As was covered in our previous articles, Design Services companies need to be able to deal with cyclical market conditions. One of the instruments pointed at were R&D grants. R&D grants are in fact a multiple edged sword. They provide a second revenue stream, obviously still tied to engineering resources, but driven by the R&D programs. R&D grants are available on a global scale. If you operate (not necessarily headquartered) in the EU or North America, you have a wide selection of programs to choose from. This also facilitates your ability to start “slowly”. Where experienced and established companies can define a specific R&D program and operate as a lead and invite key companies to participate, early-stage design services companies will need to search for a proper fit. Important here is to understand that the program is not to make easy money, its intention is to help the company to drive its strategic roadmap. Most R&D grants cover up to 80% of your operational expenses, sometimes a bit more, sometimes a bit less. It is, however, to be regarded and used as an investment in the future of the company. Participating in a project just to keep your engineers busy might sound like a good alternative to having them fiddling their thumbs. However, if the project does not deliver future value for the company, you are wasting time and effort. From the start of the company, ensure you have a few potential project outlines at hand and use the brokerage services that some programs offer. Such services can help you connect with the right partners who, in the future, might even turn out to become customers. It is important to focus on grant programs as a way to further your strategic roadmap through (advanced) R&D or even productizing existing R&D projects.
Your demonstrated ability to participate and successfully deliver within an R&D project will ensure you will receive future invitations and will also increase your application score.
When writing your part of the project ensure that you apply some level of flexibility when it comes to your resources. As discussed, one of the functions of such projects is to allow you to maintain your engineering staff, even when customers have put their projects on hold. By increasing the resources for an R&D project you are able to deliver faster. At the same time, you can consider swapping out contractors and swapping in employed staff as a way of further cost reduction. Obviously, swapping staff during a project is not recommended but at times it might be a relevant option (for instance when starting the next work package).
As a final remark, make sure your website highlights not only the successful customer projects but also the successful R&D projects.
The path to innovation is laden with unique and often substantial cost drivers that set these ventures apart from their more conventional counterparts. To handle these costs effectively, you need to understand them clearly and plan your finances and resources carefully.
At a later stage we will provide a series of postings on how to build and maintain your company’s dashboard. Most importantly, we cover how to use it. The most eloquent dashboard does no good if it is not properly used.
As a Management Team, you need to make the dashboard the central point of engagement.
If your startup is getting acquisition interest, congratulations! But should you sell to a private equity firm or a strategic buyer? Private equity (PE) firms and strategic buyers have fundamentally different financial approaches to M&A. This is because of their contrasting goals, investment strategies, and operational priorities.