The European Innovation Council (EIC) Accelerator is a significant funding mechanism for startups and SMEs, providing not just grants but also equity investments. However, the equity component, managed by the EIC Fund, has been subject to various challenges, including prolonged due diligence processes and bureaucratic delays. This article delves into the intricacies of these issues and their impact on applicants.
The EIC Fund’s Role and Challenges
The EIC Fund plays a crucial role in the EIC’s funding framework, offering larger funding amounts and closer relationships with companies through ownership stakes and board positions. Despite these benefits, the Fund has been criticized for not aligning well with the needs of high-risk, early-stage startups. Many startups face significant delays and a backlog of unfunded companies, stretching back several years.
Prolonged Waiting for Equity Investments
Startups have experienced confusion and disappointment due to delays in receiving their equity investments. Even four years into its operation, the EIC Fund has struggled, with many companies still awaiting their promised equity. This situation is further complicated by ongoing structural changes to the Fund, such as transferring its management to the European Investment Bank (EIB).
The Unconventional Due Diligence Process
The EIC Accelerator’s current evaluation process involves a sequence of steps that culminate in a 35-minute interview, based on which funding decisions are made. Intriguingly, the due diligence process, which is typically a preliminary step in investment decisions, only commences after these decisions are made. This reversal of the standard procedure is not only unconventional but also adds significant delays to the funding timeline.
Impact on Startups
For startups, these delays mean prolonged uncertainty and potential financial strain. The gap between being selected for equity support and actually receiving the funds can stretch over months, if not years. This delay can be particularly challenging for early-stage companies that rely on timely funding for their development and growth.
Strategies for Navigating the Process
- Plan for Delays: Startups should anticipate delays in the equity funding process and plan their operations and finances accordingly.
- Seek Alternative Funding: While awaiting EIC equity, explore other funding sources to maintain momentum.
- Stay Informed: Keep abreast of any structural changes or updates to the EIC Fund’s processes that might affect your application.
- Communicate with the EIC: Maintain open lines of communication with the EIC for updates and guidance on your equity funding status.
- Prepare for Due Diligence: Even though it comes later in the process, thorough preparation for the due diligence phase is crucial.
- Leverage the Waiting Period: Use this time to further develop your business, refine your product, and strengthen your market position.
In conclusion, while the EIC Accelerator offers valuable opportunities for equity funding, startups must be prepared for a long and sometimes unpredictable journey due to the bureaucratic intricacies and
delays associated with the EIC Fund’s due diligence process. Understanding these challenges and strategizing accordingly is essential for navigating this landscape successfully.
The articles found on Rasph.com reflect the opinions of Rasph or its respective authors and in no way reflect opinions held by the European Commission (EC) or the European Innovation Council (EIC). The provided information aims to share perspectives that are valuable and can potentially inform applicants regarding grant funding schemes such as the EIC Accelerator, EIC Pathfinder, EIC Transition or related programs such as Innovate UK in the United Kingdom or the Small Business Innovation and Research grant (SBIR) in the United States.
The articles can also be a useful resource for other consultancies in the grant space as well as professional grant writers who are hired as freelancers or are part of a Small and Medium-sized Enterprise (SME). The EIC Accelerator is part of Horizon Europe (2021-2027) which has recently replaced the previous framework program Horizon 2020.
This article was written by ChatEIC. ChatEIC is an EIC Accelerator assistant that can advise on the writing of proposals, discuss current trends and create insightful articles on a variety of topics. The articles written by ChatEIC can contain inaccurate or outdated information.
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