With a new multi-billion euro fund dedicated to startups and PMEs, the EU starts to shift its focus

May 22, 2014
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eu fundingWith the European elections rapidly approaching this weekend, the big question is usually top of mind for most electors is ‘what has the EU done for me lately.’  Of course, although the EU plays a central role in Europeans’ everyday lives, there is often a general lack of awareness of not only what the EU does in a practical sense, but also what its priorities and, of course, how the colossal funds at its disposal are spent. One area many bemoan goes largely ignored is the growth and development of startups and PMEs. The perception has been than much of the funding and resources on the economic side of the equation is squarely focused on large groups or research centers at the expense of smaller companies. The EU appears to have recognized the massive economic potential that startups and PMEs offer and is starting to launch various initiatives to support and encourage the growth of startups and PMEs.

One of the most substantial is that for the first time in their 60 year history, the EU has launched an initiative to directly fund startups and PMEs called the Horizon 2020 Dedicated PME instrument. This initiative via the European Commission will allow innovative startups and PMEs to access funds ranging between 50k to 2.5 million euros. This funding can go towards supporting activities such as market studies, IP exploration, product testing, etc at the lower end of the range and scale-up, internationalization, etc at the higher-end. The funds can cover up to 70% of your expense for a particular objective or project. So, the 30% that are not covered can come from other grants (ie from the member state level), sales revenues, loans and/or private investors. In addition, the funds are grants in the truest sense of the word in that the EU doesn’t take any equity nor require you to raise matching funds from private investors.

In order to spread the word about this new opportunity Kumardev Chatterjee Founder & President of the European Young Innovators Forum, who have been working closely with the European Commission over the last 3 years to establish the new funding instrument, has been on a road-trip leading various workshops in Berlin, London, Hamburg and Munich. Earlier this week, they held two workshops at ESCP to introduce and explain the process for applying for funds to Paris’ tech ecosystem.  I had the fortunate opportunity to attend this week and found it to be extremely useful in helping to clarify a process that while much clearer than many other EU funding initiatives, still requires quite a bit of explanation to navigate.

The key points to remember

  • This SME / startup vehicle is to support a specific project, initiative or innovation rather than to fund the development of your company overall.
  • The funding is organized around a three-phased approach where phase I supports concept and feasibility assessment, phase II innovation and bringing a project to ‘industrial readiness’ & market introduction, and phase III broad commercialization activities
  • In terms of specific funding amounts – phase I provides 50k in a lump sum grant with 40% coming up-front and the rest at the end of the project period, designated at 6 months.  Phase II provides between 500k – 2.5 million with 30% coming up-front and the rest at negotiated intervals over 1 to 2 years period. In phase II, participants will also receive additional support including coaching, mentoring, and other key services. Phase III is not structured around specific funding amounts but the idea is that startups and PMEs making it to this stage will get substantial support in the way of access to other, higher-levels of funding from other EU funding sources, access to procurement projects, and contacts with other potentially big customers and partners.
  • Interestingly, the funding is not targeting the 50k – 500k funding range . The reason for this is that the EU believes there’s already sufficient funding sources in the form of angels, accelerators, and aid at the member state level to support this level of funding need.  In addition, they also want to avoid the situation where companies just pass from phase to phase and never look to self-fund or find other sources of financing.
  • Each call will have a theme and, as mentioned, at least two phases. Each call will have multiple rounds, so if you miss your chance to apply there will be another round later in the year. The most pressing one at the moment for startups and PMEs is the ICT 37, Open Disruptive Innovation Scheme which will have several rounds this year and next.
  • The 2014 deadlines for this particular call are:  phase I – June 18th, September 24th, December 17th and phase II – October 9th and December 17th. In 2015, each quarter there will be a round for each phase
  • The Commission has also been actively working to reduce the time between application deadline and receiving the first funds, which is now around 4 months for phase I and 6 months for phase II.
  • It’s not a problem to apply to multiple phases overtime, but you can’t apply to more than one phase at a time. So, basically, you can’t ‘hedge your bets’ and apply to two phases at once.
  • There are, of course, follow-up points, including periodic check-in points for phase II projects and a final project ‘report’ for both phases so if you receive funds, you’ll need to make sure to document and track your progress
  • Although this is a new program, the word is spreading fairly quickly, particular amongst consultants that help with raising these types of funds. You can use these services to help prepare your application.
  • Make sure to closely follow the instructions on templates, even things like margins, font size and such, as you don’t want your application to be rejected because of a minor mistake. And keep in mind that all applications much be submitted in English

First round deadline quickly approaching 

If you want to apply for the first batch of phase I funds, as a reminder the deadline is June 18th, so you’ll need to act fast.  You can get further details on applying with guidelines, dates etc here.  For those whom phase II would be a better fit, the application deadline is October 9th and you can get further details here.