The SME Instrument funds groundbreaking innovation of Europe´s brightest and boldest entrepreneurs to bring them to the cutting edge of their perspective markets. Attracting over 31,000 applications in last 3 years, SME Instrument fortified itself as a popular European accelerator to market introduction or internationalization.
Copyright: European Commission
SME Instrument supports single or small consortia of SMEs to finalize development of products and/or services enabling to solve the pain of their end users or customers better. In contrast to collaborative Horizon 2020 projects, the SME Instrument funds only limited R&D activities even though R&D is an imperative part of the project implementation itself. SME Instrument funds EU based start-ups, scale-ups and mature SMEs to transform their close-to-market solution into a disruptive, user- and legally-validated product or service which is completely ready for market entry. Final output at the project end is always a business plan – in Phase 1, only an initial business plan for a new/better solution or market replication and in Phase 2, investor-ready business plan. Practitioners say no technology is too mature to enter SME Instrument– it also to funds design, optimisation, certification, standardization or IP protection and other activities related to market launch or introduction to global markets of an already developed product. During SME Instrument proposal writing and project implementation, the SME acquires technological and economic competencies to successfully export a technology, service or a business model that works and is replicable. Most SMEs which obtain the SME Instrument funds, have global ambitions and are single applicants.
“Innovation is exploitation of an inventive and unique solution solving the customer´s pain better than existing competition. It pairs scientific or technological excellence with economic and legal activities making it ready to enter the market and scale up endlessly.“ Ana F. Povh
As of January 2018, the SME Instrument will present the cornerstone of the new European Innovation Council (EIC) Pilot which will set up “one-stop-shop” systems to ease navigating through the mazes of funding. But this is not the only novelty the new SME Instrument work program is bringing to the table.
SME Instrument novelties
- No pre-defined topics: topics are abolished and the SME Instrument is now a fully bottom-up. Negative impacts on climate and the environment should be avoided. Abolishment of topics means all proposals will compete with each other.
- The EIC Pilot itself: the EIC replaced the European Agency for Small and Medium Enterprises (EASME) as the management authority. The EIC Work programme joins the SME Instrument, Fast track to Innovation (FTI) Pilot, FET Open, Horizon Prizes, Support & Exploratory Actions for the first time.
- 50% weighing of the award criteria goes to impact in both Phase 1 and Phase 2 of the SME Instrument.
- Two-step evaluation procedure in Phase 2: proposals above threshold (13 out of 15) will be invited to Step 2 to pitch their project in front of a jury of entrepreneurs, industry representatives, venture capitalists, business experts, investors and business coaches. If successful, the proposals receives an “A mark”, if not a “B” mark. Similar evaluators will also be evaluating the proposals in Step 1 (done remotely).
SME Instrument facts
- Co-financing of 70%: SMEs must invest 30%! (20%indirect costs help offset this).
- Open to SMEs from 28-EU countries and associated countries to the Horizon 2020.
- 4 cut-off dates (submissions) per year in 2018, 2019 and 2020.
- Target group: highly innovative SMEs with global ambitions.
- Purpose: developing an “investor-ready” business plan for internationalization, scaling up, IPR and more.
- Main impact question to address: who are the targeted users and why will they want to buy your service/product (unique selling point)?
- The prototype already exists! Not a research and development project. Your solution must be developed to at least TRL 6. Don´t build something from scratch.
Copyright: European Commission
In TRL 7, R&D work is funded to demonstrate your prototype in the real-live environment. Applicants may receive 70% funding for depreciation costs of their equipment, staff salaries, subcontracting, travel and in some well-justified cases, for buying new equipment. A dedicated work package can be created for these activities in Phase 2 with the milestone of developing the solution to be ready for demonstrating in an environment that works – production line, network, medical testing. The prototype should essentially work but is maybe subject to compliance of various target markets (e.g. China, the US, EU Member States). At the next stage, TRL 8, activities most commonly refer to work related to the prototype obtaining certifications, regulatory compliances, user validations or permits. The SME should work on design, optimization, miniaturization, solving manufacturing issues etc. Finally, TRL 9 is reached when the product/service is mature for market replication in its entirety, including an extra-ordinary business plan with a sound and professional IPR strategy.
Eligibility criteria for the SME Instrument
- The European definition of SME: Small and medium-sized enterprises (SMEs) are defined in the EU recommendation 2003/361. They are determined by two main factors:
- Less than 250 employees,
- Annual turnover less than €50M OR annual balance below €43M
- Only for-profit SMEs.
- Compliant to geographical origins:
- The 28-EU Member States,
- Turkey, Israel, Norway, Iceland, Liechtenstein, Macedonia, Serbia, Albania, Montenegro, Bosnia & Hercegovina, Faroe Islands, Moldova, Ukraine, Tunisia, Georgia, Armenia and Switzerland (since 1.1.2017). They can apply and participate under the exact same condition as others since their countries contribute to the Horizon 2020 budget.
If a SMEs is owned by any entity between 25-50%, except venture capital company, institutional investors, university or small autonomous local authority, it must perform an “Eligibility check” calculation. In the event both of these entities surpass the employee count or turnover/balance sheet threshold, they are not eligible to apply. Refer to the User guide to the SME definitionby the EC as this is a tricky question.
Copyright: European Commission
To be validated as a SME, the entity must:
- Request a Participant Identification Code (PIC) at the Participant Portal,
- Provide required legal and financial statements,
- Perform the SME status assessment.
The SME Instrument serves as the only funding scheme tailored to the needs of business and entrepreneurs. It provides the fastest time-to-grant, meaning waiting time from submission of proposals have been reduced to max. 3 months for Phase 1 and to max. 6 months for Phase 2 to receiving the first installment. SMEs can apply at any given time under the principle of “cut-offs” where the EC closes the call and sends proposals received through the online portal to evaluation procedure.
Examples of successful applicants:
8 hot Blockchain and FinTech start-ups the SME Instrument supports