Editor’s Note: Obi Ezenwa is managing director of Pine Global, a startup consultancy that, among other things, helps startups apply for grant funding in Europe. Here he speaks about the new grant opportunities in Europe.
Grants can provide an important source of early stage funding for agritech startups to help get initial ideas off the ground. Grants can also be an overwhelming and complicated space, with several options and a lack of clarity about which will suit your business. They are also incredibly time-consuming, which can be prohibitive for lean startups.
In Europe, there are a few main avenues startups can take to find funding. Horizon 2020 (H2020), the successor of the €53 billion Framework Programme 7 (FP7), which operated between 2007 and 2013, is particularly relevant as it focuses on innovation.
Launching in 2013, it is worth €80 billion and will fund innovation projects in Europe until 2020.
What is H2020?
H2020 represents the European Union’s effort to close the gap in R&D expenditure as a percentage of GDP compared to US and Japan; investing 3% of EU GDP in R&D.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
H2020 is targeting eight societal challenges including Food Security, Sustainable Agriculture and Forestry, Marine, Maritime and Inland Water Research. So far, H2020 has provided over €1.36 billion to various projects within this challenge of which €95.6 million was through the Dedicated SME Instrument (SMEi) programme.
A range of agriculture-related projects have already successfully raised funding. They include early stage scientific breakthrough concepts like FutureAgriculture, which aims to bypass photorespiration, a major yield inhibitor in crops such as wheat, soybeans and rice. And later stage innovation projects such as AgriCloud, a precision farming platform that integrates data and provides one user interface for farmers.
In the run up to 2020, organizations can expect to receive an additional estimated €1 billion for agrifood and agtech projects specifically. The Work Programme and exact budget will be released in October 2017. Based on early consultations, topics such as digitising agrifood, resource efficiency, the prevention and control of pests and diseases, systemic approaches to re-organising value chains and sustainable consumer diets, are all expected to be of top priority for funding.
How H2020 has Improved the Application Process
Beyond macro level expenditure, there is a deep desire from the EC’s Research Executive Agency (REA) to produce EU unicorns from H2020. This has led to some radical changes to the structure of the innovation programmes, the types of projects that get funded, expectations of results and monitoring by the REA. And these changes are for the better.
Before, SME grants used to require collaboration of partners in at least three different EU member states coordinating a technical feasibility study and resulting in proposals 60-80 pages in length. This was a tall order for small companies with limited bandwidth to complete the arduous process.
Under the H2020 SMEi programme, this has changed and there are two routes a project can go down to access funding:
1. Submit an initial 10-page proposal to access €50k for a feasibility study.
2. Submit a 30-page business plan to access up to €2.5 million.
This requires a far lower investment from projects to apply than previous iterations of Horizon2020.
The average success rate – based on projects funded per total number of submitted proposals – for the SMEi programme is still low at 5% to 10%, however, but there are various grant funding specialists, such as Pine Global, that help improve projects’ chances to above 60% and take some of the workload off the process.
When You Should Consider Applying?
Startups or SMEs that have a registered entity in Europe, a turnover below €50 million or less than 250 employees, are eligible to apply for the SMEi programme through Horizon 2020. With grant funding, projects can raise non-dilutive capital that’s relatively risk-free and enables them to focus on the innovation at hand. EU funded projects provide a credible platform to establish strategic partnerships with supply chain companies, technology experts and prospective customers; demonstrate new products across the continent and beyond; and secure private sector financing for commercialisation or growth.