BIO-Europe® special: EU’s “SME Instrument” as a funding tool for small and medium size companies

Written on 27 Oct 2014

The “SME Instrument” is an integral part of the Horizon 2020 program and shall provide funding to highly innovative small and medium sized enterprises (“SMEs”).

By the creation of the SME Instrument within the scope of action of the Horizon 2020 program – the EU’s biggest Research and Innovation program to go on between 2014 and 2020 -, the EU will hand-pick high-potential innovation projects of SMEs and provide them with early-stage funding, assessment and continuous mentorship. The goal is developing SMEs groundbreaking innovations for their final commercialization having, subsequently, such SMEs grow, expand and internationalize their businesses.

Horizon 2020 has destined approximately 7% of its total budget (approximately €3 billion until 2020) to the SME Instrument. Such funding will help develop high-potential and groundbreaking innovative SMEs’ products, services or processes, accelerating their exploitation. Thus, by means of the SME Instrument, the EU is opening new paths for innovation and development. The SME Instrument will consist of three phases during which the initial idea will be transformed into a marketable product, service or process:

Phase 1: Concept and feasibility assessment

Subject to an initial proposal by SMEs (of up to approximately 10 pages long), the EU will provide SMEs with a lump sum of up to €50,000.00 per co-financed project and carry out feasibility studies (both technical and commercial), which shall include a business plan. Such feasibility studies may relate, among other matters, to risk assessment in order to verify the viability of the proposed innovation or idea, partner search, intellectual property exploration, study designs, market studies, etc. This phase will last approximately 6 months.

Phase 2: Innovation project development

SMEs, with the EU’s assistance, will develop their initial proposals through innovation activities funded by the EU, such as prototyping, testing, demonstrations, market replication, development of pilot lines, scaling-up and miniaturization, enabling this way the innovative initial idea to be developed for its future commercialization. Furthermore, during this phase SMEs shall write down an in depth business plan (of up to approximately 30 pages). In this phase, the EU shall fund SMEs with between €500,000.00 and €2,500,000.00 (generally funding up to 70% of the total cost of the project, notwithstanding there are some exceptions such as healthcare related innovations). This phase will last between 1 and 2 years.

Phase 3: Commercialization

With the purpose of turning the initial innovation into a marketable product, service or process, the EU shall grant to SMEs assistance in the form of support in all possible areas, training and mentorship, as well as facilitating SMEs’ access to risk finance – venture capital funds. Nevertheless, during this phase, the EU will not provide SMEs with any additional direct funding.

During phases 1 and 2, in addition to the direct funding provided by the EU, the Enterprise Europe Network, a network of partners with nearly 600 member organizations set up by the European Commission with the purpose of providing information and advice to EU companies (in particular SMEs) on EU matters, shall provide coaching to SMEs by means of qualified and experienced coaches.

Sponsoring specific areas

During 2014 and 2015, the SME Instrument shall sponsor SMEs operating within specific areas:

  • High risk IT innovation;
  • Nanotech, or other advanced tech for manufacturing materials;
  • Space R&D;
  • Clinical research and validation of diagnostic devices and biomarkers;
  • Sustainable food production and processing;
  • Blue growth;
  • Low carbon energy systems;
  • Greener and more integrated transport;
  • Eco-innovation and sustainable raw material supply;
  • Urban critical infrastructure;
  • Biotechnology-based industrial processes;
  • Mobile e-government applications (only during 2015); and
  • SME business model innovations (only during 2015).

Meet us on BIO-Europe® – Germany, booth 24. We look forward to you discussing this and other topics!