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Finance Focus helps businesses navigate the ever-evolving world of finance. Each episode features expert insights, practical advice, and in-depth discussions on topics such as crowdfunding, trade finance, angel investing and debt. Hosted by Tracy Smart from The Smart Team and Sam Jones from Satellite Finance.
[00:00:00] Sam Jones: Hello and welcome back to Finance Focus. I should also say good day, bonjour, and buenos dias to our international listeners because we have gone global. so you're joined with me, Sam Jones, Finance Broker, Tracy Smart, the Smart Team, the FD, with all the knowledge of the numbers, and Paul Finn from Oxford Drug Design. Today we are talking about grants.
[00:00:26] Tracy Smart: So, Paul, we've worked together a few years now at Oxford Drug Design and you're Chief Scientific Officer there. But one of the things that you bring to business outside of your scientific skill set is all the money you've been raising through grant funding over the years. Why don't you introduce yourself and tell us a little bit more about it.
[00:00:45] Paul Finn: Yes, I'm the Chief Scientific Officer at Oxford Drug Design, so my main role in the company is to, guide the scientific developments of our projects, where we're trying to obtain novel drug therapies for serious diseases like cancer or bacterial infections and also the software that we develop.
But as a small company, you need to raise money from whatever source you can get. And so over the years, I've spent quite a lot of my time, submitting grant applications and in addition to that, I also spend some time on the other side of the fence, actually reviewing grants for various bodies, including the European Union.
So, over the years, we've succeeded in getting funding from, a number of different sources in the UK, the United States,and in Europe, and in aggregate, I think we've raised over, ten million dollars through grant funding, over the last, ten years or so. So that's been, very helpful for the company.
[00:01:42] Tracy Smart: So often people say grant funding's fantastic for their business because it's non diluting. What that means is that you don't have to issue shares in return for that funding. But there are a few other things that people need to think about, aren't there, when they're thinking about applying for grants.
[00:01:58] Paul Finn: Yes, there are lots of things to think about. there's of course, the bureaucracy, we might talk a little bit about that later on in the podcast. There's the fact that, the non dilutive funding, not always 100 percent of the project costs.
Sometimes it's only a proportion. So you have to think about where that matching funding is going to come from and usually the grants are you know entirely on without strings. You know there's no share of the results or the intellectual property that's developed, but some, funding agencies do like to try to, get some, return, when they fund commercial companies, if the project is ultimately very successful.
So you need to think about that as well.
[00:02:36] Sam Jones: How do you start the process as a new company with a, with an exciting idea? How do you begin to think about and get ready for grant funding?
[00:02:44] Paul Finn: I mean, the first places is to just think about, you know, what sources of funding there are that you could apply to There are quite a few of them, but they're quite diverse and different companies will, find greater success, I think, with different of those sources.
So, there are charities, The British Heart Foundation, for example, a well known charity, you know, funds research, mostly with academic groups, but it can also fund researching companies. if,that's,meeting their charitable remit, and that can be a good source of funding if you're working in one of those areas.
The UK government, funds the research councils, and most of that money goes to academics again, but some, there are some opportunities for joint funding with academics to fund the company. Innovate UK is the UK government funding agencies for more commercial activities. So that's a place to look on their website.
And as I say, we've also,historically,had a number of grants from the various European Union funding schemes, and each of those is sort of different in the sorts of things it requires of the company and, yeah, how you need to structure the grant application in order to maximise your chances of success.
[00:03:49] Tracy Smart: And you don't have to be going on your own, do you? You can apply for a grant as a collaborative team with other partners.
[00:03:55] Paul Finn: You can, and, that's, I think, quite a good way if you're starting out on this, because there is a bit of a steep learning curve, which varies a little bit from agency to agency. But, one of our early grants was with the European Union Funding Scheme, and they, very often, have these collaborative funding schemes where a mixture of companies and academic groups join together with a common overarching theme, which they will fund. And if you can, join one of those consortia and two or three of the companies have had some experience, that's a great way to learn what to do because each funding agency has its own little wrinkles and rules and things that they expect to do. So that we found was really quite a good way to get some knowledge of how to approach it, which you can then generalize to other funding bodies as well.
[00:04:45] Sam Jones: You mentioned you,process the grant applications as well, or you assess them. What would be a good starting point for a company? What makes it look like a good application from day one? What do they have to have in place to make you warm to it?
[00:04:57] Paul Finn: This is possibly the area where,the most sort of errors or, shortcomings in grant applications emerge. Companies are often very interested in their science, that's what they want to pursue, they want to develop.
But the funding body is looking for more than that. And this is very explicit in the application process, but those other parts are often not written to the same level of detail and to the same extent as the scientific part.
So the funding bodies will, want to know about how you're going to manage the project and it has clear milestones and progression and so on, and that part is sometimes neglected. And the funding bodies increasingly are interested in understanding how both you will make money out of this and how you will exploit the results.
And I guess if it's European Union, how therefore Europe becomes more competitive, on a more global level. And that part is also frequently neglected. So, it's having a misbalanced application, struggles to get through and if you're when you're first doing this, yeah, that's a trap that's easy to fall into.
[00:06:02] Sam Jones: Could be quite daunting. I'd imagine to, think about yourself and then the bigger impact internationally on your product.
[00:06:08] Paul Finn: It is. But really, it's just doing the homework. Yeah, all of these things are written about. The grant funding bodies provide a lot of information in the application. They tell you all about the process, they tell you exactly what they're looking for, they tell you how the application is scored, for the various components.
And so as long as you do your homework, you read the application, you answer the question. That in itself is a big step towards putting in, a good quality application. The science has to Be good. they're not going to fund, a poor quality application on the technical side, but you really do need those other parts if you're going to be successful.
[00:06:45] Tracy Smart: And it does take quite a lot of time to go through that process of, applying in the first place. In terms of the funding, obviously, most companies wouldn't be applying if they didn't want the funding, but sometimes the scope of the, potential grant funding is not necessarily a hundred percent in the direction you want to take your business.
I guess that's where I'm getting to.
[00:07:08] Paul Finn: Yes,and so I think two things flow from that in terms of, getting the most out of these funding opportunities. Ifthe grant call that you're thinking of applying to isn't well aligned with what the company wants to do, and you try to massage it so that, you're not quite doing what the grant funders want, you're not in the central scope of what they're after, then they will likely spot that, And you're probably wasting some time and effort in making the application because that's not what you want to do is not what they want to fund and so they won't fund you.
So make sure that your application really does fit within the area that the grant funder is asking for. And secondly, don't underestimate the time it takes to put together a good application. It's very unlikely that you'll put in a good application, if you think about doing this two weeks before the funding submission deadline, it really does take a lot of time, especially.
If you're in one of these,consortium grants where you have to pull together imports from, maybe five or six, different organizations, then that takes a lot of time, and if you don't allow enough time, again, you're not giving yourself a good chance to succeed.
[00:08:20] Tracy Smart: How long on average would you say it takes to pull an application together?
[00:08:25] Paul Finn: It varies for the funding agencies.Typically, if you want to put a grant application into one of these larger EU funding schemes or an Innovate UK funding scheme,three or four months to put something together. From the start of the process to finally submitting the application.
It depends also on the amount of money. I mean, there are some smaller awards which are, much shorter, in terms of the information you need to provide. And those perhaps you could do in a month or six weeks.
[00:08:54] Sam Jones: So potentially six months to get it right and apply on deadline. And then quite a while for them to make the decision and then to actually get the grant and the money over to you.
[00:09:03] Paul Finn: Yes. that's absolutely right. Some funders are more efficient than others. But you can't expect to get a decision from them, you know, in less than three to four months, and sometimes for the big collaborative grants, maybe even, six or nine months even. Even when you're awarded the grant, in principle, you then have to contract with the funder, get a grant agreement, get all that done legally.
So there's then a legal process of getting the contract in place and agreeing a start date. So, very often, you're a year between, the process of starting to make the application and actually, beginning the project.
[00:09:37] Sam Jones: Is that something that you look at as an assessor at the time scale? Cause I have quite a few conversations with, people in the process and cashflow is always an issue. They might have been accepted or that they look like they're going to get the money, but that's still a few months away.
Is that something you talk about quite early on is how are they going to manage their business or corporation up to the point of getting the grant funding? Because quite often they can run out of money and there's a few months away from them getting it in and operations can come halt.
That's not something that you normally think of as an assessor. But the grant funding bureaucracy, the research executive agency in the case of the European Union obviously does think about that. They look at the fact that part of the grant agreement process will be that agency looking at the finances of the company, It's got to be viable for 18 yeah.
[00:10:19] Paul Finn: They're realistic, actually. I think most of the funding agencies are pretty realistic, at least the ones I've worked with. I mean, they don't expect small biotech companies to have three years of money in the bank. They know that they have to go through funding cycles.
They're pretty flexible in that regard. But of course you have to have some level of confidence that you're going to be able to get at least to a decent way through and you can never guarantee that it'll work. But,you have to look at those things, certainly.
[00:10:43] Tracy Smart: Because one of the things obviously I'm experiencing is the fact that usually you can claim 70 percent of the money back that you're investing. I know there are lots of other different types of grants, but my experience is it's not always 100 percent funded and actually it's funded in arrears.
So, it's a quarterly, grant administrative process. So you have three months where you're effectively funding the first three months in full until you then claim it back afterwards. So that cash flow impact is quite challenging, I think, for some businesses.
[00:11:18] Paul Finn: Absolutely, and you have to think about, that, the non dilutive cash, you know, these can be quite large sums, half a million pounds, a million pounds. We've had grants of several, seven million dollars in total amount, but you do have to think about those things.
That's vital to the successful execution of the grant. Of course, those funding agencies, and a number of them do, will fund 100 percent of the project costs, but you still have the overheads and, the other business costs that you have to think about. You know, some will actually, fund in advance, and give you the money, in tranches, which is very helpful.
[00:11:52] Paul Finn: But you're quite right, mostly it's in arrears and mostly it's, a significant percentage, but not 100 percent of the project costs that you get funded. So you have to think about where the rest of that money is coming from, for sure.
[00:12:02] Sam Jones: What happens if you get to the application deadline, it's being assessed and you get a no? Would you go back as an assessor with feedback so they can apply again? Or is it almost sort of a one shot at that grant fund and they'll cut the ties?
[00:12:15] Paul Finn: Usually you can reapply. So most funding agencies provide feedback. It varies in its, degree of detail and quality. Sometimes it's very bland statements, which you can't really make much use of. Sometimes it's really quite detailed and quite often, you know, you get quantitative scores so you know which questions you...
[00:12:32] Tracy Smart: For each section, yeah.
[00:12:33] Paul Finn: And which questions you answered less well, in the view of the reviewers. So, usually you can reapply at least once. Some funding agencies don't let you have more than one reapplication. But you can usually apply more than once and, if in that reapplication, you can indicate in the grant how you've addressed the previously identified deficiencies, you have a chance of, scoring better.
So it's is well worth it. And of course, the majority of what you've written, you can reuse. So it's not as much work to go in with the reapplication.
[00:13:02] Sam Jones: I guess the grant bodies, they're there to lend the money, they want to put the money out, aren't they? That's what their purpose is, they want to get involved with these projects, a bit like the lenders I work with, give them a reason to lend the money, and they will, because that's how they make their money, and the grant bodies, want to get the money out, that's what it's there for.
[00:13:18] Paul Finn: Oh, yes. And there's nothing they hate more than, putting out a call and not getting many applications and yes, they absolutely want to fund the money. On the other hand, these grants are often very much oversubscribed.
There are far more applications than there is money to fund. Again, it's another one of the tactics, really, in trying to maximize your chances. So, to an extent, and it's a little bit unfair, perhaps, but to an extent, the assessors are looking for reasons to say no. You know, because they've got a lot of applications.
Many of them will be very good. How do you choose between them? Well, what is there in this grant that gives me a reason to down weight it? Which is why the homework is important. So if you, for example, don't put a lot of effort into answering, you know, the impact. What impact will my grant have on the economy?
If you don't put at least some effort into answering that, then you're just leaving yourself open to a low mark on that score. And it's so competitive, that one or two of those will make it very unlikely that your grant will be funded.
[00:14:20] Tracy Smart: Once you've got your grant, there's much celebration. but there's still quite a lot of work to do, isn't there? Not just from the science perspective, but from the administration perspective, keeping track of, all of the costs and then, going through the claims process. And then there's the relationships that you build with the project managers within the grant funding body as well.
Can you tell us a little bit more about that?
[00:14:44] Paul Finn: Yes, that I think is one of the things that put small companies off applying for grants. The unfamiliarity with the processes and putting the grant together and then, a perception, which in many ways true, that there is also quite a lot of bureaucracy and time required in maintaining the grants, submitting the scientific and even more, more so the financial reporting and making sure that you get that right.
This is indeed, a burden and, it can be quite frustrating the level of detail that the funding bodies require, They want to protect, you know, make sure the public money is being used for good purposes.
But again, it's all about being organized. The people who are the project monitoring officers, the people who are working on the other side to help you manage your grant, they will want to be helpful and they will want their project, to be successful just as we want our projects to be successful.
So they could be really helpful in explaining to you what exactly, the regulations of finance mean, you know, exactly what level of detail do you have to provide with the invoicing, what level of detail do you have to provide in terms of, the staff working on it and that they're really working on it with recording their time and these sorts of things.
And once you've got those templates, then it's much more straightforward. And as long as you're doing that in advance and keeping that up while the grant is ongoing and not just waiting till the end of the quarter to start to pull all the paperwork together, then it's much less stressful. And the approvals go through, much more quickly, which is also what you want, because that's when you get your money back, rather than them coming back with questions and you having to go back with new data or new files, et cetera, et cetera. So planning ahead and understanding, getting a good relationship with a project manager and using that to really understand what they want.
Those are very, very helpful things.
[00:16:27] Sam Jones: You've been quite successful on multiple grant applications. Is it easier the more you do, when you get a track record? Or are you, like, Sisyphus getting to the hill, top of the hill, having to start again? Or can they see that you've had five or six previous grants, this is a winner?
[00:16:42] Paul Finn: It definitely becomes easier, from several perspectives. I think it is true that you do get known to the funding agency and, they have confidence that, you know what you're doing and that you won't be a pain to them and so on and so forth.
And good things have come out of previous grants. So, of course, that makes it easier. I think if you're working in these collaborative grants, if you can work together with people with whom you've worked already. For example, and you've got, let's say, scientific publications together and they've, already proven to the funding agency that you can work well together.
That's helpful. For example, and although all of the other regulations of each of these funding agencies are different, there are, of course, many common themes, and so you begin to understand the sorts of processes that they have for financial management, and there might be differences in detail or, exactly what they want, but, the principles are pretty much the same.
So, absolutely. The more you do it, the better your chances, I think.
[00:17:34] Tracy Smart: One thing that I wanted to just bring up is, you have to have a project plan that assumes you're going to go through certain experiments at certain times and the cost of those, and you're going to spend the money in a certain way.And I'm starting to learn in more detail, but, nothing ever goes 100 percent to plan and particularly in the scientific world, you can do a test or an experiment and you might not necessarily get the results you were hoping for, so you have to re plan.
How does that work within the grant structure?
[00:18:04] Paul Finn: So, that's absolutely right, If you knew what the result was going to be, you wouldn't need to do the experiment, would you? So, almost from day one, the plan, unravels a a little bit. None of the grants we've had have ever proceeded, absolutely smoothly, according to plan all the way through from beginning to end.
So of course it changes. The funding agencies they understand that. They understand the science is uncertain and you'll have to change the plan. As long as you can provide, reasons. So there will be a formal process usually to make a change to the project, to change the goals, to change the sorts of experiments, maybe to put more of the money into experiments of type A than experiments of type B than you originally thought.
They will normally be sensitive to those change requests, and, if at the end of the day,the project might not be successful, it might not achieve all, maybe not even most of what you originally set out to do. But, they understand that and,I don't think that prejudices your ability to go back to them with new grants.
That's just the way that the science worked out and as long as you've convinced them that you tried really hard and you spent the money in the best way and you kept them informed.
[00:19:10] Tracy Smart: Yes, keeping them informed, isn't it? And you can re forecast and change the plan, can't you? And agree different timings and different categories of costs.
[00:19:18] Paul Finn: Yes.You can just extend the amount of time, keep the money the same, just to give you a bit more time because some experiments have gone more slowly than you thought. You can move money from one budget line to another.
So I, I think communication is the key. If you wait two years and then, spring something on them when you know almost all the money is spent that you have to change that, they probably would not look too kindly on that. But, if you tell them up front, and you'll have regular meetings with these people, don't hide anything, tell them what the problems are, explain why you want to change it, give a good justification, and they will, 99 times out of 100, I think they will accept that, and they'll support you in those changes, and it'll all be fine.
[00:19:57] Sam Jones: We had a previous episode on angel investment. Listeners, wait for this one to finish and go back to listen to that one if you haven't already. He was talking about the difference internationally in what's being asked for from, from angels in the amounts.
So over here, we might ask for 1 million from an investor in America would be 10. Is that the same with grants? You know, you mentioned you got some from the US before. Are they generally bigger in scope, or is it all fitted to the size of your particular project?
[00:20:22] Paul Finn: I think there is, some difference in that regard. Certainly the largest grant that we've received, was from a US funding source. But I think the differences aren't as great in the grant giving area that it is in the, you know, the equity investment side. Because everything's bigger in America, sort of, some of the funding sources could be a little bit bigger in the US but the biggest EU schemes that I've been involved in, this was an assessor rather than a, as an applicant. Were giving out grants of, 20 million euros to a consortium of people, that is a significant...
[00:20:55] Sam Jones: Not pocket change, is it?
[00:20:56] Paul Finn: Significant sum of money, that's not typical of the, that's not your average EU grant, just to be clear. But, you know, at the top end, they are willing to put significant sums of money into the things which they think are really going to be strategic and useful in terms of growing an area of science that they think is going to be valuable to the economy in the future. So I think there are some differences, but not as great as on the equity side.
[00:21:18] Tracy Smart: You mentioned the EU and obviously with Brexit, things changed somewhat. Can you just tell us a little bit about that impact and what that's done to the UK scientific...
[00:21:28] Paul Finn: That was an interesting time. I think there were a couple of observations about that. One is that the EU bureaucracy, this research executive agency that manages the EU money and there are many different sorts of grant schemes that they manage. As we were going through the withdrawal process and so on, but still in the eu, the UK had to be treated just as it always had been and they were absolutely telling all the reviewers that Brexit is irrelevant at this point.
Then of course, it officially happened and we were, we dropped out of the EU and were no longer eligible to apply for those EU grants and that had a negative impact. Certainly some universities, that was a big, cut in their income from hundreds of billions of pounds to zero, essentially from one year to the next.
Now, we have rejoined the Horizon Programme, so UK companies can now apply again on equal terms with members of the European Union for grants and can lead the consortium. So, in principle, we are back to the status quo of before. I haven't seen the figures recently, whether, because the UK was a net beneficiary from the EU funding, the amount of money we paid into the Horizon Programme was less than the amount of funding that UK institutions got back from the EU, because we were very successful in that.
Whether we're back to that position, or, there's been some, loss of funding from that source, I don't know. But in principle, we're now back to where we were pre Brexit and,should be in just as good a position for applying for EU money as we were before.
[00:22:56] Tracy Smart: Is there anything else we've not talked about then on grants that you'd like to share with our listeners?
[00:23:01] Paul Finn: Our experience is that, you have to go in with your eyes open. There will be a time and bureaucratic cost to doing this. You will get good applications rejected. It's a human process, these are inevitable, but if you stick with it, then I think they are a really good source of funding and you can really improve your chances by just doing the basic things right. The nominal success rate of putting applications in can be very low.
It can be, you know, single digit percent. Yeah, because some of them are stupidly oversubscribed, but you can really up your chances just by sticking to those, rules and making sure you answer the questions. So I think it's well worth persevering for a little bit because, once you have that money, you can do really good things with it. AndI think it's really helped our company as it has helped other companies really to make some progress. And, I think we wouldn't be where we are today if we hadn't, obviously, if we hadn't hadall that funding over the years. So, it's well worth considering.
[00:23:59] Tracy Smart: Excellent.
[00:24:00] Sam Jones: Excellent. Thank you very much, Paul. If I say so myself, an excellent episode. All our contact details for myself, Tracy, for Paul and Oxford Drug Design will be in the show notes on your preferred podcast platform. Thank you very much and we will see you all very soon.