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Brussels, 20 April 2011

State aid: The Commission approves a French risk capital scheme to help innovative new businesses

The European Commission has concluded that the national venture capital fund that aims to encourage the raising of risk capital for innovative SMEs in their early-growth stages is compatible with the European Union's rules on state aid and in particular with the guidelines on risk capital. This fund will invest in other funds managed by private fund managers that target above all new businesses with strong innovative potential. The Commission has concluded that the positive effects of the scheme on the development of innovative SMEs are greater than any distortions of competition that might arise as a result of the aid granted.

"By authorising the venture capital fund, the Commission has acknowledged the lack of own resources that affects innovative new SMEs in particular and that often curbs their ability to translate their technological potential into commercial reality. By applying the rules on state aid strictly, the Commission has ensured that the public investment is calibrated correctly to remedy capital market failure of this type without prejudicing competition or the internal market," declared Joaquín Almunia, Vice-President of the Commission and Commissioner for Competition.

The Commission has approved the creation of the national venture capital fund (FNA), a fund that will invest in other risk capital funds, which will in turn invest in innovative new businesses. The FNA will be allocated € 400 million. It will be managed by CDC Entreprises, a management company authorised by the French financial markets authority and wholly-owned subsidiary of the French Deposit and Consignment Office (CDC). CDC Entreprises will be responsible for selecting the funds on the basis of public selection criteria that correspond to market best practice. The chosen funds will invest in innovative SMEs not listed on a stock market and in business for less than 8 years at the time of the initial funding. Each investment will include private participation of at least 50% (or at least 30% in areas eligible for regional aid) and funding of at least 10% from investors that are independent from the company in addition to the contribution from the business itself.

The initial funding will only be for small businesses in the seed or start up phase but it will be possible to refinance the business even if it has become medium-sized in the meantime. The ceiling for the tranches of funding will be set at a maximum of € 2.5 million per business per 12-month period.

The Commission has made sure that the measure fulfils all the conditions of the guidelines on risk capital. France has shown in particular that businesses in France are suffering from a significant lack of risk capital investment, especially during the early phases of their growth. Also, the measure will have a significant lever effect on private investments to release the resources needed by innovative SMEs. And finally, the Commission has obtained a guarantee that the fund will intervene only to overcome the failures of the risk capital market in such a way as to minimise any risk of distorting competition.

The non-confidential version of today's decision will be made available under case number SA.31730 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. The electronic newsletter State Aid Weekly e-News lists the most recent decisions on state aid published in the Official Journal and on the website.

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