Seal of Excellence - a consolation prize or a real deal?
Even if the SME Instrument application only resulted in a Seal of Excellence (SoE) it is important to remember the following. As long as there is a true innovative core and a significant business potential in the project, there is a variety of opportunities to find external financing for it.
Some of these opportunities are available under the Horizon 2020 programme, where European entrepreneurs can apply for non-refundable support for development and commercialisation of their innovative ideas. The programme itself is huge (EUR 80 billion). For that reason, and to keep this post concise and readable, let´s focus only on one funding vehicle within H2020, the SME Instrument, and possible results of applying for funding under it. But first things first.
The SME Instrument provides funding to “highly innovative SMEs with global ambitions that want to disrupt the established value networks and existing markets” 1). Put simply, it is designed to support young and ambitious companies with sky-high market potential in their way through research, development and commercialization pipeline, until they successfully reach the market. Especially likeable about the SME Instrument is that it allows for a large dosage of flexibility in approaching R&D matters, thus SMEs can structure their projects in a manner that best fits their organisation and business needs.
“Since 2014, 2819 SMEs were successful in applying to the SME scheme. EU decided to invest nearly EUR 1,1 billion in these projects”
The support in this scheme is three-phased and consists of:
- Phase 1 - grants for feasibility assessment purposes: EUR 50,000 (lump sum) per project (70% of total cost of the project);
- Phase 2 - grants for innovation development & demonstration purposes: EUR 0,5 - 2,5 million (70% of total cost of the project as a general rule);
- Phase 3 - business coaching and mentoring services (optional) to support and enhance the company’s innovation capacity and help align the project to strategic business needs 2).
So much for the introduction. Now, let us look at some statistics. Since 2014, 2819 SMEs were successful in applying to the SME scheme. EU decided to invest nearly EUR 1,1 billion in these projects 3). The good news is, that by the end of 2020, the SME instrument should have supported 7500 companies, meaning that we have not even reached the half-way point yet. These few numbers sound very good, that is if you are successful. The bad news is, that as in every competition, a winners-losers ratio is not exactly very favourable for the masses. According to EC, between 60% and 85% of the proposals are normally rejected as they are not ready for funding. The rest (15-40%) deserve funding, but unfortunately, 45-84% of these proposals are not funded due to high popularity of the SME scheme and limited resources compared to this demand 4).
So what happens if you fail to be short-listed as an SME Instrument Champion? What options do you have then? Are you left with nothing but few formal documents and a sense of ill invested time? Well, not exactly.
“Today, numerous public bodies in the Member States have already implemented regular or pilot SoE- based funding programmes, and many more are still to come. This way, they add to building a strong network of financial incentives for promising and ingenious SMEs across Europe.”
In October 2015, following the idea of Commissioners Corina Crețu and Carlos Moedas, the Seal of Excellence (SoE) initiative was launched, aiming to “maximise synergies between Horizon 2020 and Structural Funds”, which basically means that all high-quality projects which fell short of receiving money from H2020 programme only due to budgetary restraints should be given a possibility to obtain funding from other sources, in this case from EU’s Structural Funds 5) available in Member States. SoE is awarded only to projects that passed a highly competitive evaluation process and reached or surpassed the quality threshold (13/15 points in Phase 1 SME Ins, 12/15 points in Phase 2 SME Ins (13/15 in both from 2018)). Thus, SoE is a high-quality label for R&D&I (research & development & innovation) projects envisioned by European SMEs.
The value added of SoE is that its holders can approach not only other regional and national public funding sources but also private funding vehicles or investors. These bodies can clearly benefit from “pre-screening services” performed under the Horizon 2020 in their decision making processes.
Today, numerous public bodies in the Member States have already implemented regular or pilot SoE- based funding programmes, and many more are still to come. This way, they add to building a strong network of financial incentives for promising and ingenious SMEs across Europe.
GAEU Horizon Centre of Excellence,