A new European agency has funded Norwegian startup EpiGuard, which makes gurneys that isolate patients.
EPIGUARD
By Nicholas Wallace
The EpiShuttle, a hospital gurney enclosed in a bubble of plastic and studded with sealed access ports, keeps contagious patients isolated while on the move—eliminating the need to disinfect ambulances and helicopters after each run. EpiGuard, the Norwegian startup behind it, is racing to satisfy the hundreds of orders that have been placed amid the coronavirus pandemic, says founder Fridtjof Heyerdahl, a doctor who began to develop the equipment after the 2014 Ebola epidemic in West Africa.
The company owes its growth to the European Innovation Council (EIC), a little-known but ambitious EU agency that aims to do for startups and spinoffs what the grantmaking European Research Council does for basic research. Without EIC support, “our organization would have been so tiny, we wouldn’t have been able to ramp up,” Heyerdahl says. Last year, EpiGuard won a €2.5 million grant from EIC. Now, EIC is offering the company a more radical form of government support. On 13 March, Heyerdahl was invited to apply for an EIC equity investment, which could give EpiGuard up to €15 million—and the European Union a stake in the company.
EpiGuard was one of the beneficiaries of EIC’s 3-year pilot program. But in January 2021, EIC is set to become a major part of Horizon Europe, the European Union’s proposed €94 billion R&D program for 2021–27. The European Commission wants €10.5 billion of that to go to EIC; national governments will settle on the final numbers in the coming months.
Frustrated by Europe’s lack of home-grown tech giants, Commission officials hope EIC will help small tech firms grow in Europe, instead of being lured away to Silicon Valley. “The aim here is to close the big gap that exists between Europe and the United States,” says Mark Ferguson, Ireland’s chief scientist and EIC board chair. But one challenge will be backing risky but promising startups without becoming “the financiers of last resort for all the failing companies that aren’t going to do very well,” says Christopher Tucci, a professor of technology management at the Swiss Federal Institute of Technology, Lausanne, who advised the Commission while it drafted Horizon Europe.
A lack of venture capital (VC) has slowed tech growth in Europe. According to the Commission, in 2016 venture capitalists invested just €6.5 billion in European startups, compared with €39.4 billion in the United States. VC funds in Europe are also barely one-third the size of U.S. funds. That limits their ability to help small companies scale up past the so-called “valley of death,” says EIC board member Kerstin Bock, whose Berlin-based consultancy, Openers, gives advice to startups. “When it comes to the growth stage, scaling companies, there might not be that many [investors] that are risk takers,” she says.
EIC is meant to remedy the problem through a combination of grants, high-risk equity investments, and one-off cash prizes for competitions. (The EIC pilot is now offering €10 million for the winning design of a cheap method to launch small satellites into orbit, and €5 million for cheap batteries for electric vehicles.) It offers two main award types: the Pathfinder, which provides grants up to €4 million for early-stage tech development, and the Accelerator, which offers grants up to €2.5 million and equity investments of up to €15 million for companies trying to scale.
It is also forgoing a standard requirement of most EU research grants: that applicants form consortia, which forces them to share findings with other participants. Danaë Delbeke, CEO of Belgian firm Indigo, was pleased that she could apply for EIC money as a small company acting alone, in stealth mode. “We are in a very, very competitive field,” says Delbeke, who spun out Indigo from photonics research at Ghent University and the Interuniversity Microelectronics Centre. The firm won an Accelerator grant to develop a subcutaneous sensor to simultaneously monitor glucose, ketones, and lactase in diabetic patients.
Bock says EIC will help companies that need more time and money to get market ready, such as medical device and biotechnology companies, which have to satisfy complex regulations and certifications. It will also target firms developing “disruptive” technologies, and is hiring program managers who can identify them—experts in fields like artificial intelligence, clean energy, and nanometrology.
Georg Licht, an economist at the Leibniz Centre for European Economic Research, says picking disruptive technologies early isn’t easy. Once it’s clear a technology is disruptive, it’s already too late for public investment, because “if they can be sure, then it’s clear also to the private sector.”
EIC’s most radical idea may be equity investment, something the Commission, which runs EIC, has never done before (although since 2014 it has acted as guarantor for some investments made by the independent European Investment Bank). EIC investments aren’t meant to make money for the European Union, and for legal reasons the shares will be owned by a separate investment vehicle. Any returns will go there first, but a Commission spokesperson says the long-term plan is for the money to come back to the EU budget. If some EIC bets pay off and it finds the next Google, the profits could help reduce the dues that EU member states must pay.
EIC guidelines say the goal is “investment impact,” not maximizing returns, and Tucci says it won’t be a sign of failure if EIC loses money on some turkeys. “There’ll be lots of failures, there’s going to be moderate successes, and if there’s one really big success, that’s going to create lots of jobs,” Tucci says. Another goal is to stimulate the European VC market, Ferguson says. EIC won’t buy shares unless there are co-investors; if none can be found, EIC will offer a loan, to be turned into shares when private capital shows up.
One company with pending EIC equity investment is Hiber, a Dutch satellite startup. It aims to provide cheap, low-bandwidth internet access to low-power sensors used by agriculture and industry in remote places. The sensors could, for example, monitor moisture in beehives or fields, broadcasting small data packets every hour or so.
Coen Janssen, Hiber’s CEO, says EIC financing is a “perfect fit,” because his company needs to invest a huge amount of capital in satellites and ground stations before it can profit from subscriptions to its service. “Satellites are not cheap,” he says. “It’s a risky game that we’re playing.” To launch its first two satellites, Janssen says Hiber raised €15 million: €10 million from the private sector, plus grants of €3 million from the European Space Agency and €2 million from the Dutch government. EIC will invest up to €15 million in Hiber alongside a grant of up to €2.5 million, but the exact amount isn’t yet public.
Not everyone is convinced that EIC’s experiment will work. “There is a history with such organizations that they tend to lose their policy role and drift into the game of making money,” says Charles Edquist, a specialist in innovation policy at Lund University. “That’s competing with private investments.” And Tucci cautions that critics may portray each failed investment as a policy failure.
If EIC succeeds, it may not be around forever, Ferguson says. He wants to build a European VC market for new technologies, not to imitate one with public money. “In my dream,” Ferguson says, “we will put ourselves out of business.”
Source: Science Mag