Horizon 2020 SME Instrument

Horizon 2020 SME Instrument Explained

Posted on Posted in Business, Funding, Innovation

Small and Medium-sized Enterprises that are EU-based or established in a country associated to Horizon 2020 SME Instrument can get EU funding and support for innovation projects that will help them grow and expand their activities into other countries in Europe and beyond. It offers support under the section Societal Challenges and the specific part Leadership in Enabling and Industrial Technologies (LEITs).

The Horizon 2020 SME Instrument offers small and medium-sized businesses phased support through:

Feasibility assessment (phase 1) – optional

Funding available for exploring and assessing the technical feasibility and commercial potential of a breakthrough innovation that a company wants to exploit and commercialize.

Amount of funding: lump sum of €50,000 (per project, not per participating business) (70% of total cost of the project)

Duration: around 6 months

Outcome: The outcome of a phase 1 project is a feasibility study (technical and commercial), including a business plan. SME can apply for Phase 2 support if the conclusion of the study is an innovative concept which has the potential to be developed to the level of investment readiness/market maturity, but requires additional funding in view of commercialization.

Activities funded could be the risk assessment, design or market studies, intellectual property exploration; the goal is to put a new product, service or process in the market, possibly through an innovative application of existing technologies, methodologies, or business processes.

The project should be aligned with the business strategy, helping internal growth or targeting a transnational business opportunity.

Innovation project (phase 2)

Funding is available for: innovation projects underpinned by a sound and strategic business plan (potentially elaborated and partially funded through phase 1 of the SME Instrument).

The amount of funding: in the indicative range of €500,000 – € 2.5 million or more (covering up to 70% of eligible costs, or in exceptional, specific cases up to 100%).

Duration: typically, around 1 to 2 years

Outcomes:

  • a new product, process or service that is ready to face market competition;
  • a business innovation plan incorporating a detailed commercialization strategy and a financing plan in view of market launch (e.g. on how to attract private investors, if applicable).

Activities can be of several types: prototyping, miniaturization, scaling-up, design, performance verification, testing, demonstration, development of pilot lines, validation for market replication, including other activities aimed at bringing innovation to investment readiness and maturity for market take-up.

Commercialisation (phase 3)

With the view of facilitating the commercial exploitation of the innovation activities resulting from phase 1 or phase 2 activities include support for further developing investment readiness, linking with private investors and customers through brokerage activities, assistance in applying for further EU risk finance, and a range of other innovation support activities and services offered via the Enterprise Europe Network (EEN).

Coaching (Optional)

Innovation and Business Development Coaching is offered in parallel throughout phases 1 and 2 to help SMEs:

  • enhance the company’s innovation capacity
  • align the project to the identified business development strategy
  • develop the commercial/economic impact and long-term sustainability.

During the first two years of implementation (2014-2015), more than 1200 SMEs were selected to receive funding under the SME instrument call and 513 million Euros were invested in the success of innovative SMEs. Available to SMEs only, which can, however, organise a project in the way that best fits their business needs – meaning that subcontracting is not excluded – the new scheme has opened a new highway to innovation through phased, progressive and complimentary support.

 Profile of successful SMEs

  • For-profit SME
  • Legally established in Ireland with resources
  • Disruptive business idea with clear market application
  • Track Record e.g. national funding, private investment
  • Rapid growth prospects

Irish Context

  • 1/3 of grants have been granted to start-ups in Ireland.
  • Ireland is one of the most successful countries in Europe in the SME instrument
  • Euro 2 million invested in 42 SME’s during Phase 1
  • Euro 43 million invested in 26 SME’s during Phase 2

Example

Dublin-based software firm Artomatix has developed artificial intelligence (AI) technology to help automate 3D art creation for game design. The company’s technology, known as Example-Based Content Creation is being developed over 10 years of research.

Artomatix closed a €2.1 million funding with Enterprise Ireland, the European Commission through its Horizon 2020 SME Instrument and several angel investors in 2017. The financing is to be largely used to hire more engineers and researchers as the company seeks to execute its product roadmap. The seed fund follows €300,000 of pre-seed funding obtained through NDRC, a Dublin-based early-stage investor, and various grants/awards including Nividia’s $100,000 Early Stage Challenge.

Comparison of Horizon 2020 SME Instrument with SBIR

  • Not limited to technology but despite wider scope, hard to see how it can have anything like comparable success to SBIR.
  • Intended to support ‘close to market’ activities, with the aim to give a strong boost to breakthrough innovation. These objectives are incompatible as ‘breakthrough innovation’ is a very long way from ‘close to market’ activities.
  • SME’s required to put up 30% upfront (within 30 days of signing Grant Agreement) of the cost of Stage 1. By only providing 70% of the cost it is tempting owners of small firms to invest at extremely longs odds in a state of uncertainty, before odds can be calculated at all. Also, unproductive as all but a tiny fraction of the Stage 1 money will inevitably be lost. If innovators lose this money they are unlikely to have the resources to try again or to want to.
  • In Stage 2 it only offers 100% if the research content is ‘exceptional’.
  • Based on deliverables determined in the Grant agreement. 15% withheld until all actions are completed.
  • Horizon 2020 SME Instrument funds less than the total cost of a research project because if a firm is making its own contribution its management ‘has more faith’ in the project. This ignores the reality that having belief that an investment will succeed is down to being able to calculate its risk. You can’t have rational belief until the uncertainty has been reduced to risk. This means that projects that get funded will be those with lower risk (greater faith of management) and those with uncertainty are unlikely to get funded.
  • There is only one decision point in the Horizon 2020 SME Instrument making the chances of a meeting of imaginations lower than that for SBIR.

Reference

 

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