EIC Accelerator: progress, process and open issues

The European Innovation Council Accelerator is the European Union’s flagship instrument for scaling deep tech start-ups and small and medium sized enterprises. Since the EIC was reorganised under Horizon Europe in 2021 the programme has sought to combine traditional grant support with direct equity investment through a dedicated public investment vehicle known as the EIC Fund. As of early January 2022 the Commission reports measurable uptake but also acknowledges that the investment component still needs implementation arrangements to become fully operational under the Horizon Europe legal framework.

What has been delivered so far

Between the EIC pilot phase and the launch under Horizon Europe, the EIC Accelerator introduced several changes intended to be more start-up friendly. A continuous short application route was set up for initial idea filing followed by periodic cut-offs for full applications. The Commission says this approach has attracted strong interest. At the same time, one of the signature innovations of the EIC framework is the combination of grant finance and direct equity investment, which was trialled during the pilot period and is being rolled out under the fully fledged EIC.

How the funding model is meant to work

Status update on equity implementation in January 2022

The European Commission reported that arrangements to run the investment side of the EIC under the Horizon Europe legal framework were still being established at the start of 2022. In practice the Commission said it will continue to process the companies that had already been selected for equity funding in 2021. Those companies will receive the grant component where relevant and the Commission and implementing bodies will proceed with the investment preparatory work including due diligence as soon as possible.

The next full application cut-off for the EIC Accelerator was signalled for spring 2022, subject to the adoption of the EIC work programme for 2022. The stated reason was to allow applicants additional time to prepare higher quality proposals and to ensure that the selection process can be followed in time by the investment process.

Context and governance

Under Horizon Europe the EIC’s operational setup includes a governance board and an executive implementing agency. The European Innovation Council and SMEs Executive Agency, EISMEA, manages the EIC implementation. The EIC Fund operates as a separate investment vehicle with its own investment guidelines and governance bodies. Horizon Europe provides the legal framework for EIC activities until 2027 and the Commission says that, once fully operational, EIC equity financing will have a legal and financial basis through that time horizon.

Why this matters and what remains uncertain

The combination of grant and direct equity is technically ambitious for a public programme. It requires both grant management systems and investment decision processes to work in tandem. Early signals from the EIC Fund are positive in numerical terms but there are practical risks that will determine the programme’s ultimate impact. These include operational bottlenecks in carrying out investor grade due diligence at scale, the speed at which legal and financial modalities are finalised under Horizon Europe, and the capacity of the EIC Fund to co invest and attract private follow on capital.

The Commission frames the equity component as a catalyst that will crowd in additional private investment. That outcome is plausible but not automatic. Crowding in depends on the terms of public investments, market appetite for the sectors being funded and the ability of the EIC to structure follow on rounds without crowding out private investors.

Practical implications for companies and applicants

For companies that already received selection letters in 2021 the practical message was clear in January 2022. They will receive grant finance where applicable and the EIC and the EIC Fund will continue preparatory investment work. For new applicants the Commission advised using the continuous short application route introduced in 2021. Successful short proposals are invited to prepare full applications for periodic batching and potential interviews with an EIC jury.

Wider milestones and ecosystem activity

In 2021 the EIC launched Pathfinder and Transition programmes and established its new governance structures including an EIC Board. The first EIC Summit took place in November 2021 where the EIC Forum and initial EIC prizes were launched. Recruitment processes for key EIC roles such as the EIC Board President and Programme Managers were ongoing at the time of this update.

Assessment and next steps

The EIC Accelerator shows clear demand from Europe’s start up ecosystem and represents an important experiment in combining public grant funding with direct public equity investment. The early figures on applications and approved investments are encouraging but they do not by themselves prove long run additionality or systemic change. The investment component needs robust, timely implementation to avoid becoming a bottleneck for companies that require patient capital. Interested stakeholders should monitor the adoption of the EIC work programme and the EIC Fund’s investment pipeline and co investment outcomes.

For companies preparing applications the pragmatic advice is to use the continuous short-application route to secure an early assessment, make use of Business Acceleration Services, and be prepared to provide the level of transparency and documentation that investor due diligence requires.