Venture capital watch: Interview to Claudio Calvani and Pierre Hausemer
Pierre Hausemer is the managing director of VVA Economics & Policy in Brussels. VVA Economics & Policy is the business unit of VVA Group that performs consulting projects for the European Commission, the European Parliament, and decentralized agencies. The business unit also has extensive experience in managing EU funds and project management.
What is alternative finance for startups?
Starting a business requires financing! Typically, when we think of startup financing, we think of equity or venture capital: a company raises its series A/B round from a well-known fund and hands over a stake in the business in return. However, the financing landscape is much more diverse than it seems: investors aren’t the only source for funding and early-stage startups are very rarely able to finance from debt investors. As an alternative to conventional channels, startups can look into other options. For instance, national and/or EU funds might be used strategically to boost business growth and/or to finance R&D activities.
As a matter of fact, in response to the Covid-19 pandemic, the EU and its member countries have adopted a transformational investment and recovery program worth €1.8 trillion to benefit the European economy. The unprecedented scale of the resources made available by the EU represents a massive opportunity for investments in innovative projects that aim to:
- Get new business ideas off the ground
- Accelerate the impact of investments
- Enhance innovative and community development projects
What opportunities exist at the EU level?
EU funding is available for all types of companies of any size and sector, including entrepreneurs, startups, micro companies, and small and medium-sized enterprises. The EU supports businesses and specific projects through a range of initiatives, including:
- Loans, guarantees, and equity
Grants are typically awarded to winning proposals after a call for submissions. These submission calls are usually in line with particular social, economic, or infrastructural goals that have been set by the European Union. So, if the EU is focusing on promoting renewable energy, it might offer grants to companies that are developing new technologies in the field.
One example of this kind of initiative is the EIC Accelerator (previously known as the SME Instrument), which provides funding opportunities and acceleration services to startups and innovative small and medium-sized enterprises (SMEs). The EIC Accelerator focuses on high-potential businesses with marketable products and services, strong business plans, and ambitions to scale up. Participants have the opportunity to receive up to €2.5 million in grants and €15 million in blended finance, while the acceleration services offered include business coaching and mentoring, as well as opportunities to connect with international corporations, investors, and other entrepreneurs.
Another example is Eurostars, which is a joint program between EUREKA and the European Commission designed to provide funding to small and medium-sized enterprises involved in research and development. Its particular focus is on supporting SMEs in the development of rapidly marketable, innovative products, processes, and services that help improve the daily lives of people around the world.
Loans, guarantees, and equity are often provided so that entrepreneurs can seek out additional financing from other conventional/commercial avenues. The funding here usually comes in the form of the EU backing financial brokers to help business owners get their applications for credit lines/financing approved. A direct investment with minority equity participation is also a viable solution that may be applied in some instances, as in the case of EIT Health, where it was used to back the growth of startups in the life sciences.
How does the EU funding program work?
About 80 percent of EU funding is granted through programs managed in the EU countries themselves. When the European Commission directly manages funding, it does so by awarding grants, launching tendering procedures, and so on. Every call for grant applications will follow a slightly different process, and specific instructions are usually provided by the organization in charge of disbursing the grants. Each call has its own quirks and peculiarities.
How can startups access EU funding opportunities?
In order to receive funding for their projects, startups and SMEs must complete an application, which can be very demanding. There are so many important details to be taken into account that even if the proposal is close to perfect there is still the possibility of getting rejected.
In fact, there are so many proposals submitted every year that few of them will get the requested funding. Depending on the program, there are diverse criteria and strict specifications for every call to action. That can make it even more difficult for a proposal writer to write and submit an EU funding–worthy project proposal. For instance, the overall success rate of Horizon Europe is approximately 16 percent, whereas the overall success rate of EUREKA Eurostars is 29 percent.
However, that doesn’t mean that writing a successful project proposal is mission impossible.
There are professionals out there (such as VVA) that provide innovation consultancy services to help applicants understand the process and guide them every step of the way, significantly improving their chances of getting EU funding for their proposals.
Valdani Vicari & Associati is a leading Europe-wide consultancy supporting innovative startups and SMEs on their path to securing funding at all stages of development and across any area of technology or business sector. VVA’s team can support a company by handling bureaucratic procedures until the funding is obtained, as well as the related reporting afterward.
There’s nothing worse than seeing the opportunity of a lifetime and not being in the right place to take advantage of it!