EIB cash injection boosts start-up firms

Date: 11/06/1998

By Tim Jones

THE European Investment Bank is stepping up its one-year-old jobs programme by channelling cash into innovative start-up firms.

The bank, the EU's Luxembourg-based agency for long-term lending, is taking advantage of the higher profile recently given to the need for boosting the Union's venture capital market to accelerate the 1-billion-ecu programme.

"The European venture capital market is underdeveloped and far from evenly distributed," said EIB president Sir Brian Unwin. "Our objective must be to try to develop the European market to match that of the United States."

The UK has the most developed market for start-up capital in Europe, according to analysts, who say that other large countries are far behind and effectively discourage people from taking the risk of going into business alone.

In Germany, for example, investors ploughed 1.2 billion ecu into the new market for small high-growth companies last year, but nearly 90% of this was concentrated on projects which were in the last stages of development.

To encourage investors to take risks at the beginning of a project's life, the EIB is beefing up its lending to financial institutions which specialise in high-risk capital investment.

Last week, the bank announced it would forward 10 million ecu to Banco Portugues de Investimento for venture capital investment in small and medium-sized enterprises (SMEs) "with strong growth potential".

The Portuguese venture capital market is, in Unwin's words, in its "absolute infancy".

This was the first EIB operation in Portugal under the special loans 'window' for SMEs established by the Amsterdam special action plan (ASAP).

The programme was set up in June last year as the price for French agreement to the 'stability pact' enforcing budgetary discipline under monetary union.

The ASAP funds high technology projects by SMEs in cooperation with the European Investment Fund, a loan guarantee specialist part-owned by the EIB, and expands its lending in the education, health and urban environment sectors.

A week earlier, the bank announced a loan to Spain's Instituto de Credito Oficial aimed at setting up an 18-million-ecu venture capital fund for SMEs.

This 'Euro-ICO Fund', the first of its kind in Spain, ensures that both institutions share the risks attached to investments made by the fund.

Since the action plan was agreed last year, the EIB has approved 2.3 billion ecu in new lending for investment in the areas of health and education, and 350 million in risk capital financing for SMEs.

Bank officials say they want the Amsterdam programme to have the same high profile accorded to the 6-billion-ecu spending plan established by the December 1992 Edinburgh summit.