The EIC Accelerator funding (grant and equity, with blended financing option) by the European Commission (EC) and European Innovation Council (EIC) for Small- and Medium-Sized Enterprises (SME) and startups awards up to €2.5 million in grants and €15 million in equity financing per project (€17.5 million total). Successful EIC Accelerator applicants are often supported by professional writers, freelancers or consultants due to the high level of complexity encountered in the 3-step application process.

This article discusses the recent changes in the EIC Accelerator as well as its budget allocation.

Changing Budgetary Tides

The EIC Accelerator is moving through ebbs and flows. If the annual EIC Accelerator budget is high then many companies will be funded. If the annual budget is low then only very few companies will be funded. This is a natural fluctuation since the applicants are not primarily competing against the evaluation criteria but are competing against each other in sight of the limited budget.

Since Step 1 (short proposal) and Step 2 (business plan) of the evaluation process are, officially, not ranking proposals against each other but are evaluating each proposal individually, Step 3 is gradually becoming the central bottleneck in gaining funding through the EIC Accelerator program.

Based on feedback from the EIC Jury members, the EIC continually aims to improve the quality of applicants that successfully make it to the final interviews since there have been many cases where Jury members complained that some companies should not have reached Step 3 in the first place. A lack of excellent candidates has even led to a surplus budget in the past.

This highlights the difficulties faced by the EIC when conducting evaluations in Steps 1 and 2 since the EIC must rely on thousands of remote evaluators with diverse and potentially inadequate backgrounds.

Nowadays, a surplus budget is a forgotten luxury but historical data shows that, while the EIC Accelerator has always remained a DeepTech program, it has not shied away from sidestepping its core mission.

The Exuberance of Affluence

While the quantitative difference in available financing should not affect the qualitative selection process through which companies are evaluated, it certainly does. If the budget is high, the EIC Accelerator starts funding more companies. If the budget is low, it will fund fewer companies.

If more companies obtain funding then it is clear that some companies must be less worthy than others since identifying this qualitative difference is the purpose of the Step 3 interviews of the EIC Accelerator.

In the past, the EIC Accelerator has funded companies in a variety of areas. Some had a scientific background, some did not. Some had patents, some did not.

The term DeepTech was stretched to the maximum to account for a variety of different projects while the mission to fund only those companies that have difficulties attracting private funding was not strictly implemented.

DeepTech Washing

An example is the company Twaice which obtained grant-only support under the EIC Accelerator in 2022. With the Step 3 interview dates set in mid-May 2022 and Twaice having announced the close of a $30 million Series B Extension funding round on April 26^th 2022, just 2 weeks before the interview, there was no need for the EIC Accelerator to provide a grant of a mere €2.1 million since private markets were more than willing to invest. But it happened anyway.

Twaice, while clearly being a great company that is deserving of public funding, is also primarily a software company which makes the EIC’s funding decision more mysterious in a DeepTech program such as the EIC Accelerator.

What is especially interesting is that the EIC has used Twaice as an example of a Centaur (a company that has a valuation exceeding €100 million) in its marketing materials at a time when the company had not raised any funding since its Series B extension. This suggests that the EIC bought into the company for the purpose of enhancing the quality of its portfolio regardless of its mission and regardless of its lacking impact.

Another example is Lili.ai which received blended finance support under the EIC Accelerator in 2021 with an EIC grant contribution exceeding €2.5 million. As a software company, it focuses on project management tools and leverages artificial intelligence (AI) and natural language processing (NLP) for the construction sector. While this type of technology clearly seems highly technical, its funding is likely a testament to the high EIC Accelerator budgets in 2021 rather than its DeepTech nature (i.e. scientific basis and high capital requirements due to hardware costs).

Reduced EIC Accelerator Budgets

The EIC Accelerator has been very well funded in recent years with budgets oscillating around €1 billion per year. The EIC Accelerator budgets for the years since its full implementation post-pilot phase were:

	Announced Budget (€M)	Work Programme (€M)	Number of Beneficiaries
2021	990	1,087.6	164
2022	1,248.7	1,167.8	227
2023	1,090.8	1,137.71	172
2024	–	675	–

All EIC Accelerator budget allocations since 2021 and the total number of funded companies.

It is evident that the budgets have witnessed a sudden and steep decline to nearly half of their original size in 2024. This, of course, is going to have a significant impact on the number of funded companies (EIC Accelerator beneficiaries). It can be expected that the total number of funded projects will be below or close to 100 for the entire year of 2024.

This reduction in the total budget will likely put a stop to the EIC’s funding of non-DeepTech companies, for better or for worse, but it remains to be seen if the EIC keeps funding well-funded companies or non-scientific technology companies.

It is also evident that the reduced EIC Accelerator budgets will greatly impact the overall success rates of the EIC Accelerator since the total number of applicants generally remains the same while the fluctuating budgets determine the funding rates:

All EIC Accelerator success rates from 2021 to the latest release in February 2024.

New Direction for the EIC Accelerator, Fuelled by Bad Habits

The EIC Accelerator is constantly undergoing changes. This should not be confused with progress since many changes are abrupt, counterproductive and confusing such as the handling of the EIC Fund’s €15 million equity investments which were miscommunicated, delayed and even threatened companies that the EIC aimed to support with bankruptcy.

Another recent example is the introduction of the EIC’s AI Submission Platform, its persistence through waves of criticism and its anti-climatic and sudden over-night cancellation just days before a deadline because of a vague contract dispute with their supplier.

Another undesirable change was the removal of the rebuttal system in 2024 which originally allowed applicants to respond to evaluators in their resubmission. Its absence now erodes the transparency and trust that the EIC should provide to its applicants.

Like many government organizations, the EIC benefits from the inability to fail or go bankrupt. A private company or a Venture Capital (VC) fund has to carefully navigate its industry to be successful but the EIC can always bulldozer through any hiccup, no matter how big, since it will always remain funded and unscathed.

Ironically, this is to the benefit of the applicants since the EIC will not be going anywhere anytime soon. It might make mistakes repeatedly, it might lack any sense of accountability and it might even go against its own mission but it will always be there to fund the lucky companies that make it through the lengthy process.

DeepTech: It’s Different This Time

Under the new leadership and in the face of reduced budgets, the EIC has readjusted its focus to what could be described as DeepDeepTech. Or Only DeepTech for real this time, we promise. The new President of the Board of the European Innovation Council writes in a LinkedIn article and post:

“In the first place you innovation needs to be deeptech, here supported by evidence from literature. It is preferably your deeptech: you are the writer of the scientific base.”

“In the first place you need substantial patents before starting, and a secure freedom to operate. So both your own patents (please more than 2, of which you are applicant, inventor or licensee) […].”

There clearly is a stronger focus on patents and on scientific discoveries that are either made or fully owned by the applicants. This should greatly reduce the eligibility of software startups if these criteria become formally implemented. At this stage, the announcement is simply a social media post by the EIC Board President.

DeepTalk

“In each jury round I have attended, and also in each full review of the full proposal there were ventures of which the reviewers/jury said: they should never have got so far. I myself, was often stricter than the juries themselves, but in seasons cases 1/3 of the proposals should not have reached the jury stage, being less convincing on all the criteria above. One third were very impactful proposals but not deep-tech. They deserve funding, but not in an instrument like the accelerator – which is really for deeptech. One third were very good proposals, but one of them (in each round) missed conviction on a few arguments and were not selected for funding.”

It is clear that the EIC is transitioning towards more austerity, not by conviction, but out of necessity since the budgets are too limited to spend on just any company.

The EIC should implement rules for fundraising as well since it is highly common that companies raise funding during the months- or years-long EIC Accelerator application process and even close major funding rounds before the interviews (see the case of Twaice above) but still receive EIC grants. At this stage, this is a dirty little secret since the EIC is not setting up rules for what “can be funded by private markets” actually means in practice.

It is interesting that the EIC Board President admits that one company per interview that deserves funding as a DeepTech, high-impact startup is rejected due to a lack of conviction in a few answers. That is absurd considering that this company has spent months or years in the application process with a success rate below 5% just to be judged on a few answers in an uncomfortable 30-minute interview. What happened to the EIC business acceleration services that the EIC keeps advertising? All the EIC Project Managers? What about all the contracted business coaches?

The EIC should gladly take in these DeepTech startups and view a few lacking answers as an opportunity to help.

Having to repeat the application process at any stage just to maybe perform better in another interview is not the treatment DeepTech entrepreneurs need. Once identified as a DeepTech and high-impact business, they should be supported and not rejected.

Bad Success Metrics

In a recent interview, the EIC Board President explained how DeepTech can be viewed:

“The easiest one definition I have for DeepTech is that in DeepTech you have a deep valley of death and so you have a valley of death that is long so it takes three, four, five, six years of fundamental development, of technological development before you have a pilot that you can show. So what the EIC does is provide the capital to survive those deep valleys and that’s the difference with, let’s say, the normal startup that normally will have a turnover within six months or a year.”

Using this explanation, DeepTech is therefore dependent on capital to survive the valley of death which means that it will die without the capital. This, in turn, means that the company cannot raise that capital with reasonable conditions or at all. However, this definition is not practical since it is very typical for companies to raise money during the EIC Accelerator application process.

As long as the EIC Accelerator application requires months or years, this will likewise be unavoidable. The EIC Board President further explains how the EIC Fund invests its equity contribution:

“The EIC fund part we have on average a a leverage of 3.2 so it means for every Euro of public money invested in that company three Euros come from other sources sometimes also national promotional banks or regional promotional banks but also they are not a lead investor so there’s always a private lead investor. So basically, our work is to seduce the private investors to go earlier in a TRL.”

Consequently, the metric that is being tracked is the multiple for every Euro invested by the EIC compared to Euros invested by other investors. But considering the mission of the EIC of funding DeepTech, this is a poor metric since it does not differentiate between companies that would have raised funding without the EIC and those that were saved by it.

The metric should not be “invested with the EIC” but instead be “invested because of the EIC”. However, such a metric is difficult to establish since it is nearly impossible to find out what would have happened in an alternative scenario.

However, creating rules on fundraising to determine the eligibility of applicants would be a good start since raising funding during the application process is a strong sign that private markets are willing to invest. Because they literally just invested before the EIC.

But if the EIC were to implement such criteria, it would be unable to benefit from the companies that would have been successful without them and vanity metrics such as the advertised investment multiple, the company valuations and the latest funding rounds of its portfolio would likely soften tremendously.

Looking Ahead

The EIC Accelerator is a very positive instrument in the European investment ecosystem. It is far from perfect, it lacks accountability and it is highly inconsistent but it is a force for good.

It is easy to look at an institution like the EIC and its thousands of investment decisions (and rejection decisions) and point out its flaws but any company that has received a non-dilutive grant will speak very highly of the program.

For applicants, consultants and professional grant writers, it is useful to know that the EIC Accelerator is now focusing more on DeepTech than ever before and that the reduction in budgets has led to a wave of austerity in the selection process.

Over are the times were a great business model and traction with a hint of tech could get a company funded since more scrutiny is now being placed on the Intellectual Property (IP) and the ownership of the scientific background.

But, considering all the changes that the EIC has gone through over the years, it is clear that any announcements, strategies or new rules that are presented by the EIC are always temporary. As soon as the budgets rise, the leadership abruptly changes and the new policy targets are published, the deck of cards will be shuffled anew.

This article was last modified on May 16, 2024 @ 12:21

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 the next Step 2 submission deadline
Step 2 (closing 17:00 Brussels Time)
- 1^st cut-off 2025: -
- 2^nd cut-off 2025: March 12^th 2025
- 3^rd cut-off 2025: -
- 4^th cut-off 2025: October 1^st 2025
Step 3
- 4^th cut-off 2024: January 13^th to 17^th 2025
- 1^st cut-off 2025: TBD
- 2^nd cut-off 2025: TBD
- 3^rd cut-off 2025: TBD
- 4^th cut-off 2025: TBD

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:

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)