Lesson Progress
0% Complete
Transcript
So I think public funding is always overwhelming in the beginning because we never know where to start, where to look, because there is not one public funding. Now every region every city has their own.
So I just want to explain firstly what public funding types do we have. And that would mean the public funding types are like grants. Innovation grant for example or the startup grant where you get the money and you don’t have to pay it back. Then we have loans, guarantees, and equity. For example, the European Commission gives that away like loans is just something you need to pay back, but guarantees is which your company can get that you get cheaper loans from banks for example or they always can take equity from your company. But this is mostly in research or innovation companies. And then we have another public funding. It’s the subsidies most known I think from the ‘Agra’ industries, so if you do for example organic farming, you can get subsidies which can be in your cash flow or also indirect. Then we also have the prices which we actually don’t put normally in the public funding category but that means winning rewards in competitions. There are a lot of business plan competitions or innovation prizes and there you can always get like between 5 to 50 thousand euros. So, it’s not small money we are talking about.
So what is also the difference between subsidies and grants is that normally grants are more for individuals than for companies. For example a grant can look like that you get for 12 months a salary which you don’t need to pay back. It just gives you the opportunity that you can follow your idea and evaluate if it’s actually possible. Whereas a subsidy you mostly get if you’re already a founded company and a subsidy can also be a direct payment or it can be an indirect payment such as tax breaks or, what I mentioned also a loan guarantee to just get a better offer from a bank for example.
I see definitely the benefits in public funding because as I mentioned especially the grants in the beginning like in the precede phase of your company, it gives you financial freedom. If you don’t have to worry about your salary for one year, that really makes you dive into your idea and really think about it deeply and you can act way more free than if you have to worry about your next month’s salary.
It’s also different to venture capital. So, most of the times you don’t lose equity which also gives you the complete control over your idea and company and visions. And most of the times it’s also like secured funding over a longer period, so it’s not one time you get like a payment for a month, it’s normally minimum six months up to two years or three years. So I think the benefits are really high, but of course there’s also a lot of admin work around it and it’s not that you get it for free, you really need to work hard for it to meet the criterias they have.
Some examples for public funding, it’s really different if you were like an individual or a company. But if you’re an individual, there are like startup funds from the city of Berlin for example or one which is focused on research and innovation is the exist ground for that you need to hand in for example a really well done business plan which is already two months three months of work. The public funding for businesses, this is mostly coming from the Ministry of Economics in Germany for example or from the EU Commission and even also from the investment banks from the states; Berlin or Bavaria or something like that. And that means just that they give you kind of grants which your company can get. But there is really the difference that you apply for the grant and you already say what you need it for. So, it’s not that you get like two hundred thousand and you can spend it and whatever. It’s more like I’m planning to develop an app and I need to pay a development agency and I need money for that. So, what they do then is offering a matching ground which means like they take 75 percent of the costs for example and you need to have yourself the matching twenty-five.
Important for this matching grants is really that you need to pay the bills before, and then you can hand in the bills to the investment banks and then you get it refunded. And this is also important to know because we got it but especially for young companies hard to make it because it’s not easy to have your cash flow that high, that means you have if you get it from an development agency an invoice over 80 thousand euros, then you need to pay these 80 thousand euros first and then it can take months to get it reimbursed. And to close this gap, you need to be really aware if you have the cash flow for that because it can be a point where you then need to say I’m bankrupt because it takes too long that I get the money back but also for that there are more different choices you can take like you can talk to your bank and say like I need some short-term loans for example just to close the gap for example. So, there’s really differences from grant, subsidy, to grant, it’s really important to check all the criterias and just ask them.
