was published on 8th April 2020 and ran until 30th June 2020. ESCALAR received a very positive market reaction receiving, over 80 applications. 9 applications are now being progressed for a potential ESCALAR investment. Find out more about ESCALAR here.
The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe's micro-, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth and employment.
eEquity was founded in 2010 with support from international institutional investors, today it is the leading private equity firm within Digital Growth and invests in experienced entrepreneurs with the aim to accelerate growth. eEquity was founded by Magnus Wiberg and Patrik Hedelin as a continuation of their entrepreneurial journey which started in 1999, through Pricerunner and boo.com, respectively.
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