Supporting deep tech innovations – the Austrian approach
One of the main challenges for deep-tech businesses in the early development stages is their high capital needs and the higher-than-usual risks for financiers.
Deep tech startups are often deemed too risky for private investors as the tangible results (e.g. market-ready solutions) as well as the return on investment take longer to realize. Therefore, the financial support provided by the public sector can help bridge the financing gap in the market and can play a pivotal role in supporting innovation. As deep tech innovation is often done in critical fields such as health, space tech or green tech, providing target financial backing can be vital for improving our society and planet.
Support for deep-tech businesses in Austria
The Austrian promotional bank aws (Austria Wirtschaftsservice) is established to provide various financial and non-financial support to Austrian companies. Among its support instruments is a funding system that covers the pre-seed and seed stages of (sustainable) deep-tech solutions.
The economic objective is to foster high-tech startups, create employment opportunities, and advance research, technology, and innovation. The system stands out for its comprehensive support across companies’ development stages as well as noteworthy grant sizes and other incentives. Their details are being shared with the Interreg Europe community and the partners of the project AccelerateGDT where aws is partner.
The funding of the pre-seed and seed programmes is provided by the Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology and Ministry of Labour and Economy. The target groups for both programmes are innovative companies at the appropriate stage from the Deep-Tech field, e.g. digitization, ICT, physical science, green tech, quantum technology, life science (pharma/biotech, medical devices including digital health).
The business models are expected to be based on an exceptionally high technological and scientific challenge and the companies need to have a great growth potential with the prospect of reaching several million in sales and financing rounds of at least 5M Euros in a few years.
'Preseed Deep Tech' funding programme
Annual budget (average): 2.5M Euros
Number of financed projects: 15 projects per year (on average)
Beneficiaries: natural persons or micro-enterprises up to 6 months after registration of the company.
Type of support: The programme supports entrepreneurial pre-start-up and start-up projects based on applied research and development (usually at TRL3). The 1-2 year-long projects help develop an initial proof-of-concept or a prototype for commercial implementation. Eligible costs include R&D, proof of concept, product development, personnel and material costs.
Max funding: 267K Euros per project. The funding rate is 80% of the eligible costs, with 10% being paid in as shareholders' equity, and a further 10% covered by sales or long-term financing.
The ‘Seed Deep Tech’ funding programme
Annual budget (average): 20M Euros
Number of financed projects: 20 projects per year (on average)
Beneficiaries: SMEs in their development phase (up to five years after establishment).
Type of support: for ideas in their development phase (around TRL6) to help them mature into a market-ready product. The program covers R&D, operating capital, personnel, material and travel costs. The projects are expected to last between two to five years.
Max funding: 889K Euros per project. The funding rate is 80% of the eligible costs, with 10% being paid in as shareholders' equity, and a further 10% covered by sales or long-term financing. Repayments are only made proportionally if there is a positive EBIT, and full repayment is not mandatory. Neither interest nor collateral is required.
Gender Bonus and IP support
In the case of both programmes, a Gender Bonus incentive is used to encourage female entrepreneurship and gender-balanced startup/SME teams. If the gender bonus is applied, the funding intensity increases from 80% to 90%. More specifically, if the project is founded by (one or more) women who (in the future) own more than 25% of the shares, the grant awarded will be increased to up to 90% of the eligible costs or a maximum of 300.000 € in case of the pre-seed funding and to a maximum of 1.000.000 € for seed funding.
Furthermore, as part of both programmes, the aws Intellectual Property department provides IP coaching to support innovation protection. For a maximum of 12 hours, the innovation protection experts provide tailor-made and confidential consultations and workshops on how to protect the beneficiaries' innovations and thereby gain valuable and sustainable competitive advantages.
EIC Accelerator certification
Lastly, it is worth noting that the seed-level programme is certified by the European Innovation Council’s Accelerator plug-in scheme. The 'EIC Accelerator Plug-In' allows companies that have already received funding in the Seed Deep Tech funding program to skip the first round (short application) of the EIC Accelerator program and submit a full application directly. As the EIC Accelerator is similarly intended to help highly disruptive European innovations reach the market and grow, it enables a simplification in the pipeline of SME support across national and EU-level instruments.
A great example for strategic support to deep tech ventures
According to Christina Koch from aws, one of the significant insights of deploying these programmes has been that “when public funds are invested and subsequently reintegrated into the system, they can be used to support new startups, thereby enhancing the associated positive economic effects.”
Therefore, the aws system provides a great example for other policymakers on how to strategically support deep tech ventures. Especially notable is that the system provides support for both the pre-seed and seed stages, thus creating a pipeline of support instruments. Furthermore, through the EIC Accelerator plug-in scheme, SMEs are further directed to follow-on support from the European level.
Considering that deep tech innovation is a long process, often spanning for a decade or longer, such pipelines are key to nurturing these ideas and companies. At the same time, the dedicated IP support as well as the Gender Bonus, which have been directly integrated into the programmes stand out as innovative components to make these programmes more attractive for companies.