Which Companies Should Not Apply to the EIC Accelerator (SME Instrument) – Part 1

Many startups or Small- and Medium-Sized Enterprises (SME) are interested in applying to the EIC Accelerator blended financing (formerly SME Instrument Phase 2, grant and equity financing) due to its single-beneficiary funding scheme. Before contacting a professional writer or consultant, it is often useful to first investigate which companies are ineligible or have lower chances for success as viewed by the European Innovation Council (EIC) and the European Commission (EC).

There are important criteria to adhere to (read: EIC Accelerator Keywords) but the official proposal template or manuals are often not a great resource to assess them in a comprehensive manner. While the innovation, traction and team quality are a must to assess in the beginning (read: Assessing a Project), they can be meaningless if the project is in direct violation of one or more of the following negative criteria. These can lead to immediate dismissals at any of the three evaluation steps and should be cleared prior to a successful grant application.

Negative Criteria

Being Well-Financed

Every startup has some type of financing which usually comes in the form of angel investors or seed investments but some companies have also been able to raise substantial Venture Capital (VC) rounds or grants which make the critical non-bankability difficult to argue. Due to the long delays between the EIC Accelerator evaluation steps, it can happen that significant VC rounds were raised during the waiting period and, when this is revealed in the Step 3 pitch interviews, it can lead to a direct exclusion from grant financing.

Transforming the EU

The EIC Accelerator is aiming to finance DeepTech companies and is regarding apps, social networks, games or similar products as less worthy than health tech, energy or environmental innovations. This does not mean that such projects are never financed (i.e. view the funded company Flexion Mobile in the 2019 SME Instrument report) but this can make it much harder for them especially in 2021. This is unfortunate for many great businesses that could have a strong impact in the EU but do not have the same metrics to show for (i.e. the long-term ROI for the EC is clearer in MedTech then for a new social network).

For all investors, a great business model for an innovation should always supersede the type of innovation being incorporated and this should be reflected by the EIC Accelerator. The more successful businesses the European Union (EU) can fund, the more financing will be available (i.e. esp. with equity stakes being involved) and the more attention EU startup hubs will attract in the future.

Arguably, London was the largest innovation hub in the EU and with Brexit being in its final stages from an EU financing perspective, Europe should focus on supporting all great companies and not just the industries it deems beneficial. The reason for this is simple: The most important impact on society comes in the form of wealth, Gross Domestic Product (GDP) and employment which are a base necessity to cover every citizen’s primal needs. This base can be viewed as the driving force which enables prosperity and allows the occurrence of innovation in all areas, including DeepTech.

The success of fields such as HealthTech, CleanTech, space exploration, etc. is directly proportional to the wealth of the country (i.e. compare the level of innovation and GDP in the US with Russia or North Korea) which means that focusing on excellent business models across the board should come first. Non-bankability is a great focus for the EIC Accelerator since it allows the clear differentiation from other funding-sources but to extend this exclusive criterion to only a handful of industries is a poor long-term strategy.

What could the impact of a marketing innovation in the EU be? Simple. Marketing drives end-consumer industries and, wherever the marketing has the highest ROI, the strongest customer acceptance and the best scalability, the most jobs and wealth will be created. Just because the long-term impact is not obvious doesn’t mean that there is no impact whatsoever.

If an applicant with such a non-obvious impact is asked by the jury as to how they transform the European landscape, they should keep this in mind and present a clear outline of the benefits. If no suitable answer to this question is known, it would not be wise to apply to the EIC Accelerator in the first place.

Opposing Values

Any application to the EIC Accelerator should make sure that the innovation does not directly threaten key EU targets or policies such as the fossil fuel phase-out, the drive for gender equality, the need for social inclusion, financial security etc. since this could lead to immediate dismissals. An innovation to locate new fossil fuel reserves through satellite and machine-learning technologies might be valuable for the oil industry but likely meet disinterest at every evaluation step from the EU.

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 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: