This article is a continuation of Part 1 and describes a perspective as to how startups and Small- and Medium-Sized Enterprises (SME) should view grant applications. Since especially the EIC Accelerator blended financing (formerly SME Instrument Phase 2, grant and equity financing) is highly competitive and templates can be difficult to work with, care should be taken in pursuing a diverse financing strategy (read: EIC Accelerator Introduction). Especially when working with professional writers or consultancies, it is useful for applicants to have an understanding of the place grants can have for a business.
Post-Project Fund Raising
Irrespective of a single grant being secured or not, any startup should be in contact with some private investors such as Venture Capitalist’s (VC) since they will eventually need to raise post-project financing rounds during their scaling process. The EIC Accelerator, in particular, is even preferring companies that can proactively onboard VC’s on their own which is why it can be a requirement (read: Insight into EIC Equity Financing).
The reimbursement rate is also a factor to consider since often a grant issuer is only funding certain percentages of the presented costs and seeks justifications detailing how the remaining financing will be allocated (i.e. a 70% rate for the EIC Accelerator). Such a scenario makes co-financing a must for pre-revenue startups and should underline how the reliance on a single grant is not the best strategy.
Different Project Focus
Many companies start with one idea and end up pivoting multiple times until the market, timing and innovation match up perfectly. Especially events such as the recent COVID-19 pandemic have led a variety of companies and research institutes to switch their focus because they either saw a significant opportunity on the horizon or had to abandon a project out of necessity.
Grants can be a low-stakes tool to test out a new idea or concept and can be used to pivot into a new market or technology that would not be feasible otherwise. A company can identify its core value proposition and propose a variety of application cases to different funding providers whereas the project that gains traction first will win.
Private over Public Financing
While grants from public sources are lucrative, they tend to be significantly smaller than private funding especially when it comes to innovative for-profit businesses. Grants are an interesting opportunity but should not be an exclusive strategy since it can have additional benefits to onboard a strategic investor or be part of accelerator programs that bring a significant amount of experience to the table.
Like most grants, the EIC Accelerator is lacking in that regard and it should be considered that financing itself is not the only benefit of forming investor relationships since simple decisions can make or break a startups success. Government bodies who issue grants can provide valuable coaching support but, due to their strong reliance on having politicians rather than entrepreneurs in leadership positions, they will always be inferior to private financiers who have a long-term interest in the founder team.
Changing EU Policies
Grants can be fickle especially when it comes to policy-driven opportunities that are recent or en vogue. A perfect example is the Green Deal in the European Union (EU) which has been launched in 2019 and has received a tremendous financing budget in a short time span that even disrupted existing grants (read: Green Deal EIC Accelerator Call). In the same vein, many funding arms in the EU have started to switch towards coronavirus-friendly projects during 2020 due to the emerging pandemic (read: Corona-Virus Call).
Such erratic changes can be a double-edged sword since they can be either beneficial or detrimental to applicants depending on the respective funding increasing or running dry overnight. Private investors are usually less affected by such changes since they are not subject to policies and are not required to operate in the publics best interest albeit regulations can still affect them.
Lastly, the European Commission (EC) aims to fund innovative projects but, due to the tracking on the Community Research and Development Information Service (CORDIS) database, it is also aware of competing projects that receive funding which can jeopardize a companies success chances in case a competitor has received a grant before. This can be entirely independent of the validity of the business model and can be purely based on the subjective reason that the EU aims to only fund an innovation once. Of course, there are exceptions to this rule but it is wise to identify past grant financing projects before applying with a new project.
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:
- 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)