How to Use Structural Funds for Startup Support – Guide for Startups

• May 30, 2024

In its commitment to fostering entrepreneurship, the RAISE initiative has spent the last two years crafting a comprehensive support system for startups and scaleups, guiding them through every stage of their journey. Central to this support arsenal is the invaluable resource, the “How to Use Structural Funds for Startup Support” guide. This guide for startups offers crucial insights into accessing European funds, which serve as vital conduits for the European Union’s efforts to strengthen employment opportunities and cultivate a sustainable economy.

At the core of the guide are the European Structural Investment Funds, Next Generation EU, and the Just Transition Funds—key pillars of financial support that underpin the EU’s vision for economic growth and resilience. Through detailed research and analysis, the guide presents the scope, access criteria, and practical examples of leveraging these funds to propel startup success.

The EU Funding Landscape

The EU’s funding structure reflects its commitment to fostering innovation, addressing climate change, and promoting social inclusion. With initiatives like the European Green Deal and NextGeneration EU, the EU aims to build a resilient, sustainable, and digitally advanced economy. Startups will benefit from a range of funding instruments tailored to support their growth and development.

---

1. Cohesion Fund: Promoting Sustainable Development and Connectivity

The Cohesion Fund (CF) is an important part of EU funding, aiming to reduce economic disparities, promote sustainable development, and enhance connectivity across the region. With a focus on initiatives aligned with EU climate objectives, startups can tap into CF support for projects related to clean energy transitions, sustainable mobility, and environmental sustainability. However, navigating the CF’s scope and criteria requires an understanding of its emphasis on sustainability and connectivity.

The Cohesion Fund (CF) has two goals: to reduce economic and social disparities and gaps, and second, promote sustainable development. Furthermore, the CF aligns with the EU’s overarching goals by steering investments towards a greener, low-carbon economy and fostering enhanced connectivity across the region. It actively promotes initiatives such as clean energy transitions, circular economy practices, and sustainable urban mobility, in line with EU directives and policies. Beyond environmental objectives, the CF extends support to activities enhancing mobility infrastructure, both at the national and cross-border levels, facilitating transportation networks and bolstering economic integration. By emphasising these dual objectives of sustainability and connectivity, the Cohesion Fund plays a crucial role in steering the EU towards a more equitable, resilient, and interconnected future.

The Cohesion Fund provides support to Member States with a gross national income (GNI) per capita below 90% EU-27 average to strengthen the economic, social and territorial cohesion of the EU. For the 2021-2027 period, the Cohesion Fund concerns Bulgaria, Czechia, Estonia, Greece, Croatia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Portugal, Romania, Slovakia and Slovenia.

As a sign of the commitment of the CF to the EU climate objectives, it is important to highlight that the financial allocation of the CF, 37% of its financial allocation will be directed towards supporting these objectives. The Cohesion Fund finances programmes in shared responsibility between the European Commission and national and regional authorities in Member States. The Member States’ administrations choose which projects to finance and take responsibility for day-to-day management.

Scope of the Fund

Regarding the scope, in article n.6 of the Regulation, it is determined that the fund will support four types of activities: 

1. investments in the environment, including investments related to sustainable development and energy presenting environmental benefits, with a particular focus on renewable energy; 
2. investments in Trans European Transport Networks (TEN-T); 
3. technical assistance; 
4. information, communication, and studies.

Criteria

The criteria, as in the case of the ERDF, is based on the shared management mechanism. This means that deciding which projects gets funded is the responsibility of the authorities of each MS, through its national, regional and local governments. Therefore, a start-up willing to get funding for its initiative would need to discover which is the authority in charge of this in their home state, in order to be able to present their project and apply for funding.

Click here to find which is the national authority of your country.

It must be noted that considering the magnitude inherent to the kind of initiatives that fall within the scope of the fund, such as sustainable transport initiatives, it might be certainly difficult for start-ups to obtain this funding.

Cohesion Fund and startups

As mentioned before, CF is managed by national authorities therefore the public authorities have the power to decide which project/infrastructure they prefer to finance. For example, many projects that were financed by this Fund were in the transportation field. It includes large-scale projects such as a bridge in Croatia, and a railway in Slovakia, and smaller projects such as new electric buses in Bulgaria. Startups have to check the calls at local level and see if they have the requirements to apply for them.

---

2. European Social Fund +: Investing in People and Social Inclusion

The European Social Fund + (ESF +) is dedicated to investing in people, supporting employment, education, and social policies across the EU. Startups can benefit from ESF + support for projects aimed at promoting skills development, gender equality, and social inclusion. With a broad range of financial instruments available, startups have opportunities to access funding for their initiatives, provided they align with the fund’s objectives.

Scope of the Fund

• ESF + objectives include improving access to employment, enhancing education and training systems, and fostering lifelong learning.
• Investments in smart specialisation, industrial transitions, and entrepreneurship contribute to broader policy objectives.

The European Social Fund is designed and implemented in a partnership between the European Commission and national and regional authorities. This partnership also involves a wide range of other partners, such as NGOs and workers’ organisations, in the design of the ESF strategy and the monitoring of its implementation. Two other important principles guide the functioning of the ESF:

1. Co-financing ensures ownership at national and regional level: ESF funding is always accompanied by public or private financing. Co-financing rates vary between 50% and 85% (95% in exceptional cases) of the total project costs depending on the relative wealth of the region.
2. Shared management allows for taking responsibility at the appropriate level: ESF guidelines are designed at European level through consultation with a wide variety of stakeholders, and Operational Programmes are negotiated between national authorities and the Commission. Implementation on the ground, through Operational Programmes, is managed by the relevant authorities in each country.

Under the ESF+ strand, actions are implemented to achieve the specific objectives mentioned above, while also contributing to broader policy objectives related to a smarter and greener Europe. These efforts involve developing skills for smart specialization, supporting industrial transitions, promoting entrepreneurship, and fostering a low-carbon economy through education and training initiatives. 

Criteria

• Eligibility extends to legal entities established in EU Member States or associated countries.
• Financial instruments such as loans, microcredits, and guarantees offer support to startups and SMEs.

A broad range of ESF-supported financial instruments can be potentially implemented:

1. Loans,
2. Microcredits,
3. Guarantees,
4. Equity. Equity can be invested at different stages in the lifecycle of a business, but publicly-backed equity is most used as early-stage capital for seed and start-up funding.

Summing up, the most relevant aspect to take into account, with regard to the possibility of a start-up applying for this fund, is the capability of the fund to fall into the main objectives and the scope of the ESF+.

Example of successful use of European Social Funds

Sviluppumbria, the regional development agency of Umbria, Italy, in 2016 launched the Creativity Camps. They are workshops which provide participants with the tools to translate the results of their studies, their insights, and their creativity into innovative businesses that can compete on the market by offering original products and services.

Participants, together with experts in the field, become aware of their own motivation and attitude towards being an entrepreneur and are stimulated to take a critical view of their business idea. Professionals, entrepreneurs, market operators were involved in order to interact with participants from the very beginning and prepare them for the challenge of the market. More than 60 young entrepreneurs participated in these Creativity Camps.

More info can be found at: http://www.creativitycamp.eu/SitePages/default.aspx

---

3. European Agricultural Fund for Rural Development: Promoting Sustainability in Rural Regions

The European Agricultural Fund for Rural Development (EAFRD) supports the sustainability and competitiveness of rural economies, complementing the EU’s Common Agricultural Policy. Startups operating in rural areas can leverage EAFRD funding for projects focused on innovation in agriculture, forestry, and rural development. However, accessing EAFRD funds requires alignment with the fund’s priorities and objectives.

For the period 2021-2027, the EAFRD budget stands at 95.5 billion euros, including an additional 8.1 billion euros infusion from the Next Generation EU recovery instrument to tackle the challenges brought about by the COVID-19 pandemic.

Scope of the Fund

The European Union has outlined six primary areas of focus in Rural Development:

• Facilitating the transfer of knowledge and fostering innovation in agriculture, forestry, and rural domains;
• Strengthening the sustainability and competitiveness of various agricultural practices, while advocating for innovative farming techniques and sustainable forest management;
• Advocating for the organization of the food chain, ensuring animal welfare, and implementing risk management strategies in agriculture;
• Initiating efforts to restore, preserve, and enrich ecosystems linked to agriculture and forestry;
• Supporting resource efficiency and facilitating the transition towards a low-carbon, climate-resilient economy within the agriculture, food, and forestry sectors;
• Encouraging social inclusivity, poverty alleviation, and economic progress in rural regions.

Criteria

• Funding is channeled through national or regional rural development programs, emphasizing collaboration with local authorities.
• Startups must demonstrate the viability of their projects and alignment with EAFRD objectives to access funding.

Starting in 2023, rural development initiatives will be integrated into the structure of national Common Agricultural Policy (CAP) strategic plans. Each EU member state will formulate a CAP Strategic Plan, amalgamating funding for income support, rural development, and market measures. 

In crafting these strategic plans, member states will contribute to nine specific objectives through a toolbox of comprehensive policy measures provided by the Commission, tailored to national requirements and capabilities. 

Within this framework, the Commission aims to enhance the adaptability of rural development initiatives to address present and future challenges such as climate change and generational renewal, all while maintaining support for European farmers in fostering a sustainable and competitive agricultural sector.

EU member states execute the European Agricultural Fund for Rural Development (EAFRD) funding through rural development programs (RDPs). These programs, co-financed by national budgets, can be designed on either a national or regional scale. While the European Commission oversees and evaluates RDPs, decisions regarding project selection and disbursement of funds are managed by national and regional authorities.

For more specific information on the implementation and application of the Common Agricultural Policy (CAP) in each EU country click here.

Through financial instruments, the EAFRD acts as a source for loans, microcredit, guarantees and equities, available to recipients in agriculture, forestry and rural areas who are undertaking financially viable projects that support the priorities of the EAFRD.

Financial instruments are expected to support the agriculture and agri-food sectors to make the progress needed for the European Green Deal and to achieve ambitious targets in line with the new Biodiversity and Farm to Fork strategies. They can also contribute to the new long-term vision for rural areas by helping rural non-agricultural SMEs start or develop their activities.

Open calls related to the European Agricultural Fund for Rural Development can be found on the portal EU Funding & Tender Portal of the European Commission at the following link: https://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/programmes/agrip

---

4. Next Generation EU (NGEU)

The NextGeneration EU (NGEU) initiative stands as one of the most extensive stimulus packages ever assembled, boasting a total of 806 billion euros sourced from European Union funds. Crafted with precision, this fund allocation aims to empower EU member states to forge a greener, digitally advanced, and resilient Europe in the face of the pandemic.

A considerable portion of the Next Generation EU funding is earmarked to bolster a digitally oriented growth strategy, aiming to foster equity through innovative solutions that enhance citizens’ well-being and fortify economic resilience.

Scope of the Fund

Centred on six primary domains, the investment initiatives of NextGeneration EU aim to:

• Cultivating a robust data-driven economy to spur innovation and job growth;
• Facilitating enhanced connectivity and the deployment of cutting-edge, resilient digital infrastructures, such as 5G networks;
• Advancing digitalisation and innovation within Public Administration, including the judicial and healthcare systems;
• Promoting the digital transition of businesses;
• Strengthening capabilities in critical sectors through the utilization of digital tools such as AI, cloud computing, and cybersecurity measures;
• Adapting educational systems to support digital skills development and facilitating reskilling and upskilling initiatives.

NGEU will play a key role in making Europe the first climate-neutral continent within 2050 by:

• Investing in future-proof clean technologies;
• Improving energy efficiency of public and private buildings;
• Promoting sustainable, accessible, and smart public and private transportation
• Enabling a more circular economy;
• Supporting the transition towards renewable energy sources.

Criteria

Any company, self-employed or individual can access the European Next Generation EU fund. The main condition is that the investment is destined to one of its four transversal axes: ecological transition, digital transformation, social and territorial cohesion and social and gender equality.

There are several ways to apply for these European funds and once the States have accessed the money from the European Union, they implement different aid programs that are articulated through: direct aid and subsidies offered by the ministries, through the calls being launched by the autonomous communities or through indirect investment thanks to the entities that work with the Administration.

NextGeneration EU and startups

SMEs and startups with proposals related to the digital transition, sustainability and social inclusion will be able to access the Next Generation EU European funds. To obtain them, companies must make the right choice of which fund to apply for and prepare to present their project. The projects that often succeed in these applications are those related to cybersecurity, artificial intelligence, robotics, machine learning and deep learning, and that also have at least €175,000 of investment. 

The Spanish Chamber of Commerce has indicated that 60% of companies are unaware of the existence of these Next Generation EU funds, while 73% do not know how to apply for subsidies.

Example of successful use of funding from NextGeneration EU

AI & GAMING (JURK) EDIH[1] acts as a one-stop shop and represents the center of digitisation and digital transformation for small and midsized entrepreneurs and for the public sector in central Croatia and the northern Adriatic. EDIH offers the possibility of introducing all digital technologies into the operations of business entities or institutions from the public sector, with a special focus on the fields of artificial intelligence, gamification, and Blockchain.

This Digital Innovation Hub is a unique place where the love of video games becomes serious business and offers offices and coworking space, conference rooms, video and music studio, virtual reality equipment, motion capture studio, studio for photogrammetry, 3D printers and computer equipment to the companies willing to establish there their premises.

This project was launched in December 2022 and will last until the end of 2025. So far, more than 80 startups have been supported thanks to the Next Generation EU funding scheme. More info can be found at: https://gaming-edih.hr/en/about-the-project/.  

---

5. Just Transition Fund: Facilitating Climate Neutrality and Economic Transition

The Just Transition Fund plays a crucial role in supporting regions as they transition to a zero-emission economy, particularly those most affected by the shift away from fossil fuels. With a focus on economic diversification, worker retraining, and social inclusion, startups can explore opportunities under the Just Transition Mechanism. However, alignment with the fund’s priorities and engagement with national authorities are essential for accessing support.

The Just Transition Mechanism is built upon three pillars:

1. The Just Transition Fund;
2. A tailored scheme under the InvestEU program; and
3. A public sector loan facility in collaboration with the European Investment Bank aimed at mobilizing additional investments for the affected regions.

Scope of the Fund

• The Just Transition Fund aims to mitigate the impact of the climate transition on regions and foster a zero-emission economy.
• Investments target economic diversification, worker retraining, and decarbonization of local transport.

The Just Transition Fund is a 17.5 billion euro fund allocated by the EU to help member states use fossil fuels as little as possible. The Fund serves as a pivotal instrument in bolstering regions most impacted by the shift towards climate neutrality while curbing the rise in regional disparities. Its primary aim is to alleviate the repercussions of this transition by financing the diversification and modernization of local economies and mitigating adverse effects on employment.  In fact, the Fund also aim at becoming a support for the regions, in order to be able to help SMEs, start-ups, but also workers, so that they can acquire all the knowledge and skills useful for obtaining jobs that respect the economy of the future. In addition to all this, there is also funding for the so-called “decarbonization of local transport”, as well as various activities that fall under social inclusion and education, again to promote a zero-emission economy.

The Just Transition Fund primarily dispenses grants, while the specific transitional scheme under InvestEU aims to attract private investments. The endeavours of the European Investment Bank are intended to galvanise public financing.

Support extended through the Just Transition Fund is directed towards fostering economic diversification in regions most impacted by the climate transition, alongside retraining initiatives and active inclusion measures for their workforce and job seekers. Eligibility criteria for investments under the other two pillars of the Just Transition Mechanism are broader and designed to encompass activities related to the energy transition as well.

Criteria

• Territorial Just Transition Plans guide the allocation of funding, requiring collaboration between member states and the EU Commission.
• Startups must align their projects with the fund’s objectives and anticipate the socio-economic impacts of the transition.

NextGeneration EU and startups

The fund is a key element of the Green Deal and aims to pave the way for a green and sustainable economy by providing support for renewable energy, start-ups, knowledge transfer, redevelopment, social infrastructure and cultural projects.

Start-ups and small and medium-sized enterprises can submit projects concerning the ecological and digital transition, financed with European resources.

---

Navigating EU Funds for Startup Growth

In conclusion, the EU offers a diverse range of funding opportunities for startups to drive innovation, sustainability, and social inclusion. While accessing these funds may pose challenges, startups can leverage their creativity, resilience, and alignment with EU priorities to secure support for their initiatives. By understanding the scope, criteria, and objectives of key funding mechanisms like the Cohesion Fund, ESF +, EAFRD, and Just Transition Fund, startups can chart a path towards growth and success in the evolving European startup ecosystem.

RAISE Initiative: Empowering Startups Through Collaboration and Exchange

Between EU funding opportunities, initiatives like RAISE (Regional Associations Incubating Startups for Europe) project emerge as catalysts for startup growth and cooperation. RAISE aims to create an interconnected startup ecosystem by fostering collaboration among associations, mapping regional funding instruments, and advocating for startup-friendly policies.

Impact of RAISE Initiative

• RAISE facilitates permanent cooperation between associations to achieve impact towards scale-ups, creating a supportive ecosystem for startups.
• By mapping regional funding instruments, RAISE enables startups to navigate the complex funding landscape and access relevant opportunities.
• Through advocacy for startup-friendly policies, RAISE contributes to creating an enabling environment for startup growth and innovation.

Key Considerations for Startups:

1. Alignment with EU Priorities: Startups seeking EU funding should align their projects with EU priorities such as sustainability, digitalization, and social inclusion to maximize their chances of success.
2. Collaboration and Engagement: Engaging with relevant stakeholders at the national and regional levels is essential for navigating EU funding mechanisms and accessing support.
3. Innovation and Adaptability: Startups should demonstrate innovation and adaptability in their projects, addressing current and future challenges while contributing to EU policy objectives.
4. Persistence and Resilience: Navigating EU funding can be complex, requiring persistence and resilience. Startups should be prepared to overcome challenges and seize opportunities along the way.

Looking Ahead: Opportunities for Startup Growth in the EU

In conclusion, EU funding presents a wealth of opportunities for startups to accelerate their growth, drive innovation, and contribute to a sustainable and resilient economy. By understanding the funding landscape, engaging with relevant stakeholders, and leveraging initiatives like RAISE, startups can navigate the complexities of EU funding and embark on a path towards success in the dynamic European startup ecosystem.