Research and Development Funding: Start-ups and Entrepreneurs

Research and Development Funding

When people think of R&D funding, they tend to think of men in white lab coats making breakthrough discoveries like the Higgs Boson particle. Yet, this view is vastly outdated. While funding was more scientifically directed and primarily gravitated toward rare and developmental research twenty years ago; today its purview is expansive.

Therefore, we reinterpret R&D as the “Solving Technical Challenges Scheme,” because this is what it essentially comes down to. In the following discussion, we eddy around key tips and scenarios to get R&D funding for start-ups and scaling entrepreneurs.

Key Tips for Startuppers

Research and innovative methods must be quantifiable for any chance of R&D funding. The advantage of being a start-up and knowing about this element is that you can build your organization and administration around your R&D spending right from the get go. If your measurements are clear, funding is approved rather quickly and easily, with fewer restraints.

The issue with many companies that retrospectively apply for the funding is that they have to go back over past projects and find some way of measuring the hours and funds that went into it. So, if you’re starting out, consider a system that will give you clear measurements of how much time is spent on R&D.

Thus, in layman’s terms:

  • Early Awareness = Better Planning.
  • Better Planning = Easily Quantifiable Research.
  • Easily Quantifiable Research = Greater R&D Funding.

Key tips for Scaling-up

If things are on track for your start-up and you are looking to scale-up there are still various opportunities for R&D funding. The process of getting R&D funding approval boils down to how many research projects you can prove to be working on. Each project gets its respective funding.

When scaling up, consider increasing the number of innovative/research related projects. This will increase the R&D costs incurred, and thus enable a greater claim for R&D funding.

This may sound like putting money in to get the same money back. However, what’s really happening is that you are further developing your business through this research, and paying only a small fraction of the cost for a large slice of the gains.

Situational and Regulatory Constraints

These are elements that drive an innovative business model because they impose unilateral restrictions. However, a sharp entrepreneurial mind will always be able to find ways around them.

Situational constraints

These are circumstantial factors that are prevalent across your economic market – i.e. a pandemic.

How do situational constraints restrict your business? In 2020, the world ground to a halt amidst the spread of a novel virus. The governmental restrictions that followed prevented people from having in-person interactions.

How will you overcome these constraints? Many companies took to online meetings via Zoom, Microsoft Team or Google Meets. The businesses involved in the development and technological improvement of these platforms are ripe candidates for R&D funding, because they are contributing to the overcoming of these constraints.

Regulatory constraints

These are legally imposed constraints that restrict doing business in your field. Consider the following question:

How might current regulations restrict your business? For example, in 2017 a law was passed in Amsterdam that made 80% of bike pathways inside the A10 ring road unavailable to motorized scooters. This was a regulatory constraint.

How will you overcome regulatory constraints? One innovative solution that prevailed was the development and provision of electric ‘standing scooters’. This innovative response exemplifies one way of overcoming a regulatory constraint. And if this innovative response is properly administered, it would be eligible for R&D funding.

R&D Funding Advantages for Start-ups & Scale-ups

  • Allows for good forecasting: You are given specific dates for when you will receive your tax rebates or funding. This provides for financial certainty, which allows you to plan based on solid and reliable incomings. Additionally, outgoings are lowered, and we all know that every penny counts in a start-up.
  • Loss making companies get higher R&D funding: Almost all start-ups begin as a loss making enterprise. Accordingly, most startups are entitled to a higher percentage of R&D benefits.
  • Competitive advantage: Utilizing these factors will give you a financial and potentially developmental advantage (if your research is successful). This can give you the upper hand in the highly competitive market that we live in today.