SME Instrument. Key tips to SUCCESS FUNDING your (business) passion
The SME Instrument within Horizon 2020 Programme (the main innovation funding source in Europe) offers a great opportunity for SMEs and startups to finance their marketable innovative products and services, but companies are not always aware of key factors to success and (too frequently) fail in their way to get funding.
Here, I give you not only key recommendations but also my evaluators´ view
We have 3 questions for you:
QUESTION 1: Are you an SME or start-up? (in any case, eligible according to the EU SME definition)
QUESTION 2: Willing to develop a highly innovative product or service?
QUESTION 3: Are you ambitious and want to expand globally?
And for sure, namely if you are a start-up and just beginning your business adventure, you are passionate but you do not know how to finance your passion! The European Commission (EC) provides financing but difficult to get, really? Let´s see the Key recommendations to fund it!
|…I´m a company, passionate for my business, I´ve been said that there is a lot of “EU money”, but…I´m getting “lost in translation” of EU funding opportunities. I´m starting to lose passion for funding…but funding is important!! What should I do?|
First, you must focus on the most suitable financing opportunity. The EC has put the focus on supporting innovative companies across Europe because has realized about their difficulty accessing finance (they know about your troubles), BUT….
the “funding arena” is massive (this is indeed good, yeah, a lot of money!) and available information is not always easy to find (this not so good).
Let´s start “tidying up the house”. First, you must know that there are two major funding pathways provided by EC:
- Access to finance, e.g. Business loans, microfinance, guarantees and venture capital. This infographic summarizes all these opportunities
- Access to funding, through calls for proposals
Maybe 1ST option (loans, venture cap, etc…) is a difficult way, namely if you are a start-up and you do not have (yet) exercised enough your finance muscle…so let´s focus on non-refundable aid (grants and calls for proposals).
Have you replied YES to our 3 questions above? So, if we are talking about grants, Horizon 2020 Framework Programme for Research and Innovation with over € 77 billion and the SME Instrument which offers € 3 billion funding opportunities is the most outstanding option, of course, BUT keep reading!!
- Did you know? Replying yes to these questions is not enough. Before getting excited by funds (wow, € 3 billion, really?), you must know some tips before and during application. Read our keys for success
- Did you know? Some common mistakes are taken by applicant companies and these, obviously should be avoided. Read our keys for non-fail
Many companies are applying and probably are not aware about this, and maybe this is the reason behind that excellent proposals are not receiving funds. Success rates are low (around 6% in Phase 1 and 8% in Phase 2 according to updated statistics in June 2016). Here, we give you keys to maximize funding opportunities. At Fundingbox group our success rate is almost 50%, so you have to hear about our keys for success!
|Do you want to know how to upgrade from a 6-8% success rate to a 50% success rate on SME-INST? Keep reading!!|
But, what are we talking about? SME Instrument overview
EC says that with SME Instrument is looking for Europe´s next innovation leader. Sounds good, but you must demonstrate that you are (see our keys for success) and first know about the instrument itself! How does it work? What does it finance?
Here you are an Infographic from the EASME (Executive Agency for SMEs) set-up by the European Commission to manage on its behalf several EU programmes including SME Instrument, which explains it in a nutshell. Let´s focus on “financing phases” (1 and 2), because third one does not provide additional direct funding, but support and networking opportunities deployed by Enterprise Europe Network (EEN). Not financing, but important for your business since (if success in previous phases) will open your company to receive, among other services, world-class business coaching.
Phase 1. Concept & Feasibility Assessment will provide €50,000 funding to carry out a feasibility study to verify the viability of the proposed disruptive innovation or concept, during 6 months. You must submit an initial business proposal (around 10 pages), but these 10 pages (and additional info) gathers a lot! (see our keys for success)
Phase 2. Demonstration, Market Replication, R&D, where you will further develop its proposal through innovation activities, such as demonstration, testing, piloting, scaling up, and miniaturisation (TRL 6 or over preferably), during 1-2 years and with €0.5 to €2.5 million financing. You must submit a more developed business plan (around 30 pages).
Depending on the degree of maturity of your project you can otherwise apply to any phase directly, but you must be sure that you are in the right path!
What themes / topics is about SME Instrument? (Widely-open but not “bottom-up”)
SME Instrument has 13 topics for current 2016-2017 work programme (topics are biannually established until the end of programming period in 2020, next one will probably cover 2018-2020)
They are widely-opened approached topics, so almost any innovative and disruptive solution in one of the 13 areas could be accepted to apply (not bottom-up, but almost). You can find here a list of the topics and their available budget for 2016-2017. Below you can see a thematic list:
- Open Disruptive Innovation Scheme (ICT)
- Nanotechnologies, advanced manufacturing and processing technologies
- Space Technologies
- Healthcare biotechnology sector
- Agriculture, forestry, agri-food and bio-based sectors
- Blue growth
- Transport and Smart Cities Mobility
- Social Sciences
When can I apply? Whenever you want, but be aware of cut-off dates!
There are recurrent cut-off dates to apply before the end of 2017.
Just note that you have a limit and cannot apply:
- To any phase / cut-off when you have a proposal pending on evaluation (whatever Phase 1 or Phase 2)
- To any cut-off date (whatever the Phase) if you already have a project approved
|Cut-off dates (for the current 2016-2017 period)|
…And now, as promised our keys for success and for non-fail to maximize your funding opportunities in SME-INST…
Tips for applying, keys for success
First, you must wonder yourself: is SME Instrument really for me? Here some questions that may arise and you must reply:
- Am I one INNOVATION LEADER? EC is looking for “innovation leaders”. But, what does this mean? Some signs to define (but not a prerequisite)
- Your company (SME / start-up) is located at one innovation hub
- You have received grants or venture capital funding in the last 2 years
- You have received innovation-tax benefits in the last 2 years
- You have won an innovation prize in the last 2 years
- But, are these requirements of the SME Instrument? NO, they are good signs to define you as innovation leader, and you must show that are applicable to you later (if so, really fine), in the application forms. The most important thing is your IDEA, which must have the following KEY 4 characteristics (DISRUPTION – AMBITION – PREPARATION – PLANIFICATION)
- DISRUPTION: Your idea must be disruptive. In a nutshell “Disruption” describes a process whereby a smaller company with fewer resources (e.g. one SME) is able to successfully challenge established incumbent businesses (See https://hbr.org/2015/12/what-is-disruptive-innovation)
- AMBITION: You must demonstrate that you have a clear ambition to grow at EU level, and even more at global level. How? You must provide information about your expectations of growth in the forthcoming 3 to 5 years in terms of:
- Return of Investment and profit: your figures must convincingly demonstrate that you will be able to grow your revenues exponentially, as Taco Bell’s Doritos Locos Taco made!
- Also employment growth is a expected change that EC and evaluators want to see. This is one of the “expected impacts” within SME Instrument. E.g. will you create (or increase) your development department, sales, engineering, etc…=?
- PREPARATION: Be prepared! Demonstrate that you know your target market, segment it, focus on it! You must convince evaluators that you are specifically addressing a NEED that the market has and where your USERS are willing to pay for / use your product. For that, previous market analysis should be done, and that knowledge must be demonstrated.
- PLANIFICATION: at the end, your idea (product / service) must reach the market to cover your growth ambition. For that, you must have a clear, convincing and credible Commercialisation Plan. If you do not have it yet, at least plan to get it ready (minimum a draft) before applying.
|These 4 KEY idea characteristics for SUCCESS (DISRUPTION – AMBITION – PREPARATION – PLANIFICATION) must be demonstrated all along the forms.|
But….before going through the forms you must know what´s “behind the scenes” of EVALUATION:
4 different evaluators, with very different backgrounds (see available list of 2014-2015 period evaluators) will assess your project. Considering their specific and diverse profiles (business experts, venture capitalists, coaches, business angels, consultants, scientifics, etc…) you must show your a idea to a very broad audience and explain your project both for “newcomers” and “experts”.
Experts will look at 3 criteria, which are the core sections of the application (but not the only ones, and you don´t have to underestimate others, as we explain below): EXCELLENCE, IMPACT and IMPLEMENTATION. Additionally, you must take the best of the SECTION 4 (description of the company), which does not have a page-limit and is where you will explain your company’s history! So, this is a good section to explain and demonstrate that you are an INNOVATION LEADER (e.g. your BACKGROUND).
Every single evaluator will put his/her focus in one or more concrete aspects: e.g. business experts will focus on impact and commercialisation, consultants will focus on implementation, scientifics in excellence, etc… This is not really the idea (e.g. all evaluators must assess all criteria) but we must recognize that we are humans and we all have a “professional deformation”.
|So, thinking about the evaluation process, you must be at the end:
excellent and clear in all criteria and application sections to be sure that all your target-audience (evaluators) understand and “buy” it!
How can you do this? How can I demonstrate that…
- I´m an INNOVATION LEADER?
- I accomplish with 4 KEY SME-INS idea characteristics (DISRUPTION, AMBITION, PREPARATION and PLANIFICATION)?
- I can CONVINCE evaluators of all this?!
Let´s go through each single “tips and tricks” per section to know how to demonstrate this
EXCELLENCE (Section 1):
- Show your DISRUPTION:
- Your innovation (product / process / service) must be excellent, and your product, process or service is disruptive, e.g. able to change the dynamic of the market.
- It is desirable that your innovation will also address a societal challenge under Horizon 2020, so show your PREPARATION as well, in this sense: get familiarised with SME-INST Work Programmes of each one of the 13 topics (2016-2017 period) and their expected impacts.
- Remind that your public (e.g. evaluators) are both newcomers and experts. Provide an explanation with a clear and understandable language.
In the very first lines of the application you must be able to build and show your UNIQUE VALUE PROPOSITION. This will be also an essential part of the ABSTRACT
- Show your PREPARATION:
- Demonstrate the viability of your idea (e.g. current state of development). For that, you must get familiar with the Technology Readiness Levels (TRL) defined under Horizon 2020. Be sure to demonstrate that your product is under TRL6 or over. How? You will normally introduce your product in a schedule prospection where you explain how you have reached current TRL (6), e.g. in previous years you have worked in your solution to reach such a TRL, and how you will reach further TRLs in the coming years.
- Explain why your idea has more value than existing solutions, from a technical point of view, e.g. which is the real INNOVATION? Why is it better than current technologies? This is not referred to competing solutions in the market, but to the way in which your technology works!
For example: you have an algorithm that provides a Business Intelligence solution which runs faster than current algorithms (this is the innovation value), and this algorithm provides a faster decision making process to end-users against current competing products in the market (this is the market comparison)
- Is there any risk in the market deployment strategy and/or the product development, from a technological point of view? Demonstate that you know those risks and that you have a PLAN to minimize them (e.g. CONTINGENCY PLANS).
IMPACT (Section 2):
- Show your AMBITION:
- You need to demonstrate that your project will generate revenues and create jobs. They are two of the concrete EXPECTED IMPACTS. You can also shown how you will create jobs in the MANAGEMENT STRUCTURES (e.g. IMPLEMENTATION) where you must show your current company structure and the future company structure (e.g. new jobs) that will be needed to deploy your product in the market. For example: you have now one sales job position and you will need (and create) 4 new sales job positions in the forthcoming 5 years.
- Submit a complete business roadmap providing: sales, revenues, profit-loss account, ROI, growth creation
- Remind that your project must have an EU or global dimension. If you only target national market, SME-INST will not support you! This market approach must be realistic and is part of your commercialisation plan (see PLANIFICATION)
- Show (again) your PREPARATION (here, in terms of your knowledge about the MARKET):
- Explain the market conditions and the evolution of the competition. Some tips:
- For that, you must provide concrete and realistic figures on the market size, the market share, the sales price.
- Which are your target users? Which is the market and the market segment? How big (or specific) it is?
- Specifically compare with your COMPETITORS: which is their added value? Which are their SHORTCOMINGS? And, against that, which are your BENEFITS?
- Explaining the market conditions and comparison with competition will help you to build your UNIQUE VALUE PROPOSITION (UVP) which must be at the very first lines of your proposal and included clearly in the ABSTRACT. Here you are some keys to build such an UVP
- Do you have exploitable results? In such a case, show how will you protect your intellectual property rights (IPR). This is specifically relevant when you submit an SME-INST with other company (you can partner with others). How will you share the property? How will this be reflected in sales sharing? Also, demonstrate if you have carried out a “freedom to operate” analysis, which is not compulsory as a general idea in H2020, but in SME-INST this is a very positive point!
- Explain the market conditions and the evolution of the competition. Some tips:
- Show your PLANIFICATION
- Do not forget to describe your commercialisation plan. Some tips:
- Where, how, when, and with whom are you planning to sell your product?
- Make a geographically distributed planning, which must be realistic
- Talk about potential stakeholders that you will need to put your plan in practice
- Make this plan coherent with your growth strategy (e.g. once you will get xx sales in 1st year, your will expand to xx geographical area, and you will need to contract xx new employees).
- Show at least 3 years of projection of sales volume, turnover and number of jobs created.
- Compare these projections with what would it happen if SME-INST support is not provided?
- Do not forget to describe your commercialisation plan. Some tips:
IMPLEMENTATION (Section 3 and the “underestimated” Section 4)
- Show your PLANIFICATION to reach your AMBITION:
- Describe your team and your technical competence, but also commercial competence. You will explain this, not only in Section 3 (e.g. company general presentation) but also (and above all) in SECTION 4, which is the one dedicated to explain your BACKGROUND.
Reminder: SECTION 4 is where you have NO LIMIT (nor pages, nor characters) to demonstrate if you are an INNOVATION LEADER, or if you gather conditions enough to become in the future, thanks to SME-INST support!
- Use Section 3 to demonstrate how your team will increase with time, e.g. how you will create new jobs. Now, you have a management and technical team of 5 people. Will you increase the team in the forthcoming years? With what competences?.
- About the Work Plan (namely applicable for SME-INST Phase 2 proposals):
- Clearly explain if you will need external partners and how you will involve them
- Provide a realistic time frame (e.g. GANTT)
And…finally, don´t forget about formats! Make reading easier (and if possible, funny) for evaluators!:
- A “sexy” title and acronym makes a proposal more attractive just from the first reading. This is the first thing that evaluators see! Take time to build your ACRONYM and TITLE.
- In Phase 1 you only have 10 pages to explain your idea. Maximize space and do it your best to explain with graphics better than text, whenever possible: less is more!
- Do not wait til last minute! Take time to review formats and language (namely if you are not a native-English speaker) and…
- Ask for support!
- Seek advice from National Contact Points, your local branch of the Enterprise Europe Network or other structures, such as incubators, consultancy, etc…
- Ask always for a third party opinion: your colleagues and relatives can help you with a “decontaminated” reading and give you their opinion
Errors to avoid (keys for non-fail)
After almost 3 years of SME Instrument implementation, during the evaluation process EASME has also identified common errors and this is the list of 6 lessons learnt about errors to avoid, which are main reasons for non-selection of proposals (and what to do to overcome them), that you must keep in mind to NOT FAIL:
- Do not focus on the project (excellence section) and keep in mind that focus is the business opportunity. Against this…FOCUS ON BUSINESS
- Do not provide a scarce information about the company (e.g. do not limit to name the company, some short CVs of the team, and do not simply list your previous projects…). Against this…PROVIDE AS MUCH INFO AS POSSIBLE
- Do not simply list competitors. Against this…EFFECTIVELY COMPARE WITH COMPETITION.
- Do not show your product as something existing on the market and simply develop it. Against this…SHOW YOUR DISRUPTIVE CHARACTER CLEARLY.
- Do not only show the idea without commercialisation plan…Against this (remind) PLANIFICATION in terms of market deployment (at least show what is your planning even at a draft stage).
And last (6) but not least, remind that PREPARATION is one of the basics of success. SME Instrument is not a lottery!
|And now, do you think that you are the next INNOVATION LEADER, able to cover these requirements? So, you able to APPLY!|