Almost two out of three companies funded by the SME Instrument have put their innovation out on the market and met commercial successes thanks to the grant. The SME Instrument has acted like an accelerator that has helped the funded companies to bridge the so-called “Valley of Death”. The independent report concludes that the SME Instrument delivers growth and market creation with large spill-over effects on society – all thanks to its flexible grant scheme, its exclusive acceleration support and its unique design that offers small grants to unicorns at an early stage of development.
The Report on the Assessment of the Performance of the First Finalised Phase II Projects measured the performance of 70 companies that have finished their SME Instrument project.
More jobs, more investments, more growth
The SME Instrument has generated an increase in turnover in 2 out of three companies, all of which have created jobs following the grant, according to the report. In addition, the SME Instrument strongly facilitates the investment process by minimising the risk for private investors and by its unique networking effects. Despite the short time-span following the funding, 27% of companies reached a highly positive commercial success, usually illustrated by outstanding market performance or additional funds raised from investors (venture capital, acquisitions, IPOs etc.) following the Phase 2 support. In addition, another 31.4% have reached the market, an achievement that was the target of the Phase 2 grant, but don’t show outstanding commercial results yet, albeit promising signs.
A small 8.5% have either experienced bankruptcy or mid-way termination of their project and can therefore be considered as a commercial failure. This small proportion proves that the SME Instrument actually invests in high-risk companies, the purpose of the programme.
Overall the SME Instrument played a critical role in supporting small innovative companies in the demonstration phase of their technology, says the report. This long and costly stage is what gets many start-ups stuck in the “Valley of Death” – the difficulty to recover negative cash flow in the early stages of commercialisation before the product sales bring real revenue. The funding has been instrumental in helping companies overcome this hump.
The reasons for this are mostly that the SME Instrument has accelerated technology development and built the capacity of the funded companies to deploy their innovation on the market. The SME Instrument funding also helped the companies get the necessary investments, the human capital or the equipment to develop their technology and get it onto the market. Companies could also build demand capacity and secure intellectual property rights thanks to the funding.
European added value
The SME Instrument differs from – and therefore adds value to – other funding schemes thanks to its unique combination of measures, the report finds. The design of the SME Instrument is the first truly market oriented EU-funding scheme and it offers a flexible and adaptive form of grant that mixes “hard” innovation support measures (high grant and high co-funding rate with possibilities for pre-payment) with “soft” measures including coaching and business acceleration services. Single companies can apply without having to form a consortium and absorb a heavy project management workload.
The SME Instrument also has a unique “label effect”. EU branding and the programme’s notorious competitiveness is a real European added value. The programme has an international reach targeting international markets compared to other public funding schemes that stick to the local or regional level.
Complementary to national schemes
The international reach of the SME Instrument is a unique feature of the SME Instrument that makes it compatible and even complementary to national and local funding schemes that often target other technology readiness levels and don’t offer the same mix of tools.
The report concludes to the fact that the SME Instrument leads to critical market achievements including:
– Market Validation;
– Accelerated commercialization and “first mover” advantage;
– New products and services;
– Penetration of and growth on new markets;
– Possible cases of market disruption.