Just a few months ago, I asked in an op-ed in ImpactAlpha: Can Europe’s Foundation Step Up? As the CEO of FASE and one of the four founding partners of European Catalytic Impact Investing Fund II, or ECIIF, I’m proud to say that the market has given us a clear “yes.”
Our ECIIF reached its first close at more than €21 million. The fund received strong commitments from European impact investors and is backed by a catalytic guarantee from the European Investment Fund. Among the investors from institutional, foundation, business angel, family office and private wealth owner realms is Relaunch for the future, the subsidiary of SFPIM, Belgium’s Sovereign Wealth Fund. In addition, several progressive foundations such as Eckenstein-Geigy Stiftung and Dachstiftung der Christoph Merian Stiftung from Switzerland, Kommunale Stiftungen Münster from Germany, and GDA Invest, promoted by Fondazione Social Venture Giordano Dell’Amore from Italy, showed that our unconventional (ad)venture off the beaten track resonates very well with them.
You may ask what’s so unconventional about an SFDR Article 9 fund financing early-stage European impact ventures with scalable business models. The difference lies in the word “catalytic.” Instead of following the traditional VC track — or what I like to call “the obsession with US-style venture capital” — we consciously expand the horizon to include a certain type of transformative ventures that are key to Europe’s future. Those with much longer-term, organic growth trajectories and no exit fantasies in their backpacks. Those with unusual structures such as cooperatives or steward-owned companies and a deep commitment to mission lock. Those that focus on social innovations rather than technological ones and need catalytic and patient capital to grow and thrive. In short, those that typically fall through the traditional VC cracks and are high potential in terms of impact but painfully underfunded.
Catalytic goes ecosystemic
Given its catalytic elements, you could call ECIIF a blended fund. We prefer to call it “a broad ecosystemic approach that’s financing Europe’s future impact middle market.” In our opinion, it’s high time to switch gears and double down on Europe’s strength, which has always been a thriving market of medium-sized, long-term-value-creating companies, often owned across generations. I’m personally convinced that only by fully leveraging the power of innovation and impact will Europe be able to catch up with the US and China. And this definitely includes social innovations.
The past months have honestly been a strain, as any fundraising impact VC can easily confirm. Investors’ impact-first appetites continue to fade. Public funding is even scarcer after the ODA crunch. Foundations revise their strategies or remain cautious. And corporates have their agendas set on AI and climate mitigation.
Without one empowering element, we probably wouldn’t have come this far: A €10 million catalytic guarantee from the InvestEU programme of the European Union, provided by the European Investment Fund, proved to be a gamechanger. It allows ECIIF to pursue a roughly 50:50 mix of exit- and non-exit-oriented target investees and to partially derisk the portfolio for investors while offering an attractive impact-risk-return profile. ECIIF is the only impact fund in Europe to date to benefit from this unique guarantee. But we hope that other European funds will soon be able to follow in our tracks.
Beyond hockey stick curves
Transformative impact ventures in Europe are equally conscious that the tides have turned. Many of them don’t want to fit into the role of “hockey stick” performers anymore. One example from an investee of ECIIF’s predecessor fund, ESIIF, hits the nail on the head: “I want to become a fund returner,” says Clemens Feigl from everwave, “but at the same time, our primary goal is to be impact first and solve a huge problem. This vision also creates an incredible bond within our team. In the medium term, I think that cases like ours are more successful also, because they are not so interchangeable.”
ECIIF will soon kick off investing in four future-facing verticals: education and employment, health and care, circular economy and climate action, and food and agriculture. If you are an impact venture, LP or co-investor within our scope and want to join the movement of catalyzing more transformative impact for Europe, we’re happy to talk.
Dr. Markus Freiburg is one of the four ECIIF Founding Partners, the Founder and CEO of FASE, and the new Chair of Impact Europe.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
