Blog series, part 1: Billions up for grabs – EU funding for growth companies and SMEs

The new European Union programme period (2021–2027) started in January – and in the next few weeks we will have more information on what types of investment support companies can apply for in the coming few years (2021–2023). Soon, also Finland’s allocation plan for the recovery funding will be published, which will clarify the strategic target areas the recovery funds are to be allocated to in Finland.

In this blog post, we highlight the most essential EU programmes and changes in the new programming period for growth companies and SMEs. In the next part of our blog series, we will focus on the allocation plan of the recovery funding.

1 Grant programmes supporting innovation and R&D
Generally speaking, and regardless of the funding programme, the European Union increasingly channels funding to projects aiming for elements of positive impact. These elements are, for instance, green growth, enabling and developing digitalisation, health and quality of life, and social and societal impact.

The precise allocation of the funds in 2021–2023 is to be clarified later this spring. What is clear already now, however, is that sustainable development, the climate, social responsibility, and employment will be central during the new 7-year programme period. The strategy of the programme period clearly stresses channelling funds to SMEs and growth companies, and a general primary aim is for European companies to develop into world-leading players in clean products and technology.

It is worthwhile, for every entrepreneur with operations that relate to the forementioned EU priority areas, to consider applying for funding from the European Union. When deliberating projects, it is good to consider how one’s business, innovation, or technology creates or revolutionises the market in the future, and how it, for instance, develops the competitiveness of the European Union in relation to other market areas (e.g., the US and Asia).

One of the priority areas during this programme period is the so-called Green Deal strategy, which aims to make the European Union carbon neutral by the year 2050. Finland’s goal is to be carbon neutral already by 2030. In practice, this means that all Finnish industries and companies will be part of this “green development”. The Green Deal initiative will mainly be funded by existing instruments and its aim is to allocate 1 BEUR in green projects through different EU programmes.  

Below is a description of the newest information on the grant programmes.

European Innovation Council (EIC)
The European Innovation Council (EIC), a renewed EU support programme, targets innovative and heavily technology-driven companies. The funding is channelled through three different instruments. Which instrument a company is to apply funding from depends on the development stage of its innovation. A more detailed work programme is to be published later in spring 2021, but according to the latest information, the programme consists of the following application types.

1 Funding innovative development paths (Pathfinder)

This financial support mostly targets research and early-stage product/innovation development.

• Most of the Pathfinder budget is given through thematic applications – this means that the EU sets strategic challenges with desired project objectives (so-called top-down funding). Typically, the applicant is a consortium, i.e., a group of 3–5 companies, who jointly draw up a project plan for the application. This plan should meet a strategic challenge set by the EU.

• As a new element in 2021, Pathfinder will also arrange a smaller amount of open applications (so-called bottom-up funding, where the applicant themself decides the objectives of the project). A single company (without a consortium) can apply for open funding.

• The four-year project budget is generally a maximum of 4 MEUR, of which the EU funds 75%

• The first application rounds open right after the publication of the work programme, and end in October 2021

   

2 Funding further development and commercialisation of previous EU project results/innovations (Transition)

This financial support targets finalised or ongoing FET or Pathfinder projects.

• A company can apply for funding as a single applicant or as part of a consortium. The IPR (Intellectual Property Rights) of the results can contractually be signed to parties of the previous project, if the original IPR holder does not apply for funding.

• The project budget is a maximum of 2 MEUR for two years and the EU funds 100% of further development and commercialisation of technology

• The first application round already ends on 22 September 2021

   

3 Funding acceleration and scaling up (Accelerator)

Funding both in the form of grant funding and direct equity investments. This funding targets SMEs, that have developed a game-changing innovation and have the ambition and capabilities to become market leaders on a global scale.

• The company independently applies for funding (does not require a consortium).

• The programme prioritises Green Deal, digitalisation, and health technology projects, but funding can be applied for any industry-revolutionising innovation (deep tech)

• The company can apply for a product development grant (the EU supports projects to 70%, which amounts to 0.5–2.5 MEUR), or for direct equity investment for scaling up (up to 15 MEUR or about 10–25% ownership)

• It is worth noting that direct equity investments represent a new device, through which the EU supports companies’ growth and internationalisation, if private investors cannot fund the risk during the growth stage

• The budget of this programme has been increased heavily – in 2021, projects are funded with 1,100 MEUR (roughly half as grants and half as direct equity investments)

   

Horizon Europe
Horizon Europe (the successor of Horizon 2020) is a top-level EU research and innovation budget programme. This programme directly funds thematic innovation applications for consortia (so-called Research and Innovation Actions with budgets of 5–20 MEUR, of which the EU funds 75%). The consortia generally consist of universities, research organisations, and private companies (incl. start-ups, SMEs, and corporations). Horizon Europe also funds other smaller EU programmes (e.g., the earlier mentioned EIC).

Horizon Europe has a total of five main mission areas, which guide the funding decisions, i.e., what type of projects are granted funding in the first place. The mission areas are:

1. Adapting to climate change

2. Fighting cancer

3. Climate neutral and smart cities

4. Protecting our oceans

5. Soil health and food

The Horizon Europe programme is divided into three different main areas. Below is a list of which R&D and innovation actors these areas mainly target:

1. Excellent Science: Financing for research organisations

2. Global Challenges and European Industrial Competitiveness: Targets strategic challenges in research and innovation

• The research community and research industry’s challenge of advancing innovation development in defined sectors

• Companies can participate in these projects through thematic programmes (top-down)

3. Innovative Europe: A funding and networking service, which globally supports market launches of high-potential innovations

• Companies can acquire funding/support for their own projects (bottom-up)

• E.g., the EIC is one of the programmes under Innovative Europe

The European Commission publishes detailed information on the goals and funding applications for the 2021–2023 work programme later in the spring.

2 How to apply for EU funding?
The application process and the content requirements for EU funding depend on whether funding is applied for a project within basic research/research development or for a company or project already in the acceleration stage.

• The EU has its own separate funding programmes for larger investment projects (e.g., in timber, cellulose and fabric manufacturing or efficient waste management), which purposes are to, for instance, set up test facilities

• Regardless of the funding channel, the company or project must consider the responsibility principles set by the EU

   

What is a good project when applying for EU funding?
A good project fits the content, objectives, and structures of the support programme in question. This might sound simple, but it is not always easy to evaluate the applicability of a programme. Within the programmes there might be many separate thematic areas, that have their own application timelines. The company must choose which of these alternatives fit their project the best.

When choosing a programme, the company must consider in which sectors it has exceptionally strong know-how, and what business areas are both disruptive and internationally significant. It is also worth noting which sectors are most important for the competitiveness of Europe.

Why is knowledge on EU funding important for Finnish companies?
We find that Finnish companies have much to offer particularly in the industries which the EU highlights. When applying for EU funding, it is important to go over the project and present it from the forementioned value perspectives (e.g., sustainable development, digitalisation, and social responsibility).

It is also essential to note, that potential EU funding does not eliminate a company’s need to plan its funding long-term – on the contrary. EU funding is not by itself the solution to a company’s growth funding. To succeed, EU funding must be accompanied by a sustainable funding plan and implementation for funding the investments.

It is important for every entrepreneur to understand, that in the coming ten years these value-based development areas will be the premise of all funding. Therefore, these values should be taken into consideration also when, for instance, applying for investment funding. Banks do not yet require companies to account for these values, but we anticipate this to change in the coming couple of years.

Please contact our team, and we will discuss your project’s applicability for EU funding. You can find our team’s contact information here.