Both Horizon Europe and the EU Structural Funds provide funding for research and innovation projects. However, the design, conditions and objectives of the sought projects as well as the funding modalities are different. Here is what you need to know to figure out which programme could be right for you.
For your new innovation project, there may be several EU funding opportunities available. However, it is important to look at the small print. Especially, Horizon Europe, the EU’s framework programme for research and innovation, and the European Regional Development Fund and Cohesion Fund (within the EU Structural Funds) offer opportunities to get your innovation project idea funded.
There are a few general considerations to be made to figure out if your project would be eligible for one fund or the other, and what the conditions in terms of the application procedures and funding rates are. One major differentiation is, for example, if you plan to do your project alone or in cooperation with other partners.
Knowing which programme your project could fall into, the basic features of the programmes and where to look for funding can save you a lot of time and avoid missed opportunities. After reading this article you have a clearer idea what is possible in terms of EU funding for innovative SMEs, in which direction to go and how these programmes actually work.
We start with a comparison between Horizon Europe and the EU Regional and Cohesion Funds as they are the biggest and therefore most important sources for EU funding in the innovation domain. Innovation projects may be funded as well through LIFE, the Innovation Fund or the Digital Europe Programme – their main features will be described towards the end of this article too.
Horizon Europe is the EU Framework Programme for Research and Innovation. Horizon funds first-class research, excellence and innovative solutions to societal problems. The competition for funding is very high. Roughly five times as many proposals are being submitted than the equivalent of the available budget, whereas this fluctuates between the individual thematic funding strands. Horizon Europe has a budget of about 95 billion € for the funding period 2021-2027. 35% of it is earmarked for projects that contribute to the EU’s climate objectives.
The Calls for Proposals typically refer to a defined technology readiness level, i.e. the technological maturity level which your endeavor should have at the start and the level which should be achieved when the project is completed.
Opportunities for innovation funding for SMEs can be found in pillar 2 (Global challenges and European industrial competitiveness) and pillar 3 (Innovative Europe).
Thematically, there are 6 clusters within pillar 2:
For project applications within the Clusters, you would usually need to form a consortium with a minimum of 3 partners (independent organisations) from different EU Member States or countries which are associated to Horizon Europe. In order to be the consortium leader, you will need to fulfill certain requirements in terms of available resources, both in operational and financial terms, which will have to be added your grant application.
Within the European Innovation Council (EIC – in Horizon’s pillar 3 “Innovative Europe”), it is possible to apply as an individual SME or small mid-cap (up to 499 employees), including as a start-up. Projects to be funded are expected to develop or scale up breakthrough innovations. Funding can amount up to 2.5 million € for grants and up to €15 million for equity investments through the EIC Fund. The EIC Accelerator has a 3-step application process. Unfortunately, the success rate has been particularly low so far (around 5%) because of very high application numbers.
Some Horizon Europe partnerships offer opportunities for the involvement of SMEs too. Partnerships are initiatives by the European Commission which are being implemented with other public partners and sometimes private partners. Currently, 49 Horizon Europe partnerships are operating.
For example, there is a partnership for innovative SMEs – Eurostars which is managed by national funding agencies through ca. annual Calls for funding. It offers opportunities for SMEs for research and innovation which is close to the market, as well as for the internationalisation of innovative SMEs.
A second example is a partnership of the European Institute for Technology and Innovation – EIT Inno Energy. There is currently an open Call for start-ups for 7 topics:
A maximum of 2 million € can be granted. 30% of co-funding has to be covered by the applicant. The Call is open throughout 2024. There are quarterly cut-off dates for applications, the last opportunity is for 31 December 2024.
EU Regional Policy has the objective to support the development of the regions and to reduce disparities between EU regions. Funded projects are therefore expected to contribute to the overall competitiveness of the particular region. Its budgetary allocation is the second highest in the overall EU budget, after EU agricultural policy. The budget of the European Regional Development Fund, European Social Fund+, Cohesion Fund and Just Transition Fund together amount to ca. 350 billion € in the funding period 2021-2027.
Regional and Cohesion Fund projects need to contribute to the EU’s policy priorities to make the EU more innovative, competitive, environmentally sustainable and socially inclusive. Consequently, a broad variety of projects can be funded.
As far as innovation and research projects are concerned, funding can be obtained in line with two specific objectives of the Funds:
Specific Objective 1 (A more competitive and smarter Europe):
Specific Objective 2 (A greener Europe, transitioning towards a net zero carbon economy):
The EU target of reaching a net zero carbon economy plays an increasing role, a minimum of 30 % of the overall allocation earmarked for this objective.
The more developed regions (i.e. those regions within Member States having a GDP per capita of above 100% of the EU-27 average) have an additional minimum requirement: They have to allocate a minimum of 85% to the above mentioned specific objectives 1 and 2, which demonstrates the high significance of not only climate and sustainability funding, but also of investments in innovation in terms of the EU’s priorities.
The Cohesion Fund is available to 15 Member States: Bulgaria, Croatia, Cyprus, Czechia, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia. From the Cohesion Fund, these countries receive an extra of ca. 24 billion € for projects contributing to specific objective 2 (Greener Europe).
The Just Transition Fund (JTF) finances regions which, during the transition to a climate neutral economy, are more affected than other regions by the loss of jobs in the fossil energy related production sector. Regions eligible for funding from the JTF can provide for example support to SMEs for the construction, expansion and modernisation of business premises for increased energy and resource efficiency.
For Horizon Europe, the Calls for Proposals and funded projects are managed by the European Commission and its Executive Agencies. The Calls are published in the EU Funding & Tenders Portal. You can see the past, currently open as well as forecasted Calls. You can search by programme parts such as for a particular cluster or by keyword search. The Calls are also included in the Work Programmes of Horizon Europe – these are usually drawn up for a period of two years. The current one is the 2023-2024 Work Programme.
When you apply for a Horizon Europe Call, you will have to submit the application form digitally through the Funding & Tenders Portal with uploads of some required documents. Your application will be evaluated by a group of independent experts who give scores related to the excellence, impact and implementation of the proposed project. You will hear about the outcome of your application max. 5 months after the closure of the Call. For the signature of the grant agreement, in case your project is selected for funding, a maximum of 3 additional months can be expected.
For the European Regional Development Fund, innovation funding can be obtained in the form of grants or low-interest loans. The grants are managed by the designated regional authorities and its implementing bodies. These are, for example, Bundesländer in Germany, provinces in the Netherlands, regions in France – whereas the implementation tasks can be delegated to more specialised bodies in the region such as regional development banks, innovation promotion agencies etc.
The exact funding topics are determined within Operational Programmes which are running for 7 years, currently for the period 2021-2027, and which are subject to approval by the European Commission. The regional authorities select and monitor all projects which can, depending on the size of the region, be several hundreds or thousands within the 7-year funding period. The region gets a certain co-financing from the EU, the rest has to be provided from within the Member State (depending on the programme or project, this can be from the national, regional or local level).
What co-financing rate for projects can be expected depends on the region and usually also on the type of project. If your organisation is based in a “rich” region such as Hamburg or Luxemburg, the overall regional programme’s financial allocation will be lower and the EU co-financing rate max. 50%. In less developed regions in terms of GDP (regions of Greece, Portugal, Romania, Baltic countries for example) the EU co-finances up to 85%.
Grants can be assigned by non-competitive funding schemes for SMEs for as long as there is enough budget available, or by open competitions for innovation funding which are subject to a selection procedure.
Some regions offer loans with favorable conditions (financial instruments) which are mostly managed by a designated regional development bank.
In general, success rates for applications tend to be higher than for Horizon Europe, in particular if there is a funding scheme to help innovation investments for SMEs.
For innovation projects, a few more EU funding programmes exist as well, which address environment and climate projects as well as at the EU’s digital transition.
LIFE is the EU programme for the environment and climate action. The programme includes four funding strands:
Within these areas, LIFE supports innovative SMEs and start-ups for close-to-market solutions as well. Submitted projects are expected to be at an advanced stage so that the products and processes should be able to be utilized on the market during or shortly after the end of the project. Funding can be obtained by applying to Calls for Proposals which are published ca. once per year. Depending on the thematic area, the EU co-funding rates mostly vary between 55 and 75%.
With a similar goal in the digital domain, the Digital Europe Programme aims to bring the results of latest innovations in the digital field to the market. There are some opportunities for funding (with a co-funding rate of generally 50%) for supercomputing, artificial intelligence, cybersecurity, advanced digital skills and for ensuring the wide use of digital technologies across economy and society.
The Innovation Fund is another source of funding for innovation projects. It caters to a specific sub-section of innovation: innovative low-carbon technologies, such as for example renewable energy, decarbonisation of energy-intensive industries, energy storage and carbon capture technologies. A certain level of maturity of the technology to be funded is expected. Most of the budget goes to large projects which have the potential to achieve substantial emission reductions. One part is going to small-scale projects. In this context, according to the last two published Calls for Proposals, a project is considered “small-scale” when its costs are between 2.5 and 7.5 million € (and up to 20 million € for carbon capture). Up to 60% of the project expenditure can be financed by the EU.
All in all, the decision to go for either Horizon Europe or the Structural Funds will first of all depend on the question if your project is able to meet the criteria of the respective funding programme. After having figured out if your planned project is – in its initial design or after some adaptation tweaks – eligible for funding from Horizon Europe or the European Regional Development Fund / Structural Funds, check the application procedures. How much detail is needed, how much time will you have to allocate to preparing your proposal? Is there still enough time left to write a high-quality proposal until the deadline for the submission of proposals?
You will probably find more frequently an open opportunity through Structural Funds in your region, whereas Horizon Europe Calls are published ca. once a year for each thematic area. For both you will need to check if your project is indeed a real fit in terms of what exactly is required regarding the exact content and sought outcome for a project.
Funding may be easier to get from the Structural Funds and the success rate be higher than for Horizon Europe, but it could still be worth the extra effort to apply for Horizon. One important aspect to consider is if you can really carry out your project alone (through Regional Funds) or would it perhaps be much better to work together with other organisations such as research institutes or universities to achieve an even better outcome (Horizon Europe)? Think of the benefits that such ties could bring you not only for this concrete project, but also for further activities in the future.
Wishing you best of success for your fundraising!
If you would like to discuss current EU funding opportunities for your innovation project, don’t hesitate to contact me for a non-binding and free-of-charge orientation call.
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Author: Astrid Mechel
https://eufundingconsulting.eu
Hello, I am Astrid Mechel and I work (for the most part) with small and medium sized organisations who aim to access EU funding. It is my goal to help discovering suitable EU project funding possibilities and to provide support to submit a high-quality grant application. My main thematic focus is on grants for research and innovation, environmental sustainability as well as on social inclusion and participation.
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