The EIC Accelerator blended financing (formerly SME Instrument Phase 2, grant and equity financing) program, as it has been published in 2019, is quickly becoming a popular target for scale-ups and Small- and Medium-Sized Enterprises (SME) that seek public or private financing to complete their technological developments (read: Technology Readiness Levels). After officially becoming an entity in June 2020, it aims to grow further and become the Europen Unions (EU) primary innovation arm with respect to for-profit commercialisation and scaling.
Just like all government entities, the future of the European Innovation Council (EIC) will be subject to policy changes, budgeting and future directives but it will likely stay on course of becoming a key innovation driver in the European market. The following presents a list of potential directions the EIC Accelerator can move towards beyond 2021 and explores how it can transform itself to better fulfil its purpose.
1. Separating Grant & Equity
As of 2020, grant and equity financing have been inherently liked together whereas a pure equity investment was not possible for new applicants and always had to be connected to a grant. Since grant and equity financing stem from different sources, namely the European Commission (EC) and the EIC Fund (read: Grant vs. Equity), it would be a natural progression to allow separate applications with varying evaluation processes and success criteria (read: Customer Interest for a Successful Application).
Since grant allocations face different levels of scrutiny compared to equity investments, pure equity applications could significantly modernise the application process since lengthy justifications relevant for government funding could be omitted. This way, the EIC and EC would have more flexibility over the evaluation requirements and are able to develop a more agile financing arm albeit the lengthy due diligence process needs to be accelerated to make this a reality.
2. Becoming a VC-Hub
The biggest limitation of the EIC Accelerator has historically been its budget whereas most applications with a 13+ score that would be eligible for financing have to be rejected due to the excess of applications in relation to the available funds. If enough financing was available, one thirds or 1,000 companies would be funded for every 3,000 applications. This would be like a dream come true for most applicants but the budget-bottleneck has turned the EIC Accelerator in an extremely competitive program where failure, even for excellent companies, is significantly more likely than success.
By introducing the equity component, the EIC has made a strong step towards increasing the budget since it allows private investors to participate in investment activities and even contact rejected applicants individually as long as the Seal of Excellence (SoE) was obtained. This presents a framework for a future VC-oriented program where the EIC can act as the facilitator who leverages external funding which could give access to double or even ten-fold the normal EIC Accelerator budget.
Technical ways to implement this could be a challenge but, with a few tweaks to the participant portal, are a highly feasible option. Next to the grant, organisation and proposal areas on the Funding and Tenders portal (read: Shorter and Clearer Applications), the EC could introduce an investor profile similar to AngelList whereas an applicant can upload pitch decks, pitch videos, full proposals, evaluation scores or similar documents and make them available to previously vetted and verified investors.
This way, matchmaking on an EU-level can be streamlined and the EIC can differentiate its investor platform through its strong innovation criteria as determined by the in-depth evaluation performed through the European Agency for SME’s (EASME). These activities can likewise be expanded through periodic online pitch events held by VC’s independently whereas they can handpick companies to participate (i.e. selected by industry or location), set a budget and a date for the event.
Creating such a VC-hub would significantly increase the attractiveness of the EIC to innovative companies since it presents multiple avenues for success that do not necessarily rely on government funding.
Note: A similar project does exist albeit on a smaller scale with the Seal of Excellence Platform.
This article continues in Part 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 likely be on March 23rd 2022, June 15th 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).
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:
- 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)