Applying for EU funding: an economic case study

by Vivien, on the 1st June 2018

Too long a read? Check our infographics that summarises this article!

Over the last four years, we at DRIAD have supported over 100 deep-tech start-ups and SMEs applying for competitive grants to fund innovation projects. We have, in the process, encountered many founders who believed that working with a consultancy would increase their costs and risk exposure.

This, I think, is a misrepresentation of what the business of innovation consultancies is, and what they bring to founders, i.e.:

  • increasing their chances of obtaining the grant
  • reducing the time they need to invest in their grant application
  • reducing their risk exposure & overall increasing their ROI

I will illustrate my point with a straightforward economic case: helping an early stage start-up applying to Horizon 2020 SME Instrument Phase 1. This European funding is meant to support innovation projects at an early stage: you can apply for this grant if you want to check the economic potential and technical feasibility of a project. This competitive, €50,000 (about £44,000) grant covers 70 % of the costs for projects which typically last 6 months.

Applying to this grant, you will be required to produce two documents:

  • the first (“Part A”) is about the administrative details of your company and project, including its running costs;
  • The second (“Part B”) is divided in two: sections 1-3 are a 10-page-long business plan answering very detailed questions from the European Commission, while sections 4-5 are a presentation of your company about four-page-long.

Incompressible work: a “light touch” application

From our experience, it takes a significant amount of time to read through the different guidelines. Overall, a typical first-timer applicant could get through the application in 5 days of work, spent as follows:

  • Eligibility check: ½ day
  • EU documentation: 1 day
  • Gathering the necessary pieces of information: ½ day
  • Preparing Part B sections 1-3: 2 days
  • Preparing Part B sections 4-5: ½ day
  • Online admin: registering user, company, SME check, Preparing Part A: ½ day

Estimated costs*: £580 direct salary costs, including 2.5 days of senior time

Chance of getting the grant: 0 %

Spending such a short amount of time on the project will most probably result in a big disappointment. Did we mention that this grant has an average success rate of 8% and that multiple resubmissions are not only allowed, but also typical? On average, applicants will re-submit twice before either giving up or getting funded. Your actual chance of success depends on the project itself and the capabilities of the person writing it; but even if you are a former academic and have as such obtained multiple grants, with such a short time investment you can at best hope to be shortlisted.

Reality check: spend time on your application

From our internal experience writing multiple applications, it takes about 10 days to prepare a winning Part B proposal, split as follow:

  • Preparing Part B – sections 1-3: 7 days (i.e. +5 days compared to the “minimum time” scenario)
  • Preparing Part B – sections 4-5: 3 days (i.e. +1 day)

Estimated costs: £1,542 direct salary costs including 7 days of senior time

Your chances of getting the grant: 10 %

If you followed these pieces of advice, your chances to get the grant would be a bit above the instrument average. With that in mind, let’s compute your return on investment:

ROI = (10% x £44,000) – £1,542 = £2,858

Our economic case: why you should work with DRIAD

Our approach to grant funding is that we take care of most of the heavy lifting. You send us your data, we write the application. If you want to increase your chances of success, you’ll still have to spend a little time reviewing our work, but overall we significantly reduce your time investment.

Time spent by the client:

  • Eligibility check: 0
  • EU documentation: 0
  • Gathering the information: ½ day
  • Preparing Part B1-3: 1 day
  • Preparing Part B4-5: ½ day
  • Online admin.: 0 day

Estimated costs: £280 including 1 day and a half of senior time + DRIAD fees

Chance of getting the grant: 23.5% (above cut-off)

In such a case, our fees will typically be: £1,000 retainer and 10% of success fees, so a total of about £5,400 if you are successful. It seems expensive, right?

However, DRIAD has an 85% success rate with Phase 1, which means that 85 % of the clients we accompany are shortlisted. Once shortlisted, you statistically have a 23.5 % chance of success — and that depends on your actual project and the total number of applicants for that specific call. Within these assumptions, let’s compute your ROI:

ROI = (85% x 23.5% x £44,000) – £280 – (£1,000 + 10 % x £44,000) = £3,109

Working with DRIAD:

  • Increases your ROI
  • Frees up more than 5 days of your seniors’ time
  • Takes the worrying away from you

But what about my risk exposure?
If you don’t get the grant:

  • Without DRIAD: £1,542 direct salary costs, including 7 days of senior time
  • With DRIAD: £280 direct salary costs, including 1.5 days of senior time + £1,000 retainer

So you would still save £250 and 5 days of senior time.

Ready to apply?

The SME Instrument Phase 1 deadlines for the next 12 months are:

  • 05 September 2018
  • 07 November 2018
  • 13 February 2019
  • 07 May 2019

You can find the full list here.

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