Author: Jessica Kehayes
EU funding vocabulary every grant-seeker needs to know
Finding and applying for public funding, whether through national or EU sources, requires an understanding of the vocabulary. Read on to increase your understanding of the lingo and to unlock greater opportunity to receive funding for your innovation.
EU funding vocabulary
- Beneficiary: An entity (business or other organization) awarded a grant. Sometimes referred to as a funding recipient.
- Co-financing rate / Match rate: Funding agencies often require the beneficiary of the grant to finance a proportion of the project with their own funds. This is called co-financing and the co-finance rate/match rate determines how much of the project budget the beneficiary must contribute themselves. The co-financing rate varies by funding call. Example: If a funding call offers a maximum grant of 500 000 EUR and requires 50% co-finance rate, then the actual project budget must equal at least 1 000 000 EUR for the beneficiary to receive a 500 000 grant.
- Consortium: A group of entities (see below) with complementary knowledge and skills that work together toward a common goal (e.g. developing a new innovative product). Many funding calls, particularly at the EU level, require that a consortium be formed to apply for funding. The consortium members apply together in one application and divide the awarded financing based on their respective roles in the project.
- A consortium can be large (25+ members) or small (2 members), and can consist of different types of entities, for example public organizations, businesses, NGOs, universities, research institutes.
- One entity will need to take the role of consortium leader.
- Different funding calls will require different size consortia and often provide guidance on the structure. For example, a call might say that applicants must apply as a consortium comprised of at least 3 entities from at least 3 different EU countries, and at least one of the consortium members must be a commercial business.
- Consortium leader: The business or entity that organizes and manages the consortium, serves as the lead applicant and sometimes acts as fiscal agent for the grant. Sometimes referred to as the “main partner”, the specific role and responsibilities of the consortium leader can vary and are defined in the funding call.
- Funding agency: The organization that is managing and announcing funding calls, distributing financing and supporting implementation of projects. These include national funding agencies or national funding bodies (e.g. Vinnova in Sweden, Business Finland in Finland, Enterprise Estonia in Estonia) and the European Commission (EC) at the EU level, as well as many others.
- Funding call: A specific opportunity for funding, as defined by a funding agency. When a funding call opens, it means the call has been announced by the funding agency with detailed information on requirements and deadlines. When a call closes it means the deadline for submissions has passed and the submitted applications are now being evaluated for possible awards.
- High risk/high impact innovation: High risk/high impact projects have high innovation levels, unknown outcomes, and high business risk, but also have the potential to produce new state-of-the-art innovations or business processes that target a large underserved market. Funding agencies often seek these kinds of innovation projects and use funding to incentivize applicants to pursue high–risk activities, while recognizing that there is a higher potential for failure in these projects.
- Small and medium size enterprise (SME): A company is declared an SME based on two main factors: (1) turnover levels or assets and (2) number of employees. Generally, an SME is defined as an entity with (1) turnover of less than 50M€ or assets less than 43M€ and (2) fewer than 250 employees. In addition, the European Commission and other funding agencies have specific rules regarding autonomy and ownership which must be reviewed carefully.
- Technology Readiness Level (TRL): A common scale used to explain the development level of an innovation from conception (TRL 1) to market (TRL 9). This scale was first developed by NASA and has since been adopted by many different industries and agencies, including the European Commission. Funding calls often define what TRL level of innovation they are interested in funding and will ask applicants to explain their innovation’s TRL.
- Mature and close-to-market innovations: Innovations in the later TRL stages. Significant development and testing have already been done, and they are nearly ready to enter the market.
- Bottom-up and top-down approaches to funding: These are two different approaches to funding R&D. In a bottom-up approach, a funding agency encourages applicants to determine what project ideas they would like funded. The funds are allocated in response to these individual requests from the research community. A top-down approach means that the funding agency determines specific project topics they are interested in financing and puts out a call looking for applicants who can meet the established goals.
- Open and challenge-driven calls: This is similar to the bottom-up and top-down approach. Open calls are funding opportunities that are open to all technologies/topics within the call parameters, and allow the applicant to determine the project topic. A challenge-driven call addresses specific technological or innovation needs as determined by the funding agency. Challenge-driven calls are often aligned with larger national or regional strategic goals.
Forms of financing
Public funding may be offered in different forms. In the context of public funding, it is common to see the following:
- Grant: financial sum awarded to an entity to perform an agreed-upon set of activities. Grants are usually awarded in response to a competitive application process.
- Convertible loan: A loan that is provided under favorable terms for the borrower which requires the borrower to meet an agreed–upon set of targets. Once the targets are met, the loan is converted to a grant. If the targets are not met, the loan must be repaid.
- Equity funding: Funding agencies can offer opportunities in which they provide funding in return for an ownership stake in a company. This is most notably being implemented through the European Commisison’s EIC Fund. The EIC Fund provides venture capital for high-risk, high-impact innovation. Their investments are decided in a competitive application process.
- Blended financing: A mix of both public and private funds through a common investment. For example, the EIC offers financing comprised of a grant component and an equity component.
Common Abbreviations in Public Funding
- EC – European Commission
- EIC – European Innovation Council
- EIT – European Institute of Innovation and Technology
- NFB – National Funding Body
- SME – Small and Medium Enterprise
- TRL – Technology Readiness Level
We are experts in public funding. If you have questions, we are here to give solutions. For exploring public funding opportunities in your area, contact our regional experts:
Jaakko Ojanen, tel: +358 (0)40 557 6602
Henrik Dagmalm, tel: +46 7 0988 6667
Kai Krashevski, tel: +372 5647 7546