Category Archives: Phase 1

EIC Accelerator Success Rates and Feasibility Studies (SME Instrument)

The EIC Accelerator blended financing (formerly SME Instrument Phase 2, grant and equity financing) is a competitive program targeted at innovative Small- and Medium-Sized Enterprises (SME) and startups. Under the name SME Instrument, it was active for many years and provided a financial support system over two phases – Phase 1 and Phase 2. The former consisted of a small grant of €50,000 while the latter is identical to the EIC Accelerator today (read: EIC Accelerator Introduction).

With the last Phase 1 deadline having been in September 2019, startups today do not have the option to first apply for this seed-grant which was a great opportunity to nourish early-stage startups and allow them to fully assess a project through a feasibility study. Such a study was not only useful to analyse the validity of an innovation or business model but also acted as a springboard to prepare the information-dense Phase 2 (EIC Accelerator) proposal since it requires extensive market studies, customer descriptions and a full business plan that includes the workpackages for the grant support (read: EIC Accelerator Workpackages).

This was a very useful setup and its effects were evident in the statistics collected on the Phase 1 & Phase 2 applicant success cases throughout 2018 (read: Impact Report). In the statistical report, it was found that the chances of receiving the SME instrument Phase 2 funding were 4.1% if no Phase 1 was secured beforehand while the chances rose to 6.8% with a completed Phase 1 project. This means that just having received and completed a Phase 1 project significantly increased the success chances of grant applicants (i.e. a 65% increase).

This increase, of course, can be due to a variety of reasons and the following article presents a shortlist of effects a Phase 1 project could have on a successful Phase 2 evaluation as well as strategies to emulate this advantage for the EIC Accelerator.

Description of the Pilot Results

The most obvious reason as to why the Phase 2 application is improved after a completed Phase 1 is that such projects likely have a comprehensive description of their respective pilot studies. Since the Phase 1 report includes content on the project’s feasibility, the corresponding sections of the proposal template can be filled with suitable content. This includes the documentation on the technical feasibility, test results and the descriptions of use-cases in the relevant environment.

When writing a Phase 2 application like the EIC Accelerator, it can often happen that pilot tests are neglected or not described with great detail. To remedy this, the obsolete Phase 1 feasibility studies have incentivised applicants to elaborate on them in-depth which is likely a contributing factor for the increased success rates.

Financial and Commercial Feasibility

The Phase 1 study directly requests validations of the feasibility from a commercial and financial point of view which can easily be overlooked when writing a business plan. Key factors in this validation process are the customer demand, willingness-to-pay, expected margins and a general analysis of the opportunity which can dramatically enhance the quality of an application.

Having a separate section describing such a detailed feasibility assessment is beneficial and can be neglected if the EIC Accelerator template does not directly ask for it. Even if no Phase 1 project has been funded prior, professional writers and consultants can still benefit from adding the respective section to an application.

Budget Allocation

Workpackages are a critical part of every EIC Accelerator application but they can be tricky since companies do not usually define their development work in such a distinct manner (read: Work packages). As a result, it is easy to rush the workpackage creation and its budgeting as a mere afterthought but this can make the respective implementation less believable or too vague. The Phase 1 feasibility study did remedy this since it requested information on the project’s future, required developments and budgets which could be directly used to inform the EIC Accelerator application.

Proposal Quality

In General, the narrative of the proposal is critical and the vision should be in full alignment with the expected impact, the innovation and the project itself (read: Assessing a Project). If a company has spent 5-6 months in preparing a report for Phase 1, they have likely further refined and aligned key cornerstones of an application (read: A Proposal Narrative). This can enhance every single proposal section since the Freedom to Operate (FTO), the timing, the introduction, the hiring needs, the Key Performance Indicators (KPI), the broader impact, etc. are all highly relevant but are often only briefly addressed.

The quality of a proposal is enhanced in relation to the amount of attention that is placed on its details. This is perfectly supported by a Phase 1 feasibility study which aids in just that – giving the applicant time and a structure to fill in the blanks.

Evaluators’ Bias

Lastly, there is always a bias from the evaluator’s position since seeing that a project has successfully completed Phase 1 will make Phase 2 more appealing to them. From their perspective, the applicant has already succeeded in a highly competitive application process, has completed the stringent documentation responsibilities and has delivered a final report. This element of ‘social proof’ has an effect on the reader and, in and of itself, is expected to increase the evaluation score (read: Buzzwords for the EIC Accelerator).

How to Use this Information

First of all, the absence of a Phase 1 option under the EIC Accelerator program should not be a reason to neglect the points listed above (read: Biggest EIC Accelerator Mistakes). A feasibility study or pilot project can be conducted independently, can come from other funding sources or be performed directly with customers. Taking the time to describe the past milestones, the results of extensive R&D and presenting technical as well as commercial and financial information to validate the project should be prioritized when planning an application.

Some documentation on the now obsolete Phase 1 process can be found in the official template for the feasibility study (here) and the Grant Agreement Contract (GAC).

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 June 16th 2021 and October 6th 2021 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). 

Any more questions? View the Frequently Asked Questions (FAQ) section.

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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:

Work Packages for the EIC Accelerator (SME Instrument Phase 2)

Work packages are an integral part of EIC Accelerator applications (formerly SME Instrument Phase 2) and are the key to specifying and quantifying the exact use of the grant or blended financing requested (i.e. a combination of grant and equity). Professional writers and grant consultants are well aware of their importance and, as an integral part of the official EIC Accelerator proposal template, they have to be addressed with great care.

What is a Work Package?

A work package is a concrete set of tasks and development plans revolving around a specific deliverable. The EIC Accelerator recommends the use of five work packages in total which should encompass the full project scope and include all developments such as technical, financial and commercial tasks.

The individual work packages should be quantified according to their budget (i.e. separating grant and equity contributions), their timeline (i.e. giving the start and end of tasks and sub-tasks) as well as their respective project managers (i.e. task leaders, contributors, subcontractors).

Furthermore, work packages should be as credible and thought-out as possible since they will become the blueprint of the entire EIC Accelerator project if it is approved and successfully funded by the European Commission (EC). As such, work packages have to be clear, quantified, trackable and specific which allows the future project officers to assess the ongoing project, its adherence to the planned budget and also identify potentially emerging problems.

Why is a Work Package Necessary?

A large development project is separated into multiple work packages to make budgeting, tracking and accountability easier for the responsible party, namely the European Innovation Council (EIC). Without work packages, the EC would not know what the budget of the project is actually used for and the applicant would have an excessive amount of freedom over a large sum of government funds.

The work packages also help the proposal evaluators to assess the Implementation criteria and the overall credibility of the project (read: The Evaluation Summary Report). Since Technology Readiness Levels (TRL) are a key quantifier for the European Union (EU) in identifying the progress of an innovation from idea to market, the work package also helps in validating the overall development timeline and identify a project with short time-to-markets (read: How TRL’s are Funded).

Does a Company Need to Create Work Packages?

Work packages should already be an integral part of any innovation startups internal operations in one way or another since Research and Development (R&D) projects generally require a high degree of planning and careful budgeting. In addition, business plans and investors often require information on the use of funds which is why such information is likely already existing internally.

There are cases where a startup or Small- and Medium-Sized Enterprise (SME) is looking for funding but does not have any quantified work packages yet which is a warning sign that the EIC Accelerator might not be a suitable financing avenue. If development plans are non-existent then this either means that the project is not innovative enough (i.e. no significant R&D) or that it is too early stage to be considered close-to-market.

A third option and also a very common case is a semi-complete work plan whereas a general vision has been developed internally but it lacks specific tasks, quantification and a clear timeline. This is often the case with startups who have an adaptable technology that can be applied in a variety of places and where the required funding source determines the path to take.

Such a preliminary plan can easily be edited and improved to match the EIC Accelerator scope and should not exclude an innovative company from submitting a proposal to the next deadline. If a previous application has been submitted but rejected with a low Implementation result, the work packages are a priority to review and edit before a re-submission is performed.

Specific and Quantified

While less relevant for the pitch interview, the proposal will need to specifically describe all of the expected tasks and cost factors (read: Pitch deck vs. Proposal). The rule is to quantify and specify as much as possible so that the progress can be tracked on a monthly and even weekly basis. Milestones, the budgeting and Key Performance Indicators (KPI) should correspond to the work package deliverables and the timeline should connect all respective items so that the evaluator is impressed by a comprehensive plan.

Prospect EIC Accelerator applicants should be aware of the types of work packages to include and not confuse feasibility assessment tasks (i.e. FTO, market analysis, etc.) with development tasks (i.e. value chain, technical tasks, certifications, etc.) since only the latter are eligible for the EIC Accelerator. The feasibility of the project (i.e. the former SME Instrument Phase 1) should have already been assessed and described inside the proposal which is why the Implementation should focus on the practical project execution.

Summary

  • What is a Work Package? A concrete set of development tasks with specific, quantified and traceable outcomes.
  • Why is a Work Package Necessary? It helps investors to keep the grant beneficiary accountable and track the budget.
  • Does a Company Need to Create Work Packages? They should already be existent internally but often have to be refined.
  • Specific and Quantified: Work packages should be quantified as much as possible and be consistent with other proposal sections.

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 June 16th 2021 and October 6th 2021 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). 

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, 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:

Changes in the EIC Accelerator during 2019

Since 2019 has come to an end, here is a summary of the main changes that have occurred regarding the EUs startup grant – the EIC Accelerator: 

1. Equity Finance: The most significant change was the discontinuation of Phase 1 (€50,000 grant financing) and the introduction of the new blended financing option for Phase 2 (now up to €17,500,000 with grant and equity). 

2. Phase 2 Template: The template for the Phase 2 application has been reworked and includes new additions such as detailed financial information, listed KPIs, explicit need for EU support and the addition of specific summaries to the proposal introduction instead of the previously introduced executive summary. 

3. Pitch Deck: The pitch deck for the required presentations and interviews will now need to be uploaded with the application and cannot be modified later on. 

These and other minor changes will need to be considered when submitting (or re-submitting) your next proposal.

SME Instrument Grant Writing Tips (EIC Accelerator)

I frequently get asked about the application process for the SME Instrument Funding by the EU, so here is a brief overview for every startup that wants to apply:

Proposal writing is the most important part but I am covering this in another post

Choosing an Acronym and Tagline: Each proposal has a short Acronym that is used as a project identifier and a tagline which gives a quick overview of the project. The Acronym does not actually need to have any meaning at all and you can be creative. Here is an example of a fictional health project (“ACRONYM – Tagline”):

  • PATIENT NETWORK – Smart & Secure Software for Hospitals to Automate Essential Patient Data Processing and Create a Unified Patient Network in the EU 

     

Abstract: Next to the Acronym and Tagline, you will also need to provide an abstract which is 2000 characters long and should give a brief summary of the project. If funded, the Abstract, Acronym and Tagline will be published by the EU. Make sure that every sentence is packed with information and that all information given here counts. Follow the general way scientific work is presented:
Problem > Market Pain Point & Competitors > Your Solution > Your Current State > Your Commercial & Market Impact > EU Benefits 

Keywords: When you create the draft for the submission, you will be asked to select up to 3 keywords with respective sub-keywords from a drop-down list. You can then also add some manual keywords to better describe your project. These keywords will determine the background of our 4 evaluators.

Excluding Evaluators: The EU is regularly publishing a list of all evaluators for the SME Instrument and if you suspect a conflict of interest, you can exclude specific reviewers.

There are many more small things to consider such as legal/financial data and the overall company registration but the points above cover most of the writing parts for the proposal submission.

SME Instrument Phase 1 vs. Phase 2 (EIC Accelerator) Part 2

Here is some additional information regarding the EU’s Startup Funding (The SME Instrument) that I frequently get questions about:

 

Since Phase 1 will have its last two cut-off days this year with Phase 2 applications still being open, let me give you the main things to keep in mind when writing a Phase 2 proposal directly.

 

    • Number of pages: Sections 1-3 (the main proposal) are 10 pages long for Phase 1 and 30 pages for Phase 2.

 

    • Content: Naturally, in a Phase 2 proposal, you can go into more depth in each section but there are also a few parts that are unique compared to the Phase 1 template (e.g. “Communication and access to research data”)

 

    • Work packages: This is an important one. Phase 1 applications are for a feasibility study and you do not need to have a fixed business plan in place but for Phase 2, you will need to have a very detailed cost structure for the next 2 years of developments. You must know who will perform each task, how much it will cost and what the deliverable will be. Plan about 7 to 15 pages just for the work packages.

 

    • Budget: Phase 1 is fixed at €50,000 while Phase 2 can be set to €2,500,000 or higher in some cases.

 

The Two Most Important Features for an SME Instrument Project (EIC Accelerator)

Here is some information on the EUs startup grant to help you find out if you can apply. I am always looking for two major things to quickly assess a companies success chances: Innovation & Traction.

(1) Innovation

The EU specifically funds high-risk and high-reward projects. This means that the innovation should be market-disrupting or market-creating and that you have overcome barriers which other companies have failed to overcome. Two major questions I always ask are:

 

  • If you consider your closest competitor, can you name at least one or two things that make your product unique?
  • If a large company would attempt to copy your product, could they succeed in less than a year?

(2) Traction

While the innovation is central to the SME Instrument funding, the market interest is just as important. You must show that there is a clear market need for your product and the best way is to have written proof of intent. You must at least be in contact with some customers or, even better, have ongoing pilot studies or revenues from your current product.

 

Innovation & Traction are always the first two things I ask for when talking to companies. If these check out, the pre-requisites for a successful grant application are met in almost all cases.

SME Instrument Phase 1 vs. Phase 2 (EIC Accelerator)

Since Phase 1 (€50,000) of the EUs start-up grant will be discontinued after September 2019 but Phase 2 (€2,500,000) will remain open, here is an overview of the main differences between the applications.

 

While Phase 1 &2 proposals do follow almost the exact same template, there are important variations to consider:

 

  • Feasibility vs Implementation: Phase 1 is granted for a feasibility study of the project while Phase 2 is for the implementation of all technical and commercial developments.
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  • Grant amount and competitiveness: Due to the higher grant amount, Phase 2 is more difficult to achieve than Phase 1
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  • Funding threshold: The official threshold for funding is 13/15 for Phase 1 and 12/15 for Phase 2
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  • Interview: Phase 2 requires an in-person interview before the grant is approved
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  • Proposal length and additional sections: The main document is 10 pages for Phase 1 while Phase 2 is 30 pages.
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  • Value for money of subcontracting is rated: The subcontracting in the proposed project must be described and justified according to its best value for money.

How To Identify a High Quality SME Instrument Project (EIC Accelerator)

If you are considering to apply for the start-up grant by the EU, here is the most important information on how to identify a high-quality project:

 

(1) Hardware products: More than 60% of all funded projects are related to hardware manufacturing, followed by subscription services at only 16%. This does not exclude pure software projects but shows that hardware innovations have a better way of showing a need for funding due to high production costs. They also have an easier time to patent the solution and show the innovative nature of the project.

 

(2) High Value Industries: While the budget distribution in the newest installation of the SME Instrument has changed, the past data shows that the most frequently funded projects are related to healthcare, cleantech, energy, analytics and transportation.

 

(3) Revenue Model: B2B is by far the most sought after project type with 76% of all funded projects, followed by B2C revenue models. It is usually difficult for B2C projects to show investors any customer interest if the technology is still in the pre-commercial stage but e.g. retailer & distribution agreements can help in this regard.

What Types of Companies Have Received Funding?

In 2018, the EC has published an annual report which contained some helpful statistics. It actually answers quite a few questions that I frequently receive from companies, so here are the bullet points:

 

  • Of all funded companies, 84% (Phase 2) and 95% (Phase 1) applied as single entities
  • Most funded companies require coaching to better understand the market and business strategy
  • While Phase 1 is optional, Phase 2 is twice as likely to receive funding if Phase 1 is completed first
  • Most funded companies have under 3 employees
  • 76% of funded companies have a B2B revenue model

SME Instrument 2018 Changes

Before 2018, there were pre-defined industries (13 in total) which could apply to the SME Instrument. Starting February 2018, the funding is available to projects of all industries with no topic restrictions.

 

The budgets and competitiveness of the old topics were highly disproportionate so this new development might level the plane field and give more equal opportunities.