I. Fundraising for innovative companies
If you are creating a business project that brings innovation or novelty to an existing market, you should be aware that the process differs from that of creating a so-called traditional business. As with any project, you will first need to find a way to finance it. Financing innovative businesses can be a rather long and tedious process.
Many schemes have been put in place to support and encourage innovation. In these articles, discover the different steps to secure funding for an innovative startup, as well as the various funding options available.
What is an innovative company ?
Before looking for funding, it is important to determine whether your project is truly innovative. A company or startup is considered innovative when it carries a project that brings something new, it can also replace an existing business model already on the market.
It is important to know that a project’s innovative nature does not only relate to technology, it can cover several aspects, including :
- Implementing a new, original and ambitious marketing strategy
- Improving existing products already on the market, oil-free fryers for example
- Developing a completely new organisational process
- Adjusting revenues and costs
- Developing a more sustainable and ethical model by taking action for the environment
In summary, to be considered innovative, a company must use processes or techniques, or offer products that deliver innovation. The economic development outlook that will be used must be recognised. The company must also justify a specific budget dedicated to research and development. This budget should represent at least 10% to 15% of eligible tax-deductible expenses. Naturally, all these expenses must generate a fairly significant turnover.
Read the article : What is an innovative startup to better understand the concept.
In order to create and finance your innovative company and support its growth, significant funds are required. Before starting such a project, it is essential to understand the funding ecosystem and to learn more about the different options available to you.
In general, it is possible to finance your innovative project internally or externally.
II. Internal financing for your innovative project
This involves financing your innovative project without using external organisations. There are two main types of internal financing, shareholders’ funds and love money.
Shareholders’ funds
Shareholders can, if they wish, invest their own funds in the company. This is possible through shareholder current account advances or cash contributions. Thanks to these funds, equity will be built up for the innovative company.
When shareholders get involved and finance the company solely with their own funds, this is referred to as self-financing. This funding method is very beneficial because the company is free from any commitment to another organisation, such as a bank.
When shareholders’ funds are not sufficient to fully finance the company, they can still help secure bank loans to finance innovation.
Love money
To raise funding for your innovative company, it is entirely possible to turn to friends and family and ask them to contribute to financing your project. This is known as love money. You may be offered donations, low-interest loans, or even interest-free loans.
For donations of €31,865 or less, there are no duties to pay. However, certain rules must be respected. First, the donor must be under the age of 80 and must have a direct relationship with the beneficiary. The beneficiary, in turn, must be of legal age and legally emancipated.
III. External financing for your innovative project
There are several external organisations that can help finance your innovative company. Here are the most important ones.
Bank loans and credit facilities
A bank can lend money to a startup that wants to launch an innovative product or service, and there are even some support schemes available.
Before determining the loan amount the bank will grant you, your company’s borrowing capacity will be taken into account.
If you do not need a very large amount of funding, you can opt for a microloan, the maximum amount is €10,000, and the eligibility conditions are less demanding.
Crowdfunding
All you need to do is present your innovative project on a crowdfunding platform, people interested in it can contribute the amount they wish. This contribution can be made with or without any return, it can therefore take the form of an interest-free loan or an interest-bearing loan, and you can choose whether to accept or refuse it.
The different support schemes
There are many support schemes that can help finance an innovative company, we will discuss them in more detail so that you can find the right one. Whatever stage your project is at, you will be able to find suitable support.
Support schemes to finance your innovative company
To encourage innovation, a startup can benefit from several support schemes when it engages in research and development projects. As a result, there are several types of support, tax incentives, social contributions support, and financial support.
Financial support to fund your innovative startup
Today, there is a wide range of financial support available for innovation. To access it, the company simply needs to engage in a research and development project.
Here, we present and provide details on different support schemes that can help finance innovation.
The different grants
To finance innovation, it is possible to obtain grants directly from regional councils. These grants are intended to support the research and development of your project.
To obtain a grant, you need to contact the department responsible for economic development and new technologies. This will allow you to identify the innovation support schemes available in the region where you wish to launch your project.
For the creation and development of innovative projects, BPI France as well as other organisations, offers several support schemes for people looking to start their own business.
Competitions
Financing innovative companies through competitions is very popular. Today, there are many competitions that reward the best innovative projects. The prizes are generally financial in nature.
Find here the different competitions, grants and calls for projects of the week.
Innovation loan
This is a financial support scheme designed to help innovative companies, with the aim of supporting the commercialisation of their innovations. This scheme is offered exclusively by Bpifrance.
The amount of this innovation loan ranges between €30,000 and €1,500,000 depending on the nature of the project. It must be used to launch an innovative product or service on the market. More information can be obtained directly from Bpifrance regarding this loan.
Financial support for innovation
In addition to the support schemes mentioned above, there are other forms of financial support available by contacting the various organisations that support innovation. It is also possible to seek advice from an accountant to learn more.
Here is a list of some financial support schemes you may be eligible for :
- support for the creation of an innovative startup
- support for the development of a technological partnership
- the Inno’Tech programme
- ANR innovation funding schemes
Tax incentives for innovative companies
Tax incentives are very important if you want to finance your innovative company. They do not directly provide funding, but they help reduce expenses by lowering the tax burden. Below are the most important ones.
Innovation tax credit
Companies that invest in the design of new products or innovative services can benefit from the Innovation Tax Credit. They may receive a tax credit equal to 20% of total eligible expenses. The annual cap is €400,000.
Research tax credit
This is a tax incentive that supports research projects carried out by innovative companies. Eligible companies can benefit from a tax credit calculated mainly on the costs of research activities undertaken. A tax reduction of 30% can be granted on eligible expenses up to €100 million.
Statut "Jeune entreprise innovante" (JEI)
To obtain Young Innovative Company status, at least 15% of total expenses must be allocated to research and development. By obtaining this status, companies can benefit from numerous tax incentives, as well as social security exemptions. For example, companies may be exempt from corporate income tax.
Social support schemes for innovative companies
As mentioned above, social support schemes are available when a company obtains Young Innovative Company status. Like tax incentives, social support does not directly finance the innovative company, but it helps reduce costs.
Among these social support measures is the exemption from social security contributions on the salaries of employees involved in innovation, such as researchers and technicians.
It is important to know that a project’s innovative nature does not only relate to technology, it can cover several aspects, including :
- Implementing a new, original and ambitious marketing strategy
- Improving existing products already on the market, oil-free fryers for example
- Developing a completely new organisational process
- Adjusting revenues and costs
- Developing a more sustainable and ethical model by taking action for the environment
In summary, to be considered innovative, a company must use processes or techniques, or offer products that deliver innovation. The economic development outlook that will be used must be recognised. The company must also justify a specific budget dedicated to research and development. This budget should represent at least 10% to 15% of eligible tax-deductible expenses. Naturally, all these expenses must generate a fairly significant turnover.
Read the article : What is an innovative startup to better understand the concept.
The funding stages for innovative companies
Funding an innovative project involves several stages, and each stage comes with specific support schemes that can be used.
It is important to know that a project’s innovative nature does not only relate to technology, it can cover several aspects, including :
- Implementing a new, original and ambitious marketing strategy
- Improving existing products already on the market, oil-free fryers for example
- Developing a completely new organisational process
- Adjusting revenues and costs
- Developing a more sustainable and ethical model by taking action for the environment
In summary, to be considered innovative, a company must use processes or techniques, or offer products that deliver innovation. The economic development outlook that will be used must be recognised. The company must also justify a specific budget dedicated to research and development. This budget should represent at least 10% to 15% of eligible tax-deductible expenses. Naturally, all these expenses must generate a fairly significant turnover.
Read the article : What is an innovative startup to better understand the concept.
Funding the feasibility stage of an innovative project
It is important to have equity to cover the first expenses and manage the initial investments. These funds will also serve as a guarantee for the company’s future partners.
At this stage of the project, many support schemes are available to help finance it.
Bourse French Tech
It supports you in validating your innovative project and developing its business viability, particularly through the creation of your business model and the feasibility study. You can find out more about the different ways to obtain this grant.
Regional grants
Many regions offer support schemes to help fund innovative startups. This funding is often available at the research and feasibility study stage of a project.
Bourse French Tech Emergence
It follows the same principle as the standard French Tech Grant, except that it targets innovation projects with a strong technological component, also known as Deep Tech.
This grant supports the company and helps assess the potential of the proposed innovative project, as well as its prospects.
It is important to know that a project’s innovative nature does not only relate to technology, it can cover several aspects, including :
- Implementing a new, original and ambitious marketing strategy
- Improving existing products already on the market, oil-free fryers for example
- Developing a completely new organisational process
- Adjusting revenues and costs
- Developing a more sustainable and ethical model by taking action for the environment
In summary, to be considered innovative, a company must use processes or techniques, or offer products that deliver innovation. The economic development outlook that will be used must be recognised. The company must also justify a specific budget dedicated to research and development. This budget should represent at least 10% to 15% of eligible tax-deductible expenses. Naturally, all these expenses must generate a fairly significant turnover.
Read the article : What is an innovative startup to better understand the concept.
Funding the project development phase
The development phase comes before the launch of the innovative product or service. By this stage, the financial forecast has already been prepared, and resources are mobilised to produce a prototype of the product or service.
The initial funds were used only for the feasibility study, so additional funding will be needed to successfully complete this stage.
Here are the different innovation funding schemes that can be used at this stage:
- The different grants
- Competitions that offer financial support;
- Tax incentives that support innovation development;
- Loans with long repayment terms.
Funding the launch phase
Once the prototype has been created and mass production has begun, it is now time to launch your product on the market. Many banks and certain investors can assist you during this stage. There are numerous loans available to help you successfully complete this stage, even if you decide to launch your product or service internationally.
Here are the various forms of support you can benefit from at this stage to finance your innovative project:
- Mutual funds investing in innovation after obtaining ‘innovative company’ status
- Innov’ess Funds offered by SIFA (Société d’investissement France Active).
- Public investment funds covering numerous areas.
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