(Bloomberg) — The European Union is planning a 3.5 billion-euro ($3.9 billion) fund that will invest in early stage technology in an effort to increase the pipeline of innovations that might someday take on giants in the U.S. and China.

Traditional venture capital firms tend to avoid the costly and risky research needed to turn a scientific breakthrough into a viable product, said Jean-Eric Paquet, the European Commission’s director general for research and innovation.

It’s “the famous innovation valley of death,” he said in an interview at the Slush technology conference in Helsinki.

Read: What If Silicon Valley’s ‘Brilliant Jerks’ Are Just Jerks?

The fund will seek to close that investment gap by providing equity and grant funding to early stage firms in so-called deep tech, such as manufacturing, biotechnology, health-tech and artificial intelligence, he said. It’s set to formally launch in 2021 and will be run by the European Innovation Council, though the final size could change depending on the outcome of budget talks with the bloc’s member states.

The EU currently puts money into tech companies through grants from the commission and via the European Investment Fund, which invests venture capital firms but doesn’t have a mandate to take on a lot of risk.

“We are hoping to make a big, big impact with this European Innovation Council,” Paquet said. “We are emulating indeed to an extent the positive features of traditional VCs.”

Venture capital in European tech has jumped as the continent’s companies have gotten bigger and as a trade war between the U.S. and China has pushed investors to consider alternatives to the two tech hubs. Capital invested in European companies this year grew to $34.3 billion, up from $15.3 billion in 2015, according to a report published this week by venture capital firm Atomico.

A pilot phase of the EIC started this summer with a 600 million-euro pool of capital to test the appetite of innovators for combined grant and equity support, Paquet said. The pilot is set to decide on between 50 and 100 projects by the end of the year.

Read: Top Tech Startups in Oman

The EIC’s fund will be run by external experts who will be required to conduct due diligence and find other participants for a more traditional round once a product moves into a phase where it can be tested.

Some investors have already given their nod of approval for the EU’s plans.

“The European Commission’s approach to investment in deep tech is, in my view, very thoughtfully designed, laser focused on areas that are not yet viable for venture capital investment,” said Sarah Cannon, a San Francisco-based partner at Index Ventures, a venture capital firm that has invested in European companies, such as payments firm Adyen NV and mobile game maker Supercell Oy.