Cascade funding: boosting innovation in SMEs and startups

Cascade funding: boosting innovation in SMEs and startups

Cascade Funding: Boosting Innovation in SMEs and Startups

EU cascade funding is a mechanism designed to distribute European public funds in an agile way to small and medium-sized enterprises (SMEs), startups, and scale-ups. It allows large European projects to redistribute part of their grants to third parties through open and simplified calls, supporting R&D&I activities.

At European level, it works as a form of “innovation subcontracting”: the European Commission provides public funding to a consortium of companies and research centers, and that consortium reserves part of the budget to distribute among SMEs, startups, and sometimes associations through simplified calls.

The model follows a pyramid structure with the following flow of funds:

• Level 1: The European Commission (European Commission), mainly through Horizon Europe, funds a project.
• Level 2: The project consortium (leaders) publishes Open Calls.
• Level 3: Third-party entities apply for funding to carry out a specific experiment, pilot, or technical development.

This scheme was designed to remove the entry barriers typical of traditional EU programmes (such as large Horizon Europe consortia). It enables smaller companies and entities to access funding for pilots, experiments, or specific technological solutions without having to lead major international consortia.

It is estimated that by 2025 more than €650 million will have been distributed through this mechanism in areas such as Artificial Intelligence, Industry 4.0, the Green Deal, and Cybersecurity.

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Advantages and Challenges of the Model

For third-party entities, this represents a significant opportunity. Bureaucracy is reduced, as proposals are usually shorter compared to other EU programmes. Funding is agile, with payments typically made as lump sums, greatly simplifying financial reporting.

In addition to receiving funding (generally between €50,000 and €200,000), beneficiaries also gain access to mentoring and consortium technology. This allows third parties to collaborate with major European sector players without having to manage the entire project. For associations, it provides an opportunity to act as ecosystem connectors or to lead social validation and training initiatives within technological environments.

However, the system also presents challenges. Calls are often highly focused on specific technological niches, with short application deadlines and limited visibility. They are not always published on the main EU portal but rather on individual project websites.

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The Agri-Food Sector: A Strategic Area

The agri-food sector is among the main beneficiaries of cascade funding, aligned with European priorities such as the “Farm to Fork” strategy and the European Green Deal. Unlike traditional Horizon Europe grants, these calls focus on practical, applicable solutions to specific challenges such as farm digitalization, circular economy, sustainability, and food traceability.

Some cascade-funded projects in the agri-food sector include:

• FutureFoodS: Innovation in circular food processing systems and dietary shifts.
• ECIV (Circular Innovation Valleys): Collaborative circular economy projects in agro-industrial regions.
• AGRARIAN: Promoting plant and animal genetic diversity and agroecological transition.
• ARISE: Robotics and human-robot collaboration applied to agri-food logistics.

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Outlook for 2026

For 2026, the total approved EU budget amounts to approximately €192 billion, with key allocations dedicated to research and innovation. Within this framework, the areas feeding cascade funding include:

• Research and Innovation (Horizon Europe): Around €12.97 billion. This is where most of the funding later redistributed to SMEs and associations through cascade mechanisms originates.
• Natural Resources and Environment: €56.529 billion, including the Common Agricultural Policy (CAP) and sustainability funds for rural development.

While there is no single figure labeled as “total cascade budget,” since each project decides how much to redistribute, estimates based on the Horizon Europe 2026–2027 work programme suggest:

• Euroclusters and Digital Innovation Hubs: Expected to manage approximately €150–200 million in micro-grants (vouchers) for industrial and agri-food digitalization and sustainability.
• EU Missions: Missions dedicated to soil health and climate adaptation in the agri-food sector typically allocate between 10% and 20% of their budgets to third parties (FSTP – Financial Support to Third Parties).

Overall, the agri-food ecosystem could benefit from more than €400 million allocated to innovation, promotion, and digitalization accessible to small entities—reinforcing cascade funding as a strategic pathway to democratize access to European funds and accelerate the transition to a more sustainable and technology-driven model.

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Estimated 2026 Timeline for Cascade Funding

January – March
Closure of 2025 calls (e.g., FutureFoodS and ECIV projects).

April – June
Agri-food promotion programmes (e.g., “Buy European Food” programme).
Target beneficiaries: Producer associations and Regulatory Councils.

July – September
New Euroclusters.
Large consortia funded under Horizon Europe 2026 publish their first cascade Open Calls.
Target beneficiaries: SMEs, startups, and innovative entities.

October – December
Rapid Innovation Vouchers.
Micro-grants for short projects aimed at executing budget before year-end.
Target beneficiaries: Startups and SMEs with prototypes at TRL 6–7.

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Key Recommendations

• Ensure strong alignment between your proposal and the corresponding Topic.
• Confirm that your technology has the appropriate maturity level.
• Guarantee measurable impact (clear KPIs).
• Demonstrate co-financing capacity.
• Build a team with a solid track record, including technical profiles capable of managing the proposed technology.
• Highlight the European dimension: even if the project is local, explain how the solution can benefit other entities across Europe.
• Provide a robust exploitation plan showing economic sustainability beyond the grant period.
• Address ethics and environmental requirements, especially compliance with the “Do No Significant Harm” (DNSH) principle in the agri-food sector.

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How to Identify Cascade Funding Opportunities

At artica+i, we recommend monitoring three main sources:

• The EU Funding & Tenders Portal (section “Competitive calls and calls for third parties”).
• EIT Food, Europe’s largest food innovation community, which regularly launches its own cascade calls.
• Specific project platforms (e.g., historical initiatives such as SmartAgriHubs or AgROBOfood and their successors).

At artica+i, we support you in monitoring key calls, assessing your technology’s maturity, and aligning your proposal with European requirements to maximize your chances of success.

Our International Project Funding team assists clients in securing and managing European funds for R&D&I projects. We guide them throughout the entire process—from technical and economic diagnosis and partner search, to proposal preparation, administrative and technical consortium management, and milestone and deliverable monitoring.