How to obtain funding from the public administration?

HOW TO OBTAIN FUNDING FROM THE PUBLIC ADMINISTRATION?

RESUMEN

Obtener financiación de la Administración Pública es una opción viable para empresas innovadoras. Las ayudas pueden venir en diversas formas como subvenciones, préstamos, deducciones fiscales, y más, enfocadas en proyectos con alto grado de innovación y riesgo técnico. Es fundamental demostrar la novedad y el impacto de la innovación a nivel regional, nacional o europeo, dependiendo de la administración a la que se presente el proyecto. La interpretación de lo que se considera innovador puede variar, por lo que es clave presentar el proyecto destacando su novedad y el riesgo técnico involucrado. Los presupuestos de proyectos de innovación deben incluir principalmente gastos de personal dedicado a la investigación y desarrollo. Además, criterios como la creación de empleo y la contribución a la sostenibilidad pueden influir positivamente en la aprobación de las ayudas. Las medidas especiales debido al COVID-19 también ofrecen oportunidades adicionales de financiación pública. Al solicitar estas ayudas, es esencial preparar un pitch que resalte el alto grado de innovación y el presupuesto enfocado en personal técnico.

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Visión General de las Ayudas de la Administración Pública

The public administration can provide aid to companies that comply with the regulations of each aid scheme. In general, there is aid from the European Social Fund for training and job creation, registration of the self-employed. And from the ERDF for companies that make innovative investments.

The concept of innovation is rather "subjective". It depends on the interpretation that each official gives to each aid regulation. The administration gives aid (grants, loans, deductions, bonuses, subsidised services...) to cover % of the investments. They only subsidise expenses when the degree of innovation is high.

Desafíos y Consideraciones al Solicitar Ayudas

Each European country and each region (in Spain, each autonomous community) has different subsidies. The Canary Islands has the highest % subsidy in Europe, reaching 60% and the tax deductions for R&D&I are the highest in the world, reaching 80%!!!!

There are more than 200 different grants that change every day, many with very short deadlines (only 20 days after publication in one of the 40 official gazettes in Spain) and a few that are always open throughout the year.

It is a big mistake to make investment decisions solely on the basis of existing aid. The investments we need to make are the ones we have identified as key in our CANVAS (+).

The grants take many months to be paid, and in most cases they come after you have paid all the investments. So they are not really a source of funding (+), but a reward we receive for the effort already made that helps us to recover the investment in less time and reduce the investment risk.

Subjectivity of innovation

Where is my project innovative?

The larger the region where I can demonstrate my novelty, the more chances I have to obtain subsidies. 

Where can I demonstrate novelty? Only in my company? In my home? In my sector? In my region? In my municipality? In my province? In my autonomous community? In my country? In Europe?

If you can demonstrate innovation in your region, you can apply for grants at your regional ministry, promotion company (SODECAN), etc. If you can demonstrate innovation at national level, you can apply to CDTI, ENISA... and if you can demonstrate innovation at European level, you can apply to European aid instruments. 

Example: If I buy red socks for the first time, this may be innovative in my wardrobe, but in my community of neighbours it is not, because there is someone else who already wears them. And even less so in my municipality, because I'm sure there are others who have them. 

Maximizando la Percepción de Innovación para Subvenciones

The more distant the administration is, the more demanding it is with the degree of innovation. European (H2020...), State (CDTI, ENISA...), Regional (Sodecan, councils, regional councils...). If I demonstrate my level of innovation at European level, I can submit it to the SME Instrument to get a €50,000 non-refundable grant to design my business model, and to phase II with €2 million....

Innovation at national level (what I am going to do does not exist in Spain), pI can apply for the CDTI grants, ALWAYS BEFORE STARTING TO SPEND. Learning to highlight my Degree of innovation and to sell it in an "exaggerated" way to the public administration. You have to know how to exaggerate your innovation, never lie, but the more innovation it seems, the more eligible you will be.

Notice how the degree of innovation rises as we move down the table:

LOW DEGREE OF INNOVATION

  • I buy and put it up.
  • Maintain, renew.
  • Enlarge.
  • Automate.
  • Digitise.
  • Innovation in the process.
  • Product innovation.
  • Technological innovation.
  • Disruptive innovation.
  • I buy something innovative and we modify it at our personal supplier...
  • Technological development to bring out a new product, or a new process...
  • ALTA Basic, applied, experimental research...
HIGH TECHNICAL RISK

The more technical risk there is, the more the public administration helps you. Companies do not innovate because of the high risk involved; the higher the degree of innovation and the greater the technical risk, the more intense the support from the public administration. Basic research involves more risk than applied research, and less than technological development or incorporation. 

Innovation project budget

The Public Administration offers subsidies to projects where there are people thinking, innovating, putting intelligence... not so much in equipment, and much less in bricks and mortar. Of the total budget, more than half has to be spent on our own personnel for innovation, another part, subcontracting external companies to cover Know-How... and very little for fixed assets, and a small part for operating costs for testing.

Other arguments that help the approval of the subsidy are the creation of employment, the drag effect in the sector or region, CO2 reduction... in each aid order there are the assessment criteria. 

The companies and entrepreneurs affected by the COVID have special public aid measures available to them, which you can consult in the following link link (+)

Pitch to the public administration: 

Show that the degree of innovation of your product or model or process is very high (better with novel technology, use very technical words), show that you have to take a lot of technical risk. In the total investment budget, a very important part has to be your own technical staff researching, developing.

TYPES OF AID USUALLY PROVIDED BY THE PUBLIC ADMINISTRATION:

  • Non-repayable grants.
  • Soft loans, with interest rate subsidies.
  • Participatory loans, no personal guarantees are required, only project guarantees.
  • Bonuses.
  • In Social Security... subsidised training.
  • Flat rate, one-off payment.
  • Goods produced in the Canary Islands

R&D&I TAX DEDUCTIONS.  

I can stop paying corporation tax for the next 18 years. The degree of innovation is interpreted by the tax authorities, in the Canary Islands you can deduct the 78% of all the expenses already incurred. certifier and apply for the reasoned report. 

  • Investment deduction: 25% of the entire investment.
  • RIC: No IS is payable up to 90% of the tax base.
  • Deduction for R&D&I: up to 80% of the investment made (40% if not so much research).

In addition, an 80% tax credit can be claimed from the deduction and credited as a grant. There are about 6,000 companies in the Canary Islands using the 80% and about 600 using the tax credit.

  • The ZEC: 4% of IS is paid forever. There are 600 companies in the ZEC zone.
  • Memory to justify that it is not a prohibited sector: an administrator resident in the Canary Islands, investment of more than €100,000 and more than 5 jobs. 18 months for registration. 6 months to create the job and one year for the investment.

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NOW THAT YOU HAVE READ THIS TIP, ANSWER THE QUESTIONS:

  1. How will you obtain funding from the public administration?
  2. How are you going to make use of European funds?

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Picture of Jaime Cavero

Jaime Cavero

Presidente de la Aceleradora mentorDay. Inversor en startups e impulsor de nuevas empresas a través de Dyrecto, DreaperB1 y mentorDay.
COMENTARIOS
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COMENTARIOS

  1. SOURCES OF FINANCING - Mentor Day WikiTips

    [...] approves in a very different way, I need to understand them to make the right PITCH for each source: A) PUBLIC ADM , B) BANKS, C) [...]

  2. José Luis Prieto Calviño

    It is a big mistake to make investment decisions solely on the basis of existing subsidies.

  3. Paul Lejarza

    Each organisational structure of the public administration may be different and this is possibly one of the reasons why nine out of ten entrepreneurs consider that the conditions set for accessing these credit lines are very complex.

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