The EIC Accelerator blended financing (formerly SME Instrument Phase 2, grant and equity financing) is undergoing a transformation in 2021 (read: Proposed Evaluation). The former 2-step process (application and pitch interview) which has been active for almost 4 years is gaining a third step (video pitch and mini-application) which can have a variety of effects on its funding thresholds (read: EIC Accelerator Introduction).
The Horizon 2020 Process
In the past, it was clear that Step 1 (long application) was the most difficult stage to pass through with success rates being well below 10% and with many weeks having to be invested in the preparation of the respective documents. On the other hand, Step 2 (pitch interview) was comparatively easy with success rates of approximately 50% and much shorter preparation times.
For startups and Small- and Medium-Sized Enterprises (SME), it was clear that the likelihood of receiving the grant financing improved the further one was in the process since the success rates were increasing for each step. To facilitate the application, many applicants relied on professional writers and consultancies to support them in working with the official proposal template.
In the old evaluation process, the funnel for the selection of EIC Accelerator applicants can be visualised as follows:
Note: 100 Applicants (Y-axis) are chosen as a base and 5 EIC Accelerator winners are selected for the sake of simplicity. The length of Step 1 (X-axis) is twice the length of Step 2 to reflect the amount of effort needed to prepare the documents.
In contrast, the newly introduced third step could change that dynamic since the three steps under Horizon Europe (2021-2027) could have entirely different thresholds. Depending on how these are distributed, it can render the EIC Accelerator an excessive time investment or can make the grant more appealing to startups.
Evaluation Thresholds under Horizon Europe
Based on the European Agency for SME’s (EASME) and the European Innovation Council’s (EIC) decision as to how proposals are scored and ranked as well as how their thresholds are determined, the success chances per step can vary greatly. Unfortunately, there is currently no definite way of predicting if the new Step 1 (the mini-application) will have a high or low success chance compared to Step 2 (the long application).
In the same vein, the interview and pitch evaluations could shift from the past model since performing them remotely presents an opportunity to execute more pitch evaluations at scale to screen companies. This could likewise lower the interview success rates significantly and change the dynamics of the application process (read: Pitch Interview Preparation).
From a participants perspective, the EIC should prioritize matching the effort an SME has to invest in an application with their success chances. This means that having a low-effort application with a high success rate followed by a high-effort application with low success rates would be frustrating for applicants since they will have wasted a lot of time and resources.
The central question is how much effort a rejected applicant had to place into an application and if this effort was proportional to their success chances. If the first two steps have success rates of 90% while the last step has a 5% success chance then the amount of time wasted is enormous. If the first step has a 5% success rate while the remaining steps select 90% of applicants each then this would be time well invested.
To visualise the difference scenarios, a pyramid-type funnel is used for the selection thresholds of each step. To simplify the representation of such scenarios, the following considerations apply:
- A 3 Step evaluation is used to select 5 successful beneficiaries from 100 starting applicants. This yields a 5% success rate for the grant.
- The selection thresholds are chosen as 50% or 20% to account for low- and medium-success stages. 50% * 50% * 20% = 5%
- Since the effort per evaluation step will vary greatly, the long application in Step 2 is at least twice as difficult as either Step 1 or Step 3. For all 3 Steps, the following effort-relationship is represented on the X-axis: [1-2-1]
The result is the following overview whereas the Y-axis is proportional to the number of applicants and the X-axis corresponds to the effort that is placed into an application. The area of the pyramid represents the number of applicants (Y-axis) weighted by the effort (X-axis) they apply. The more “bulky” a pyramid is, the more time the rejected applicants will waste due to the chosen thresholds.
Analysing the Scenarios
In these three scenarios, it is evident that scenario 3 would be the best for applicants since the first and most selective step will require a low amount of effort. In the same vein, the second scenario is the worst outcome for applicants since they would invest a significant amount of effort into their applications while the chances drop towards the last step.
From the evaluator’s perspective, there is always a trade-off for the simplification of the application documents since an application that is too simple might be unsuitable for a grant selection while an application that is overly complex will waste both the applicant’s and the evaluator’s time.
Nonetheless, the EIC should aim to prioritize scenario 3 since this will greatly reduce the entry barrier for startups whereas they will know, with little effort, if the EIC Accelerator is suitable for them or not.
Unfortunately, the 2021 process will likely follow scenario 1 since it will be a simple extension of the 2020 process with only the addition of another step. This scenario would match the previous process since the 50% rates for Step 1 and 20% for Step 2 yield the combined 10% for the old Step 1.
In addition, the EIC and European Commission (EC) have decided to reintroduce thematic topics which are separate funding arms within the EIC Accelerator and will have different budgets, evaluator pools and levels of competitiveness. This will further increase the overall complexity of the evaluation process and can impact the effort-to-success ratio of each Step’s selection.
The assumptions for the graphics presented above are limited and are only acting as a way of conceptualising challenges that applicants might face under the future EIC Accelerator.
Another interesting direction the EIC could move towards is the removal of the full application (Step 2) whereas all applicants could directly join a remote evaluation after passing the mini-application in Step 1. This is especially feasible for equity-applicants since the due diligence that follows the successful selection can replace the in-depth financial documentation of Step 2.
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) will be on March 16th 2022, June 1st 2022 and October 5th 2022 under Horizon Europe. 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).
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by Stephan Segler, PhD
Professional 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:
- EIC Accelerator Interviews: Pitch Deck vs. Proposal Documents (SME Instrument)
- Choosing a Good Project for the EIC Accelerator (SME Instrument Phase 2)
- The EIC Accelerator Budget: Grant vs. Blended Finance (SME Instrument Phase 2)
- EIC Accelerator – Introduction and Blended Finance (SME Instrument Phase 2)
- EIC-Accelerator Writing: Providing the Missing Link (SME Instrument Phase 2)
- The Biggest Mistakes When Applying to the EIC Accelerator (SME Instrument Phase 2)
- Identifying a Broad Vision for an EIC Accelerator Project (SME Instrument Phase 2)