How to know if the SME Instrument is for you
EU funding About the author Madalina Serban is a mid-career switcher, an NGO founder and an aspiring social business owner. Born in Romania, she lived, worked and studied in Bucharest, Vienna and Brussels. She left her corporate international career in digital marketing in 2011 andstarted her own individual coursework in social development in Kathmandu, Nepal. Back to Europe she completed a master in European Studies in Brussels in 2012. She is currently working as an EU Funding consultant within the social entrepreneurship sector in Vienna.
As part of the Horizon 2020 programme and starting in 2014, the European Commission is hand-picking potentially disruptive businesses to invest in and support as part of the SME Instrument. Your business could receive up to 2.5 million euros in funding, world-class business support and mentorship.
Who is the SME Instrument for?
The aim of the SME Instrument is to fill the gaps in funding for early-stage, research and innovation SMEs and accelerating the exploitation of innovations. High growth, highly innovative SMEs with global ambitions that want to disrupt the established value networks and existing markets. You should be driven, actively investing in innovation, and looking to grow. And you should have been established for a while. Startups are included, but the SME instrument is not meant as a company creation vehicle or instrument, but rather supports the growth of companies with innovative ideas with European or global potential.
It’s a good sign if your company is based in an innovation hub, has received grants,VC funding, or innovation-related tax benefits, or won an innovation prize in the last 2 years.
Is your company an SME, by the European Commission’s definition in practice?
The first step to qualifying as an SME is to be considered as an enterprise. According to the EC’s new SME definition in practice, an enterprise is “any entity engaged in an economic activity, irrespective of its legal form”.
Therefore, the self-employed, family firms, partnerships and associations regularly engaged in an economic activity may be considered as enterprises. It is the economic activity that is the determining factor, not the legal form. The scope of the new SME definition is clearly marked out by being formally included in the Commission’s recommendation concerning the definition of micro, small and medium-sized enterprises.
How does the SME Instrument work?
The instrument is implemented through three phases, with up to 2.5 million euros in funding and a coaching and mentoring service for enterprises. Participants can apply to Phase 1 with a view to applying to Phase 2 at a later date, or apply directly to Phase 2. Applications are evaluated independently from phase to phase, therefore to be successfully selected in Phase 2, a company does not need to need to have completed Phase 1.
The instrument is implemented through three phases. Participants can apply to Phase 1 with a view to applying to Phase 2 at a later date, or apply directly to Phase 2.”
In Phase 1 – Idea to Concept, a feasibility study shall be developed verifying the technological as well as economic viability of an innovation idea (product, process, services), with considerable novelty to the sector in which it is presented. The activities could, for example, comprise risk assessment, market study, user involvement or Intellectual Property (IP) management. Proposals should contain an initial business plan (around 10 pages) based on the proposed concept. The European Union will provide 50,000 euros in funding. Projects should last around 6 months.
In Phase 2 – Concept to Market Maturity, innovation projects that demonstrate high potential in terms of company competitiveness and growth underpinned by a strategic business plan will be supported. Activities should focus on demonstration, testing, prototyping, piloting and scaling-up and aim to bring an innovation concept to industrial readiness and maturity for market introduction. They may also include some research.
Proposals will be based on a more developed business plan (around 30 pages). Particular attention must be paid to IP protection and ownership; applicants will have to present convincing measures to ensure the possibility of commercial exploitation (‘freedom to operate’). The EU aims to contribute between 0.5 million euros and 2.5 million euros. Projects should last between 12 and 24 months.
In addition, in Phase 3 – Prepare for Market Launch, SMEs will receive extensive support, training, mentorship and facilitating access to risk finance as the project is further polished into a marketable product. Additional support and networking opportunities will be provided by Enterprise Europe Network (EEN). The EU will not provide additional direct funding in this phase.
Your first point of contact? The National Contact Point.
National Contact Points (NCPs) are national structures established and financed by governments, which give personalized support on the spot and in applicants’ own languages. It is good to set a meeting with one NCP representative in your country as soon as you are considering applying for funding through the SME Instrument.
The first winners of 2014 were announced on 18 September. 155 SMEs from 21 countries will each receive 50,000 euros to finance feasibility studies for their projects and with this first round, valuable learning will be made available for the future development of the program.
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