The European Commission and the European Investment Fund (EIF) have presented a new ‘Venture Capital (VC) Fund of Funds’ programme that could attract over €1.6bn to support SMEs.

At the Web Summit in Lisbon, Portugal, the commission showcased its latest initiative in its ‘Capital Markets Union’ action plan to promote European innovation and economic growth.

Fund managers – who can apply until 31 January 2017 – must raise at least three times as much from other sources, which means additional investments to VC of around €1.6bn.

The launch of the new pan-European fund of funds is a result of two major points: that VCs in Europe tend to have relatively small funds – on average around €60m compared to €120m in the US – and the fact that most of the capital is concentrated in a handful of markets.

The commission and the EIF are therefore hoping to scale up the VC industry in these parts, while simultaneously working on a plan to transform more start-ups into ‘scale-ups’.

Michael Collins, CEO of Invest Europe, said: “The commission’s VC Fund of Funds is the initiative the industry needs to attract more private investment to support more of Europe’s most talented entrepreneurs and innovators.

“It will allow more global investors to access Europe’s thriving start-up scene, helping more of our world-class small businesses develop into household names and help investors to secure the returns they need in a low-yield environment.”