The European Commission takes a nuanced look at the implementation of the European Innovation Council through the growing pains of its first years.
As the European Union’s flagship innovation funding programme, the EIC has faced difficulties and criticism in ramping up its activities in support of start-ups (see the latest European Parliament draft report here). As part of the reflection on how to improve the institution’s performance going forward, the European Commission has published an evaluation of the European Innovation Council (EIC) Pilot, which ran from 2018 to 2020. The study looks at how the programme met its objectives of supporting breakthrough innovation and the scaling up of European deep-tech start-ups. In particular, it reviews the early results that have been achieved, in order to identify valuable lessons for improving the fully-fledged EIC in Horizon Europe (2021-2027).
The report evaluates the soundness of the programme’s intervention logic, its institutional setup, its ability to adapt and address emerging needs, and its capacity to attract talents. It also looks at the programme coherence within the overall European research and innovation (R&I) policy mix and its European added value. The report mentions how the programme was a victim of its own success, with a decreasing success rate over time across actions, and replicated the imbalance in favour of entities based in highly innovative regions against those based in EU-13 countries (i.e. the newer EU member states including Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia).
The report notes that the EIC Pilot successfully met the objective of reorienting the support for innovation by integrating and connecting science with innovation more directly. It also focused more on deep-tech breakthrough innovation. In particular, the Pathfinder portfolio of projects is well-positioned to nurture the potential also of speculative technologies where Europe’s position is strong. These include plant communication, spintronics, bioelectronics, aluminium-ion batteries, airborne wind turbines, artificial photosynthesis. More problematic were the issues, at least initially, in understanding its rules and procedures. A notable contentious point on the EIC Fund’s functioning regarded the evaluation of companies applying for blended finance funding: did they need to show they could not raise funding through private sources? And if so, how should they do so? Additionally, the recurrent delays in approving the beneficiaries that applied for the blended finance instrument (still in evidence in 2022, see last paragraph) have been detrimental to the reputation of the EIC Fund.
In terms of the programme’s impact, Pathfinder projects have not progressed much in delivering innovation outcomes, but they display a higher market creation potential than FET projects (before 2018) and other projects in Horizon 2020. The majority of Accelerator projects included in the case studies showed progress with their core technology assets but with no evidence yet of scaling up. There are, however, early signs of growth for some companies. Based on Dealroom data, in July 2021, 27 Accelerator beneficiaries reached a valuation of more than €100m. Crucially, the programme seems to be meeting the objective of crowding in other sources of capital: On average, each supported company in 2018 received 2.8 times the amount awarded by the EIC Pilot in subsequent (public and private) investments, which is very close to the market capital multiple targets of 3 set in the EIC Vision statement (see SwissCore article here). According to survey respondents and the case studies, participation in the EIC has strong reputational benefits.
The report concludes with three key lessons: (i) there is scope for improving the offer of training and coaching under the Business Acceleration Services, (ii) the EIC Fund responsible for the equity investments into beneficiary companies should improve and speed up its operational decision-making and communication, and (iii) the impact assessment of the EIC should align better with the assessment framework of Horizon Europe.
The EIC was the brain-child of the then Research Commissioner Carlos Moedas in 2016, with the aspiration to do for European innovation what the European Research Council (ERC) has done for European science. The pilot version took form gradually over the three years. The first phase of the EIC pilot was launched late 2017 as part of the Horizon 2020 Work Programme 2018-2020, grouping together pre-existing Horizon 2020 instruments: the Future Emerging Technologies Open (FET), the SME Instrument (SMEI), the Fast Track to Innovation (FTI) and Horizon 2020 Prizes.
In a later step, the FET transitioned to the EIC Pathfinder Pilot, providing grants to international consortia undertaking cutting-edge research on radically new technologies with a very low level of technological maturity. The SMEI evolved into the EIC Accelerator Pilot to create and promote co-investment for enterprises undertaking radically new, high-risk, market-creating innovations. The last change involved the introduction of non-grant funding. For the last 5 cut-offs of the EIC Accelerator under the pilot, starting in late 2019, beneficiaries were offered the possibility to apply for equity or quasi-equity investment in addition to the EIC grant (applying for both constitutes the so-called “blended finance” option). This is the overall programme structure that has remained in place during the first two years of Horizon Europe. Swiss entities performed strongly in all the instruments of the EIC under Horizon 2020. Under Horizon Europe, Swiss companies have hitherto been excluded from the EIC Accelerator. Although Swiss researchers can participate as third country entities in EIC Pathfinder projects, they cannot take on the role of coordinator. There is hope that full participation will be possible if negotiations between Switzerland and the EU advance on full association to the programme.