European Union Cash Up for Grabs for Croatian Technology Companies

March the 1st, 2022 - European Union (EU) funds are up for grabs by Croatian technology companies in the current programming period of the bloc for the period between 2021 and 2027.

As Poslovni Dnevnik/Tajana Striga writes, the current programming period of the European Union, planned for the period from 2021 to 2027, is the most generous so far and makes over 25 billion euros available to the Republic of Croatia. By comparison, Croatia's annual gross domestic product was just over 55 billion euros last year. The size of the funds available is encouraging, but it still isn't enough to declare success.

Only the efficient and market development-oriented distribution of those funds can lay a sound foundation for the growth and development of the Croatian economy in the long run. The first step in this is to provide clear, accurate and above all adequate information to potential applicants so that they can identify tenders of interest as soon as possible and start preparing for them.

Among the first tenders announced for this year is the "Commercialisation of Innovation", which is planned for the first quarter of the year. The competition is aimed at small and medium-sized enterprises with mature innovation projects that are close to entering the market (TRL level 7 or higher). TRL (or Level of technological readiness) is a measurement system in which each level is characterised by a stage in the development of technology. There are 9 levels of technological readiness, and in order for a given project to be considered level 7 and eligible for funding under this tender, it's necessary to have a prototype whose performance has been tested out in an operational environment at the pre-commercial level.

In addition to the above, a clear plan for the production and commercialisation of products (TRL 8 and 9) is needed. In order for a product or service to be considered an innovation in the context of this tender, its functionalities when it comes to terms of application and characteristics must differ significantly from existing market solutions. In addition to the innovativeness of the project, the probability of commercial success will also be taken into account.

Although the details of the tender are still unknown, we've since learned from the National Recovery and Resilience Plan that the total budget for this tender stands at a massive 380 million kuna. The investment will be supported by at least 95 small and medium-sized enterprises during one public call/invitation and the amount of financing per project ranges from 760,000 kuna to a maximum of 5.32 million kuna.

Additional points will be achieved by those proposals that contribute to the green transition by reducing greenhouse gas emissions, increasing energy efficiency and stimulating the circular economy, offering blossoming Croatian technology companies a fighting chance. While the contribution to the green transition isn't explicitly prescribed by the tender, the project must meet the principle of "no significant harm", meaning that it must not have a negative impact on the six environmental objectives set within the EU Taxonomy Regulation.

Environmental objectives include climate change mitigation and adaptation, the sustainable use and protection of waters and marinas, pollution prevention and control, the transition to a circular economy, and the protection and restoration of biodiversity and ecosystems. This form of funding can be used to adapt a developed product or service and prepare for the launch of a product or service, which is perfect for many quickly developing Croatian technology companies. For example, eligible activities to adapt a developed product include the additional testing and incorporation of those test results into a final product, consulting services, capacity building, feasibility study audits, product design, and the protection of intellectual property rights.

Eligible activities for product launch preparation include the preparation or revision of a business plan and/or marketing plan, market research and testing, product testing with potential customers, production preparation and zero-batch investment, as well as operational marketing activities.

In addition to the aforementioned "Commercialisation of Innovation", the first quarter is expected to have yet another tender announced "Grants for start-ups" intended for innovative small and medium enterprises in high-tech sectors and knowledge-based sectors for TRL projects level 5-8, or those projects maturity beyond the concept-proof phase, but not yet ready for the market.

Companies that have been present on the market for a maximum of five years, with a somewhat defined team, and projects with a credible path to commercialisation can apply. The grant serves to support product development and increase existing production capacities, including upgrading, designing, verifying performance, market validation, testing, pilot line development, intellectual property protection and external services aimed at developing innovative ideas (product, process, service, etc) as well as training on the

Funded activities may also include part of the cost of accessing global business networks/clusters, which also involves the adopting of new marketing tools and accessing new markets. Eligible costs include the purchase of equipment, materials, staff recruitment and outsourcing. The total budget for this tender is planned in the amount of 141.7 million kuna, and the investment will support up to 141 small and medium-sized Croatian companies with individual grants of up to 1 million kuna.

In general, the focus of policies and measures of this EU programming period is the pursuit of systematic integration of sustainable development and green and digital transformation of the economy, which is something most Croatian technology companies also place a focus on, be it directly or otherwise. Thus, in the second quarter of the year we can expect the tender called "Digitisation Vouchers" with a maximum grant of 150,000 kuna, as well as the tender called "Digitisation Grants" with a maximum grant of 750,000 kuna on offer.

During the year, the announcement of the tender "Support to companies for the transition to energy and resource efficient economy" with a maximum amount of support of 7.5 million kuna is expected, and eligible applicants will be micro, small and medium-sized enterprises, and investments will be directed to energy-intensive industries.

In addition to all of the above, in the second half of the year, we can expect the announcement of the tender "Strengthening sustainability and encouraging the green and digital transition of enterprises in the tourism sector." Eligible applicants for this tender will be micro, small, medium and large companies engaged in the field of tourism and hospitality, and the primary focus will be on investing in less developed tourist areas of Croatia.

In the potential lack of pre-tender public consultation, the timeframe for preparing extensive draft documentation is relatively short. The very serious preparation of projects that maximises the probability of success in the tender takes months and requires a significant amount of human resources. At the same time, despite the significant increase in the amount of available funds, the level of competition among interested applicants has increased, as more and more companies are turning to this form of financing.

On top of that, significant interest in grants can be expected from young and innovative companies, such as Croatian technology companies, given the fact that traditional banking financing is often not a realistic option for them, while alternative sources of financing in Croatia are still at negligible levels.