25 (120) 2016
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New approach to R&D funding

by Michał Żukowski, legal counsel, head of legal department, National Centre for Research and Development (NCBR)
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For Poland and, in particular, for the National Centre for Research and Development (NCBR), the previous EU Financial Perspective (2007-2013) was a lesson of how to spend, invest and distribute a huge amount of money effectively.

I would like to emphasise three of the new approaches to public R&D funding as implemented by the NCBR.

When in 2012 two groups of industry associations (aviation and innovative medicine clusters) had concluded agreements with NCBR, we were almost certain it was just the beginning of a new attitude to R&D financing. What was new? The process had been initiated by private entrepreneurs and co-operating research entities. They proposed their research agendas to NCBR and committed almost half of their budgets to NCBR, but they were looking forward to public contribution and expecting NCBR to become a distribution hub of joint financial resources.

Following the first, very successful request for proposals (RFP), NCBR decided to let all sectors take part in the national R&D budget and announced a call for feasibility studies in 2014. At first only three branches were selected: InnoSBZ - supporting innovative unmanned systems (not only drones!), INNOTEXTILE - focusing on textile manufacturing and INNOCHEM - concerning chemical research. The first RFP under INNOCHEM was successfully concluded in May 2016 with 27 projects recommended to receiving a grant. Their total amount of eligible costs was over 161m zlotys.

What the NCBR did next was not close the door to those sectors which were not fully ready to launch their R&D activities and draft proper research agendas. Extra time in 2015 and 2016 allowed a further nine sectors (video games, steel, supply chain sector, automotive, smart devices, electrical power, pharmaceutics, wood industry, and recycling) to take part in the sectoral programmes scheme. Such an approach combines the promotion of those sectors where Poland excels and links strongly into the reindustrialisation of the Polish economy, as set out in the so-called Morawiecki Plan.

The second new approach currently being developed redefines the philosophy of money distribution. A few years ago the NCBR launched two pilot programmes – BRIdge Alfa and BRIdge VC. They represented a first attempt to let managers decide in very risky projects (in pre-seed and seed phase) where and how to invest, as well as supporting returnable capital projects and companies with a product or service close to market entry. NCBR has subsequently built on the success of the pilot editions and expanded these programmes.

The second edition of BRIdge Alfa resulted in 112 proposals filed by investment vehicles (the so-called Alfas) which are now being evaluated. Each seed fund can get 24m zlotys, of which 6m zlotys is its own contribution. 20% of this funding constitutes the administrative budget of an Alfa and consists of the management fee, proof of principle phase and due diligence of the project. The rest of money is dedicated to investments into target companies. Start-ups and companies established during that process may receive another leverage from the fund of funds co-funded by NCBR and Poland’s leading insurance company PZU. Named Witelo, this fund will directly support target companies by skipping financing through a VC fund. This cherry-picking method should encourage the best VC funds to invest in Poland in companies with a Polish nexus (e.g. HQ or main activities held in Poland, know-how/IP created in Poland etc.).

The third novelty concerns project evaluation. Over the last few years, NCBR has used a traditional way of evaluating projects; sending all proposals to external experts, collecting their remarks and taking their average as the final result. A new approach determines three stages of evaluating projects which formally fulfil basic criteria: traditional ‘scientific’ evaluation, a pre-panel meeting to select proposals to qualify for the final stage – a Dragons' Den-like meeting with the company that submitted the application. In this formula, company founders or their representatives (excluding advisors) need to defend their idea in the discussion with experienced business professionals. The main aim of these changes is to prevent inappropriate projects from being selected and to meet people behind projects funded from public money in person. Will it be more effective this way? We shall find out in the next five years.

In my opinion, these three factors are the result of NCBR’s radical modifications of the R&D funding ecosystem. If we add the many different programmes and incentives provided by other agendas and public companies, as well as upcoming legal changes aimed at making it easier to run R&D businesses, we can start envisaging Poland as becoming the next start-up nation.

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