Research and development grants

Access to cash is a necessity for all growing firms, in particular emerging hi-tech businesses for whom meaningful revenues remain some way off. Government grants offer an attractive alternative to venture capital and debt for such firms.

Access to cash is a necessity for all growing firms, in particular emerging hi-tech businesses for whom meaningful revenues remain some way off. But while securing suitable debt facilities or venture capital investment is a priority for many young technology companies, Government grants offer an attractive alternative.

See also: 10 Business Grants for UK Start Ups and Growth Businesses

Organised by the Department of Trade & Industry (DTI) in England – with similar schemes operating in Scotland, Wales and Northern Ireland – research and development grants are available for businesses of all sizes. The only requirement is that those applying are developing technologically innovative products and processes that will benefit, not only their own activities, but also the UK economy as a whole.

In England, four strata of support grants are available:

Micro Projects

Offer awards of up to £20,000 to businesses with fewer than ten employees,

Research Project

Those successfully applying for Research Project status may receive up to £75,000. In order to qualify for this latter category businesses must employ fewer than 50 staff and should be carrying out projects with a scientific or technical leaning over a six-to-18-month period.

Development Project

At the larger end of the spectrum, grants of up to £200,000 are available for those with technologies at a pre-production stage and that employ fewer than 250 people.

Exceptional Projects

Those deemed to be running Exceptional Projects meanwhile, may receive up to £500,000 to assist in the development of very high cost technologies that are likely ‘to generate much wider economic benefits and must have strategic importance for a technology or industrial sector’. To qualify in this final category, firms must again employ fewer than 250 individuals.
 

As with venture capital funding, the odds are stacked heavily against those applying. That said, there have been numerous examples of business who have received Government research and development grants and have gone on to establish sizeable companies.

For example, Disperse – a business centred on a new way of manufacturing creams for the pharmaceutical and cosmetic industries – was established by consultant chemist Derek Wheeler in 1996 and was initially run from a bedroom office in Dorking. Then Disperse applied for a Smart Award (forerunner to the current research and development grant scheme) and received £45,000 to develop its technologies. Following a four and a half year stint on OFEX the company graduated to AIM 12 months ago and is now valued at more than £13.5 million.

Fellow AIM companies ClearSpeed Technologies and Oxonica, meanwhile, have each received Exceptional Project awards of around £450,000 in recent times. The former has used the cash to develop innovative microprocessors, while the latter has focused on deriving specialist nanotechnology products for the energy, healthcare and materials sectors. Having already developed products for, and signed significant agreements with, retailer Boots and bus operator Stagecoach, Oxonica has seen its market valuation soar above £60 million.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.