EIC Accelerator Budget Planning: The 70% Grant Rule and How Much Equity to Request

The EIC Accelerator budget has two parts: the grant financing on one side and the equity financing on the other. Both are an integral part of the programme, but they have to be planned separately because each comes with different considerations. This article walks through both budgets, the rules that govern them and how the numbers tend to play out in practice.

The Grant Budget and the 70% Funding Rate

The biggest consideration for the grant budget is the funding rate of 70%. Whatever grant budget you allocate, the EIC can only give you a maximum of 70% of it.

If your total grant budget is €1 million, the maximum grant you can receive is €700,000, because that is 70% of the budget. If you want more than this amount, you have to increase the budget of the grant so that 70% of it equals the grant you actually want.

What It Takes to Reach the Maximum Grant

The maximum grant is €2.5 million. To reach it, the total grant budget has to be €3.57 million.

No matter what you ask for, the maximum you can obtain is 70% of the budget or €2.5 million, whichever comes first. A grant budget of €10 million does not mean you suddenly receive a grant of €7 million. The cap stays at €2.5 million.

Most Companies Go for the Maximum Grant

Having analysed the statistics, written extensive articles with the exact numbers and looked at over 700 companies and their exact grant amounts, the pattern is clear: most companies go for the maximum grant.

In turn, almost all of these grant project budgets sit at around €3.5 million or higher. Either this is coincidentally what the budget came down to for all of these companies, or, as I suspect, most companies inflate their budget to match the €2.5 million maximum under the 70% rule.

Budgets Must Stay Accurate

All budgets have to be accurate. You should not inflate any costs, and you should not add any cost you are not going to incur. Everything has to be truthful.

Just know that the 70% rule applies: whatever you ask for will be at most 70% of the total budget. That is a hard rule.

The Equity Budget Is the Funding Round

The equity financing looks a little different but is remarkably similar, because you again have a total budget. In this case, the total budget is the funding round.

You might say you are planning a funding round of €10 million. You then have to allocate how much of that money will come from your private investors, the ones you find yourself, and how much will be requested from the EIC.

You make that request for equity as part of the funding decision. The equity request is therefore a direct part of the EIC Accelerator, because it is part of the funding decision.

Contribution Factor and Crowd-In Factor

Say you ask for €5 million in equity and plan a funding round of €10 million. That means the EIC is providing 50% of the round: €5 million from the EIC Fund and another €5 million from private investors. What happens in reality might differ, but this is the plan.

This gives you a contribution factor of 50%, or a crowd-in factor of one. The crowd-in factor means that for every euro the EIC invests, other investors invest one euro too. That is one to one.

The EIC usually likes a much higher crowd-in factor. It likes to publish crowd-in factors of 2.7, three-point-something or even four, which means that for every euro the EIC contributed, other investors put in three or four euros. That is a bigger leverage.

What Happens in Practice

In reality, EIC equity shares vary widely:

• The EIC Fund has taken more than 50% of a funding round.
• It has made very small contributions, with much smaller investments somewhere around 10%.
• There are also cases where it provides an equity injection without an official round.

How Much Equity to Request

What I recommend depends very much on the company. When a company asks what type of equity it should request, how much it should request and whether it should request equity at all, I look at a few things:

• The company's past funding rounds.
• Its conversations with investors.
• The type of project, and whether it sounds like something the EIC would like to back with a big chunk of equity.
• Whether it sounds like something the EIC would like to fund heavily because it is very urgent.

It is very much a case-by-case decision, but I usually do not recommend a fifty-fifty split. I usually advise taking a smaller amount from the EIC and more from private investors. That is a little safer, but it always depends on the exact case.

Budget Summary

• The grant funding rate is 70% of the grant budget.
• A €1 million grant budget yields at most a €700,000 grant.
• The maximum €2.5 million grant requires a €3.57 million grant budget.
• The grant is capped at 70% or €2.5 million, whichever comes first.
• Budgets must be truthful: no inflated or unnecessary costs.
• The equity budget is the funding round, and the equity request is part of the funding decision.
• A €5 million request in a €10 million round is a 50% contribution factor and a crowd-in factor of one.
• A smaller EIC share with more private capital is usually the safer choice.