Which Companies Should Not Apply to the EIC Accelerator (SME Instrument) – Part 2 Posted on December 18, 2020December 12, 2020 By Stephan Segler, Ph.D. This article is a continuation of Part 1 and presents an exploration of criteria that could lead to the immediate dismissals of projects applying to the EIC Accelerator blended financing (formerly SME Instrument Phase 2, grant and equity financing) by the European Innovation Council (EIC) and the European Commission (EC). Non-Innovations Many professional writers and grant consultants are highly creative when it comes to packaging an innovation in such a way that it sparkles and shines more than it should. Many startups or Small- and Medium-Sized Enterprises (SME) should assess, prior to their EIC Accelerator application, if they are a me-too business or truly a first mover. Sometimes, a new product or service is only innovative in a certain environment (i.e. a region or industry) but the base technology is not new and only appears unique due to its specific application. Without a clear innovation, the barriers to entry for competitors are likely too low to warrant EIC Accelerator financing and an application would possibly be dismissed. Small Profits While it is clear that the EIC Accelerator does not finance non-profits, it is less clear that low-profits will also be unsuitable for financing. The EIC boasts about the growth observed for EIC Accelerator (or SME Instrument) beneficiaries (read: Impact Report 2020) but it does not clearly state what revenue-scale is expected from companies. Nowhere does it say “We want your maximum revenues next year to be €100,000 p.a. and your minimum revenues within 5 years of market entry to be at €50M.” As a result, many companies applying to the EIC Accelerator think that they could have a chance but do not actually have the market impact or commercial scalability that the EU is looking for. Such an expected scale is hinted at under the rules for equity financing (i.e. an ROI within a certain time frame) but is not clearly quantified (read: Equity Financing). If the European Union would explicitly warn companies upon submission that the entered financials do not have the impact they are looking for, applicants would have much more realistic expectations of their success chances (i.e. when using submission forms for financials as proposed here). Using the EIC for Material Expenses The EIC is looking for startups that are at a certain Technology Readiness level (TRL) since an immature technology will likely be non-bankable and be in need of special financing from the EC (read: Understanding TRL’s). Companies that have already brought their technology to a high TRL but only need financing to scale up their production (i.e. purchasing materials, marketing, leases, etc.) will not be covered by the EIC Accelerator. If, however, these expenses are in addition to actual technology developments then these can be covered by the EIC as long as they are properly justified. Foreign Ownership and Financing The EU, as diverse and inclusive as it is, is very guarded when it comes to foreign ownership of grant applicants since they, understandably, want to make sure that government funds are spent inside the government’s territory. Having foreign entities (i.e. companies, individuals) take ownership in a startup that is seeking EU funding is not a problem per se but it should be assessed on a case by case basis if the SME is independent or controlled. A startup owned to 49% by Chinese investors might not make the application to the EIC Accelerator ineligible but can raise many eyebrows from the evaluators and the jury in the pitch interview. The same goes for management teams that are all from a non-EU ethnicity and clearly give the look of being foreign even though the company, on paper, is based in an EU country and 100% owned by EU residents (i.e. if 9 out of 10 employees are from Pakistan). Highlighting the inclusivity and diversity of a company works well in isolated cases but it should be assured that it is balanced and does not backfire in case that foreign control is suspected. Summary Being Well-Financed: Does the applicant already have sufficient financing? Transforming the EU: Is the innovation presenting a transformative impact for the EU and its citizens? Opposing Values: Is the project aligned with the EU’s long-term goals? Non-Innovations: Is the company an innovator or a me-too? Small Profits: Does the company have exponential financial growth expectations? Using the EIC for Material Expenses: Is the funding required for technological developments or only scaling? Foreign Ownership and Financing: Is the company independent and EU-controlled? This article was last modified on Dec 12, 2020 @ 11:25 These tips are not only useful for European startups, professional writers, consultants and Small and Medium-Sized Enterprises (SME) but are generally recommended when writing a business plan or investor documents. Deadlines: Post-Horizon 2020, the EIC Accelerator accepts Step 1 submissions now while the deadlines for the full applications (Step 2) under Horizon Europe are: Step 1 Open now: Apply as soon as possible to be eligible for a Step 2 submission Step 2 (closing 17:00 Brussels Time) 1st cut-off 2025: Approximately January or March 2025 2nd cut-off: - 3rd cut-off: - 4th cut-off: - Step 3 1st cut-off: - 2nd cut-off: - 3rd cut-off: - 4th cut-off 2024: January 13th to 17th 2025 The Step 1 applications must be submitted weeks in advance of Step 2. The next EIC Accelerator cut-off for Step 2 (full proposal) can be found here. After Brexit, UK companies can still apply to the EIC Accelerator under Horizon Europe albeit with non-dilutive grant applications only - thereby excluding equity-financing. Contact: You can reach out to us via this contact form to work with a professional consultant. EU, UK & US Startups: Alternative financing options for EU, UK and US innovation startups are the EIC Pathfinder (combining Future and Emerging Technologies - FET Open & FET Proactive) with €4M per project, Thematic Priorities, European Innovation Partnerships (EIP), Innovate UK with £3M (for UK-companies only) as well as the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants with $1M (for US-companies only). Any more questions? View the Frequently Asked Questions (FAQ) section. Want to see all articles? They can be found here. For Updates: Join this Newsletter! by Stephan Segler, PhDProfessional Grant Consultant at Segler Consulting General information on the EIC Accelerator template, professional grant writing and how to prepare a successful application can be found in the following articles: A Quick FTO Guide for EIC Accelerator Applicants in a Rush 2023 Budget Allocations for EIC Pathfinder, Transition and Accelerator Developing the Unique Selling Points (USP) for the EIC Accelerator Explaining the Resubmission Process for the EIC Accelerator A Short but Comprehensive Explanation of the EIC Accelerator EIC Accelerator Success Cases Deciding Between EIC Pathfinder, Transition and Accelerator A Winning Candidate for the EIC Accelerator EIC Accelerator Interview Preparation Process: Scripting the Pitch (Part 1) EIC Accelerator Horizon Europe Phase 2 SME Instrument / EIC Accelerator EIC Accelerator equityEIC Accelerator financingEIC Accelerator grantEIC Accelerator submissionEIC Accelerator successIndustries & CompaniesInvestorsSME Instrument Phase 2TimelineWriting Tips
EIC Accelerator Technology Readiness Levels and the EIC Accelerator (SME Instrument) Posted on June 5, 2020October 9, 2020 Technology Readiness Levels (TRL) are a useful way of classifying the current stage of an innovation or technology. They have originally been developed by the National Aeronautics and Space Administration (NASA) many decades ago but have persisted as a popular tool used by institutions such as the European Commission (EC)… Read More
EIC Accelerator How the EIC Can Incentivise Shorter and Clearer Applications for the EIC Accelerator (SME Instrument Phase 2) – Part 1 Posted on December 13, 2020December 10, 2020 Information for readers: The following is a description of a proposed evaluation process but it does not, in any way, reflect the current way EIC Accelerator applications are evaluated. For this, please read this article. The European Commission (EC) and the European Innovation Council (EIC) have always aimed at optimizing… Read More
EIC Accelerator How to Script an EIC Accelerator Pitch Video (SME Instrument) – Part 1 Posted on January 1, 2021December 30, 2020 In 2021, the EIC Accelerator blended financing (formerly SME Instrument Phase 2, grant and equity financing) requires the upload of a pitch video which can present new challenges to prospect applicants (read: Proposed 2021 Template). While startups and Small- and Medium-Sized Enterprises (SME) can find information on the creation of… Read More