How can the funding ecosystem be improved to better support spinouts and SMEs developing Deeptech and Midtech
Quick Introduction
Innovation Zero World Congress 2026 and many panel talks are focused on funding:
- From Lab to Listing
- UK & EU Funding Ecosystem
- The Funding Gap: Series A/B
Panellists from Climate Tech Super Cluster, Innovate UK, Venturenomix, HSBC and more, agree that the UK and Europe have invested heavily in science, talent, companies, innovation, and commercialisation capability over the past few decades. We are world leading.
To deliver on this potential, we need capital in the right structures to create verified market demand. Clear and demonstrable market-pull is essential for companies at series A / B round stage to overcome the ‘valley of death’ or ‘messy middle’ that remains the major failing point for bringing innovations to commercial readiness.
Funding Pillars
Fast and useable non-dilutive funding
R&D Grant Funding has a key role to play in providing the crucial funding needed throughout the R&D phase; from proof-of-concept and prototyping to demonstration and commercial readiness:
- Early TRL Funding (feasibility): At TRL 1-4, where deeptech innovations need to spin-out or midtech innovation need early validation, grant funding already offers opportunities to fund proof-of-concept feasibility studies. UK grants tend to be on the lower side with funding of between £25k and £100k available from Innovate UK, Catapults, UKRI and sector specific bodies such as the National Institution for Health Research (NIHR), Advanced Propulsion Centre (APC) and more. European grant funding from EIC Pathfinder offers between £1m and £4m for this TRL1-4 journey, funding collaborative projects between universities, SMEs and industry.
- Mid TRL Funding (Prototyping): At TRL4-6, where prototyping is the core focus, SMEs can expect to be eligible for grant funding of £150k to £1.5m from UK funders (Innovate UK, UK Government Departments, and sector themed public bodies). EU grant funding from EUREKA and European Innovation Council is available to all innovation-led SMEs with a validated technology (if you can win it), offering funding from €350k to €2.5m depending on the programme.
- Late TRL Funding (Testing): At TRL6-9, SMEs are moving towards a commercially viable product, process or service. Grant funding supports development, testing, pilots, validation, certification, localisation, regulatory compliance and preparation to scale. Funding from grants varies, offering between £150k to £1.5m+, and late stage calls become focused on real-world validation, certification and preparation to scale.
Early access to finance expertise
- Accelerators and Innovation Clusters offer access to high quality professional service advisors in finance, innovation management, grant funding, tax credits and more. Understanding the journey, milestones and the funding options to deliver on the key deliverables needed to unlock the next stage of funding or customer validation can accelerate the R&D journey. At an early stage, this advice is often offered at no cost as part of the package of support at accelerators and innovation clusters.
Investors who understand the journey
- Patient finance (this is not a company, rather a trait needed in investors) means experienced investors and funders who understand the process, pitfalls and risks of the R&D journey. The most patient funder will likely be government innovation agencies such as InnovateU K and European Innovation Council (amongst others) that don’t need a 10x return in under 5 years, but take on early, high-risk projects from high-growth potential spinouts and SMEs. Staged investment from angel investors (ideally leveraged by grant funding) is critical, while VC funding at scaleup stage is ideal.
Market-pull (Demand)
- Public Procurement through schemes such as innovation procurement (EU) and Contracts for Innovation (UK) offer the change to deploy and test mid-late stage innovations in public sector environments. These pilots allow for optimisation, data gathering and, ideally, purchase agreement based on specific KPIs (that need to be clearly defined).
- Advanced Commercial Agreements from industry buyers validate innovative solutions to hard-to-solve real life problems. “If your solution can deliver x, y and z, we commit to purchase at £x in year x.” This kind of agreement, although hard to achieve, is gold dust for investors and other funders. High quality accelerators and innovation clusters will prioritise supporting the attainment of these agreements. Governement support through catapults are also excellent routes to market through these agreements.
Recommendations for improving the role of R&D grant funding
Venturenomix has operated in the R&D Grant Funding domain since 2008. We have a good understanding of the whole R&D funding landscape based on our 20+ years working with startups, scaleup and midcaps. Here is how we would improve the role that grant funding plays in the journey from deeptech / midtech to commercialisation.
Quicker decision timeframe for grant applications
8 weeks is a lifetime for startups and scaleups, but that is the shortest decision time for submitted grant applications. Then there is a 4-8 week project setup period. Some grant decisions take over 6 months. This needs to speed up; significantly.
Fast funding at an early stage of R&D is particularly important. Speed up grant assessment times. Speed up grant project setup times.
Make grant funding guidance clearer for applicants
Stating that startups, scaleups and midcaps are eligible to apply for a specific grant call (such as EIC Accelerator) when assessors are being told to only award funding to scaleups and midcaps is not helping anyone.
Stating pre-revenue businesses can apply for innovation loan funding (such as Innovation UK Innovation Loans) when pre-revenue applicants are rejected by the credit team, is wasting everyone’s time.
Give clear guidance to applicants so the right companies apply to the right competitions.
Make UK grant funding useful internationally
SMEs are told to collaborate to accelerate R&D. At the same time, Innovate UK won’t allow staff to work overseas, even if they are on a UK payroll and paying taxes in the UK. This is a clear contradiction. If the SME is based in UK, and the CTO lives and works in Berlin, find a way to make it possible to allow the the CTO to participate in the R&D grant project.
Deploy a unified ontology for public funding
The technology exists to standardise language and overcome barriers to miscommunication in grant funding (and many other domains). Grant giving bodies use different definitions from one another, making communication and clarity effectively impossible. Agree a standard or use technology to develop a community-driven ontology that automatically standardises language (‘did you mean”). This will make grant funding calls more transparent, understandable and actionable.
Looking for R&D grant funding?
Venturenomix works with universities, spinouts, startups, scaleups and midcaps. We help discovery, matching and applying for impactful R&D grant funding from UK and EU grant funding bodies. We can offer a strategic view of how R&D grant funding can support your journey to commercialising innovative products, processes and services. Contact us for a free meeting. We can protect more of your equity for longer with non-dilutive funding.
Alex Chalkley
I have over 20 years experience in founding and scaling businesses, mainly focused on the non-dilutive funding sector. Since 2008, I have built, trained and mentored teams to successfully draw down over €100m in non-dilutive funding from the UK and EU for clients spanning multiple sectors.
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