The EIC Accelerator blended financing (grant and equity) has undergone a dramatic transition from its first inception out of the now obsolete SME Instrument Phase 2 in 2019 and its following test phase as the EIC Accelerator Pilot in 2019/2020. With a new application process that includes multiple steps, an online AI platform for the submission and a video pitch, it has changed not only its process but also its outcomes (read: AI Tool Review).
With the evaluation and the proposal template having changed alongside this newest iteration, it is clear that what worked in 2020 and earlier phases might not be applicable in 2021. Clearly, the proposal looks different, prioritises a pre-determined structure over a free business plan narrative and defines a specific roadmap that all companies have to adhere to. But the factor that might have the most significant impact on the newest changes of the EIC Accelerator might be the evaluation itself.
Moving away from the SME Instrument Phase 2 and EIC Accelerator Pilot
The aim of the new Step 1 of the EIC Accelerator is a quality check of applications to identify if the project is of interest to the EU and if it fits the general risk, innovation, team and market criteria. As such, it was initially advertised as being a way of emulating the old Seal of Excellence* which was awarded to 2020 projects with an evaluation score of at least 13 out of 15. Historically, 30% to 50% of all submitted projects between 2018 and 2020 reached this level.
The current Step 1 success rates of 60-70% match this threshold rather well although one could argue that the equivalent old score would rather correspond to a 12.5 and not a full 13. Still, Step 1 acts as a threshold that is partially replacing the old scoring but also has a distinctively different focus when it comes to project quality. This quality aspect can be investigated through a simple question:
Will resubmissions of 12.5+ scored applications from 2020 automatically do well in the 2021's Step 1?
*Note: The new Seal of Excellence is now only awarded to some companies that reach Step 3 of the evaluation process, namely the interview stage. The 2021 Seal of Excellence is not associated with the Step 1 short application or with any type of scoring but acts as a useful analogy to the previous iterations of the funding program prior to 2021.
Transitioning from 2020 to 2021: Thresholds and Quality
The EIC has stated that Step 1 is designed to "trigger the interest of evaluators" which means that it is a very surface-level assessment compared to even the old SME Instrument Phase 1. There are only 5 simplified evaluation criteria in Step 1 while the 2020 evaluations had to address 17 very detailed criteria.
One could argue that the newest evaluation criteria which directly define the success of projects are now heavily favouring innovation, risk and the market while the old criteria were looking at every aspect of the company and project with equal weights. Without a judgement as to the benefit or tradeoffs of this approach, it clearly impacts what types of projects will succeed and it will likely be very different from what was observed in 2020 as well as the decade before (read: Recommendations for the EICA).
Some interesting cases of applicants who have applied to the EIC Accelerator have surfaced whereas a 2020 submission that showed low scores of 10 to 11 out of the maximum of 15 passed Step 1 in 2021 with very positive reviews. What is interesting is that such low scores in 2020 were often treated as a lost cause in the eyes of professional writers or consultancies since it means that either the project lacks the sophistication needed to convince the European Innovation Council (EIC) or the startup or Small- and Medium-Sized Enterprise (SME) does not have a well-thought-out business model or financial planning.
Changing the Evaluation Criteria
With the first stage being designed to only peak the evaluator's interest, many projects which would not have been considered for funding in 2020 even if the European Commission (EC) had excess financing available can now easily pass the first stage. How this will change in Step 2 is unclear but what can be said is that the evaluation criteria have changed significantly.
In 2020, there were 17 detailed criteria that covered the entire business model ranging from the subcontracting over the partner network to the details of the customer base (read: Companies That Should Not Apply). Questions were highly detailed and covered:
- Why would customers buy from you?
- Is your business model able to scale your company?
- Is the strategic plan for the commercialisation sufficient?
- Are any IP or licensing issues addressed?
- Is the product easy to use?
- ...
This has been replaced by 13 criteria in Step 2 and only 5 in Step 1. Instead of asking very nuanced questions to the evaluators who have to grade the complete project in increments, the new criteria are simplified and focus on many of the same questions albeit with less detail.
Interestingly, the new criteria omit gender equality, broader benefits in the EU and societal challenges. These were explicit in the old evaluation criteria but are now non-existent even though they must be described in the Step 2 application. This is likely due to the new Strategic Challenges and female-CEO quota that is enforced in the back-end and must not be re-iterated in the evaluations front-end.
The "Go" Criteria
There clearly is a different focus in the new evaluation criteria with a strong preference for the risk, market, innovation and the team with instructions for evaluators being that a Step 2 Go should correspond to what would have been a 4.5 to 5 score under the 2020 rules.**
To revisit the anecdote mentioned above, an application with a score of 10.5 would have had average scores of 3.5 for each section which means that it should not stand a chance to pass Step 2 under the old criteria. It remains to be seen if such an application can succeed in Step 2 but, with the change in the evaluation, it could be that the types of companies funded under the EIC might be very different from the previous decade.
The biggest takeaway from what the EIC has communicated is that the 2021 Accelerator does not seek perfectly drafted proposals. Does that mean that the evaluators will select companies that lack expertise, have no market overview and have no commercial strategy? This is unlikely but the way applications are evaluated seems more surface level while prioritising gut feeling and Go/No-Go over a quantified assessment.
As an example of this, there have even been cases of applicants from the United Kingdom successfully applying to Step 1 with a blended financing application (i.e. with an equity component) even though these are prohibited from doing so. And not one of the 4 evaluators who graded the application as Go have commented on this. Of course, in Step 1 these factors are not as relevant since the numbers given can be changed in Step 2 but it shows that there might be less scrutiny applied by evaluators in the new system.
**Note: Impact, Excellence and Implementation each had a maximum score of 5 which added up to the maximum total of 15 when combined. If 4.5 was given to each, the overall evaluation score would have been 13.5 which was close to the threshold of the interview invitations in 2019 although 2020 saw thresholds rising from 13.7 to 14.1 for male CEO's.
Conclusion
The changes in 2021 are interesting and there is no say if they are good or bad. The EIC Accelerator Pilot and SME Instrument were not perfect and it is excellent that the EIC is standing by its name and keeps innovating its own processes. What is important for applicants is to consider how the focus of the EIC Accelerator has now changed.
Companies that would have been viewed favourably in 2020 might not do well in 2021 and vice versa. There have been many surprising cases of companies receiving a 4 out of 4 go in Step 1 which likely would have had a difficult time in 2020 to even reach a score of 12. As the EIC states:
[The] Accelerator is not about selecting perfectly drafted proposals. It is about selecting great ideas and innovation developed by committed and tenacious innovators, that EIC support can help become real and achieve great impact for the benefit of Europe and Europeans.
It seems that consultants and professional writers (or freelancers) have to reassess how they vet their clients. Pure software innovations might be viewed more favourably in 2021 compared to 2020 while pure CleanTech or MedTech hardware innovations that enter competitive markets might not be viewed as favourably due to the new evaluation criteria.
If the above statement is true remains to be seen but what can be stated with certainty is:
The EIC Accelerator 2021 is a new funding program and its selected beneficiaries will likely be very different from the ones funded in 2020.
