The Digital Europe Programme & The Role of Private Equity Funds
Digital Europe
In December 2020 the European Commission has welcomed the political agreement between the European parliament and the EU member States on the first EU programme that aims to accelerate the recovery and drive the digital transformation of Europe, the Digital Europe Programme.
It was launched in January 2021 and is part of the new long-term EU Budget. With the aims to build the strategic digital capacities of the EU and facilitate the wide deployment of digital technologies, to be used by Europe’s citizens, businesses and public administrations, the project will strengthen investments in supercomputing, artificial intelligence, cybersecurity, and ensuring a wide use of digital capacity across the economy and society. €7.5 billion (in current prices) will be invested through the period and distributed as follow:
- €2.2 billion for supercomputing to build up the EU’s supercomputing and data processing capacities by buying world-class exascale supercomputers by 2022/2023 and post exascale facilities by 2026, and broaden the use of supercomputing in areas of public interest
- €2.1 billion for artificial intelligence to set up a true European data space and a trustworthy and energy efficient cloud infrastructure (Gaia-X) and support existing artificial intelligence testing and experimentation facilities in Member States and encourage their cooperation
- €1.7 billion for cybersecurity to strengthen coordination between member states tools and infrastructures, boost Europe’s capabilities in optical communications and cybersecurity through Quantum Communication Infrastructures
- €580 million for advanced digital skills to support the design and delivery of programmes and traineeships in key capacity areas like data and AI, cybersecurity, quantum and HPC and the upskilling of the existing workforce through short trainings
- €1.1 billion for ensuring the wide use of digital technologies across Europe and strengthen the network of European Digital Innovation Hubs (one -stop shops that help companies becoming more competitive with regard to their business and production processes)
The Digital Europe Programme will complement other EU programmes such as Horizon Europe, the €95 billion EU programme for research and innovation as well as the Connecting Europe Facility for digital infrastructure.
The Role of PEs
We discussed a lot of subjects regarding the European Union work to preserve its Tech Sovereignty, writing about GDPR, European Batteries or more recently Chips. Today we will take a couple of lines to discuss how the Private Equity sector can address the Tech Sovereignty issue and the role of the EU to encourage it.
Where are we today?
According to Margrethe Vestager, the European Commission Executive Vice President, Europe lost the first round of the digital revolution to China and the US. Her statement is backed by our recent notes, Europe has had a hard time regarding microprocessors supply chain; on 603 listed Unicorn, Europe has 41 on its soil etc. In the first 4 articles of this newsletter you discovered the European Startup Nations Standard, a promising initiative to make the Old Continent the most advanced place to create a startup and to scale it up, hence Europe is doing its job to tackle down its 3rd place.
Europe must help Private Equity to foster growth:
There is a huge Equity gap in the European Union. If you subscribed to this newsletter you are aware of it and of Move Capital’s investment strategy, aiming at growing European leading Tech companies.
Last month, the European Commission published a 88 pages, giving key points of understanding about this gap and how to fill it. The report assumes that the small average fund size of European late-stage VC and growth equity-funds, which is roughly three times smaller than their US peers, is a major contributor to the issue.
High-growth companies in the pre-IPO stage usually need financing more than EUR 30 million. Given that investment size is often limited to 10% of fund size, the advent of funds larger than EUR 300 million will be needed to adequately meet the funding needs of these high-growth companies. The EU should intervene to support Growth Equity and late stage VC funds by allowing investments of up to €100M per fund to create the first momentum needed to attract private investors. We think that this recommendation would allow more investors to engage in later-stage financing rounds and promote more funding of series C and beyond to portfolio companies, increasing European competitiveness on a global scale.
The full report is available here.
