About
With the Defence Equity Facility, the European Investment Fund (EIF) will invest, as a Limited Partner, into private funds (venture capital or private equity funds) with investment strategies targeting European companies developing innovative defence technologies with dual-use potential.
Rewards & Benefits
- With EUR 175 million invested between 2024 and 2027, the Defence Equity Facility will stimulate the development of an ecosystem of private funds investing in defence innovation. The Facility should mobilise around EUR 500 million in support of European companies.
- By taking cornerstone positions in the funds it supports, the EIF will act as key investor and help crowding-in additional investors.
How does it works?
The Defence Equity Facility is targeted at independently managed funds, including first-time management teams, established in the European Union or Norway.
Funds receiving an investment under the Facility should invest in SMEs (including start-ups) or small mid-caps established in the EU, Norway or Iceland, developing innovative defence technologies with dual-use potential (i.e. having both civilian and defence applications).
Fund managers seeking support from the Facility should apply through the EIF website. Further information, including indicative term sheets and product descriptions are available under the call for expressions of interest for InvestEU on the EIF website.
The EIF is a specialist provider of risk finance in support of small and medium sized enterprises across Europe. The EIF is part of the European Investment Bank Group and is headquartered in Luxembourg. Its shareholders are the European Investment Bank (EIB), the European Union, represented by the European Commission, and a wide range of public and private banks and financial institutions.
The Bank develops and offers targeted financial products to intermediaries, such as venture capital and private equity funds (as a limited partner), and credit providers (through guarantee products) to enhance access to finance for companies across the EU and other associated countries.
The EIF is the largest implementing partner of the InvestEU Fund, with close to EUR 11 billion of guarantee for equity and guarantee products. The EIF is working to maximize the reach & impact of public resources whilst focusing on key policy areas that are important for InvestEU.
The EIF will invest as a Limited Partner in funds that apply and are selected under the Defence Equity Facility. Such investments will be on a pari passu basis with the other Limited Partners. The EIF seeks to be a cornerstone, or key investor, in the funds in which it invests.
The EIF seeks to make significant investments in the funds it supports. Investments made under the Defence Equity Facility will not be below 7.5% of the closing in which the EIF participates, and, as a general rule, not above 25% of the fund size. Under certain circumstances, such as strong alignment with InvestEU horizontal priorities, the intensity of support can be increased.
Funds will be required to invest a minimum amount into companies that meet the terms and conditions of the Facility. This minimum is determined by the size of the EIF investment and is calculated as two times the amount invested through the Defence Equity Facility, capped at 80% of fund size. Investments that do not meet the terms and conditions of the Facility will not count towards this minimum.
The Defence Equity Facility will invest in independently managed, closed-end funds established in the European Union or Norway. To be eligible for support, such funds should have an investment strategy targeting companies established in the EU, Norway or Iceland which develop defence technologies with dual-use potential. To this respect, The EIF will aim to support funds which cover more than one country across the portfolio of operations.
The entity managing or advising the fund shall, at the time of commitment by the EIF, be established in a Member State or a country associated to the European Defence Fund (EDF) - i.e. Norway - and shall not be controlled by a third country or third country entities.
The Defence Equity Facility can support first-time management teams, provided they demonstrate the necessary investment and industry experience.
The EIF selects fund managers (financial intermediaries) based on applications received in response to the InvestEU Equity call for expression of interest. The EIF selects candidate funds on the basis of both a policy fit assessment and a commercial assessment which includes further eligibility checks, e.g. investment strategy, Environmental, Social, Governance (ESG) factors and compliance with international and EU standards / principles.
For further information please visit the InvestEU Equity Call for Expressions of Interest on the EIF website.
Funds receiving an investment under the Facility will be able to invest in SMEs (including start-ups), small mid-caps, special purpose vehicles, joint ventures, spin-offs, spin-outs, technology transfer projects or technology rights.
Final Recipients shall be established in a Member State, Norway or Iceland, and shall not be controlled by a third country or third country entities (although the control requirement can be waived if a guarantee is provided, in accordance with the regulation of the European Defence Fund).
The “control” is defined as the ability to exercise a decisive influence on a legal entity directly, or indirectly through one or more intermediate legal entities.
Funds receiving an investment under the Facility will have to invest in the target area of “Defence” (as defined in the Term Sheet of the call for expression of interest). It includes, but is not limited to, research and development, manufacturing and/or maintenance of defence products and critical future and emerging defence technologies with a dual-use potential, in the area of:
- a) cyber, space, air, ground (including force protection and mobility), naval and underwater systems,
- b) defence medical response, chemical biological radiological nuclear (CBRN), biotech and human factors,
- c) information superiority (C4ISR),
- d) advanced passive and active sensors,
- e) digital transformation,
- f) energy resilience and environmental transition,
- g) materials and components,
- h) simulation and training,
- i) strategic technology foresight.”
A dual-use product, technology or service is one that can be used for both civilian and defence purposes.
Investment funds receiving an investment from the EIF will be required to comply with the principles of the EIF’s policies and procedures on Restricted Sectors. These policies and procedures, which are currently being updated, delineate specific conditions for investments in defence and security, and will explicitly prohibit investments supporting weapons or ammunition.
InvestEU is an investment programme of the European Commission for the period 2021-2027. The EIF is the largest implementing partner of the programme, providing access to finance to European SMEs and small mid-caps through equity investments in venture capital and private equity funds, and debt guarantee products.
The Defence Equity Facility is implemented through a blending operation between the European Defence Fund and the InvestEU programme: it is funded by the European Defence Fund and implemented under InvestEU. The Defence Equity Facility follows all the rules defined under InvestEU. Certain additional conditions and restrictions exist on investments made through the Defence Equity Facility to ensure consistency and compliance with the EDF.
Each year in Spring, the European Commission organises in Brussels the “European Defence Fund (EDF) Info Days and a Networking Event”.
The event provides a unique opportunity to network with investors, as well as other companies, government representatives, research organisations active in defence. We organise thematic pitch sessions corresponding to the topics of the EDF’s annual calls for proposals, as well as pitch sessions dedicated to investors. We also give access to an open networking area to facilitate one-to-one matchmaking.
In 2023, 2000 participants attended the event (the sessions are also accessible online).
The next edition will take place on 28-29 May 2024. Registrations will be available soon.