According to EASME, the widest funded Phase 2 projects under the SME Instrument in 2018 were those related to “health”. However, based on our wide experience with the Small and Medium Enterprise Instrument (SME-I) funding scheme is part of the Horizon 2020 programme within the European Innovation Council (EIC); it is aimed at innovative SMEs and startups needing to commercialise a product. Grants are provided for commercial feasibility studies and scale-up R&D, which prescribes a Technical Readiness Level (TRL) sufficient for a tested prototype. The Phase 1 grant is available for concept and feasibility assessment and the EU offers a €50k lump sum. The Phase 2 grant funds engineering, industrialization, demonstration, and market replication with a maximum budget of €3.5mln, 70% of which is fully covered by the non-dilutive contribution of the EC. The SME Instrument runs on a bottom-up continuously open call scheme with 4 pre-determined cut-off dates per year. The application (project proposal) is evaluated against 3 criteria, Excellence, Impact and Implementation, meaning that high scores in innovative potential, market need and execution plan are required.
In 2018 the European Innovation Council (EIC) has allocated €450mln to 254 SME-Instrument Phase 2 projects to the EU-28 and associated countries. Five countries (Spain, France, Germany, Norway and Israel) account for 50% of the beneficiaries’ location. Italy, a top performer in the past, has attracted little Ph2 funding in 2018. The SME Instrument's geographical distribution matches the main innovation hubs in Europe, including Madrid, Paris, Berlin, Munich, Oslo, London, Dublin, Vienna, Amsterdam, Stockholm, Helsinki, and Copenhagen. The countries which are the most effective in applying to the SME Instrument, with the highest success rates, are Iceland (18%), Switzerland (14%), Ireland (11%), Austria (11%) and Denmark (11%). As a reason for the high success rates of these countries, it is noteworthy to mention the concentration of exceptional R&D Universities in Switzerland, the strong institutional support for promising SMEs in Ireland, the mature VC ecosystem in Scandinavia led by a few large exits which has attracted talent, money and experience in attracting funding (both public and private).
A significant component of the research done by the Typewiser analysts includes detailed studies of the patterns of public financing under the SME Instrument.
Within the cohort of the 2018 SME-I Ph2 winners, the most funded category (as defined by the EASME portal) was Health (€115mln), followed by Engineering&Technology (€91mln) and ICT (€65mln), whilst the least funded categories were Space, Finance and Consumer Product categories.
To further understand the company demographics of SME-I Ph2 winners, financial and company metrics were analysed. A significant proportion (20%) of companies operate in the Biotechnology Industry, followed by Software (15%) and Drug Discovery (10%). Another way to categorize the companies is through the Verticals they operate in. The figure below shows the top Verticals and indicates a large slice of funding taken by the Life Sciences, Clean Tech, Software-as-a-Service (SaaS), Industrials and AI.
The most recurring keyword of the 2018 Ph2 winning projects was “data”, indicating the growing importance on data gathering, but more relevantly, the use of this data via Artificial Intelligence and Machine Learning. Other recurring keywords are within the Healthcare sector (“cancer”, “treatment”, “cell”, “therapy”, “disease”) and energy sector (“wind”, “energy”). “Sensor” and “monitoring” were also frequent suggesting interest in the control of industrial processes and devices, in line with Industry 4.0 priorities.
From a Business Status point of view, 60% of companies are reported as ‘Generating Revenue’, 30% as a ‘Startup’ and 5% as ‘Profitable’, re-enforcing that companies winning a Ph2 grant are semi-mature SMEs and not only young startups. Another quantitate evaluation can be made by the employee count of the companies just before the award of the grant. The data shows that 50% SME-I Ph2 winners were micro (1-9 employees) followed by small enterprises (9-50 employees).
The figure below summarises the profile a winning company.