Management of innovation funding: best of roundtable tables 2020

How to use all the financial devices available to boost innovation?

Like marketing, R&D is often seen as a cost for the company and its ROI is difficult to quantify ...

Concretely, how to align innovation, business and fiscal strategies? 

CIR / CII / JEI, International, European, national, regional aid & subsidies, private funds and cash advances ... What are the best practices for using these devices “effectively”? 

Following several round tables with many expert opinions (in particular La Banque Postale, KPMG, France Innovation, Bpifrance, the former Head of the CIR Service at the Ministry of Research, the National Contact Point with the European Commission, etc.), here is a summary of feedback and advice for agile use of these devices.

A request for R&D project funding is not limited to demonstrating the innovative nature of the solution. You generally need a business part dealing with the market, environmental and societal impacts ...

It is therefore a question of setting up a real "project financing management" strategy and this implies in particular knowing how to combine public and private financing, modernizing the management of these systems and strengthening the efficiency of its innovation financing strategy. 

Public funding tools should not be considered as financial means, but as one of the tools at the service of companies' performance in terms of R&D strategy. 

The management of innovation funding is a holistic view on each stage of innovation projects: 
• Opportunity detection
• Financial engineering 
• Promotion and protection of innovations 
• Implementation of economic models, 
• Deployment of products and services on the market, 
• Sales / marketing strategy and execution

Understanding the challenges of financing innovative projects 

Due to very important economic issues at the international level and an exacerbated competitiveness around the mastery of new technologies (in particular the use of AI), the French government wishes to make France a technological breakthrough economy! This notably involves significant financial support for all companies: a Large Investment Plan (GPI) is implemented to finance these ambitions from 2018 to 2022 for € 57 billion including the € 10 billion of PIA 3!

This “Deeptech” generation must develop offers based on technologies resulting from scientific research and which present barriers to entry (state of the art). These projects require long-term research, which generates significant costs and which generally takes a long and complex time to market. 

Or, malgré cette course effrénée, n’oublions pas ce qui fait que nos innovations, qu’elles soient de rupture ou incrémentales, BtoC ou BtoB : l’usage qu’en feront nos futurs clients. Si le taux d’échec des lancements de nouveaux produits et services avoisine les 90 % : comment composer avec ce paradoxe : course à l’innovation et réponse aux besoins à venir de nos clients ?

“Innovation is an alliance between research, marketing, instinct, imagination, product and industrial courage. »(Antoine Riboud / Founder of Danone)

In France, we tend to think too much about technology rather than uses (and take time to react). It therefore becomes fundamental to understand users well, even when it comes to financing innovation. Innovation must start from the user and go up to technology. This is the whole issue of global innovation management! Finally, financing of innovative projects does not concern just one department of a company ! It takes the vision of decision-makers, R&D departments, executives, while taking into account the opinions of human resources, the financial department, the marketing department, etc. 

Welcome to the jungle of innovation funding!

As much funding as there are ways to obtain them ... Imagine: more than 4000 systems, representing hundreds of billions of euros are at your disposal: tax aid (CIR, CII, JEI ...), regional, national, European aid and subsidies, international, private funds etc ... But beware of sirens song: it is essential to see this as additional income in order to accelerate your activities rather than a means of substituting for equity investments! Nothing can be envisioned without equity and without a solid business model.

The vast majority of companies do not know what funding they are eligible for… We are facing a real underexploitation of the potential offered to them and this implies aborted projects because of this lack of knowledge and expertise. However, it is essential for entrepreneurs to master the ecosystem of valuation of their projects! It is important to know at what stage of the project, it is necessary to resort to funding (seed, marketing, internationalization, etc.) and to what types of funding (public / private or dilutive / non-dilutive, etc.) to associate each stage of his projects. 

Aid & subsidies favor risky and promising projects as they are so “disruptive”.

Tax exemptions (CIR, CII, JEI) make it possible to reduce the weight of the project on the company but after the expenses have taken place (+ tax audit).

And to accelerate the development of my projects, there is Recoverable Loans or Advances which can be mobilized quickly (apply on the fly) and will allow rapid investment (recruiting, buying equipment, subcontracting, etc.).

Regarding private funds, there are more than 800 in France: on average, each investment fund receives around 1,500 files per year, but only makes 3 new investments over the same period. Raising funds is an obstacle course and being poorly prepared can be catastrophic in terms of image, deadlines and survival. Finally, an entrepreneur does not ask for money from investors for fun : going to funds often means making concessions (selling shares, putting patents on guarantees, changing management, etc.). Once again and even more with the private financing of innovation: this need for liquidity must be integrated into a growth plan with perfectly defined, realistic and achievable objectives.

Regarding the CIR / CII : it becomes more and more complex to justify his request in view of the now very academic and acerbic view of the tax administration. What marks the year 2019 is this sort of selectivity on the criteria: the MESRI seems to want to know more precisely where it spends its money, perhaps because of some drifts that have occurred over 30 years of uses in France ...

In summary, it is necessary know how to anticipate your strategy to be able to reduce the risk of failure & launch innovative projects. 

4 key points to remember to be able to anticipate / develop a global strategy with all the devices / for each project:

1. Make sure your projects are viable & eligible

2. Decompartmentalize the silos between systems and anticipate their associations

3. Create an investment strategy around each project

4. Associate the most suitable financing for each phase of its projects

To maximize your chances of being funded, you must integrate this approach from idea to marketing, because all the stages of a project can be financed by various aids. 

It is imperative to adopt a forward-looking approach in order to anticipate future projects that will be developed and once again: never forget to create the future needs of its customers

To find out what funding you are entitled to, it's here 

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