Give startups bonuses
A startup needs money. That's a correct, simple statement, isn't it? But where does the money come from? First of all, there is organic and inorganic growth. Organic growth (bootstrapping) explains the process of setting up a company without external funding. Basically, the founder supports the entire company with his private assets and savings.
This usually works quite well when the founder has the financial buffer until the company reaches a particular stage where it needs higher sums of money from outside investors to be able to scale.
In such cases, a variety of external funding may be appropriate. For the seed stage and anything in the later stages (Series A, B, etc.), venture capital firms can be a great asset.
For really young companies in the pre-seed phase or immediately after the start-up process, business angels, family offices and startup accelerators can also provide money to help these companies grow in the early phase. However, there is one method of external funding that is greatly underestimated - public grants.
First some good news: There are around 2000 different grants made available by the German government, the EU and regional governments such as the Free State of Saxony or the City of Leipzig.
This high number has the disadvantage that founders often feel overwhelmed by the great variety of funding. There are two forms of public funding.
One form is the granting of cash with a subsidized interest rate and guarantees. The other form is non-refundable cash / grants.
We are talking about non-repayable grants here. As a rule, the funding organizations demand their own share of the funding from the applicants, usually 50%.
Exceptions are (startup) projects initiated by science. In these projects, the personal contribution represents the time invested by the people. The guidelines in these funding programs are very strict and must be adhered to under all circumstances.
Basically, it is reduced to reporting and proof obligations that what the recipient has promised will also be adhered to. It should be reasonable and workable.
In principle, anyone who wants to set up a company can submit an application to the funding institution. However, it is advisable to seek counseling before and during the application process to save time and effort.
Saxony, in particular, offers attractive funding programs for start-ups as part of its state-political and innovation-oriented orientation. We are on hand to provide advice and assistance to those interested in setting up a business and help to keep the Saxon start-up climate attractive for the next funding period from 2021.
This article aims to make the process of finding the right grant easier.
HERE IS A LIST OF THE 7 MOST IMPORTANT SUBSIDIES AVAILABLE FOR FOUNDERS AND STARTUPS IN LEIPZIG, SAXONY AND GERMANY
1. EXIST Scholarship (BMWi)
The EXIST program is a well-known initiative of the Federal Ministry of Economics and Technology (BMWi), which aims to help students or academic staff to turn a scientific idea into reality.
On average, 59% of all Saxon applicants successfully receive funding. Over a period of 12 months, the founders receive between € 1,000.00 - € 3,000.00 per month (depending on the level of training; Master, PhD) and up to € 30,000.00 for material tasks. On average, EXIST is giving away € 120,000.00 per grant.
On average, 59% of all Saxon applicants successfully receive funding.
Requirements for the application:
- The applicant for the scholarship should be in the second half of their studies or they should have completed a research assistant no more than 5 years ago.
- The number of founders should be three do not exceed.
- The startup project must be innovative and related in some way to the technology.
- The idea needs a strong USP.
- The university must be part of the start-up network and provide the founder with a mentor and a place to work, with the obligation to use the infrastructure free of charge.
As a rule, the university applies for the EXIST scholarship on behalf of the founders. Both the university and the founders are equally involved in the application process. To apply you have to go through the following 6 steps:
- The founders hand over their concept paper to the university.
- The founders appoint a mentor from the university.
- The responsible startup network provides a suitable coach who supports the founders.
- The university must prove that it is part of the start-up network.
- The founders must take part in a consultation with the university's start-up initiative.
- The university forwards the application to the lead partner “PTJ Jülich”.
The PTJ Jülich was commissioned to carry out the entire evaluation process for the applications for the EXIST program. If the application is successful, the university receives the money and forwards it.
What happens after I get funding?
During EXIST, several compulsory seminars have to be attended in order to be able to present a draft of the business plan. The final business plan must be available at the end of the 12-month period. In addition, it is possible, but not mandatory, to set up the company within these 12 months.
Important information about EXIST:
- Some elements need to be considered when applying. For example, the “Innovation” part should be highlighted very carefully.
- The idea and / or the product should be related to science. Industrial property rights are an advantage, but not a requirement. It doesn't hurt to plan for patenting.
- A homogeneous team, clearly composed of know-how owners and suitable for the implementation of the project, is essential for an approval.
- Often the decisive factor for a later improvement is an external contract, e.g. B. for software development. A planned, paid assignment of a know-how owner at a later point in time can be advantageous here.
- A project can be economically viable if it is characterized by a well thought-out business case with sufficiently evaluated market and competition, as well as comprehensible financial planning. Too many Excel spreadsheets are a disadvantage. It is worth getting to the heart of the matter. Ultimately, the innovation has to solve an existing problem and offer real added value for a sufficiently large market.
This technology-driven, innovative company scholarship supports students, past and current research workers who are ready to start an innovative company.
Who can apply:Individuals who are part of a founding team of at least two People are. The applicant must belong to one of the following groups:
- Graduated from a university / professional academy
- Academic staff of a university
- Former academic staff with degrees no older than ten years
In addition, the main or secondary residence must be in Saxony and the company must concentrate on one of the following two areas:
- Innovation in relation to the product or process (technical) that is to be implemented in your own environment
- New, innovative services with great benefits for customers and a clear USP
Last but not least, some final requirements:
- The company must not already be established.
- At least one of the founders must have some economic knowledge.
- The company is a small business.
- At least 15% of the expenditure must be allocated to research and development.
- The founders have never been supported by this scholarship so far.
- The sponsored person must have a managerial position in the company being founded.
Some important notes on the technology start-up grant (SAB):
First of all, an approval requires patience. It takes about 8-12 weeks to process an application. This also includes the obligatory queries from the processor. This is a good thing, because it allows points of view and ideas to be formulated in detail and the help of the processor to be taken into account in the application.
3. InnoStartBonus (SAB)
The InnoStartBonus can be used for spin-offs from a company or for founders who are not eligible for the above-mentioned “Technologie-Gründerzuschuss (SAB)”.
The program is structured like a competition. First, an application with a description of the innovative idea is required. A committee of experts evaluates the ideas received twice a year and decides whether they are eligible for funding.
Once the decision has been made, an application must be submitted to the SAB, which will be processed within a very short time (approx. 4 weeks). This program only covers the cost of living for the founders.
- Persons aged at least 18 years with their main place of residence in Saxony
- For founding teams, a maximum of 2 members
- 1,000.00 € / month
- € 100.00 bonus for children of the founder
- 2 founders eligible
- Maximum duration: 12 months
- The scholarship is paid out in equal monthly payments for the first 6 months. The second 6 months are paid out in one payment. The condition for the second payment is the establishment of the company.
- The company must not have been founded at the time of approval.
- The newly founded company must be based in the Free State of Saxony.
- The funding can only be used once, funding for different start-up projects is not possible
Important information about InnoStartBonus:
University founders can also apply if the research share of the idea is less than 15%. Due to the fact that the jury only meets twice a year, it is advisable to submit the idea early on and at the same time to examine alternative financing options.
4. Innovation bonus (SAB)
In order for a company to be actively innovative, it often requires research and development services that it cannot provide itself. For this reason, the “SAB Innovation Premium” offers small and medium-sized companies grants for cooperation with external research and development service providers.
Expenses for external scientific work prior to product, process or service innovation, such as B .:
- Market research
- Feasibility studies
- Material studies
- Manufacturing engineering studies
Expenditure on external implementation-oriented services with a focus on technical assistance and technology transfer, which primarily have an advisory role and whose main aim is to bring the product, the technology, the service to market.
- Construction services
- Design services
- Product test for quality assurance and environmental compatibility
- Laboratory services
- Preparatory measures for certification
- Purchase of machines, equipment, hardware and software
- Internal expenses of the applicant (e.g. personnel, material and travel costs, expenses for sales and advertising)
- Fees and consulting costs in connection with the protection of intellectual property
- Research and development services carried out in-house
Small and medium-sized commercial enterprises (including craft businesses), the cultural and creative industries and freelance engineers are eligible to apply.
Requirements for providers of research and development services:
- From universities, non-university research institutions and from the private sector
- National or international provider
- Can be a family member, employee, or affiliate
- Research and development services must not include any student or academic work that is the subject of examinations or student projects as part of training and further education units (seminars, courses, etc.).
- For external services, a maximum of 50 percent of the reimbursable expenses
- Up to two innovation bonuses per year
- € 20,000.00 per year
Important information on the innovation bonus (SAB):
- Applications must be submitted before the start of the project to be funded.
- Any delivery or service contract signed in relation to the project is considered the start.
- The project can be started after acceptance.
5. MARKET LAUNCH OF INNOVATIVE PRODUCTS AND DESIGNS (MEP) (SAB)
Once a product has reached MVP / Prototype status, SAB's MEP program should be considered.
A marketable design of a product and bringing it to market can sometimes cost a lot of money. This is where the MEP program comes in and supports the directly attributable costs during the introductory phase with a grant.
Up to € 150,000.00 (75% share for founders)
What could be financed?
- Product design and supporting (external) design services
- Manufacture of a marketable mass production sample or a zero production series
- Actions that serve to prepare for the market launch, such as standardizations and certifications
- Development of a product-related sales / marketing concept, implementation of market surveys and quality / quantity tests
- Creation and production of product-specific advertising materials
Important Notes on Launching Innovative Products and Designs (MEP) (SAB):
Typically, the program should include an application for a marketing and design position.
In this context, personnel costs are usually the largest cost item. If this position is remunerated at the level of the applicable collective agreement, an additional bonus of 10% can be requested.
6. “Innovative Founders” awarded by the city of leipzig
As part of the medium-sized business promotion program of the city of Leipzig, innovative entrepreneurs can receive up to € 4,000.00 as a bonus.
In the context of the “Mittelstandsförderprogramm” of the City of Leipzig, innovative founders can receive up to 4000 € as a bonus.
- Small start-up teams with a future company location in Leipzig
- The company must not be founded more than three years ago (the date of business registration / entry in the commercial register is decisive)
- The idea must have a technical / innovative / creative-innovative component or lead to the merger of several small companies
- Mandatory start-up advice (e.g. SMILE, accelerator program, chamber of industry and commerce, etc.) must be carried out successfully
- The company is the founder's main business
- Job creation in mind
- In general, a first rental or a first purchase of a property should be realized (max. 3 months in advance)
- Companies that are excluded from this grant are listed here: http://www.leipzig.de/mittelstandsprogramm
Applications are accepted all year round free of charge at the Office for Economic Development in Leipzig.
Up to 20 companies per year can receive the award, which is based on an assessment by experts who assess the applicants four times a year.
Criteria for the evaluation of the startups are:
- Degree of innovation
- Use for the customer
- Market potential
- Concept of company
- Relevance of the location
These € 4,000.00 represent a great and comparatively inexpensive opportunity to receive funds from the city of Leipzig thanks to its striving for an innovative future.
7. INVESTMENT GRANT FOR INNOVATIVE START-UPS (BAFA)
This program is designed to help young companies get more investment by supporting investors. A private investor can get back 20% of the issue price of their investment if the investment is held for at least three years.
The investor must provide the company with at least € 10,000.00. If the investment is linked to the achievement of a milestone, then each payment must be at least € 10,000.00.
- The company must have fewer than 50 employees.
- The company must be younger than 7 years.
- It must be a company headquartered in the EU.
- At least one branch (registered in the commercial register) or one permanent establishment in Germany.
- Maximum annual turnover or total assets of 10 million euros.
- Must be innovative (one of the following must be true):
Applications are made on the website. After entering all the required information and submitting the application electronically, it must be printed out and signed. After attaching all the necessary verification documents, it must be sent to the following address:
Federal Office of Economics and Export Control Head of Press and Public Relations
Frankfurter Str. 29-35
65760 Eschborn, Germany
- Commercial register extract
- If the head office is not in Germany -> extract from the commercial register for branch or business registration of the permanent establishment
- In the case of a patent -> copy of the cover or title page of the patent specification
- If research and innovation funding has been received -> copy of the notification of approval or commitment stating that the support relates to a research or innovation project
- If financed by EXIST or similar programs -> copy of the notification of approval
The program, if granted, is valid for 6 months and can be extended if necessary.
- Participation of the investor in the creation of a company
- Investor must send their request first
- The company must submit an application after signing the deed of incorporation (of the articles of association) of the participation agreement
- The company must declare that it is a newly established company with an investor involved in the establishment
- The application number of the investor must be given
- The complete application must be submitted to BAFA no later than three months after the application is submitted by the investor
Every company can receive funds for investments of up to 3 million euros for its share issues. Since the grant is 20%, each company can receive a maximum of € 600,000.00. This money goes to the investors.
Important information on investment support for innovative start-ups (BAFA):
- Closing funding can be subsidized
- Convertible bonds can also be subsidized, provided that the application by the company and the investor was submitted before the loan agreement was concluded and the conversion takes place within 15 months
- The investor can either take the form of a GmbH or a UG (corporate company)
It is very important that the business purpose of the innovative company to be founded contains elements for classification into the product categories that are considered to be innovative.
An example of an application: “The development, hosting, operation, sales and licensing of software solutions with the designation“ xxx ”.
The software solution advises xyz on zyx. In addition, the object of the company is the acquisition, sale and management of investments of any kind, in particular in other companies.
Furthermore, the company takes on management tasks and other services for companies in which it is involved. "
Recently, convertible loans with a maximum conversion horizon of 15 months and, very importantly, follow-up financing have also become eligible. The change in the guideline is very exciting for investors who only need a UG (corporate company) as a legal form.
This means that all possible sensible subsidy constellations are possible.
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