Tag Archives: tip#19

EIC Accelerator, Horizon 2020, Phase 2, SME Instrument / EIC Accelerator

The EIC Accelerator: Grant vs. Blended Financing (Equity)

Here are the answers to some frequently asked questions regarding the equity financing option of the EU’s start-up grant (SME Instrument, EIC Accelerator). The EIC Accelerator offers the application for either a pure grant or blended finance (a mix between a grant and equity-based financing). 

While the application and reviewing process for both options is the same, the financing for the grant (€2.5m) and for the equity contribution (€15m) originate from different sources so the criteria for a successful proposal are also slightly different. 

While the grant is requested as is, the equity financing is based on an “offer” whereas the proposal details the overall equity contribution requested and presents an offer regarding the company shares which are provided in exchange. As such, the equity contribution requires more information compared to a simple grant application and the major points to consider are: 

    • Amount of Ownership Offered: The guidelines suggest to offer a minority ownership of at least 10% and up to 25%.
    • Exit Strategy: There is a specific section in the proposal which asks you to describe your exit strategy or your plans for the company once it has been scaled. The EU is looking at 7-10 year time frames regarding the ROI with a maximum of 15 years. Exit strategies can be buyouts, IPO’s, liquidations, etc.
    • Company Valuation over Time: You are asked to describe the progression of your company valuation using past data and your future projections, including the reasoning behind them.
    • No revenues and non-bankable: The equity contribution is directed at high-risk companies with limited or no turnover and negative EBITDA’s. This usually excludes profitable companies which are only seeking scaling support and rather targets research-heavy projects. It also defines high-risk businesses as having no interest from the market or investors just yet.
    • TRL9 activities: The equity financing is exclusively targeted towards Technology Readiness Level 9 (TRL9) activities which relate to market deployment as opposed to technical developments. This, in turn, means that if a grant is requested for activities related to product deployment and marketing then this will either be ineligible or will be transferred to equity financing.

 

There are some other minor things to consider when applying for equity financing but the points above cover the most important parts. 

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:

  • January 11th 2023 (only EIC Accelerator Open)
  • March 22nd 2023
  • June 7th 2023
  • October 4th 2023

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!