The EIC Accelerator has added a preliminary step in the application process to filter applications and notify candidates of their fit, and has simplified its evaluation procedure through an IT-based qualification method.
The first stage application was introduced as a measure to curb the number of full applications reviewed by the EIC which was kept rising exponentially in 2020 (over 4,200 full applications submitted in October 2020 for only 38 funded). Another measure with the same objective was to impose a limit on the number of submissions (now only 2 allowed) before being given a 12-month “cooling off“ period.
At the time of writing (May 2021) it is unsure how many applications are expected to pass to the 2nd stage. On the one hand, it has been heard that roughly 70% of applicants are expected to be invited to the 2nd stage. On the other hand, the briefing to evaluators suggested that only 30% of applications are expected to make the cut.
Only time will tell. In the meantime, here are a few things to know.
Rage against the Machine
The first stage relies on an AI tool in order to assign a score ranging from A to D on the scientific and technological breakthrough of applicants’ solution.
The system takes into account the specific input introduced by applicants when describing their functions and their features (it asks applicants to submit a description of the knowledge and technology required to develop each feature within 500 characters) and seems to compare it against available scientific publications and patents (the system indicates that it searches over 200 million entries in 5 seconds). The system then assigns a score which depicts where the innovation is located on an innovation matrix.
The inputs, score and matrix are used by evaluators, along with a ‘patent intensity’ graph to guide them in their evaluation of the solution.
Several innovation consultants have asked the EC to clarify how the AI tool functions, or at least to disclose which databases it uses to assign the score. At this stage, the European Commission declined to offer more details on the grounds that in doing so, Innoloop (the company tendered to develop it), would lose its competitive advantage and potentially jeopardizing its IP.
Working in the sphere of innovation, we certainly understand the concern. However, given that it has the potential to influence decision making in the largest public funding scheme, especially given the recent EC announcements, it is only natural that it would be subject to public scrutiny.
The European Commission does not like that we call it opaque, but the reality is that we do not know how it works or whether it performs as intended.
At the time of writing, evaluators who were briefed by the EIC on April 09th at the time of the opening of the first stage applications were specifically given the guideline to not rely on the analysis of the AI tool, because it has not been trained enough to offer reliable results.
As a source reported, evaluators were told to use their own judgement, given that “a groundbreaking technology might well receive a D from the system.”
We’ve experimented enough with it to tell you that the opposite is also true.
Grant Only or Blended: don’t be a ‘money grabber’
When reviewing the available data on its laureates, one notices that the EIC’s preference for Blended financing is not new. Already in 2020, the budget allocated to projects funded under the blended instrument has steadily increased over time.
This trend is likely to continue under the new EIC.
In fact, in the evaluator’s briefing, EC representatives made this inescapably clear, any company requesting Grant only, will need to offer compelling justification as to why it is asking for Grant financing alone, and to justify very thoroughly why it needs the EIC grant and with what money it is planning to scale (and why can’t that money also be used to reach the market?).
In other words, perhaps in echoing the popular (but not necessarily true) wisdom that Europe doesn’t have a start-up problem, but a scale-up problem, it seems less interested in funding go to market projects and evidently more interested in funding scaling-up projects.
They seem also warry of companies asking for ‘free’ money. In their own words during the briefing: “we are not looking for money grabbers.”
We consider this one as being simply a poor choice of words. Isn’t a grant, whether disbursed in grant only or in blended, in itself free money after all?
The EC presumably implies that they are reluctant to offer grants to companies that are already funded or that have the ability to do so from private markets and who are instead asking for a hand-out.
In any case, be careful not to appear as a “money grabber.”
Against this background, first stage applicants should be especially vigilant when selecting the estimated financial needs for their projects.
Candidates are automatically prompted to choose whether they ask for financing through a ‘grant only’ or for ‘blended financing’, and to estimate the amount of grant and equity needed for their project. They are also prompted to specify the amounts that they intend to raise from other sources, if any.
The system states that the amounts are indicative and used purely for statistical purposes – implying that it is not intended for the evaluation of proposals.
In fact, candidates will only have to choose between the different financing schemes (the EIC work programme 2021 mentions 4 schemes to choose from, introducing 2 novelties ie. grant first, or equity only) in the second stage.
Candidates however should exercise some caution here because the disclaimer is misleading.
On the one hand it suggests that evaluators may not have access to those figures, and even if they did, they would be no prejudice to the evaluation of the application.
What candidates don’t know is that not only do evaluators have access to it, but that when assessing the scaling potential, evaluators are in fact required to form an opinion on whether the associated financial needs are well assessed and realistic.
While there is a specific section regarding the scaling potential that evaluators can draw from to form an opinion, there is no other question besides the one highlighted above where candidates can discuss costs and financial needs.
So be careful here too.
Another reason for vigilance, is that (as mentioned above) while the EC does indeed prefer blended financing, our experience with previous clients suggests that they also prefer candidates who bring investors., contrary to the original EIC investment guidelines,
Our conversation with past candidates suggests that those able to match 1-to-1 the equity investment with funding from private investors are the only ones that seem to have the ability to receive the amount requested from the EC under favourable conditions.
In fact, 18-months into the process, the pattern suggests that they are the only ones who have received any financing at all for that matter (as of May 2nd, there are only 9 out of 150 companies since October 2019 that have seen the money in their account).
All other candidates, those that are non-bankable and unable to raise funding from other sources and for who the EIC was originally designed for (if we are to believe the July 2020 investment guidelines) have been given very different terms than promised and have yet to see any financing in their bank account.