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TL,DR;

I’m sometimes asked questions about grant funding by start-ups. Specifically, I’m asked how to go about getting Innovate UK grant funding, and what tips and tricks I know to could help with the process.

I’ve never applied for Innovate UK funding, so I have no direct experience of what works and what does not.

As a consequence, I decided to contact some companies who have recently received Innovate UK funding (in this case Smart Grants) and ask them, since they know better than I do.

This article presents 12 insights into the process of applying for and receiving an Innovate UK Smart Grant, as expressed by those who have done it.

Innovate UK Smart Grants

Innovate UK Innovation loans are for UK-based SMEs only to carry out late-stage research and development projects. The application process is open to all and is designed to fund innovations with high growth potential across any industry and sector.

Over the last 5 rounds Innovate UK has funded 364 projects with over £100m in grant funds awarded. The increasing popularity of the scheme has seen the overall application success rate fall from 15% to 7% at its lowest.

The application process is split into two strands. The first is for projects of up to 18 months and £0.5m in total costs. These can be collaborative or led by a sole applicant. The second strand is for larger collaborative bids of up to 3 years in length and costing up to £2m.

I decided to concentrate on businesses that have recently received an award in the lower of the two grant ranges, i.e. less than £0.5m. A list of the companies who have received Smart Grants can be found on the UK Government website.

I contacted a number of the companies who have received funding within the last year and was lucky enough to have several of them respond to my request for an interview. This article is a summary of the information and advice I received.

Interview process

With any interview it is essential that you enter the process prepared. That means being very clear with yourself beforehand what the interview is intended to achieve.

In this case, I wanted to know the following:

1. What stage where you at as a company when you applied for grant funding?
2. What was the motivation for applying for funding?
3. Why did you choose an Innovate UK Smart Grant?
4. What was the application process like?
5. What did you hope the Smart Grant would do for your business?
6. What did it actually do for your business (i.e. was there a difference between hope and reality)?
7. What were you least prepared for?
8. What worked well about the process?
9. What did not work well about the process?
10. Was it worth it?

Although the number of companies I interviewed is too small to be statistically significant I was gratified to discover that all of my interviewees seemed to have similar insights. It is a rule of thumb when conducting ad-hoc interviews that you know you’ve done enough when you start to hear the same thoughts being repeated. It is because of this that I consider my sample size to be ‘big enough’ to be of use to others who are considering applying for Innovate UK grants.

I am hugely grateful to the business owners who responded to my request and took time out of their busy schedules to answer my questions. In particular, and in no specific order, I’d like to thank the following people for their contributions:

• Ty Burridge-Oakland, MD of Congnitive Business
• Neil Williams, CxO of Tilix, NED for Enian
• Dr Christopher Richardson, Founder and CEO of Digital Smart Solutions
• Robert Pell, Director of Minviro

The rest of this article is a summary of the help and advice I was given during these interviews.

Insights into applying for the Innovate UK Smart Grant

1. This probably isn’t your only paying gig

   All of the recipients I interviewed were in businesses that were already established to some degree and were currently self-funding. That is to say, they had customers and were earning significant income from those customers.

   However, most of them were earning direct income from the innovation they hoped to develop (although one business was earning money from innovation through paid proof of concept projects). A common pattern was that they either had existing products or were offering some kind of consultancy service in their area of interest.

2. Your innovation is complex and has a high degree of risk

   Another common theme was that the lead times associated with their new business proposition and their estimate of the risks involved with developing their innovation are what led them to apply for Innovate UK funding.

3. You’ve already looked for investment

   Several of the interviewees had investigated the possibility of some kind of Angel or Venture Capital investment at the same time as looking for grant funding.

   In most cases this investment was not forthcoming as, without a product and customers for that product, the start-ups were not yet seen as being investible.

   For those who were offered funding, most turned it down as the amounts offered were based on valuations that they considered too low for the opportunity they were investigating.

   One of the disadvantages of chasing investment that people don’t take into account until they they’ve gone through the process is just how much it damages your velocity.

   You spend all your time preparing for, discussing with and making deals about investment rather than actually building your business.

   Most companies who go for venture capital or angel investment have an executive dedicated to raising investment. This is a specialist role: reporting on and gaining access to the next set of funds.

   For many early stage companies employing someone solely to raise investment would break the bank. So they look for grant money instead.

4. You’ve applied for funding before

   Another extremely common feature of my interviewees is that they had at least some kind of experience of applying for funding in one form or another in the past.

   This was either because they had previously applied for and sometimes received alternative grant funding of a lower amount, or because they brought someone into their team who had recent experience of applying for funding.

   One of the benefits of this situation is that many applicants found that they could re-use part or all of a previous application and combine it with the feedback it generated at the time to make a stronger application the second (or third, or fourth!) time around.

5. You get close on your first Smart Grant application, but not close enough

   Competition for Innovate UK funding in general is highly competitive. It is extremely difficult to win a grant. It is highly unusual for a grant application to be accepted on the first submission.

   Of course this does happen, but it is very much the exception rather than the rule. Even so-called professional bid writers have seen a reduction in their ability to get grant funds accepted.

   Writing successful grants is a niche skill. One of my interviewees achieved success with a company called Granted. Other grant writers, as they say, are available - this is simply one that I was told about directly.

   Many of those interviewed received a score of 79%-80% on their first application, which was just short of what is needed for success.

   There is no barrier to an application being re-submitted, possibly multiple times (strictly speaking submissions can only be made twice, but quite often the submission will change in substance from a previous submission based on feedback so in effect it becomes something totally different).

6. Don’t shoot for the moon

   As mentioned in the introduction, there are two levels two Smart Grant funding: up to £0.5m and over £0.5m.

   The terms and conditions and specifications of the grants each category is slightly different and they appear to be scored differently (although this doesn’t appear to be stated anywhere).

   The threshold score for an application for more than £0.5m is different to the threshold for getting below £0.5m: it’s about 2%-3% higher for the larger funding.

   The extra effort required to get the 86%-88% needed for the higher funding is enormous. To get these these bids through you need something absolutely revolutionary, and partnerships with ridiculously big companies, rather than just being a ‘start-up’.

7. You don’t need a partner to apply, but it can help

   It’s very, very hard to sell to large companies. The sales process alone can take anywhere between 6 and 24 months.

   Partnering with a business through innovation which meets their strategic goals is much more straightforward.

   Innovation can often fit their buying process: they like to buy things that they’ve already tested. By innovating in partnership you can run these tests as part of the development of your solution, and build it with them.

   You can learn their internal processes and where their teams will have touch points with the technology. You can learn where else the technology can go, and that builds your exploitation roadmap for you.

   These innovation partners are representative of other potential customers. It gives you the opportunity to say “we are working with company X who is one of the biggest players in the global market”. That’s hard to argue with from a customer standpoint.

   The other thing it allows you to do is identify the metric that matters to your customer. It’s very easy to come up with all kinds of metrics to report on, but if these don’t meet the internal business metrics that are being used within customer organisations, no one cares.

   You risk comparing apples with oranges. You need to learn the ‘lingo’ in order to get sell into those organisations and make sure that your solution technology is going to deliver for them.

   When selling in to large organisations there are typically 7 or 8 people involved in the decision to purchase. It is tempting to think that businesses make rational decisions, but the reality is much more nuanced.

   There are aspects within any organisation that require more social influence than value-based proof for certain individuals in the buying chain. Partnering with an organisation helps you learn all of these things which is absolutely key for an exploitation roadmap, as well as for marketing and sales.

8. You need to demonstrate excellent project management capabilities

   One of the best things about Smart Grant funding is that it really helps you ‘get your ducks in a row’.

   You might have an idea for investigation. The way that you frame and deliver that idea has to be done a certain way, in order for it to be eligible for the grant. This includes things like having a business model and market understanding, as well as having a technology that’s going to work.

   How that technology is going to be implemented and the value propositions that it’s going to drive aren’t necessarily included within other grant applications in a very formal way, but they definitely need to be in a Smart Grant application.

   Your project management needs to have milestones and deliverables in a clearly laid out fashion. Everything needs to be costed appropriately, including all your work packages.

   Your project management breakdown is what is being marked. The judges don’t necessarily care what the innovation actually is, as long as it looks like it’s going to work.

   Above all else, the most important aspect of your application is risk management: what are the risks, how are you going to manage them? This should be a core element of your application and not just an afterthought.

   You are, after all, asking for a significant amount of money from the UK tax payer. The body that awards it to you is going to want to know that it is in capable hands.

9. You’re not alone

   There is an infrastructure of support for Smart Grant applications that comes for free. For example, you are assigned an Innovate UK monitoring officer who doesn’t necessarily know about your specific area of invention but who is able to challenge you in the right way to help you succeed.

   This is especially good because the funding framework is quite rigid. Milestones have to be delivered every quarter. This keeps you on track and accountable, and you have to keep your project managed well.

   By the end of it you have everything that you need to be able to exploit the technology, and you’ve delivered it on a timely basis: there are very few, if any, extensions to a Smart Grant deadline.

10. You need to be absolutely committed to the process

    The amount of time it takes to write a Smart Grant application means that you have to be really invested in the whole process. It’s not something you can knock out in a couple of days.

    Writing a successful Smart Grant application takes weeks, if not months, of preparation. As such, it’s better to aim for the most you can get while remaining under the threshold requirement (i.e. £400k - £500k). That’s quite a big project!

    If you are a startup with a runway of less than 12 months you’re going to struggle to make a Smart Grant work for you.

11. It’s called Innovate UK for a reason

    Your project must have the potential have for a game-changing innovation with UK-wide impact. You need to be able to show that you will improve the UK economy through providing jobs, either directly or indirectly.

    Your application needs to show that as a company you are invested in innovation and will feed profit back into your innovation processes. This is an important part of the Innovate UK strategy: improving UK global exports.

12. Getting grant funding can open the door to investment

    It is not uncommon for companies that receive Innovate UK Smart Grant funding to then find it much easier to access angel or VC funding.

    It is also not unusual for these companies to turn down that offer of funding as they no longer need it.

The take-away

The biggest thing that Smart Grant funding did for most of the interviewees was to accelerate their business. By definition, most innovation companies work in an area which is pretty new. Being first to market with a product is probably the most important thing for them.

The external support framework surrounding Innovate UK is a large part of this process. It helps fill in knowledge about things that start-ups don’t know well, even if they have been operating for some time.

The most intensive aspect for a small team is the project management, like the regular quarterly administration requirements. These are there to make sure that the company is doing what they said they’re going to do, and rightly so, but in a small team it can be pretty challenging. It may be helpful to have a project manager to deal with just with grant administration.

The good thing about the Smart Grant which all my interviewees expressed is that even the application process really made them refine their ideas. Even if you’re not successful with the grant application you’ll questioning a lot of things about your concept, so it’s definitely worth the effort.

Don’t be afraid of failing a grant application because you’ll learning something new every time.