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Innovative fundraising for SMEs and startups – results of the EIF program for 2022

The Ukrainian Cluster Alliance (UCA) reports in its annual report on the results of the EIF programme in innovation fundraising as one of the most successful activities in 2022. Indeed, innovation fundraising is important for UCA both in terms of internationalization of clusters and support of innovative SMEs and start-ups in wartime. Innovation development, twin digital and green transition are the basic principles of European cluster policies, and for Ukrainian clusters following these priorities was and is a huge challenge. Most of them have significant gaps in these areas. At the same time, in 2022, we saw fundraising programs as an important source of survival for many developers, because the demand in Ukraine for innovative developments from the domestic customer has fallen significantly. So, let’s take a closer look at the main results of the EIF program in 2022, as well as the challenges and prospects for 2023.

Main activities under the EIF program in 2022

In April, the association APPAU provided access to the EIF program for all UCA clusters. The program was created at APPAU in 2021 with the aim to provide innovative fundraising to all industrial SMEs and startups.  APPAU is the focal point of the I4MS/Horizon program in Ukraine and since 2021 has engaged several managers to run this activity, closely cooperating with the Digital Innovation Hub (DIH) of Kyiv Polytechnical Institute.

In terms of SME outreach, focus and specialization, the EIF program remains the only one in Ukraine that offers monthly grant funding offers in Industry 4.0 – 5.0 to SMEs and industrial high-tech startups. The total, average amount of monthly funding reaches about EUR 1 million, which is 10-12 grants for which innovators from the industrial, energy and infrastructure sectors can apply. Most proposals are designed for international cooperation – they are implemented in small consortia of 2-3 participants, and where the average grant per participant is 60 thousand euros. Each grant is presented on the EIF platform and is provided with expert support.

Скріншот з платформи EIF

From May to December, the following activities were carried out in the EIF programme:

  • More than 70 grants were put up on the EIF platform, which are the result of filtering 300+ grants from the pan-European space of available grants
  • Within the framework of the BOWI project, a large promotional campaign was conducted in January 2022, in which 55 SMEs and startups took part, and 35 applied for the BOWI competition, which was a highest number among 10 other Eastern European countries participating in the project.
  • During the year, 16 educational webinars, 1 large campaign (August) and 2 offline events (September and December) were held to attract clusters to innovative grants and
  • In October, APPAU together with DIH KPI took part in the final, European meeting of the I4MS program in Budapest
  • About 20 experts of DIH KPI were involved in the active promotion of I4MS grants, memorandum of cooperation were signed with them
  • There was a series of exchanges with Ukrainian and foreign partners on the development of DIH in Ukraine; DIH KPI passed a 3-month training program in BOWI project
  • APPAU created a consortium of 6 foreign and 5 Ukrainian partners to participate in the EIC startup support competition (20 million euros). The results are still unknown at the time of the report release

This extensive work was funded primarily by APPAU, to which should be added the volunteer work of KPI DIH experts, which was partially covered by funding from the BOWI project (project from 2021).

Results in 2022

The above systematic activities in the terminology of business processes is the first result of the work of the APPAU Project office. With great difficulty, but we finally managed to establish systematic work on all stages of the innovative fundraising cycle. We remind our readers that the biggest challenge in this area since 2017 was the involvement of technological experts in the tasks of technological brokerage, and more specifically – in the tasks of educational work and consultations of market participants. In 2022, we state that this challenge is partially accepted and the key role in this was played by DIH KPI.

The direct results of this activity at the end of the year are as follows

  • 8 competitions in the I4MS and EIT programs were won
    • 1 competition in the BOWI project (4 winners)
    • 3 competitions in the I4MS program (DIH-World, Mind4Machine, DIH²)
    • 1 I4Trust competition (2 winners)
    • 2 competitions from EIT Manufacturing: Pre-launch accelerator (Jumpstarter), and artificial intelligence (the number of winners is being specified – at least 4)
    • 1 competition from EIT Raw Materials (continuation of the cascade grant from 2021)
  • The beneficiaries of these calls were 15 Ukrainian organisations: 12 SMEs, 2 DIHs and 1 association.
  • The total amount of funding received is more than 700 thousand euros
  • As a result of the development of the UCA EIF program, partnerships have been established with 10+ EU countries and leading actors in innovative development. Partners promise a number of “submissions” of projects in consortia for 2023.

Below is a list of the most interesting applications among the winners of the 2022 calls

  • IT-Enterprise (Kyiv, member of APPAU) – won the BOWI competition with its own product KOEEBOX. It is an innovative solution for MRO (Maintenance and Repair) of manufacturing enterprises in the low-end segment and which allows you to quickly scale to various sectors of the economy.
  • SmartZavod (Kyiv, member of APPAU) won 2 competitions in the EIF program – DIH-World and Mind4Machine. In addition, this startup won 3 more competitions – 2 in Ukraine and 1 in Germany and became the absolute record holder in our Industry 4.0 community in terms of the number and volume of grants won in 2022. SmartZavod’s specialization and their focus in these solutions is on advanced 3D printing offered as a service.
Oleksiy Solntsev (left) and his colleagues – a banner with another win.
  • Alestein (Kyiv, member of APPAU) is one of the first deep-tech startups from Kyiv Polytechnic, which enter our community 4.0 not from industrial automation or IT. The innovative Structurescope EG solution allows to analyze the strength problems of various materials by non-destructive testing methods and using artificial intelligence algorithms.
  • 482.Solutions (Odesa, member of APPAU) is a leading Ukrainian developer in the field of blockchain, has been applying for grants for a long time and independently. Nevertheless, certain collaboration activities with DIH KAU and APPAU members in 2021, gave results in 2022 – the company won the prestigious I4Trust competition in a consortium with 2 more Ukrainian companies (from Mykolaiv and Kharkiv), as well as with 3 Spanish partners.
  • Innovinprom (Vinnytsia, a member of Vinnytsia Instrumentation and Industrial Automation Cluster) – won the BOWI competition with a cloud-based solution for industry-specific APM (Asset Performance Management), with the integration of a service model, a number of new technologies and customization for the agro-food sector.

Indirect results relate more to the impact of EIF on the environment, market participants and synergies with partners

  • Under the influence of the EIF programme, a number of SMEs have stepped up their own fundraising and applying for other programmes on their own – 5 other market players (20 in total) and other applications from the 12 mentioned above. For example, Infocom Ltd, SmartZavod won grants from the Ukrainian Startup Fund. The approximate amount of these additional funds for 5 participants is estimated at 300 thousand euros.
  • The experience and knowledge gained, the developments of the EIF program will be used in another large-scale project – AviaCore4.0, which began in 2022 by our partner, Center 4.0 “KhAI” on the basis of the Kharkiv Aerospace University “KhAI”. Consultations involving APPAU and UCA members began in December 2022. The project has every chance to receive funding of up to 2.5 million euros.
  • At the end of 2022, the UCA decided to expand the project office – it already includes 5 managers and, in addition to innovative fundraising, systematization of “general purpose” grants is taking place. In other words, business processes and practices are expanding from innovative fundraising to all areas of this activity at the UCA.

Summing up – compared to 2021, where only 2 projects were won (BOWI and EIT raw materials), 2022 was the year of a real breakthrough. And it is not only about a multiple increase in the volume and number of participants compared to last year. Although tens of millions of euros have passed through the I4MS / Horizon2020 program since 2014, which were received by hundreds of innovators from the EU, there was not a single developer or innovator 4.0 from Ukraine among them until 2021. Therefore, “better late than never” – the Ukrainian Industry 4.0 community begins to be seriously involved only in 2022, primarily thanks to the EIF program as a systematic tool for the development of innovative fundraising in industry.

From the final meeting of the EIF program, December 2022

In terms of project payback, these results are also encouraging. By investing about 25 thousand euros of its own funds in the program (staff + platform development), the APPAU and the Industry 4.0 community received an output of 1 million euros for 20+ Ukrainian industrial SMEs and startups.

It should be added that APPAU is also a key fundraiser in the UCA activities – the total fund of 86 thousand euros, which the UCA shows in the annual report, in the vast majority of sources consists of grants to which APPAU is involved.

For the APPAU and the 4.0 community, all these victories in 2022 are a double success, as these achievements came “not thanks to, but in spite of” – we did not have any support or attention to this program (as well as other Industry 4.0 programs in general) from either the government or international organizations. Against the backdrop of powerful PR from the government about total digitalization, all Industry 4.0 programs, including the development of DIH and the innovative development of industrial high-tech, are actually stepchildren in this government. And this is definitely the challenge for the next year.

Prospects and challenges for 2023

For 2023, we see a number of grant opportunities that will definitely contribute to strengthening the innovative potential of industrial high-tech. First of all, it is worth noting the EIC grant for 20 million euros, where 12 million will be distributed among 200 Ukrainian startups. This is an unprecedented amount of funding, and we hope that a significant part of it will go to industrial high-tech.

Numerous Horizon / Digital Europe programs and competitions look no less interesting. The I4MS program, which we already know well, will continue until 2023. Numerous grants will be available from other funds, in particular, we hope for new interesting programs from EIT Manufacturing. There will be grants for the “green course”, the Restoration program will probably start, as well as competitions from donors present in Ukraine.

At the same time, these wonderful prospects will manifest and intensify old problems, but also form new challenges.

  • Weak coordination of innovation programs at the State level.

There are indeed many funding programs, especially at the European level, but there is no visible coordination of them in Ukraine. This coordination should concern, first of all, the synchronization of actions of key actors by sectors of activity – for example, in the field of Industry 4.0 – 5.0. Instead, when we see that the Ministry of Education and Science creates another initiative on Industry 4.0 without any consultations with business, it means only another increase in the fragmentation of efforts and different vectors of their direction. Accordingly, a number of EU programs, including those focused on Ukraine and the Eastern Partnership countries, will not give proper returns under such conditions, and in some cases will again turn into the classic and quite widespread “granting” in Ukraine.

  • Lack of proper interaction of business with universities and research institutes

Universities and research institutes are theoretically our best partners in the development of digital innovations in industrial applications. And they actually win many grants every year aimed at development in the field of Industry 4.0-5.0. But we do not see any significant connection with business, or at least attempts to communicate – to transfer the results of activities to domestic business. 2022 and some progress with KhAI, KPI and KAU are rather exceptions that confirm this general rule of the past 5+ years. So, how to turn educational and research institutions “facing business” and in particular within cluster communities remains a big challenge for 2023.

  • Insufficient capacity of the newly created “collaborative model”

The shortcomings of universities also include their low capacity for rapid change. The DIH model that APPAU has now created with Igor Sikorsky Kyiv Polytechnic Institute is still far from European standards. If only because the teachers – experts involved in the work of projects and the I4MS program continue to combine it with teaching activities, with the allocation of time to perform the roles of DIH, which is far from desirable. In other words, in 2022, we have practically exhausted this “free time reserve” of individual faculty members, while the inflow of new experts is very weak. The low manageability of such a model and relationship is obvious, and is unlikely to withstand the influx of dozens of SMEs from clusters that will need advice and support. However, 2023 will give precise answers to this question. Another option is grant support from the EIF program, which would allow to cope with this challenge. APPAU has prepared such an application and is ready to actively cooperate with international donors.

  • Difficulties in attracting SMEs and innovators during the war

The past year has clearly shown that engaging SMEs and innovators 4.0 is no less challenging than engaging expert consultants. Numerous difficulties of the war period, such as the loss of personnel (mobilized to the Armed Forces and those who emigrated), lack of time and motivation, working conditions that are far from what they were – this list is incomplete, but it is important to understand that these factors act in combination. Accordingly, both cluster coordinators and managers of SMEs and startups who really want to enter the grant funding should be very well aware that they need to redouble their efforts to keep the rhythm and fulfill the tasks of innovative development. As we saw in the August campaign with Innovations meet clusters, this awareness is still low, and many managers lack both the will or better focus, as well as the skills of effective communication and engagement of market participants.

  • Insufficient attention of all stakeholders to innovation infrastructure issues in Ukraine

Advanced experts in the community, close to understanding the tasks of policies and strategies in the field of innovation, have long been talking about infrastructure challenges as key to industrial applications. We are talking about a whole range of components of developed innovation ecosystems that are absent in Ukraine or very weak, such as modern laboratories, technology parks, incubators – accelerators of industry direction, experimental stands, installations, metrological centers and standardization centers, etc. The state constantly withdraws itself from solving these issues and, on the contrary, plays along with the mainstream hype for startups. Simply ignoring the fact that without the infrastructure of innovation, this “talent hunt” is nothing more than a strategy of “skimming the cream”. This strategy is dominant in the country, because neither large holdings, nor ministries, nor international donor organizations practically do not talk about how to create the innovation infrastructure itself, that is, the environment in which industrial and deeptech innovations can grow. APPAU has repeatedly provided its proposals and vision in this area and, in particular, for the National Economic Strategy 2030. But so far, no significant changes in this area are visible.

APPAU – and now together with the UCA clusters – is preparing new guidelines and a specific action plan for the EIF program for 2023. It will be presented in January. It is now obvious that this plan should take into account not only the achievements of 2022 and the strengths of our cooperation, but also consider the above challenges. 

The Board of APPAU thanks all partners and participants of the EIF program for the excellent results of cooperation in 2022. We look forward to the same growth rate in 2023.

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