Blended Funding Schemes explained. How can we make the most of this new funding model?
What are Blended Funding Schemes?
Blended or public-private funding schemes combine grants with private investor money to support innovative companies in various industries. Private investors collaborate with the government funding agencies in the process of selecting and allocating the funding to promising SMEs, following targeted and sector-focused competitions.
At Winnovart, we believe these blended funding schemes have the potential to change the grant-funding marketspace in the UK and Europe.
What are Key Benefits of Blended Funding Schemes?
After conducting surveys directed at select private investors who have participated in previous schemes, we identified four common benefits of blended funding:
- Grants are less risky and make for easier investment and funding decisions
- Less risk leads to better return on investment
- Blended funding gives private investors greater access to good companies and R&D expertise which comes with more visibility
- According to a 2017 article Funding Innovation published by Beauhurst, SMEs that secure both private investment and grants outperform those that only secure private investments or grants. These companies are more likely to raise capital and achieve higher valuations.
Who offers blended funding schemes?
In the UK, Innovate UK (IUK) has piloted several Investment Accelerator Competitions during 2017-2020. These are schemes that match grant funding with private equity finance. IUK’s assessment of the innovation in parallel with the private investor’s due diligence creates a low risk profile that attracts private equity investment. Check out The Experience So Far.
More information about what Innovate UK does can be found here.
In Europe, EC funding agencies have shown a clear interest in such schemes, with early pilot schemes introduced as part of the Horizon 2020 programme. After an initial pilot during 2019-2020, the EC has extended the EIC Fund as main vehicle for blended funding investments. The EIC Fund is now part of the EIC Accelerator/ Horizon Europe programme.
We expect to see early-stage pilots in individual European states in the years to come.