Martin Koch from the European Commission presented on financial instruments available through Horizon 2020 to support research and innovation. These include equity investments, risk capital, loans, and guarantees to financial intermediaries to increase lending. Approximately 4.5% of the Horizon 2020 budget will be allocated to these financial instruments. Two instruments are proposed: one for debt financing through loans and guarantees, and one for equity financing focused on early-stage companies. Options for including technology transfer funding through the equity instrument are being examined, considering factors like addressing funding gaps, leveraging additional capital, and achieving critical mass.

1. Financial Instruments
for Research and Innovation
- HORIZON 2020 -
Martin KOCH
Policy Officer
European Commission - DG Research and Innovation
RTD C-03 – Financial Engineering Unit
EU – Israel Seminar on Technology Transfer
Tel Aviv, 25/26 November 2012
Not legally binding

2. What are EU Financial Instruments?
Equity/risk capital/ loans: e.g. venture capital to SMEs with
high growth potential, risk capital to infrastructure projects and
risk-sharing loans for R&D and innovation investments
Guarantees to financial intermediaries that provide lending to
e.g. infrastructure projects, SMEs, persons at risk of social
exclusion
Other risk-sharing arrangements with financial
intermediaries in order to increase the leverage capacity of the
EU funds (e.g. Project bonds)
or a combination of the above with other forms of EU financial
assistance
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Not legally binding

3. EU Financial Instruments: Why
and when?
Rationale and guiding principles:
1. Addressing clearly identified funding gaps: Market
dysfunction due to general economic uncertainty, high
business/innovation risk (transfer of R&D to innovation and the
market; innovative SMEs; introduction of new technologies),
high transaction costs, asymmetric information
2. Ensuring EU value added:
• Effective targeting of EU policy goals
• Catalytic effect on existing similar MS schemes or private
investment, no crowding out
1. Leverage effect: Using the EU budget for leveraging additional
funding through risk-sharing and attraction of private capital
Not legally binding

4. HORIZON 2020: Budget proposal for
Financial Instruments
•HORIZON 2020 budget proposed: EUR 80 billion for the period
2014-2020
•Approximately 4.5% provided not via grants but through
Financial Instruments (various facilities)
•H2020 (SP "Industrial Leadership") – “Access to risk finance”
•€ 3,768 million in current prices (net of administrative costs)
for financial facilities supporting all sizes of companies and types
of entity (demand driven) + additional budget possible for policy
targets (topping-up possibility)
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Not legally binding

5. HORIZON 2020: Proposed Financial
Instruments (FI)
Two Financial Instruments: One for debt, one for
equity
oDebt Financial Instrument: Two facilities
o Loans and guarantees for investments in Research &
Innovation (demand-driven; target groups midcaps and
larger companies, research bodies and stand-alone projects)
o Guarantee facility for research-intensive and innovative SMEs
& small midcaps (loan guarantees)
oEquity Financial Instrument – focus on early-stage finance
o Early stage finance for innovative SMEs and small midcaps
(seed and start-up companies)
o Growth-stage finance also possible
o Implementation in co-operation with the COSME programme
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of the EU (in particular growth-stage)
Not legally binding

6. HORIZON 2020 Equity Financial
Instrument
Provision of early-stage (seed and start-up) finance for
research- and innovation-driven SMEs and small midcaps
through different means:
•Formal VC (Funds-of-Funds; funds)
•Informal VC (Business Angels & their networks)
•Technology Transfer funding ?
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Not legally binding

7. Technology Transfer funding under
HORIZON 2020: Examination of options
• Current state-of-play: Concept of TT funding at
European level under discussion (Commission
services, JRC, TTOs, EIF)
• Clarification of added value to address TT funding
needs at European level (TT funding landscape in
Europe very divers)
• Survey of "best practices" and successful models on
its way (EU Member States and other countries
including Israel)
• Budget: No budget foreseen so far in HORIZON
2020 for dedicated Technology Transfer funding;
but principal option to include TT funding in the 7
Equity facility Not legally binding

8. Technology Transfer funding under
HORIZON 2020: Examination of options
• Next step: Building the case for a convincing
justification for TT funding at EU level
• Key elements in this context:
• Addressing a clear funding gap (Proof of concept
stage, pre-seed and seed phase)
• TT funding through equity at various stages
• Leverage of EU funding through additional, notably
private capital
• Sustainability, if possible (probably difficult in view of
the high-risk profile of TT)
• Achieving critical mass (no small-scale EU TT fund)
• Governance and implementation costs
• Ex-ante Impact Assessment for TT funding foreseen in
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early 2013
Not legally binding

9. Thank you very much for your
attention!
Not legally binding

10. Thank you very much for your
attention!
Not legally binding