EU & UK Funding for Research and Innovation
Gray McCrickard Barcelona - 19/09/2018
Start-ups at one stage or another will ultimately require outside sources of funding. Though bootstrapping is a great option, it is often unsustainable in the long run as the start-up scales and enters new markets and expands business lines. As such, sources of funding can be a challenging topic that is often fraught with complexities and consequential terms. In the past, traditional sources of financing have been debt and equity - raised through angel investors, VCs, and banks. However, one option has emerged recently amid the start-up boom; government grants.
Government grants are an attractive source of funding as they are equity free and don’t require to be paid back. However, that is not to say that governments are aimlessly giving away tax-payer money to any founder with an idea in a shared office space in Shoreditch. Grants require a rigorous application and vetting process to determine the legitimacy and strength of the grant claim. Furthermore, the grant will often require evidence that the funds have been used honestly and productively.
So why are governments giving away equity free money to start-ups? Governments have an interest in job creation and in supporting technologies and services that will ultimately benefit their country. In this sense, government grants form a symbiotic relationship with the start-up.
Governments support the start-up ecosystem in their respective countries while benefiting from the technologies, services, and jobs provided by the start-ups.
Currently, the European Commission and the UK government have competitive grant schemes that aim to attract world leading ideas and talent to promote their respective regions. The European Commission is currently running its Horizon 2020 program with €80 billion in grant funding available. This marks the biggest EU research and innovation program to date. Across the English Channel, the UK government has ring-fenced grant funding with an aim to become one of the world’s leading innovation hubs by 2030. Ultimately, this is good news for start-up founders seeking financing as a new alternative to debt and equity.