Two years ago the European Commission launched the SME Instrument to address a notorious funding gap in small early-stage companies that is a major barrier to innovation. Here’s the key steps your start-ups should follow to enjoy this funding opportunity.
The European Commission has fully recognised the key role of ICT in improving the business landscape in Europe and many efforts are being made to foster digital entrepreneurship.
Firmly embedded in Europe 2020 – the European Union’s ten-year growth strategy – the Digital Single Market strategy (formerly known as Digital Agenda) recognises the revolutionary potential that information and communication technology (ICT) offers to boost growth, increase productivity and improve the welfare of citizens and consumers.
The Digital Agenda has set goals with 101 actions, spread over 7 pillars, which will help to reboot the EU economy and enable Europe’s citizens and businesses to get the most out of digital technologies. ‘Pillar V: Research and innovation’ hopes to attract Europe’s best minds to research, acknowledging that world class infrastructures and adequate funding are crucial.
From an economic perspective, the importance of SMEs for economic growth and jobs creation is increasingly obvious: Start-ups create the majority of new jobs. However, Europe is clearly lagging behind other geographical areas in terms of global leadership in this sector.
Therefore, EU level action is essential, as a complement to existing initiatives at local, or national level. The issues identified, such as the need for a stronger culture of entrepreneurship and innovation, or insufficient access to financial resources and human capital, extend well beyond the borders of individual EU member states.
In an effort to maintain Europe’s competitive edge through increased coordination and its attempt to go beyond national fragmented efforts, the European Commission has taken action to help entrepreneurs and SMEs fully exploit the potential of technologies, both in terms of supply of new digital products and services and in terms of demand and smart use of these technologies.
In this spirit, Start-up Europe and the Entrepreneurship 2020 Action Plan were designed to unleash Europe’s entrepreneurial potential, to remove existing obstacles and to foster the culture of entrepreneurship in Europe.
The challenges ahead
Yet, efforts to remove obstacles alone are not enough; turning research/science based innovation into new services and products is a challenging endeavour, as commercialising new forms of innovations is inherently high-risk and requires significant investments and follow-up funding.
It is worth noting that private investments in ICT research in Europe continue to lagging behind (less than half of investments compared with the US).
As such, the EU is currently losing the race on scaling-up disruptive, market-creating innovation with the US leading the pack (101 Unicorns) and China following (36 Unicorns). By contrast, the EU only counts 19 Unicorns.
The lack of sufficient public information for potential investors about technologies developed by small firms or the leakage of new knowledge that escapes the boundaries of firms and intellectual property protection, are amongst the many different challenges young entrepreneurs face.
The challenges of incomplete and leaky information pose substantial obstacles for new firms seeking capital. The difficulty of attracting investors to support an imperfectly understood, as yet-to-be-developed innovation is especially daunting.
Indeed, the term, “Valley of Death”, has come to describe this challenging transition when a developing technology is deemed promising, but too new to validate its commercial potential and thereby to attract the capital necessary for its development.
Lacking the capital to develop an idea sufficiently to attract investors, many promising ideas and firms perish.
Despite these challenges, many firms attempt to make their way across this Valley of Death by seeking financing from the wealthy individual investors (business “angels”) and, later in the development cycle, from Venture Capital firms.
But because the angel market is dispersed and relatively unstructured, with a wide variation in investor sophistication, few industry standards and tools, and limited data on performance and VC funding typically oriented towards much later stages of development, capital remains very difficult to obtain for many high-technology start-ups.
The SME Instrument
In this spirit, the European Commission launched the SME Instrument within Horizon 2020 in the purpose to address a key funding gap in financing for small early-stage companies that is well recognised as a major barrier to innovation.
The instrument addresses the financing needs of internationally oriented SMEs, in implementing high-risk and high-potential innovation ideas. It aims at supporting projects with a European dimension that lead to major changes in how business (product, processes, services, marketing etc.) is done.
The purpose is to launch the company into (new) markets, promote growth, and create high return on investment. The SME instrument addresses all types of innovative SMEs so as to be able to promote growth champions in all sectors.
Unlike private risk capital which flows relatively freely during good times but plummets during economic downturns, this programme provides stable support for high-risk ventures throughout the ups-and-downs of the volatile business cycle. It cushions economic shocks that might otherwise lead to major extinction events for the industry.
To achieve these goals, the SME Instrument project has been bolstered with an €3 billion budget until 2020.
A piece of Advice: 3 steps you should follow
Define the reasons for application
Are you an entrepreneur who has established your own startup/SME? Is your startup/SME based on an innovative IT concept, product or service harnessing the potential to disrupt existing markets? Moreover, don’t hesitate to use the SME instrument basic eligibility check which can tell you if your project is eligible or not.
Build up your business strategy
You are an entrepreneur, planning to start your Startup / SME or have already started and are in the early stages. Your startup / SME is an innovative ICT based concept, product or service which has the potential to ultimately disrupt existing markets.
Bear in mind that a professionally written business strategy is the first thing that will help you grow and sell. Whatever your capital source, you will need to demonstrate to potential investors and lenders that you have taken the time to research the market and competition, identified your target customers, developed a business model and have a marketing plan in place to accomplish your goals and achieve success.
In short, you will need a well polished and compelling business plan that will satisfy lenders and get you in front of potential investors.
Check the application process and start implementing
Make sure that:
– you know the deadline for the phase you apply for. There are three phases: phase 1, phase 2, phase 3, each of them having a different deadline in each semester of the year. All proposals are submitted online;
– the written proposal has met all the requirements proposed by the European Commission;
The Commission has an online register of the organisations participating in the EU research and innovation or education, audiovisual and cultural programmes. This allows consistent handling of the organisations’ official data and avoids multiple requests for the same information.
Interested in learning more about EU funding opportunities for your startup?
The EU Startup Services Team can provide you the useful information you need for every phase of your application process. The services include consulting, evaluation, proposal writing and workshops.
The EU Startup Services Team worked with more than 1300 startups, operates in 21 countries and has held 33 workshops on EU Funding so far, with 9 successful proposals in the last year. The representatives can provide expertise on who should apply, when and which are the steps, but also help you choose the instrument which best fits your stage and your current needs.
Planning to attend the upcoming workshop? Here you can find all the details you need.
 Source: Fortune, ‘The Unicorn list 2016’; ‘Unicorns’ are start-ups with a market value > $1 billion
Picture credits: Susanne Feldt
The European Commission has just launched a consultation to look into the needs for Internet speed and quality beyond 2020. We need to make sure that our broadband policies are driven by a vision that takes into account all the different scenarios we may face in the next twenty years, says Anna Krzyżanowska, Head of Unit Broadband at DG CONNECT.
The Digital Post: What is the purpose of the consultation?
Anna Krzyżanowska: Just after the launch of the Digital Single Market strategy and five years before the broadbandtarget date we have realized that the most active families and SMEs using current applications and services may be needing more than 30 megabits per second.
At the same time several organizations, including public institutions such as schools, may need a connection of more than 100 megabytes per second in order to perform their online activities.
Hence, having reviewed the available literature and the projections on the increased use of Internet networks, we want to know what is the opinion of the general public regarding the connectivity needs they might have beyond 2020.
Let me also stress one more important element of reflection: at the moment in Europe there is a large availability of publicly supported funds, with the European structural funds alone providing six billion euros for broadband networks and the opportunity to unlock huge resources under the European Strategic Investment Fund.
We need to make sure that these investments are supported by decisions and by a vision that look beyond 2020 to the trends of the next ten or twenty years.
The Digital Post: In a word, the consultation will help shape the new European Digital Single Market after 2020.
Anna Krzyżanowska: Definitely. This consultation is part of an evidence building exercise which will orientate our decisions as to whether or not a new broadband policy should emerge within the context of the digital single market.
It’s not about what we want to build or what we’re building today, but whether that’s going to be enough to enable the considerable benefits that the digital single market can bring us.
This is the main question we are trying to answer through this consultation by focusing on those sectors that will be the main users and beneficiaries of the digital single market.
The Digital Post: What are the sectors whose demand for connectivity will jump in the following years?
Anna Krzyżanowska: We want to listen from people building applications or those currently developing band-hungry services, mainly game producers or media companies.
We will look at the needs that will be generated by cloud computing as well as by the expanding availability of shared software and shared platforms, which is of particular importance for the definition of the needed upload capacity of networks.
In addition to that, there are certain services that will require higher security or ubiquitous access. It is difficult to imagine for instance a ministry of education introducing electronic school books if it cannot do it across the territory.
A similar consideration applies for instance to health monitoring, which could bring enormous savings to the public sector by keeping people out of institutionalized health, i.e. out of hospitals.
We will also take inspiration from the research programs of the Commission focusing on future services: on health services or in the manufacturing sector. And we obviously will talk to automotive companies which are working on the connected car.
At the moment we’re doing fine but what will be the implications for the quality of networks when all of us in Europe will have a connected car?
The Digital Post: And from the point of view of the households what will be the main factors driving a higher demand?
Anna Krzyżanowska: Looking at the future, it is the cloud computing which will mostly drive the need for more connectivity, especially in terms of upload speed. As for the download, the same can be said for the consumption and exchange of video content.
However, it is also very difficult to define what a household is. In the case of somebody starting his own company and working from home the needs of a household turn into those of a small enterprise, and in that particular case the value of services or software sharing becomes extremely important.
In any case, it’s very unpredictable what our home connection will serve in 10 years time. That is why we need to make sure that our investment decisions may reflect the different scenarios we may face in the future.
The Digital Post: However, setting higher broadband targets might stir discontent among some telecoms stakeholders.
Anna Krzyżanowska: The reaction of different stakeholders may be quite predictable. There’s a general resistance in accepting that the world is going in a certain direction.
Hence, we are not starting with a proposal, but rather with a public consultation so as to allow everybody to voice their views and perhaps their reservations.
Having said that, I believe that we can find plenty of examples in which we have underestimated technological developments and the strain they have put on infrastructures.
This is all the more true for the digital networks: we are not only facing more people using these infrastructures but we also facing different ways of using them. Hence, whereas it may be not in the interest of some people to have that discussion, I believe that it is very important.
Big telecom companies often tell us that the demand would not materialize quickly enough. And I believe that in some cases they’re right: there are some countries or certain population categories that are more conservative than others and it’s very difficult to make a generalized statement.
However, I believe that speed or quality of connection is addictive and it is contagious so the more people have it the more people will ask for it and that will probably drive the dynamics of demand fairly quickly.
The Digital Post: What is the link between this consultation and the concomitant consultation on the review of the telecom framework?
Anna Krzyżanowska: Telecom review is a legal requirement of the legislation. On one hand it is written within the legislation that it needs to be periodically reviewed.
Second, the Commission has made a commitment to better regulation and we in general look whether the regulation proposed has fulfilled its objectives, whether it’s still effective efficient and effective and has the right impact.
From that perspective we would have done a review of the framework irrespectively of whether the market needs for connectivity change or not. But since we have an instinct that they are changing and they will be actually changing throughout the period of the review and beyond, it is obviously important to link the two processes.
Regulation is there for a reason and the reason is to make sure that the consumers get the connectivity that they want. From that perspective there’s no difference between the regulatory objective and the policy objective as it is explained in the digital agenda and as it is intended in the digital single market.
I believe it’s particularly good that policy reflection, regulatory fine-tuning or improvements and the availability of funds are actually happening at the same time.
Anna Krzyżanowska is the Head of Unit « Broadband » at DG CONNECT of the European Commission. In addition to policy activities focusing on achieving Digital Agenda for Europe broadband targets, she is coordinating the efforts related to Connecting Europe Facility and future Cohesion Framework in the areas relevant to DG CONNECT.
photo credit: European Commission
We need to change the paradigm and change the course. A European digital market has to be seen as an immense advantage rather than a threat.
As an active member of the Italian “Internet Bill of Rights” Commission, the Commission that is trying to codify and outline “rules and rights” of the Internet with the intention to make it more open and accessible, I figured out the real debate is not about “rules and rights” but investments in digital, innovation, and in a truly single digital market.
Having a look around on what’s going on in Europe, and not only in Italy, I’m deeply convinced the continent has completely lost the world leadership in mobile technology.
We Europeans created the Global System for Mobile Communications that became a global standard. Right now, unfortunately, we lost that competitiveness; most innovation in information and communications technology comes from the other side of the Atlantic.
And that’s why we don’t have such a vibrant capital market as in America, and at the same time, we don’t create the conditions for our startups to become great corporations.
We need to change the paradigm and change the course. A European digital market has to be seen as an immense advantage rather than a threat. We also don’t need barriers of any kind because such barriers have a habit of outliving their usefulness.
How can we let the next Google, Facebook or Amazon be European and not American? The recent Obama’s statements against Europe don’t help and we need to find our way.
In a continent where there’s an important digital divide between nations, where you can find 28 different data privacy and copyright laws, where U.S. companies are going to remove services in some countries because of their local laws, what are the solutions to bridge the gap and create growth and jobs with innovation?
I guess the only answer possible is going ahead with the Digital Agenda explained by the Digital Commissioner Gunther Oettinger. Everybody right now is focused on Net Neutrality and the openness of the Internet, but Europe’s Internet is already open.
If you want to take your business online today, you can. We must not follow the current US approach led by President Obama and FCC. The real point, as ever, is to create the conditions to stimulate investments and entrepreneurship. To create a digital single market with efficient, modern policies across the continent that remove the burdens of becoming the next Google, Facebook or Amazon.
Half of European productivity growth over the past fifteen years was already driven by information and communications technologies and this trend is likely to accelerate. The European Commission identified seven priorities on which the first is creating a “Single Digital Market”.
As Oettinger said in February at the Berlinale “I want Europe to understand the advantages of digitalization. In an age where consumers are spending most of their time online, we should work together to ensure that our creative potential and European diversity are preserved and are accessible for everyone”.
That said, Italy is doing its part and Prime Minister Matteo Renzi pointed out we need to increase the digitalization of our country, beginning from the public administration, and the challenge is not against American telecoms or OTT but to create the right conditions to bring back Europe in the Olympus of the digital innovation.
This column was originally published on E!Sharp
photo credit: Thomas Hawk
Alessandra Poggiani, the director general of the Agency for Digital Italy (Agid), tells The Digital Post how the government is working towards the objectives of the Digital Agenda for Europe. “Embracing the digital economy is not only a question of growth and new opportunities for Italy. It is also a question of democracy”, says Ms Poggiani.
phot credits: Giuseppe Moscato
Europe’s broadband system is highly fragmented and in need of improvement. That helps explain why the European Commission is working toward a digital single market. Reduced regulation and tax rules harmonization play a key role in achieving this goal.
The EU’s struggle with broadband connectivity is largely due to inadequate investment in infrastructure from broadband providers. As the European Commission explained in its memo about the connected continent, there are hundreds of telecom operators in Europe, but none active in all member states.
Many European leaders are increasingly abandoning their regulatory approach and looking to the US broadband model.
The American market-led approach of facilities-based competition has resulted in greater investment in next-generation broadband technologies. American operators have invested almost twice as much per capita as their European counterparts in recent years.
While broadband investment can be cyclical, with periods of high spending for network upgrades followed by periods of lower spending and maintenance, the US has been the world pacesetter, investing some $1.2 trillion since 1996. Since then, an average of at least $60 billion annually has been invested to build and upgrade wired and wireless networks, to lay millions of miles of fiber-optic cable (more than in the whole EU combined), and to erect cell towers.
The EU is composed of some 28 nations, 24 official languages, and 11 currencies.
America’s de facto single market allows companies of all sizes to achieve scale, and this holds true for both large broadband providers that deploy infrastructure and for entrepreneurs and emerging companies that want access to a large domestic market.
Indeed, Europe is the top location for America’s digital exports, and some concern exists that the lack of broadband investment in the EU could inhibit the growth for some digital exports to Europe in the future. So both previously mentioned points are really the clue.
That helps explain why the European Commission is working toward a digital single market across the EU, with initiatives aiming to bring American-style investment, innovation, and entrepreneurship to the European broadband market and Internet-based industries.
Which are those recipes that could bring us potential success?
Generally speaking, the European Union should simplify and reduce regulation of broadband providers, remove barriers to consolidation, and embrace a market-led with technology-neutral approach.
1) Market-led broadband development. The government should not decide which technology citizens should have and shouldn’t give subsidies for broadband deployment where providers are investing. Given the right regulatory circumstances, the marketplace is willing and able to make efficient decisions about broadband.
A smart vision for broadband realizes that no one network can do it all and embraces a variety of network solutions and innovations that depend on the market. [Tweet “The broadband market, if allowed to operate freely, can meet the demands of today and the future”]
2) Creating a single market. The creation of a digital single market would permit the consolidation of broadband providers across borders, reduce costs through economies of scale, and create a better business case for operators to invest in broadband infrastructure.
It would also permit a more effective and continent-wide spectrum policy, the removal of inefficient national divisions, and the introduction of more comprehensive secondary markets to allow more efficient usage of the limited resource.
Harmonizing tax regimes across the continent would also reduce the burden on consumers and businesses.
3) Simplifying and reducing regulation. Regulatory reform is another necessary step in resolving Europe’s broadband challenge.
Removing the open-access mandate would encourage investment by market incumbents in next-generation infrastructure without fear of being undercut by non-investing new entrants.
Reducing the current regulation may encourage more independent investment in upgrading existing infrastructure.
And the most important is to remove national restrictions on consolidation across countries. This would allow operators to find the cost savings across borders and build a business case for infrastructure deployment.
Recently, the European Commission’s vice president for the digital single market, Andrus Ansip, said he is “worried” about the direction that negotiations over the Telecoms Single Market package have taken in the European Council, where member states appear divided on the issue.
We need to continue trying to convince them and focus on the overall keys to success that I have outlined above.
More help is required on this.