The European Commission (EC) and European Innovation Council (EIC) provide €2.5 million in grants and €15 million in venture financing per startup or Small- and Medium-Sized Enterprise (SME).

This article discusses highlights from the 2022 impact report on the new EIC Accelerator program (grant and equity, with blended financing option).

1. The EIC Fund’s Mission

“In 2022, the EIC made a major development by establishing the EIC Fund as an investment vehicle for high risk, high-potential startups in their early stages of development.”

The EIC Fund is a great addition to the EIC’s portfolio of funding arms since it enables larger funding amounts and closer relationships with companies through ownership stakes, deep due diligence and board seats.

Unfortunately, it is currently not aligned with the needs of high-risk and early-stage startups due to many delays, a long backlog of unfunded companies spanning multiple years into the past and a distorted selection process that often abandons the idea of DeepTech (see Breaking the Rules).

2. Industries and the EIC’s Role

“Whether it’s the energy crisis, the food crisis, or the path towards economic resilience, the EIC is helping to find solutions to these deep societal challenges by identifying investment opportunities and catalysing private investments in deep tech startups that can scale in global markets.”

It is clear that many of the EIC Accelerator portfolio companies focus on very technical fields in the areas of health, energy, computing, space technology and others, often including hardware developments. This is a great accomplishment since pure software companies would be less risky and easier to scale in comparison.

Still, it remains to be seen if the EIC is crowding-in private investments or if private investors are crowding-in the EIC.

There are cases in which companies raised substantial capital before or during the EIC Accelerator approval process so it is likely that the EIC is pursuing a safe strategy of piggybacking on private markets while also following a risky approach of betting on disruptive technologies in parallel.

This is, of course, a very reasonable approach since disruptive DeepTech is too risky to be the exclusive priority of any investment vehicle, including the EIC.

While it is easier for the EIC to advertise results from EIC Pathfinder and EIC Transition due to the filing of patents and the publications of scientific papers, the EIC can only advertise results from the EIC Accelerator through valuations, scaling and revenues which are difficult to achieve (see The EIC Portfolio).

This places a major burden on the EIC since obtaining financial success cases is extremely difficult and creates distorted incentives where the evaluation prefers companies that are already successful rather than those that will (potentially) be. It also requires a near-unreasonable level of risk mitigation from companies that are expected to have signed contracts with major industry stakeholders or customers even at TRL5.

3. Stealing Thunder

“To date, the EIC has supported a portfolio of over 1 600 startups that have helped generate 12 deep tech Unicorns and 112 Centaurs here in Europe. EIC companies have attracted over EUR 10 bn of follow on investment and the valuation of the EIC portfolio of companies stands at over EUR 40 bn.”

Interestingly, the EIC lists a company called TWAICE as an example of a centaur but this is quite deceptive since, according to Crunchbase and public data, the company raised $30 million before obtaining EIC funding and no funding afterward. This would suggest that their valuation had already reached the centaur status, potentially exceeding the status of an SME, while the EIC support had little or no effect.

This casts doubt on the EIC’s unicorn or centaur claims and a thorough investigation of the EIC’s role in their growth and success is warranted.

4. Diversity

“The EIC also continues to outperform the market in supporting women-led companies and entrepreneurs from all regions of the EU - factors essential for a balanced and diverse innovation chain better addressing the needs and reflecting capabilities of our citizens.”

It is quite clear that the EU member states and associated countries are not equally represented in the portfolio of EIC-funded companies. Of course, this is not avoidable since different countries have varying startup ecosystems and low-GDP countries will generally struggle to create cutting-edge DeepTech startups.

Diversity goals, including gender targets, are generally driven by political agendas and it remains to be seen if such goals, as they are applied to technology investments, will have a positive impact on all citizens in the long term.

5. No Country for Old Companies

There is a preference for companies within a certain age range whereas the majority of funded businesses are 6-10 years old and a total of 50% of companies are below 10 years of age. This, of course, can stem from the fact that many older businesses are not incentivized to innovate while it is often startups that are in a position to disrupt industries with ground-breaking technologies.

6. Congesting Innovation

“The first EUR 260 m in investments through the EIC Fund has resulted in 92 investment agreements. 48 investments by the EIC Fund have been sufficiently mature to leverage just under EUR 500 m in co-investments by private and other funds, resulting in a leverage of 2.6 times the value of the EIC Fund equity investments. 2022 also saw the largest investment round involving the EIC Fund: a EUR 100 m fundraising round by SiPearl. 44 investment agreements signed by the EIC Fund have taken the form of convertible loans. These act as a bridge to the next fundraising round, which is expected to fall within 12-18 months of receiving EIC support.”

It is no secret that the EIC Fund has had a difficult past (see An Inside Look). Confusion and disappointment among beneficiaries as well as delays in the issuance of funds are still plaguing startups even 4 years later.

Most companies are still waiting to receive their equity investments and the EIC is still making structural changes to the fund which will likely lead to more delays - i.e. handing the EIC Fund to the European Investment Bank (EIB).

“Since September 2022 it has been fully functional and is in the process of taking investment decisions on 179 companies selected by the EIC Accelerator for equity support in 2021 and 2022.”

It is likely that the EIC Accelerator will undergo substantial changes over the coming years which will reshape the evaluation process and especially the selection procedure.

Considering the current evaluation process, the EIC is putting the cart before the horse by performing the due diligence on a company after the funding decision has already been made.

While the EIC Fund can still decide not to invest in a company, it is not how the program was intended to function.

Currently, a subjective assessment process using conflicting criteria in 3 steps screens companies while final investment decisions are made based on a 35-minute interview. Only then will months of due diligence be performed. This is, of course, highly uncommon in the investment industry.

7. Turtles Investing In Hares

"Operational Excellence: Including time from application to grant for Accelerator, 6 months for Transition, and 8 months for Pathfinder"

Days-to-Grant by Program

*Days-to-Termsheet

The statistics on the application durations are quite revealing since they suggest that the average beneficiary was rejected at least once in the process. For a company applying to the EIC Accelerator, it is possible to move from the beginning of Step 1 to the final funding decision in Step 3 within 6 months if no rejections are received. Afterward, 2+ months can be expected to access the funding.

Since the average duration given by the EIC is 300 days or 10 months (100% higher than in 2020), it seems that either the projects are rejected before obtaining funding, applicants skip deadlines due to the higher workload or the EIC caused substantial delays in the issuance of the financing.

Still, it is unclear what this timeline actually represents since it does not clarify the start and end points (i.e. Step 1, Step 2, Step 3, money in the bank).

But it is possible that the numbers reflect rejections faced by beneficiaries which highlights the inaccuracy of the evaluation process and the persistent luck factor of obtaining funding.

These tips are not only useful for European startups, professional writers, consultants and Small and Medium-Sized Enterprises (SME) but are generally recommended when writing a business plan or investor documents.

Deadlines: Post-Horizon 2020, the EIC Accelerator accepts Step 1 submissions now while the deadlines for the full applications (Step 2) under Horizon Europe are listed below. The Step 1 applications must be submitted weeks in advance of Step 2. The next EIC Accelerator cut-off for Step 2 (full proposal) can be found here. After Brexit, UK companies can still apply to the EIC Accelerator under Horizon Europe albeit with non-dilutive grant applications only - thereby excluding equity-financing. Switzerland has resumed its participation in Horizon Europe and is now eligible for the EIC Accelerator.

Contact: You can reach out to us via this contact form to work with a professional consultant.

AI Grant Writer: ChatEIC is a fully automated EIC Accelerator grant proposal writer: Get it here.

Eureka Network: The Eureka Network delivers various international collaborative R&D initiatives such as Network Projects, Clusters, Eurostars, Globalstars, and Innowwide, providing funding from €50K to €6.75M per project based on the specific initiative. This network emphasizes market-driven innovation and deep-tech advancement across multiple technology sectors including ICT/Digital, Industrial/Manufacturing, Bio/Medical Technologies, Energy/Environment, Quantum, AI, and Circular Economy. Eligible participants include SMEs, large enterprises, research organizations, universities, and startups, with Eurostars particularly focused on R&D-performing SMEs. Get Started

EIC Transition: EIC Transition delivers up to €2.5 million in funding to overcome the 'valley of death' gap between laboratory research and market deployment, emphasizing technology maturation and validation. The initiative supports single legal entities or small consortia of 2-5 partners including SMEs, start-ups, spin-offs, and research organizations. Key technology domains include Health/Medical Technologies, Green/Environmental Innovation, Digital/Microelectronics, Quantum Technologies, and AI/Robotics. Get Started

EIC STEP Scale-Up: EIC STEP Scale-Up delivers significant equity investments of €10-30 million for established deep-tech companies prepared for hyper-growth and large-scale expansion. The initiative targets SMEs or small mid-caps with up to 499 employees who have obtained pre-commitment from qualified investors. Primary focus areas include Digital & Deep Tech (Semiconductors, AI, Quantum), Clean Technologies for Net-Zero objectives, and Biotechnologies. Get Started

EIC Pre-Accelerator: EIC Pre-Accelerator represents a 2025 pilot initiative delivering €300,000-€500,000 in funding for early-stage deep-tech development and preparation for the EIC Accelerator program. This program is exclusively accessible to single SMEs or small mid-caps from 'Widening countries' to foster regional innovation development. The initiative encompasses deep-tech innovations across physical, biological, and digital domains. Get Started

EIC Pathfinder: EIC Pathfinder delivers up to €3 million for Open calls and up to €4 million for Challenge-based calls to support early-stage research and development with proof-of-principle validation. The initiative requires research consortia with a minimum of 3 partners from 3 different countries, including universities, research organizations, and SMEs. Primary technology focus areas include Health/Medical, Quantum Technologies, AI, Environmental/Energy, and Advanced Materials. Get Started

EIC Accelerator: EIC Accelerator delivers flexible funding options including blended finance (€2.5M grant + €0.5M-€10M equity), grant-only (up to €2.5M), or equity-only arrangements for scale-up and market deployment of breakthrough innovations. The initiative targets SMEs, start-ups, and small mid-caps with up to 499 employees, with MedTech/Healthcare representing 35% of funded projects. Additional technology areas include Biopharma, Energy, AI, Quantum, Aerospace, Advanced Materials, and Semiconductors. Get Started

Innovation Partnership: Innovation Partnership enables collaborative innovation between public and private sectors with typical funding of €1-5 million per project. The initiative supports cross-sectoral strategic technologies through public-private partnerships and consortia. Projects concentrate on addressing societal challenges through collaborative innovation approaches. Get Started

Innovation Fund: The EU Innovation Fund delivers substantial funding of €7.5 million to €300 million for large-scale demonstration of innovative low-carbon technologies. The initiative targets clean energy, carbon capture, renewable energy, and energy storage technologies to accelerate the transition to a low-carbon economy. Eligible participants include large companies, consortia, and public entities capable of implementing large-scale demonstration projects. Get Started

Innovate UK: Innovate UK delivers various programs with funding ranging from £25K to £10M depending on the specific initiative, supporting business-led innovation, collaborative R&D, and knowledge transfer. The organization funds projects across all sectors with particular emphasis on emerging technologies and supports UK-based businesses, research organizations, and universities. Programs are designed to drive economic growth through innovation and technology commercialization. Get Started

Industrial Partnership: Industrial Partnership delivers €2-10 million in funding for industrial research and innovation partnerships focusing on manufacturing, industrial technologies, and digital transformation. The initiative supports industrial consortia and research organizations in developing collaborative solutions for industrial challenges. Projects aim to strengthen European industrial competitiveness through strategic partnerships. Get Started

Eurostars: Eurostars represents a joint EU-Eureka initiative delivering €50K-€500K for international R&D collaboration specifically led by SMEs. The program adopts a bottom-up approach, accepting projects from all technology fields without predefined thematic restrictions. R&D-performing SMEs must lead the consortium and demonstrate significant R&D activities. Get Started

LIFE Programme: The LIFE Programme delivers €1-10 million in funding for environmental protection, climate action, and nature conservation projects across the European Union. The initiative supports environmental technologies, climate adaptation strategies, and biodiversity conservation initiatives. Eligible participants include public authorities, private companies, NGOs, and research institutions working on environmental and climate challenges. Get Started

Neotec: Neotec represents a Spanish initiative delivering €250K-€1M in funding for technology-based business creation and development, supporting the growth of innovative Spanish SMEs and start-ups. The program covers all technology sectors and aims to strengthen Spain's technology ecosystem. Funding is specifically targeted at Spanish technology-based SMEs and start-ups to enhance their competitiveness and market presence. Get Started

Thematic Priorities: EU Thematic Priorities encompass various programs aligned with EU strategic priorities including green transition, digital transformation, health, and security initiatives. Funding amounts vary based on the specific program and call requirements, with projects designed to address key European challenges. Applicant eligibility varies by specific program and call, with different requirements for different thematic areas. Get Started

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