The EU put more than a billion euros in a fund meant to boost startups. But they're quickly running out of cash.
Around 2,000 companies have applied to the European Innovation Council Accelerator for funding since the beginning of April, amounting to at least €4.85 billion, more than four times the €1.1 billion the fund had set out to give.
The high demand is encouraging for EU policymakers, who are keen to boost Europe's digital economy and rely less on U.S or Chinese tech companies. But the struggle to meet it also highlights the difficulty in getting 27 countries, with varying degrees of technological advancement, to prioritize investment at a time when Europe is struggling to keep up with its competitors. And it's likely to leave several eager companies shorthanded.
Companies who are left without any money will get a "seal of excellence," meant to tell private investors that the EU likes the company.
The bloc’s executive urges private investors and EU states to step in for those it can't fund itself. "We hope that the really good ones for which we don't have money, as we won't have enough budget, that they will get funding from other sources," the EU official said.
Big ambitions
The EU positioned the Accelerator to be the major startup funder for fields that the EU finds strategically important, especially those that are in line with its political priorities like fighting climate change and keeping up with the U.S. and China in the digital sphere.
"It will lead Europe at the forefront of innovation and new technologies, and help us tackle the health, environmental and societal challenges we're facing,” said Mariya Gabriel, the commissioner for innovation, in April, when the fund was first opened.
The majority of the companies responded to a specific call linked to the Green Deal, as the EU's climate initiative is known, and advanced health care and digital technologies. Gabriel had earlier told a news outlet that green tech was an industry that Europe can actually lead.
Part of the EU's Horizon Europe research program is meant to boost new technologies like artificial intelligence and blockchain, as well as helping digitalize sectors like health care and energy. After three years of pilot schemes, the project took off this year in earnest.
Companies can ask for a grant of up to €2.5 million, or a combination of a grant with an equity investment, ranging from €500,000 to €15 million, with returns on the investment to go back into the program.
"The huge demand clearly shows the interest of the community for this kind of support," a Commission official said.
Empty pockets
But there's not tons of support to give. Officials say there is no budget increase planned, although there might be a slight bump when some non-EU countries like the U.K. make their contributions after EU countries allowed them to participate.
But the launch of the program has been troubled from the start. Companies complained that the difference between grants and equity was not clear, leading some to actually lose money. The funds were also held up to due to politics. Horizon Europe's budget wasn't approved until this month because EU countries were divided about allowing non-EU countries like the U.K. and Israel to participate in the program, holding up some valuable cash.
The agency also may have spooked applicants to apply when it actually wanted to inform applicants they might not be able to meet the June 16 deadline. A message that it was impossible to submit applications went up in May. "That was not correct by any means, as the application was never closed," a Commission official said.