What types of grants are available to fund your deep tech startup’s journey?
Launching a deep tech startup can be an exciting journey. At the same time securing funding and support is a crucial step in turning your innovative ideas into reality. In this article, we’ll explore grants for deep tech startups. They can vary depending on factors such as location, industry focus, and stage of development. Our post provides a more generic overview and is not intended to be an exhaustive review.
In general, grants are never sufficient to keep a company running. Grants are typically based on a project-based application and will cover, depending on your status, 50% or sometimes up to 80% of the cost related to executing the project. This means that a company cannot exist by the grace of grants alone (although some companies try hard to do so).
During the early stages of the company, grants are attractive as pre-seed/seed-stage companies are often funded out-of-pocket (a.k.a. friends and family) hence a small grant is a welcome addition to the cashflow of the company. These early stage grants can help you push out the moment you need to raise venture capital or, more appropriately formulated, it allows you to start raising capital when there is a better foundation for the raise.
Here are some common types of grants:
Many governments offer grants specifically tailored for deep tech startups to encourage innovation and economic growth. These grants may be provided by government agencies, departments of commerce, or innovation hubs.
Many governments provide grants specifically aimed at supporting research and development (R&D) initiatives in technology-driven sectors.
Some government agencies offer grants to support innovative projects that have the potential to address key societal challenges or drive economic growth.
Some corporations offer grants or funding programs to support startups working on technologies relevant to their industry or strategic priorities. These grants may come with additional benefits such as access to mentorship, resources, or potential partnership opportunities.
Nonprofit organizations and foundations may offer grants to support deep tech startups that align with their mission or focus areas. These grants may be targeted towards social impact, sustainability, or addressing specific global challenges.
The European Union (EU) provides various funding opportunities for deep tech startups through programs such as Horizon Europe, European Innovation Council (EIC) Accelerator, and European Regional Development Fund (ERDF), aimed at fostering innovation and competitiveness across Europe.
For each grant it is critical to work through the programme and review the three key parts that determine if you should apply or not. Only when these three fundamentals have been dissected and are evaluated as being a solid fit for the company, is it worthwhile to start the effort of writing and submitting an application. Consider these three groups of criteria:
Deep tech startups need to meet specific eligibility criteria, such as demonstrating the potential for technological innovation and commercial viability.
Applying for government grants typically involves submitting a detailed proposal outlining the project’s objectives, methodology, and expected outcomes.
Grants come with many limitations including the type of cost that can be claimed (e.g. expenses versus investments), they might limit (or prohibit) the use of sub-contractors and typically require personnel cost to be based on actual employment contracts.
There are many more constraints specific to the grant programme under which the application runs so it is key to review the programme in detail before applying.
One of the challenges that comes with design services is the cyclical nature of the services business. When the economy tightens and corporates are watching their operational expenses, the first step will be to halt any external contracts/contractors which are not deemed absolutely essential.
Whereas the earlier (staircase) model is a good approach in scaling up revenue and creating new revenue streams, the foundation of the company is still based on the service model: headcount continues to be the main driver (typically up to 60-70% of revenue). In terms of (enterprise) valuation the additional revenue streams, however, will already make a significant difference.
Design services companies typically start small (some exceptions when it concerns management buy-outs) and natural growth is a slow process as it requires hiring and training of engineers based on/driven by the revenue stream of the company. Growth of business is tied to growing the team and it is not always easy to find the engineers.