You’ve overseen EIF’s equity investment activities across Europe, including several national fund-of-funds programs. From your experience, what are the key ingredients of a successful model?

National fund-of-funds programs suggests the sponsorship of the public sector which in itself is proof of a forward looking and visionary perspective of public sector policy. When looking at such programs the degree of their success, however, varies. Venture Capital and Private Equity are industries that function in the context of a sound market logic, where thorough selectivity of investment targets decides on the success of a programs investment strategy. The public sector programs that I have seen succeed have one thing in common: they respected private sector logic in (i) the quality of the investment management, (ii) the selection process of investment targets and (iii) the governance of the program itself, which should protect economic decision making from undue political influence. Public sector investment programs, no matter at what level, thrive in a setting of mutual respect between public policy objectives on the one side and private sector investment logic on the other side, for the benefit of all stakeholders involved.

Austria is now establishing its own national fund-of-funds. What do you see as the biggest opportunities and potential pitfalls in its implementation?

I think this is courageous and a bold move at a time when precisely bold action is needed to sustain our socio-economic model in Europe. Austria has a set of unique opportunities ahead. First, Austria has a best-in-class research base in Europe and beyond. Austria also has an increasingly dynamic ecosystem for entrepreneurship, emerging at the interface between academic research and market-minded entrepreneurs. But there is more than that: the mobilisation of private sector capital for the funding of innovation is in its infancy across Europe. With the concept of the Austrian national fund-of-funds that I have seen, engaging the private sector in the financing of innovation is a core objective. This is a game changing perspective: this fund-of-funds, if properly set up and managed, will become the cheapest (and even profitable!) economic policy instrument that Austria has ever had. And for the private sector, it not only will dispel the wrong perception that venture capital is a charitable activity, it will give major players in the private sector a means to shape the economic dynamism of their home market, which in turn fuels their own assets under management and economic prospects. If successful, Austria can become an institutional investment hub for the entire Central and Eastern European region which is the extended core market to many Austrian financial institutions.

EIF has been a major catalyst for Europe’s venture and growth capital markets. How do you see the interplay between public funding and private capital evolving in the coming years?

It is clear that we are at a turning point in the development of the European capital markets. We need to catch up with competing geographies to the East and to the West in terms of simplicity, liquidity and scale, both in the pre-IPO markets as well as in the post-IPO market. Public sector capital has a critical role to play to kickstart market segments and to lead the way for private sector to follow. But the private sector is key. The scale of funding that is needed to regain competitiveness for Europe’s economy and to maintain it is such that no public sector budget will ever by able to cope with it alone. This is way the Venture Capital and Private Equity industry needs to prove that they can deliver attractive risk-commensurate returns. On the other hand, the institutional financial sector needs to take responsibility for fuelling the development of the national European economies that we all are living from. Ultimately, if we are staying behind in the global race for economic prosperity that serves us all, we only can blame ourselves.

Impact and sustainability are becoming increasingly integrated into private market strategies. How does EIF ensure that public purpose and financial performance align?

The co-existence between public interest and policy objectives and financial return objectives is in the DNA of EIF. We operate in areas that are core to the development of the European Union, in terms of economic politics to foster innovation and competitiveness or social and environmental policies linked to social cohesion, energy transition and sustainability. But within those public policy areas we operate with the mindset of private sector investors because our objective is to mobilise private sector capital by delivering proof that investing in all these areas not only delivers policy results but also very attractive financial performance. In 25 years that I have been involved in the equity business of EIF, we have never lost money on any of our investment mandates. To the contrary, we have delivered returns that have encouraged private sector investors to invest in European Venture Capital and Private Equity through investment products managed by us. There is no reason why the Austrian Fund-of-Funds could not achieve the same.

As both an institutional investor and a private angel investor yourself, what advice would you give to Austrian LPs and investors looking to engage more actively in early-stage and growth investing?

My advice to them would be to look at their options. In a world that moves at the speed we are currently witnessing, procrastinating in traditional investment strategies with an overweight in fixed income and public markets will place you out of the market. Admittedly, I have always been a very strong believer in innovation finance and there may have been a time where such a strategy may have been more cyclical than traditional portfolios. But today, investing in innovation is no longer a question of risk taking. It is the best means you have to hedge your traditional portfolios against the market developments that lie ahead of us.