Evaluate your projects for SME Instrument (Part II)
If your project is viable, you are at a good starting point, but this is not the target. As discussed in my previous blog, SME Instrument grants look for investable projects, and projects with traction of private investment. Some big projects are conceived for solving problems, give value and create work for lots of people but, if it does not have the capability of high growth, preferable in an international market and therefore able to pull private investment, then it is not an investable project and therefore it is not a project liable for SME Instrument.
Apart of the mentioned high growth, SME Instrument also underlines the sustainable competitive advantages of the project. Sustainable competitive advantages are company assets, and attributes or abilities that are difficult to duplicate or exceed. They will provide a superior or favorable long term position over competitors.
Examples of sustainable competitive advantages that a project could have are: a low-cost provider, market power, a powerful brand, strategic assets, a market with barriers to entry, adapting product line, product differentiation, a strong balance sheet, and outstanding management. In a proposal for SME instrument, the EU pays special attention to strategic assets and barriers to entry. Strategic assets are considered patents, trademarks or copyrights – i.e. assets which have legal protection against competitors. Common impediments to companies trying to enter new markets are high investment costs and government regulations.
An exhaustive analysis of the competitiveness in the market and how it will be sustainable along the time will give the evaluator two main insights. First, the firm knowledge of the market and second, the sustainability of the project. For this reason, it is difficult to base the competitiveness on the lack of competence. This type of line of arguments might be perceived as a lack of knowledge of the market or a superficial analysis of the risks of the project.
How to rate your project before preparing a proposal?
By rating your project as a preliminary exercise before starting to write the proposal, this will give you an overview of how mature the project is and which parts still need to be developed and improved.
There are some tools to help you think about the maturity of your project. According to Peter Thiel and Clayton Christensen Institute, there are 9 critical aspects to consider. If the result of rating the project falls below 70% on average, it is not recommended to apply for SME Instrument grants.
1) Is it the right timing for this business? Is the market prepared for adopting the proposed solution?
2) Do you have a breakthrough and enabling technology? Does your technology give you a considerable competitiveness?
3) Do you have something no-one else has?
4) Have you already identified the market? A good and consistent argument for the target
market shows insight of market knowledge.
5) Can you sell and market your product/service? Proving the market traction will substantially increase the credibility of the project.
6) Do you have the right people on board? Staff is one of the most important assets in the company. If the staff is only oriented to product development, it will face difficulties to commercialize and to go to market. There must be a balance of skills and experience in the key members of the project.
7) Do you need something else in the boundaries of the business? A way to build credibility in the project is to be honest about which things we need from the boundaries of the business and which is the action plan to get them.
8) Is the value proposition in accordance to the related costs? There are two main ways to afford this justification, high scalability and/or high margin.
9) Will you be there in 10 years? Grants aim to push projects to a high growth in Europe and globally as a sustainable way to create value in EU, not for short term purposes.
Evaluating your project is a way to think on the idea, to find arguments, to work on the consistency of the project, to find the weaknesses, and to analyze the risks. In other words, to mature your project.