Inside Europe's new €120m 'catalytic' impact fund: 'We're backing companies in the missing middle'

Switzerland-based Chi Impact Capital and German impact investor FASE have teamed up to launch the European Catalytic Impact Investing Fund II (ECIIF II), targeting €80m with a hard cap of €120m.

The new fund, structured as a SFDR Article 9 vehicle, will invest in early-stage European companies – typically pre-Series A to Series A – spanning climate tech, circular economy, food systems, and services such as care and education.

Christine ter Braak-Forstinger, founder of Chi Impact Capital and now co-founder of ECIIF II, said that while the fund will invest in AI-enabled solutions where relevant, it does not plan to invest in defence tech.

One of the standout features of the new fund is a €10m “catalytic” guarantee from the European Investment Fund (EIF), designed to de-risk a portion of the portfolio and unlock a type of financing most venture funds can’t offer.

Targeting the ‘missing middle’

Unlike a typical EIF commitment, which usually comes as equity, the EIF backing for ECIIF II comes in the form of a guarantee covering convertible loans.

Braak-Forstinger told Impact Loop that the fund is explicitly targeting Europe’s “missing middle” – companies that are often too slow-growing for traditional venture capital.

In the DACH region, such companies are often referred to as the ‘mittelstand’ – typically small and medium-sized enterprises (SMEs) with annual revenues up to €50m a year. ECIIF II will also target social enterprises or businesses operating under structures such as steward ownership.

“These are companies that are not geared towards fast, quick growth,” says Braak-Forstinger. “They need more patient capital...and more of it because these companies can struggle to get new funding."

The argument echoes a growing narrative across climate and impact investing: that not every transformative company will become a unicorn – and that Europe may need more patient capital to scale the businesses driving real-world change.

Joining forces

Chi Impact Capital, founded in 2017, previously raised a €13m Luxembourg-based impact VC fund in 2020. Germany-based FASE raised a similarly sized fund the same year, with a stronger focus on social innovation such as education and care-related investments.

The two funds were raising for second funds before they decided to join forces.“Teaming up for us has been a true multiplier for us,” says Braak-Forstinger.

She said the combined platform should help the fund reach a size that appeals to larger LPs – a hurdle that many smaller European impact managers must face.

First close planned for 2026

ECIIF II is targeting a first close above €30m in Q2 2026, with backing expected from a mix of private investors and at least one institutional LP, Braak-Forstinger says, declining to name investors.

The fund will still make traditional equity investments, but a portion of its capital will be deployed through convertible loans repaid through cash flows over time.