What Are EU Funds?
EU funds represent a crucial facet of financial support for entrepreneurial ventures within the European Union. As every member country contributes to the EU budget, each member state possesses the prerogative to leverage these funds to bolster its industrial growth and fortify its economic foundation.
EU-funded projects are instrumental in providing co-financing through either government entities or direct EU bodies, thereby diminishing the risk to the business owners and their investors. They serve to stimulate investments in innovative technologies and concepts, particularly those deemed inherently risky yet aligning with the EU's vision for future technological development.
These initiatives span an array of themes, application strategies, and desired outcomes across various industries and utilization domains. In this concise overview, we shall primarily focus on innovations and the technology sector, a domain personally well-versed by the author of this text.
It is paramount to grasp the concept of the Technology Readiness Level (TRL) before delving deeper into EU funding mechanisms. TRL, an acronym for Technology Readiness Level, is graded on a scale from 0 to 9, signifying the spectrum of technological maturity. TRL 0 denotes an initial concept idea, while TRL 9 signifies a fully commercialized product, technology, or service.
The TRL level of your idea restricts your eligibility for specific EU funding calls. Some calls cater to projects at TRL 0, while others necessitate the presence of a functional prototype that is not yet prepared for mass production or customer deployment. We shall primarily focus on the latter scenario.
Typically, the EU funding landscape features perspectives and multi-year durations defined by specific objectives and varying co-financing percentages. During the pre-application phase, hearings and drafting periods are conducted for each individual call. Consultants specializing in project development are often present during this stage, meticulously noting the particulars of each call.
Let's consider an illustrative example. Suppose there is a call for innovative products aimed at supporting nascent companies, offering a total financing amount of up to 150,000 Euros from the EU, with a maximum co-financing rate of 85% for your project.
Now, imagine you lead a relatively new company, operating for less than five years, and have conceived an innovative project. In your case, it's a blend of hardware and software designed to address household composting and food waste reduction—issues of paramount interest to the EU. Assuming you've already developed a prototype, albeit at a TRL 5 stage (a prototype tested in a real environment), and your aim is to further refine it in preparation for commercialization.
To proceed, it's advisable to engage a competent consultant who can assist in crafting your proposal. This proposal should encompass a detailed budget spanning 1-2 years, encompassing equipment, software, and other essentials, all contingent on the specific call type and its financial provisions. Typically, the proposal incorporates personnel salaries, along with the provision of necessary work equipment such as laptops and monitors.
Project proposal development can be an intricate endeavor, prompting the necessity of hiring a consultant who, in most cases, charges fees for proposal drafting and success-based payment if the project secures funding. Furthermore, you should be prepared for the administrative requirements throughout the project timeline, including regular updates and quarterly submission of financial reports to facilitate reimbursements for the expenditures you've previously incurred. Be mindful that these administrative obligations incur associated costs that should not be underestimated.
It's imperative to ensure that your project aligns with the objectives stipulated in your proposal, and that post-project completion, you maintain business operations for the duration specified in the contract, thereby preserving employment opportunities for your team as outlined in the specific call's objectives.
De Minimis Considerations
De Minimis is a fundamental regulatory principle that permits entities to receive small grants, typically capped at 200,000 Euros over a three-year period, from the state. This numerical threshold is of significant importance, as exceeding it may limit your eligibility to apply for additional funds. Calls offering less than 200,000 Euros in co-financing are often allocated toward your De Minimis budget. Conversely, calls involving higher financial commitments and multiple partners tend to fall outside this category.
Key points to keep in mind:
Recall that I mentioned the necessity of securing the remainder of the funds for your project, especially if your company is pre-revenue. You have various options, including generating revenue through other services and products, securing loans from family members or financial institutions, or obtaining private investments from angel investors or local venture capital (VC) funds.
However, it is crucial to exhibit prudence in your financial planning. Here's the unvarnished truth: refrain from pursuing EU funds unless you are committed to your project's long-term viability. Failing to do so can have detrimental consequences. Furthermore, do not embark on an EU-funded project if you do not have at least half the total project value securely stored in your company's bank account. It's essential to recognize that, as with most bureaucratic processes, timelines can be protracted. You may apply for funds and then endure a waiting period for results. The ideal scenario is to await the approval of the financing agreement and the initial disbursement of funds. If this is not feasible, you may find yourself grappling with financial constraints, diverting your focus from business operations, product development, and customer acquisition.
In fact, do not commit to a project unless you have at least six months' worth of salaries and other company expenses securely allocated in advance.
In conclusion, view EU funds as an augmentation to resources you've already secured, rather than the primary source of funding for your project. They are most suited for companies that can afford to wait or already possess ample financial backing. EU-funded projects, contrary to their intended purpose, are not ideal for highly speculative innovations. Such ventures are more susceptible to financial depletion and delays, a scenario frequently observed in EU-funded projects.
EU funding operates within an ecosystem of experienced companies well-acquainted with its intricacies and highly skilled consultants who navigate the terminology. More often than not, projects of this nature cannot progress without their involvement, ensuring a greater likelihood of success.
EU funds are the cherry on top, not the cake itself!