Funding your innovation is a fundamental step in your innovation process. It is assimilated to all public and private measures (grants, repayable advances, investment) designated for research and innovation projects development. In this post, we will talk about the main ways and means to fund innovation ideas and projects.
Define your project
Before seeking for funding, the project must be well defined:
A well-established business model.
A completed Business plan (summary and financial previsions).
The right team (mainly the founding team).
An operational pitch.
The business plan and the business model will be the subjects of a future post by NETO Innovation. Stay tuned.
The project phases
Innovation projects are mainly composed of 3 phases:
The maturation phase: During this phase a concept (or prototype) is generated from an original idea. This phase delivers the business model.
The incubation phase: This phase proves that the company is viable financially. It delivers the business plan.
The seed-stage: This phase is characterized by the industrial development and the commercialization.
These phases are of variable duration (some months to multiple years) depending on the project and the market.
The funding actors
Multiple funding sources are possible.
1. Public funding
These types of funding can be accessed in different forms: grants, repayable advances (zero rate loan), and other tools supporting research, development and innovation projects. In Europe, these funding are supported mainly by the European Commission (Horizon Europe, EIC, EIT grants, etc.), or by national entities such as Bpifrance, ADEME, DGE, ANR in France.
Innovation can be funded a-posteriori by the tax credits for research (CIR) and innovation (CII): Companies active in fundamental research, experimental development and/or innovation can benefit from the CIR and/or the CII by deducting the related expenses from their tax.
There are public funding opportunities for every phase of your innovation projects. Here are some of these funding opportunities.
Maturation phase: EIC Pathfinder, EIC Transition, the Reasearch and Innovation Actions in Horizon Europe, Aide pour Développement de l’Innovation (ADI – Bpifrance), the French Tech "Bourse", etc.
Incubation phase: EIC Accelerator, Innovation Actions in Horizon Europe, i-Nov, etc.
Seed-stage: EIC Accelerator, Plan de relance pour l'industrie, etc.
For more information about innovation projects funding opportunities, contact NETO Innovation here.
2. Private funding
This mainly consists in funding the innovation by equity and investment.
Bootstrapping: it consists of funding the project directly by the founding team. The funding comes from their personal finances or the operating income of the new business[1].
Love money: it is a way to finance your business by financially involving relatives (friends, family) in the development of your company. This way, they become shareholders[2].
Crowdfunding: it consists in calling for funding via social media and internet users. This method allows to raise funds from a large audience via crowdfunding platforms. Funding can be done as:
o Donation with adequate valuable consideration (reward-based crowdfunding).
o Participation in the company (equity crowdfunding)[3].
Business angels and venture capital risks: Business Angels are natural persons who directly invest part of their personal wealth. Venture Capital funds are managed by equity professionals. These two actors play a central role in the financing of startups. These 2 categories of investors offer 2 types of resources:
o Financial resources.
o Cognitive resources contributing to the success of the project[4].
Do you need support in funding your company and you research, development, and innovation projects? Contact us here to see how we can help you.
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[1] https://startupedia.net/fr/quest-ce-que/bootstrapping/ [2] https://www.tudigo.co/p/love-money [3] https://www.economie.gouv.fr/entreprises/crowdfunding-financement-participatif [4] https://www.fun-mooc.fr/fr/cours/financement-de-linnovation/