Public Financing Alternatives for Startups

If you're looking for investment for your project, one of the alternatives you can consider is public sources. In Spain, there is a wide range of financing options, each with different characteristics and requirements that would suit your startup based on various criteria.

In order to contribute to the community and stay connected, we organize interesting events for the community and all those who want to join. At the "Public Funding Breakfast," we combined coffee and pastries with a talk about public funding.

At this event, we had two expert consultants in the sector, Diego Oteo and Iñigo Larraza , who came from iPlusF to explain what options exist for startups within the ecosystem when looking for sources of financing today.

There are many factors and elements that influence the choice of financing source and which one to choose. These factors include:

• Company size: determines whether or not you will be eligible for European aid, which is aimed at more established projects;

• Geographic location: Some funding programs focus on promoting local economic development, so access to these programs may vary depending on where your startup is headquartered or registered.

• How much investment do you need? In this case, again, it's influenced by the possibility of accessing European aid, which offers very high funding but also a much more careful and strict selection process.

• Your startup's profile: This can open doors when seeking funding, but it can also close them. For example, if your startup is a SaaS offering veterinary services, you probably won't be eligible for grants for projects focused on innovation and development in video games or fashion.

Calls 

It's important to keep in mind that there's a vast array of different calls for proposals at the local, national, and European levels. Here are a few of them:

At the national level, there is the National Innovation Company (ENISA) , which offers financing and support to entrepreneurs and companies at different stages of development, but "stands out for being a perfect option for startups that are just starting out," as Íñigo Larraza comments. This entity offers participatory loans, which must be repaid at the end of the established term. Therefore, they approve financing on the condition that the funds must be invested within a specified timeframe and, in addition, you must have the investment round notarized and converted. You should keep in mind that if you don't repay the loan within the agreed term, ENISA may penalize your project and add interest. Last but not least, ENISA's investment can be up to double the startup's equity (for example, if you have €0.50, you can apply to receive €1).

On the other hand, the Center for Technological Development and Innovation (CDTI) is a public entity whose objective is to promote innovation and technological development in Spanish companies. It is geared toward more solid and advanced projects. Among the financing lines offered by this organization are:

1. NEOTEC 's grants are focused on technology-based startups. NEOTEC also provides advice and offers loans that can be converted into equity in the startup.

   One of our community's startups, Break Event, led by Lucía Martínez Prado, has secured a €320,000 grant from this annual funding round.

2. CDTI Innvierte involves the entity co-investing in projects with a CDTI-approved investor. This option is attractive for investors because it reduces risk, and it provides a financial advantage for startups.

At the regional level , many communities are investing in innovation and offering a wide range of funding options for each industry, such as video games, culture, etc. Each autonomous community has its own funding lines, which can be different and targeted at different projects.

In this case, the regional financing of the region of Catalonia has been used as an example. When selecting projects, which are usually high technical risk, the emphasis is placed on these four factors:

• the technological advancement of the initiative or its novelty

• your execution plan

• the team

• and the project itself, in the sense of implementation

On the other hand, European grants are much more selective and are geared toward projects with highly disruptive technologies. In this case, there are no small grants, and funding rounds typically range in the millions of euros. The most relevant programs are:

1. Horizon Europe: Funds research and innovation projects in a variety of areas, including technology, health, and sustainability.

2. COSME Program: Supports the competitiveness of SMEs through financing, improving their business capacity and access to new markets.

3. European Regional Development Fund (ERDF): finances projects that contribute to regional and local economic development, including investments in innovation, infrastructure, and employment.

4. Competitiveness and Innovation Facility (COSME): provides financing and support to SMEs to improve their competitiveness and access to finance.

However, there is also the option of participating with an established company as a subcontractor. If you are presented as a beneficiary of the requested aid, this could be very viable for your project.

Despite everything, Diego Oteo affirms that "we mustn't forget about small grants, such as cultural or impact grants," which are easier to obtain and, even if the investment isn't huge, are a good start. Small steps make a difference. Also, the type of grant you choose somewhat defines the company's image, that is, its character. 

There are certain factors that help when seeking public funding and one of them is the Startup Certificate or The Innovative SME Seal . These licenses demonstrate the company's innovative nature and small size, which may allow you to benefit from certain tax advantages.

Because a company's age affects the type of funding it can apply for, having one of these certificates contributes to greater access to grants from the ecosystem, which is currently experiencing significant growth.

Another very interesting point explained by Diego and Íñigo was that "the expenses must be incurred in the autonomous community where you request financial aid, meaning the company must be domiciled in the same region where the grant is being requested." Although it depends on the call for proposals, most agree on this. Diego Oteo also states that "it is not advisable to go through all that unnecessary paperwork, changing the startup's headquarters in order to get aid, because it is an unnecessary and lengthy process. Think carefully and carefully before making that decision, and only do it if you are truly interested in the grant."

We hope you found this article interesting, and if you have any questions, please don't hesitate to contact us. We also invite you to take a look at the other articles on our blog.