For many fast-growing businesses and SMEs, government grants are a lifeline. Not only do they allow startups to build and grow but they enable founders to secure a much-needed injection of cash without diluting their own share of the business.
But as many of those reading this will know, not all grants are made equal. Many businesses — my own included — are wondering whether they are simply worth the time and effort.
We recently applied for a grant worth over £1.8m, and during the process, our accountant’s report was found to have a £1 discrepancy. As a result, we were told to do the entire application from the beginning, which of course, cost more time and money.
I reflected on what these punitive measures from grant providers actually achieve? And why is there this “gotcha” mentality? It was as if they were delighted to have found a small administrative error that would derail the entire process. Who is this actually helping?
More generally, there seems to be a presumption of guilt by grant assessors that grantees by default are trying to swindle the system.
There is a nagging feeling that we must first prove our innocence and show we are not just trying to pocket government cash. It’s a mindset and process that needs to be challenged.
And that isn’t the only thing that needs to change about the grant system.
Entrepreneurs have greater ambitions than being part of a knock-off Dragons’ Den
Grants are typically paid in arrears, presenting a significant administrative and cashflow problem for small businesses. It presumes that small innovative businesses have the in-house expertise to navigate the complex and rigid cash management processes.
Then there’s the requirement for businesses to match grant awards with their own funding. I personally know of great startups that have jumped through all the hoops to be awarded a grant but who can’t then secure the match funding and so the project has to be abandoned.
This wastes not only the company’s time and money but also that of the government.
If it’s good enough to get a 70% government grant and demonstrate it has the potential to make a material impact on the climate and the economy, then why not make it 100%?
Blue chip companies can absorb the costs of skilled accountants and can manage multi-million-pound cashflows within their wider business, and they can afford to hire professional lobbyists to heavily influence the shape of funding structures.
So these larger, less innovative businesses often go on to win the lion’s share of grants. Meanwhile, huge swathes of startups are left to navigate the so-called valley of death.
There seems to be an almost gladiatorial mindset — to be successful you have to demonstrate that you’re prepared to bleed.
You have to navigate all the red tape — admin-heavy, costly cashflow processes that effectively bankroll government — whilst managing first-of-its-kind manufacturing supply chain, building market confidence and all the other business necessities.
The grant and funding process is at odds with how growing businesses operate.
During the Covid pandemic, the UK government, like many others, fast-tracked contracts for personal protective equipment (PPE) to prevent bureaucracy from slowing down critical supplies reaching the front lines.
I’m not suggesting this “VIP lane” system was perfect, but what it did demonstrate is that governments can fast-track money when it needs to. The climate emergency warrants the same level of urgency and we should learn from Covid emergency funding programmes.
Due diligence is obviously critically important, but so is the climate emergency, and climate-focused grants could be processed more appropriately.
Perhaps SMEs that were able to demonstrate significant climate impact and a track record of mission-oriented commitment could secure 100% funding and share, for instance, any IP benefits accruing with the government. This could encourage the government, as a potential beneficiary of commercial success, to provide concrete support.
Entrepreneurs, and especially climate entrepreneurs, have greater ambitions than being part of a knock-off Dragons’ Den.
There are thousands of great young companies out there that need the oxygen to create a new green economy. With the right support, we can make a difference, rapidly reduce emissions, create good green jobs and make a meaningful contribution to the economy.
