SME Instrument in Horizon 2020 – An overview Dr Jane Watkins

Sounds simple!! Horizon 2020 - summary Innovative projects (more support for innovation activities) Projects address priorities identified by the Commission’s Work Programme Projects must respond to a call for Proposals Involving partners from multiple countries Reimbursement up to 100 % of eligible costs Co-financed through a Grant Agreement with the European Commission Simplified access, for all companies, universities, etc Sounds simple!!

Horizon 2020 - getting involved Does H2020 meet your business needs? What are the timescales? Is there a likely ‘home’ for you project? - Societal Challenges, SME instrument, Eurostars, other EU programmes? Are you ready to be the Coordinator? How do you find partners? What are the participation/funding rules? How do I write and submit a proposal? The participant portal is collapsed, where can I get support? What happens if I’m successful?

Targeted Approach “We would like to apply for Europe Smart award. I note the deadline is only 45 working days away. Please can you send me full details of how to apply ASAP. I looked at Eurostars but we cannot apply for it as the company has less than 5 full time researchers Just to double check, is there anything other than the following 3 calls we could apply for: H2020 ICT 37 H020 ICT16 UK SMART Programme”

Horizon 2020 is different A strong challenge-based approach, allowing applicants to have considerable freedom to come up with innovative solutions Emphasis on innovation, with continuing support for R&D Less prescriptive topics, strong emphasis on expected impact A strategic approach, with two-year work programmes Focus areas bring together different technologies, along entire innovation chain

Industrial Leadership Horizon 2020 Priorities Excellent Science European Research Council Future & Emerging Technologies Marie Curie Research Infrastructures Industrial Leadership Leadership in enabling and industrial technologies Access to risk finance Research and innovation in SME's (SME Instrument) Societal Challenges Health, demographic change and wellbeing Food security, sustainable agriculture and the bio-economy Secure, clean and efficient energy Smart, green and integrated transport Climate action, resource efficiency and raw materials Inclusive, innovative and secure societies Excellent Science Best ideas, developing talent, providing researchers with better access to innovation networks & training,  e-Infrastructures Industrial Leadership Making the EU a more attractive place to invest in R&D & investing in key industry technologies (such as nanotechnology and materials), providing better access to finance. Societal Challenges Challenge based approaches to bring together knowledge across different sectors - piloting  and demonstration projects, public procurement.   - Topics include:  Activities for SME's - focus on SME engagement, bottom up approach (can even be single co. application), will fund product concepts, feasibility, market demonstrations and commercialisation. - Simplification rules: 1 set of participation rules (bringing the three previously separate programmes together)… and apparently quicker admin and turn around for projects. Emphasis on funding projects that address specific challenges and social innovations rather than prescribing specific research projects. Funding projects that are closer to market. Challenge led. Single set of rules, less paperwork and faster funding. E.g lower audit requirements, better IP provision, lower threshold for SME’s, streamlined application process. Calls with broad and/or SME-friendly topics; making modest-sized consortia more eligible for funding; placing greater stress on ‘close-to-market’ or demonstration activities (which are important given SMEs’ need for quick return on investment); and the inclusion of specific criteria in calls, such as explicitly stipulating SME participation or SME coordination in projects, and output for the benefit of the participating SMEs. Get involved in high level working groups, who develop the sector’s strategy, who in turn develop the sector roadmaps, who in turn develop the work plans and calls.

SME Instrument – KEY FEATURES Targeted at all types of innovative SMEs showing a strong ambition to grow (and to develop and internationalize) Only for profit SMEs allowed to apply for funding (single company support, but collaboration is certainly advisable) Competitive, EU dimension - only the best ideas pass Market-oriented, close-to-market activities: 70% co-funding Entrance in both Phase 1 and 2 Embedded in societal challenges and key enabling technologies Evaluators: market perspective Time to grant*: 400 days in 2008 - > 150 days in 2014

Target Group Innovative for-profit SMEs showing a strong ambition to develop, grow and internationalise Single company support is possible or consortium of for-profit SMEs Highly competitive, market-oriented, EU dimension Other partners (research providers like universities and research institutes, large companies etc.) can be involved as third parties (subcontractors) SMEs need to be established in the EU-member states or associated countries

? SME instrument Demonstration Market Replication R&D Concept & Feasibility Assessment Commercialisation pictorial graphic of SME instrument– 3 stages from SME perspective This slide seeks to provide a visual reference to illustrate how support is intended to promote progress from the idea or concept of how the innovation led proposition could lead to a commercial success, beyond research results, all the way through to successful exploitation. It’s intended the SME instrument will be governed by ‘SME-friendly rules and procedures’ to try and encourage participation and address concerns around bureaucracy, such as providing a faster time-to-contract; and allowing more flexible and efficient project management by ‘simplifying’ the rules, such as one project, one funding rate, with a broader acceptance of SMEs accounting practices etc.. Only 2 rates of support for direct eligible costs – 100% for research; 70% for innovation ; + 25% (of eligible costs) contribution towards indirect cost. Note – simplification for the Commission may not necessarily mean the same for the SME A 3 part evaluation process is involved, with selection and award criteria that will require; ‘excellence’ in innovation and commercial potential a strong focus on economic impact the company’s demonstrable potential to achieve the expected results – ambition will not be enough! European added value. SMEs can enter direct at Phase 2, but must provide same level of information in their application as someone who has completed Phase 1 Phase 3 – there is no grant element – but Its intended that involvement in Phases 1 & 2 will be used as a 'quality assurance label' to help the SMEs raise required private equity, along with additional incentives for the finance markets to encourage the leverage of private funding, co-investors, or follow-up investments, to help promote the successful commercialisation and exploitation of the projects research led results and innovative ideas. Throughout participation, from a successful application at phase 1, additional coaching and mentoring support will be available alongside the grant aid to promote the progress and growth of successful applicants. SME window EU financial facilities Idea to concept, risk assessment, technological & commercial feasibility Quality label for successful projects, access to risk finance, indirect support Demonstration, prototyping, testing , market replication, scaling up, miniaturisation, research IDEA continued support throughout the project MARKET

Phase 1: Concept and feasibility assessment Phase 2: R&D, demonstration, market replication Phase 3: Commercialisation No direct funding Input: Idea/Concept: "Business Plan 1" (~ 10 pages) Activities: Feasibility of concept Risk assessment IP regime Partner search Design study Pilot application etc. Output: elaborated "Business plan 2" Input: "Business plan 2" plus description of activities under Phase 2 (~ 30 pages) Activities: Development, prototyping, testing, piloting, miniaturisation, scaling-up, market replication, research Output: "investor-ready Business plan 3" Promote instrument as quality label for successful projects Facilitate access to risk finance Support via networking , training, information, addressing i.a. IP management, knowledge sharing, dissemination SME window in the EU financial facilities (debt facility and equity facility) Possible connection to PPC (and PPI?) Slide 7 – SME Inst – 3 phases Phase 1: Concept and Feasibility Assessment In Phase 1, the objective is to ensure that SMEs receive funding support to explore and assess the scientific or technical feasibility and the commercial potential of an innovative new idea or concept that has been developed, in order to identify a potential route exploitation. As part of keeping the process simple, in Phase 1, a lump sum contribution of €50,000 will be made towards direct eligible costs of €71,429, (shown in table 3.4 of the application template), which will be reflected in the work package description (3.1a) identifying the project costs. It’s intended to be payable through an up front payment, and the balance on delivery of the agreed outcomes, including the ‘business innovation plan II’. The outcome of Phase 1 will be a meaningful feasibility report, including a ‘Business Innovation Plan (version II)’ reflecting the projects achievements, and the intended route to exploitation. This could show that solutions already exist on the market – so another funding request would not required - or that buying existing know-how or IPR could solve the problem – again no further funding request required. It could also be that private finance for the development of the project is sought, linking to the financial facilities supported under the specific objective "Access to risk finance". or – it could show that additional demonstration or market-readiness activities are required, which could lead to an application for funding in phase 2. Duration: Projects should be on average 6 months, but could be longer if requested and justified by the SME. Implementation: a target 8 – 12 weeks to contract from the evaluation cut-off date Applications in the form of an initial business innovation plan (version 1) – short, (around 10 pages). (on-line template available) with additional space to show whose going to be involved. Reporting would only be at the end of the project - the main outcomes being captured in the business innovation plan II.. To avoid multiple applications, and to allow the SME to focus their resources on key planned developments only one successful application per company at a time will be allowed, and it wont be possible to apply for phase 1 during the submission and/or implementation of a successful phase 2 project. Phase 2: demonstration, market replication activities The objective is to allow those SME applicants who have a successfully evaluated feasibility report or ‘business innovation plan version II’ (@30pages), complemented by an outline of the proposed future work, either developed under phase 1 or outside Horizon 2020, to access EU investment support to develop their innovation project. Any new direct entrants would have to fulfil the same requirements as SMEs supported through phase 1, but it’s anticipated that Phase 1 funding, complemented by mentoring and coaching made available to the beneficiaries should have facilitated the preparation of a ‘solid’ innovation project. There are some success stories on Commissions Techweb portal of successful FP7 Research for SMEs demonstration projects illustrating how various projects identified cross cutting themes and sectors as routes to commercialisation (e.g. WaterBee, at http://ec.europa.eu/research/sme-techweb/newsletter/issue14/success- story_en.html) and a booklet ‘Investing in European Success’ The FP7 demonstration model proposal produced by the EU wide NCP SME network as an aid to the ‘Research for SMEs’ scheme may still be an appropriate source of guidance for applicants, ahead of more formal guidance being made available around the application process.. Model FP7 ‘Demopac’ proposal available at http://www.betatechnology.co.uk/2012/02/15/model-research- proposals-for-smes-small-and-medium-sized-enterprises/ illustrates the kind of summary and activity required. By the end of phase 2, its intended participating companies should be in a position to deploy and launch on the market their new idea / product / process / service. The business innovation plan [version III] that will be developed by the end of the project will have to contain a detailed marketing and commercialisation strategy and a financing plan describing how private investment will be used. Funding: EU investment in the form of a grant could be around €1 - 3 million, but can be flexed if a strong enough business case can be made. Projects can include some research, and sub-contracting will be possible, but the focus will be on supporting SME innovation activities such as demonstration, results testing, prototyping, piloting new products or services, etc. developed through a research stage. NB - it’s intended as a legacy of the EU investment that the participating SMEs will more capable in managing their future innovation led growth plans, so extensive sub-contracting could jeopardise the SMEs future growth and weaken the competitiveness of an application. Duration: The duration should be on average 12 months, but could be longer if required and justified by the SME. Envisaged time to contract: Target: 150 days (@ 5 months) from the evaluation cut off date Standard grant agreement using an output based funding model with payments made after reaching each milestone, or key stage of development to avoid more complex arrangements around sub- contracting (e.g. for outsourcing R&D activities) being required in the grant agreement. Phase 3: Commercialisation Intended objectives: The EU will not provide additional direct funding in this phase - participants will be able to present their case to investors and get feed- back on their ‘investor readiness’, to help to pave the way to access private finance and raise the profile of the companies. To promote the implementation and successful commercialisation of innovative solutions identified through the projects, by facilitating access to private capital and ‘first customers’ – for instance, those customers or clients who would be prepared to be involved in early market trials– as well as offering support services to the project. SMEs can access extensive support, training, mentorship as the project is further ‘refined’ into a marketable product. Additional support and networking opportunities will be provided by Enterprise Europe Network (EEN). Successful completion of phases 1 and 2 will represent a "quality assurance label" which is intended to promote market take-up and private investment, and allow companies to successfully launch their innovation onto the market, which strengthens their competitiveness and boosts their growth. PPC = Pre Commercial Procurement PPI = Public Procurement of Innovation Funding / Implementation: no direct funding for this stage (work programme summary available with next steps slide) All applications will be on-line through the revised version of the Participant Portal: The portal will be the source of information for all calls, including those involving the SME Instrument, through technology and challenge identified topics identified in the ‘Innovation in SMEs’ work programme. The portal will be searchable by SME topics and the SME Instrument at this site which will find all relevant open calls. Electronic application process, with electronic signature of the grant agreement, amendments, financial statements and technical reports. SME status validation will be through a self certified declaration that the information provided is in line with the definition – when its available – with checks carried out by EASME to confirm the information is accurate. There will be a facility to ‘discuss’ the project through the portal, rather than e-mail, which may not be the project officer, but information will be transferred to the appropriate person. Fast track to Innovation Pilot: Bottom up or business led for any legal entity – not just SMEs To be launched in 2015 Innovation actions with a max of 5 partners – not just SMEs - and a max of 3m contribution (70%) per project contribution Time to grant no longer than 6 months Continuously open, with 3 cut off dates per year. All field across leading technologies and societal challenges. Lump sum: 50.000 € ~ 6 months 1-3 (5) M€ EC funding ~ 12 to 24 months

Evaluating SME instrument activities There has to be a market Commercialisation potential and economic impact Excellence in innovation Evaluation There are no comprehensive EU wide statistics or studies on high potential SMEs with a European perspective, but, it’s estimated that between 1 to 6% of all 20.7 million SMEs belong to the target group of strategic innovators. -SME must have own project, with outstanding commercial prospects, and shared ambition for growth and success to match! (Venn diagram) target SMEs are those in the central crossover area who can demonstrate their project meets the high standards required in all 3 areas of excellence in innovation, impact , and efficient implementation criteria that will require; ‘excellence’ in innovation - better than existing solutions, and ‘state of the art’ and clearly addressing an identified challenge Commercialisation & potential economic impact – there has to be an identified market that’s being addressed, and commercial potential. Implementation - demonstrable potential and capability by the company(s) to achieve the expected results – ambition will not be enough! Project results leading to a product or service that’s easy to use or produce for the customer & the SMEs own business - sales and marketing team in place, to support production, coherent work plans and appropriate allocation of resources etc. European added value – beyond regional or national levels.. Organisationally, formerly the European Agency for Competitiveness and Innovation (EACI), the executive agency who will be responsible administering the scheme – EASME – will coordinate the evaluation process, and seek to meet reduced time to grant targets, by avoiding processes that lead to unavoidable delays.. so introducing: Remote evaluation by competent evaluators with business and technical experience, covering the science and technology and innovation aspects, as well as business case being made. Evaluation strictly on information provided – no recommendations for substantial changes around improvements that have in the past been picked up at the negotiation stage, and reflected in Evaluation Summary Reports (ESRs) Page limits in the templates that will be available as part of the on-line process through the participant portal will be made simpler, with ‘warn & watermark’ indicators on pages if the content goes beyond limits. It’s recognised the budget needed for a feasibility assessment may vary according to the type of the innovation project, the sector, the number of partners involved etc. so evaluators will check whether the requested financing corresponds to the proposed project in the work package.. Only projects that have been positively assessed by all three evaluators (no consensus meetings) and are above the general quality threshold will be funded till the expiry of the annual budget. No negotiation stage - only ‘high scoring’ quality project proposals will be funded. Each criterion scored out of 5 so scoring maximum of 15 available: Normal minimum threshold score 3 for each; overall threshold 10 for collaborative projects But for SME Instrument: 13 for phase 1 12 for phase 2 When scoring is level, impact considered first, with criterion weighted by factor of 1.5 – then a series of steps to establish priority.. Technical solution possible and better than existing ones Easy to use/produce for the customer and the firm Company's potential to achieve the envisaged results Plus: EU added value

SME Instrument – Phase 1 - Submission 1st Cut-off date 18 June 2014: 2662 proposals 2503 single company applications. 119 consortia with 2 SMEs. 34 with 3 SMEs. 6 with 4 SMEs Italy was the country with the highest number of proposals submitted (436), closely followed by Spain (420), UK (232) and Germany (188), France (167) and Hungary (166) The Open Disruptive Innovation (ODI) topic attracted by far the highest number of applications with 885. followed by low carbon energy systems (372). nanotechnologies (305) and eco-innovation/raw materials (241)

SME Instrument – Phase 1 – First Cut-Off Date 2602 eligible applications received, 317 (12%) were evaluated above threshold. Based on the positively evaluated applications per topic 155 projects could be funded (6%). 49% of applications above threshold will be funded  every second "good" proposal is funded. 105 out of 155 (68%) of the SMEs reportedly are newcomers to Framework Programmes. Countries with highest success rate are: Ireland (20%), Austria (15%), UK (11%), Israel (10%) and Spain (9%) Company statistics: 58% of funded SMEs have between 6 to 50 employees, 30% of SMEs micro-companies with up to 5 employees, and 11% have more than 50 employees. 25% of funded SMEs are consolidated companies with more than 11 trading years, 39% with 4 to 10 years, and 36% with up to 36%. 36% of funded SMEs have a turnover higher than €1M, 35% between €100K-€1M, 28% less than €100K.

SME Instrument – Phase 1 - Submission 2nd Cut-off date 24 September 2014: 1944 proposals Italy in the lead in terms of number of applications (351). followed by Spain (283), United Kingdom (149), Germany (128), France (93) and Hungary (91) Open Disruptive Innovation (ODI) attracted again the biggest number of proposals (608), also followed by low carbon energy systems (268), nanotechnologies (234) and eco-innovation/raw materials (199) No further information yet on applicants

H2020 SME Instrument – Lesson Learned Most of the non-selected proposals were: Too much focused on the project and not enough on the business opportunity; Not convincing when describing the company (you have to explain why your company will succeed and not your competitor); Not providing enough information on competing solutions; Having a too low level of innovation, planning to develop a product that already exists on the market; Proposing just an idea without any concept for its commercialisation; Just trying their luck (the SME Instrument is not a lottery!). Here are 6 lessons we learnt from this very first evaluation exercise that we think can be useful for the future applicants. If you keep these 6 points in mind when drafting your proposal, you may have higher chances to succeed. The next deadline for phase 1 is on the 24th September 2014 (but the call is continuously open).  

EUREKA Eurostars The Eurostars Programme is the first European funding and support programme to be specifically dedicated to R&D performing SMEs. Short lead-time (14 WEEKS from cut-off date to funding decision) Projects funded by the respective partners national funding bodies UK – InnovateUK

EUREKA Eurostars Consortium leader is an R&D-performing SME At least 2 partners from 2 different Eurostars participating countries Project duration is no more than 36 months Market introduction is foreseen within 2 years after project ends. Research-performing SMEs undertake minimum 50% of total R&D cost No single country or project partner is responsible for more than 75% of the project costs No restriction on thematic area [except military] and project managed from the bottom up Partners in a Consortium must be separate legal entities

Fast Track to Innovation pilot Horizon 2020 Open to any legal entity - consortia of no more than 5 participants Funding of innovation actions (close-to-market) Proposals relating to any technology field under LEITs and Societal Challenges (bottom-up-driven logic) Grant up to € 3 million (but no comitology) •Permanently open call with three cut-off-dates per year •Impact criterion given a higher weighting in evaluations •Time-to- grant 6 months Open for applications as of January 6 2015

National Contact Point Support National Contact Points will give impartial advice regarding European funding, tailored to each individual business and organisation. The services include: Guidance on choosing relevant H2020 topics and types of action Advice on administrative procedures and contractual issues Assistance on proposal pre-screening Distribution of documentation (forms, guidelines, manuals etc.)

Contact details Dr Jane Watkins UK Horizon 2020 National Contact Point for SMEs Email:NCP-SME@innovateuk.gov.uk Tel:  +44(0)7500051146 IF YOU WISH TO BE KEPT INFORMED ABOUT EUROPEAN HORIZON 2020 FUNDING OPPORTUNITIES PLEASE REGISTER YOUR INTEREST ON www.h2020uk.org