Academy Entrepreneurship Funding Innovation Innovation Q&A

Q&A David Arias from STRATA on How Do European Public Grants Work?

David Arias Consultant for Public Funding and Startup Strategy STRATA TEAM.

You can find David Arias, in our Knowco Collabwith Community for finance your startup and innovation projects and work with him personally.

QUESTIONS AND ANSWERS

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FAQ: EUROPEAN FUNDING FOR STARTUPS

AN INTRODUCTORY GUIDE

 

Is the European Commission supporting start-ups?
Of course! Since 2014 the Horizon SME Instrument Programme (part of Horizon 2020 programme) has supported 5,582 companies with 2,510.47 million eur. During these years the programme has experienced important changes and there is a much stronger focus on start-ups now. In fact, the program is now called EIC Accelerator Pilot and today does not only offers grants but also equity investments. A new budget period will start in 2021 and will initially count with a higher budget although it is still under negotiations.

Which are the best grant programmes for start-ups?
European start-ups can apply to many different calls as long as they comply with the eligibility criteria. The best programme for start-up companies is the EIC Accelerator programme. While most European calls require medium or large international consortia, the EIC Accelerator is a single-participant program perfectly adapted for start-ups.

What type of start-ups do H2020 or Horizon Europe support?
Good question! The EIC Accelerator is looking for breakthrough innovation projects with a market-creating potential. Your company must be really innovative and, in most cases, the projects funded have a technology-based innovation. We carefully assess all projects and companies before recommending the EIC Accelerator because the success rate is very low and only companies with a very unique innovation have a real chance of success. The program is “bottom-up” or “horizontal”, meaning that all types of innovations and industries are eligible. All applicants are evaluated with regards to their Excellence, Impact and Implementation. Most of the evaluators have a business background and the characteristics required are similar to those evaluated by private investors. However, there is an important difference today: the EIC Accelerator program is looking for high-risk high-impact projects and is especially aiming to fill the funding gap, supporting those projects with a high technological or commercial risk. Projects that would not easily get funded by private investors.

What is the real success rate?
The success rate is published by the EASME after each call and has been typically around 4% although it decreased even more during this year due to the growth of applications. We believe that there are many projects that are submitted that are not yet ready and therefore the success rate for the good projects is much higher. In our experience, if your project is a based on a unique technology (deep-tech/high-tech), the company is at the right stage of development (TRL & CRL), devotes the necessary time and work with senior funding consultants, the success rate can go up to 20%-25%. Obviously, we look for all these success factors in all our projects.

What are the requirements?
Not many. All companies can apply as long as they are SMEs (Small and Medium-size Enterprises).

Do we need a consortium?
No. The EIC Accelerator is a program for single participants.

Is it worth trying? What is the effort needed to prepare a competitive proposal?
The effort estimated to prepare a competitive proposal is estimated in 200 hours, if the project is ready for the program. If the applicant lacks important aspects such as a FTO (Freedom-To-Operate) analysis, a financial plan or a regulatory analysis, for instance, the number of hours needed will significantly be increased.

What is the funding rate?
70%. But you also get 25% of indirect costs covered.

What type of activities can be funded?
Typical technical tasks include customization, testing, miniaturization, up-scaling, optimization, demonstration and design. The projects should also include a management as well as a pre-commercialisation (communication & dissemination) work packages.

Is there any requirement regarding the time-to-market? What if we are already selling?
Projects have a typical duration of 2 years and should end up with a product ready to be
commercialised. The company could be already selling other products or services.

What about older companies? How can SMEs and SCALE-UPS get funding support for
innovation projects?
All types of SMEs, no matter their foundation date, can apply to the EIC Accelerator Pilot. When working with SMEs or scale-ups there is a preliminary work to be done before applying in selecting the best approach. The applicant will have to identify a project that basically fulfils all the requirements previously mentioned for startups. Today, there is also a tricky question for SMEs or scale-ups regarding the “bankability”. The EIC Accelerator supports “non-bankable” projects and therefore all applicants will need to justify why they cannot access other funding sources including private investors and banks among others. Besides, there are other programmes that are really interesting for SMEs and scale-ups including Fast Track to Innovation (FTI), Eurostars and RIAs. These are collaborative calls that require partnerships.

Do we need a consultant?
The evaluation process is highly competitive and the workload is also heavy. For most companies it makes no sense to invest 1-2 months of work in writing a proposal. Besides, most companies also lack the necessary expertise. Experienced consultants will not only prepare a competitive proposal and will save you time and money, but they will also help you strengthen your business case. While preparing solid proposals, we will also try to challenge your business model and strategy, making the application process a very valuable experience for any company that is also reaching to investors, other funding sources or simply looking for a road to the market.

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