With some regularity entrepreneurs knock on NOM's door with the idea that we provide subsidies. A misunderstanding that we would like to clear up with this article. With our investment funds we encourage innovation and economic development in the northern Netherlands, just like SNN does with certain subsidies. Yet there are essential differences between the two sources of funding. The main one: our capital costs entrepreneurs money in the form of interest or shares, while subsidy is given (project) money within strict conditions.
This is how it works at NOM
NOM's core task is to strengthen the economy in the northern Netherlands. To provide venture capital to companies that contribute to sustainable growth and innovation in the region, we are funded by the three northern provinces and the Ministry of Economic Affairs. In addition, we manage several of our own funds. Because we are partly funded by the government, there may be confusion that NOM provides subsidies (as well). However, we are purely an investor, offering opportunities to companies with venture capital. In order to apply that model cost-effectively and also be able to absorb long lead times or failures, we work only with loans and shares.
Possible forms of funding
Entrepreneurs can come to us for subordinated loans, risk capital - in exchange for shares - or a so-called convertible loan, which can be converted into shares at a later stage. It can also be a combination of these; or co-financing together with other investors, banks or funds. The subordinated loan is often used to strengthen the equity position of a start-up company. This is often a requirement of banks if funding is also requested there. An important feature of a subordinated loan is that in the event of bankruptcy, NOM is only repaid after regular creditors have been satisfied. The entrepreneur pays a relatively higher interest rate for this form.
Startups can also opt for a convertible loan, where the borrowed capital is converted into shares at a later stage. The conditions for this - conversion criteria - are contractually defined in advance. This option exists alongside direct share ownership, as it is more difficult to determine the share value in young, fast-growing companies. For companies that have already proven themselves, NOM can also step in directly as a shareholder, with a minority stake. In that case the entrepreneurs 'pay' for the required growth capital with shares. Although a subordinated loan also remains possible for longer established companies.
Conditions for investment
NOM's focus is on seven sectors that contribute to a sustainable and strong region: agrifood, chemicals, energy, high-tech systems & materials, life sciences & health and water technology & maritime. Entrepreneurs working with or in these sectors can submit a business plan to NOM if they need funding for growth or innovation. It is important that the funding need is clearly mapped out and that possible subsidy options are also investigated. In addition, the investment manager looks at the extent to which a company contributes to regional growth. Return is especially important to NOM because healthy business operations contribute to innovation, sustainable development and employment in the northern Netherlands.
If an application fits within the frameworks of NOM, the first step is an exploration to determine which form of funding fits best. If an agreement of intent is reached, a complete business survey will be conducted. If this is successful, the investment proposal will be presented to the investment committee. The time it takes from funding application to final decision varies from situation to situation and depends largely on the information provided by the entrepreneurs. Good to know: in most cases funding is provided in stages. The partial amounts are then linked to the achievement of certain objectives.
For more information about the possibilities, application and the funding process, visit nvnom.com.
This is how it works at SNN
The Samenwerkingsverband Noord-Nederland (SNN) serves the same three northern provinces as NOM and also contributes to the development of the region. Only the SNN emphatically does so from a different role. By offering grant opportunities to entrepreneurs, individuals, knowledge institutions, housing corporations and social organizations, SNN stimulates ideas and ambitions for sustainable and innovative development in the Northern Netherlands. This involves both subsidy schemes commissioned by the state, provinces and municipalities and European subsidy programs, such as the European Regional Development Fund (ERDF) and the Just Transition Fund (JTF).
Subsidies for entrepreneurs
Companies that want to invest in growth, innovation and future-proofing can qualify for business subsidies through the SNN. Among other things, grant funds are available for developing new products or services, doing research, digitalization, sustainability and labor market transition. Various grants encourage the development of innovative solutions and technologies that contribute to an even stronger Northern Netherlands. This touches on NOM's objectives, which is why NOM also regularly points entrepreneurs to investigate subsidy opportunities. If they are eligible, this can strengthen any NOM funding.
Advice and cooperation
Discover and find out appear to be key words when it comes to subsidies, because there is a multitude of schemes and possibilities. Independent grant advisors can be hired to help entrepreneurs with this, both during the application and during the project period for which grants are provided. The SNN encourages SMEs as much Investment money versus grants as possible to cooperate with each other and with knowledge institutions, because sharing knowledge is of value to the region. Applications from consortia are more complex and take longer, but can yield more grants. The average time between an application and grant award is 20 weeks and faster where possible. The better the coordination on what is needed in this process, the smoother it can be.
Subsidy conditions
Each subsidy scheme has its own and often strict conditions, which can be found on the SNN website. Before making an application, it is important to first have a project proposal check how promising an innovative idea is for obtaining a grant. Entrepreneurs are advised to contact the SNN or their own province about this at the earliest possible stage to gain a better understanding of the application process and support in submitting the right information. After that, an application can be awarded in several steps - including a subsidy test. Important to know: European grant funds are rarely provided all at once. Entrepreneurs receive a work advance of 30 percent on average. Additional advances require interim reporting to substantiate the use of grant funds.
Check snn.nl for the application process and all grant opportunities, or for information on submitting an initial project proposal.
This article was created in collaboration with Stijn Kamminga - investment analyst at NOM - and Michella Mensinga - senior project officer European grants at SNN.