The first wave of start-ups and SMEs has been selected for the newly updated EIC Accelerator, whose assessment procedures have changed under Horizon Europe.
The European Innovation Council (EIC) has selected 65 innovative start-ups and Small and Medium Enterprises (SMEs) from 16 countries to receive €363 million of funding for breakthrough innovations. This is the first batch of companies that will be funded under the fully-fledged EIC Accelerator. Companies will obtain financing for scaling up their innovations in the form of grants, or equity, or a “blend” of the two forms of financing amounting up to €17 million. These funds will serve to support the development and commercialisation of high-risk breakthrough innovations in healthcare, digital technologies, energy, biotechnology, space and other sectors. 60 out of 65 companies requested, in addition to grants, further equity financing through the new EIC Fund. Out of the 65 projects, 31 were awarded with fully blended financing, followed by 24 that received grant first (with an option for equity investments at a later stage). 5 projects only received a grant and 5 only equity. €227 million out of the total €363 million are expected to be disbursed in the form of equity.
The EIC Accelerator was launched in March 2021 as a major novelty under the Horizon Europe programme, following a successful pilot phase between 2018 and 2020. The EIC Accelerator is aimed specifically at addressing the financing needs of high-risk deep-tech innovations as they enter the key scale-up phase, as they begin commercialising their products and expanding their operations. High-growth innovative SMEs in Europe have lagged behind their US and Asian peers, often due to the comparatively risk-averse investment climate they face. Thus, the EIC was established as a successor programme to the former SME instrument under Horizon 2020 to address this perceived gap between early-stage seed funding for development and late-stage funding (also called the “Valley of Death”) (see SwissCore article).
Today, the programme provides substantial financial support with grant funding (non-dilutive) of up to €2.5 million for innovation development costs, and direct equity investments of up to €15 million managed by the EIC Fund for scale up and other relevant costs. In addition, EIC selected companies receive coaching, mentoring, access to investors and corporates, and many other opportunities as part of the EIC community. In that respect, the EIC Fund actively seeks to bring in co-investments and follow-up investments by outside co-investors on attractive conditions.
Under the fully-fledged EIC Accelerator under Horizon Europe, a new evaluation process has been introduced, to ensure a level playing field for applicants from all regions across Europe. Applicants can submit their ideas on the user-friendly EIC AI platform at any time for an initial assessment. In a second step, successful candidates are invited to prepare a full application and are offered free business coaching. The full applications are then evaluated at regular cut-off dates approximately every 3 months, before the selected finalists are invited to interviews with expert panels empowered to make a funding proposal. In first wave of the EIC Accelerator in 2021, most beneficiaries remain based in Western Europe (with France, Germany and the Netherlands being at the top of the list), with a minority of projects located in Southern or Eastern Europe. So far, the newly introduced application process has not yet sufficiently levelled the playing field for all regions across Europe.
These adjustments are the latest in a series of modifications introduced between the launch of the initial pilot and its formal institutionalisation under Horizon Europe, to better adapt it to the specificities of the start-up ecosystem. In 2017, the SME instrument turned to bottom-up calls without sectoral restrictions and included face-to-face interviews with expert panels into the evaluation process. In 2018, the European Commission (EC) introduced the so-called enhanced pilot as the evolution of the former SME Instrument phase 2. The enhanced pilot brought together the EIC Pathfinder for early-stage exploratory research and the EIC Accelerator (see SwissCore article) focused on start-ups under the same EIC governance to allow early stage researchers and innovators closer to market to interact and learn from each other. The goal of the pilot was to test procedures for evaluation and investment management, and secondly to ascertain the interest among European start-ups for blended finance and to see whether they would be attracted to the EC as a potential investor.
The EIC Accelerator pilot generated plenty of interest from the beginning. The first cut-off for the programme included 1’852 applications requesting a record of more than €5.2 billion financial support (see SwissCore article). Since the launch of the enhanced pilot, several trends could be observed. Firstly, blended finance in the form of grant and direct equity investment was introduced to the programme in 2019. This novel equity instrument, managed by the European Investment Bank (EIB) allowed for a much higher level of funding, and a broader set of activities eligible for funding, in particular costs associated to commercialisation (see SwissCore article).
Secondly, the budget per applicant increased. In 2018 and 2019, around 1’200 participants received funding, the budget increasing from roughly €494 million in 2018 to €622 million in 2019. In 2020, the EIC Accelerator only accepted 228 participants to the programme, disbursing a sum of €429 million in total. Thirdly, the thematic focus of the projects funded slightly shifted. While projects in Health and Engineering and technology still receive the largest share of financial support, energy-related projects surpassed ICT projects in 2020 (see EIC Accelerator data hub). This is likely because in 2020, the EIC Accelerated called for projects from any, which contributed specifically to the goals of the Green Deal. While in the beginning, the EIC Accelerator did not open calls in a specific field, it called for projects contributing to specific problems in some of its waves in 2020, such as the Green Deal call. This top-down approach is called the “EIC Accelerator Challenges” and provides financing for innovations in specific fields of technology or application, while the EIC Accelerator Open focuses on all innovations building on scientific discovery or technological breakthroughs (‘deep tech’). Thus, it is expected that under Horizon Europe, the EIC will focus on both thematic as well as open calls for projects. The thematic focus areas include EC priorities such as technologies for open strategic autonomy and addressing the green transition.
Lastly, in 2020, the prioritisation of women-led companies invited to the interview pitches was introduced, which led to an increase of EIC funded start-ups with female CEOs from 8% to 29%. In the newest wave of the EIC Accelerator in 2021, one in five successful companies had female CEOs.
Currently, Switzerland is not associated to the Horizon Europe programme and therefore cannot participate in the mono-beneficiary instrument of the EIC Accelerator.