The debate about what is the single most important factor in a successful company will forever remain: Funding? Team? Technology? Timing? Traction? As far as the founder is concerned control comes first and if you keep your equity, you keep control.
After reading the next 400 words, you will be in a better position to decide if R&D Grant Funding offers a viable option for retaining equity whilst (at the same time) funding your venture.
To give you an idea of the quantum of the R&D Grant Funding Market, the European Union Innovation Funding Framework that ran from 2014 to 2020 (Horizon 2020) had a budget of €80bn. By 2023, the leading UK innovation funding agency (UKRI) will command a budget of £2bn per annum. So – the funding is available – tick.
3 insights and differences between R&D Grant Funding and Investment Funding:
Match Funding
It is unlikely that Grant Funding for Innovation will cover all of the venture costs. For example, Innovation Grant Funding must be spent on R&D activity (not business development, cashflow or operations). Also, it is likely that you would need to ‘match’ the grant with your own funds – normally in a 70:30 ratio (i.e. innovation grant funding will provide 70% of the total R&D project funding)
Equity
Innovation Grant funding is ‘non-dilutive’ which means you get the funding without giving up any equity (nor indeed do you pay any interest). There are reporting requirements that come with the innovation grant funding, but this is minimal impact compared to surrendering equity.
Grant Funding Relationships
Unlike equity funding, grant funding does not generally require you to meet the funders. Applications are made, assessed and awarded without numerous meetings or pitches (in the main).
A few other considerations:
- Charities, NGOs, Universities, NfPs AND Businesses – all are eligible for grant funding
- Timing – Innovation Grant Funds will have a set deadline and assessment time period. Don’t miss the deadlines as there is no flexibility.
- Funding Amount – Innovation Grant Funding awards can be €25,000 to €10m – similar to investment funding.
- Multiple Funding Rounds – Ventures can apply for multiple grants over their lifetime and it can become a valuable part of your overall funding strategy.
- Investors like Grants – In our experience grant funding is a most welcome form of funding with investors – ‘free money’ and external validation.
- Collaboration – Innovation Grant Funding will enable the opportunity to partner with academic institutions, research agencies, government bodies and industry partners – collaboration is encouraged and will increase your chance of success.
- Competition – As always, there are more ideas than there is funding. Make sure to stand out and clearly differentiate your innovation from existing solutions.
In summary
Innovation Grant Funding is as close as a venture is going to get to ‘free money’ – there is a time impact, but no equity or debt involved. It should be considered as a key part of the overall funding strategy for any venture seeking to develop a novel, disruptive product, service or process.
We’d love to help
We have experience of writing R&D grant applications and securing funding from grant funders across Europe. If you would like our opinion on your venture’s chance of success, please complete our information request form here and we will be in touch to discuss.
