What’s Scaleup Europe, the $5.7B fund that just backed satellite company ICEYE?

Forget the European summer lull: startups can’t afford to stay still, and Brussels is following suit. In the middle of peak vacation time, the European Commission announced that the Scaleup Europe Fund was fully operational, with investments “expected in the coming weeks.” But its first deal was actually made public the very next day.

ICEYE, a Finnish satellite intelligence company now valued above $11 billion, is the first startup backed by this unique public-private vehicle, which co-led its Series F. Similar deals should follow soon; Scaleup Europe plans to deploy €5 billion ($5.7 billion) into growth-stage startups based in the EU or partnering countries and operating in strategic sectors.

“Space-based intelligence is becoming critical infrastructure for governments, and the Scaleup Europe Fund exists so companies like ours don’t have to leave Europe to compete globally,”  ICEYE CEO Rafal Modrzewski (pictured above) wrote on LinkedIn.

Even in less critical sectors, helping Europe build scaleups and keep them is key for its competitiveness and tech sovereignty — and that’s also the fund’s raison d’être. With the conviction that Europe misses out when its deep tech talent lacks late-stage funding or only finds it abroad, the Commission took the matter into its own hands, but it also partnered up.

Unlike other programs that are managed directly by European institutions and handing out public monies, Scaleup Europe is backed by private investors and run by Swedish asset manager EQT, which was selected via an open call to “experienced fund managers.”

Other candidates reportedly included Eurazeo, Northzone and Vitruvian Partners, with Atomico as final challenger. While it has offices across Europe, the firm may have been hindered by having its headquarters in London. But having pointed out the growth funding gap for years, still described Scaleup Europe as “urgent and necessary” when EQT was announced as the winner.

As for EQT, it described the initiative as a “big moment for Europe.” “Europe has proven its ability to create successful early-stage technology companies, the challenge is now to scale those businesses into becoming global leaders while maintaining their European roots,” EQT CEO and managing partner Per Franzén commented in a statement.

Notably, the Commission has given the fund manager some leeway as to where to invest — with a mandate “including but not limited to deep tech, life sciences, clean tech, advanced manufacturing, and digital technologies.” For EQT, this will overlap with the likes of AI, biotech, energy, robotics, semiconductors and space — as shown by ICEYE.

With ties to the Wallenberg family, which was initially listed as a potential anchor investor of the fund, EQT was arguably a front runner to run Scaleup Europe. With more than $300 million in assets under management, it will also be tasked with helping the fund reach its total fundraising target — starting with a “significant commitment” of its own capital. 

It is unclear how much capital Scaleup Europe has raised so far, but its first closing was anchored by a €1 billion investment from the Commission (approximately $1.15 billion) investing alongside institutional investors from all across Europe, credited as “founding investors.”

According to public information, these founding investors include German insurance giant Allianz; APG, representing Dutch pension fund ABP; Spanish bank-affiliated funds CriteriaCaixa and Santander-owned Mouro Capital; Italy’s Fondazione Compagnia San Paolo, Intesa Sanpaolo and Fondazione Cariplo; and Denmark’s EIFO and Novo Holdings.

Scaleup Europe’s fundraising is expected to extend into 2027, with a second fundraising round described as potentially open to non-European investors, as long as these are aligned with Scaleup Europe’s objectives. 

This might be a necessary compromise to raise the kind of capital Scaleup Europe is seeking. According to reports, the Commission suggested it could eventually expand to €25 billion ($28.9 billion). If it does, it would start belonging to the same category as Asian and U.S. growth funds. 

As it stands, Scaleup Europe’s €5 billion target already makes it an outlier in the EU — VC firms in continental Europe typically manage millions, rarely billions. But with the EIF’s European Tech Champions Initiative actively backing growth-stage VC firms as a fund-of-funds, this could quickly change. In other words, Scale Europe may soon just be there to fill the gap.