PowerPoint Presentation

[Audio] Now we move to Module 6, where we focus on funding mix and portfolio management. Up to now, we've mainly discussed how to manage funds once they are awarded. In this module, we shift perspective and ask a different question: where does the funding come from, and how do we combine different sources to ensure sustainability?.

[Audio] The concept of a funding mix is based on the idea that relying on a single funding source—usually grants—is rarely sufficient for long-term success. Most innovative projects, especially in digital agriculture, require a combination of funding sources to remain viable, scalable, and resilient. This combination typically includes public grants, revenues, private capital, and sometimes crowdfunding. Each of these funding sources plays a different role. Grants are often the starting point. They reduce risk, enable experimentation, and support early-stage innovation. However, grants are time-limited and usually come with strict rules. Once the project ends, the funding stops. That's why a project that depends only on grants may struggle to survive beyond the funding period. A grant is essentially a non-repayable financial contribution awarded by a public authority, such as the European Commission. Its purpose is not profit, but policy impact—supporting innovation, sustainability, competitiveness, or rural development. We usually distinguish between action grants, which fund specific activities or pilots, and operating grants, which support the ongoing functioning of an organisation. Grants reduce financial risk significantly, but they also come with strict rules, reporting obligations, and limited flexibility. That's why, while grants are crucial, they should rarely stand alone. This is where revenues come in. Revenues can be generated through services, products, licensing, or subscriptions developed during the project. For example, a digital agriculture platform might offer premium analytics services to farmers or agribusinesses. Revenue streams help cover operational costs and demonstrate market demand, which is crucial for long-term sustainability. In financial terms, revenue is often called the top line, because it sits at the very beginning of the financial flow. In agri-innovation, revenue might come from advisory services, digital tools, licensing technology, or service fees paid by farmers or cooperatives. Unlike grants, revenue provides autonomy and continuity. It can be reinvested, scaled, and adapted quickly. However, it also introduces market risk, meaning that demand, pricing, and customer adoption become critical success factors..

[Audio] Next, we have private capital, such as investments from companies, venture capital, or strategic partners. Private capital is particularly important when scaling up successful innovations. It allows projects to expand faster, invest in infrastructure, and enter new markets. However, private capital also comes with expectations—investors look for returns, governance influence, or strategic alignment. This means that financial planning must carefully balance public interest objectives with commercial realities. Private capital refers to funding invested directly into non-public ventures, such as startups or innovation-driven projects. This can include venture capital, private equity, private debt, or infrastructure investment. What makes private capital distinctive is that it seeks a return on investment, not just impact. Investors often bring not only money, but also expertise, networks, and strategic guidance. In agri-innovation projects, private capital is particularly relevant for scaling solutions beyond the pilot phase. However, it also increases expectations around performance, governance, and long-term viability. Finally, there is crowdfunding, which is increasingly relevant for certain types of agri-innovation projects. Crowdfunding can serve both as a financing tool and as a validation mechanism. When farmers, consumers, or communities contribute financially, they are also expressing trust and interest in the solution. For example, a project developing a community-based digital farming tool might use crowdfunding to support pilot deployments while building a user base at the same time. The key point here is that a funding mix spreads risk. If one source is delayed, reduced, or discontinued, others can help sustain the project. A diversified funding mix also increases flexibility and resilience, making the project better prepared for uncertainty. Crowdfunding is an alternative and increasingly popular funding source, especially for startups and early-stage innovation. It allows projects to raise funds directly from a large number of individuals, usually through online platforms. Beyond financing, crowdfunding helps build a community, test market interest, and gain early feedback from users. For agri-innovation initiatives, crowdfunding can support pilot demonstrations, local engagement, or niche innovations. While individual contributions may be small, the collective value—both financial and social—can be significant. In summary, the concept of a funding mix encourages project teams to think strategically about financing from the very beginning. By combining grants, revenues, private capital, and crowdfunding, projects can move beyond short-term funding cycles and build a financially sustainable pathway from innovation to impact..

[Audio] Up to this point, we've talked about different funding sources and how they can be combined into a funding mix. Now we take a step further and ask a more strategic question: How do we manage all these funding sources, projects, and activities together, in a way that makes sense over time? This is where portfolio diversification and risk balancing come in. Instead of managing each project or funding stream separately, we start looking at the portfolio as a whole. Think of the portfolio as a living system. Some elements are stable and predictable, others are experimental and uncertain. If everything in the portfolio carries the same type of risk, the entire system becomes fragile. But if risks are spread intelligently, the portfolio becomes far more resilient. Portfolio diversification means intentionally spreading resources across different types of investments or activities, rather than concentrating everything in one area. In agri-innovation, diversification can happen in many dimensions. It can mean funding both digital tools and on-farm practices. It can mean combining short-term pilots with long-term infrastructure investments. It can also mean mixing low-risk, well-established activities with higher-risk experimental solutions. The key idea is this: diversification does not eliminate risk, but it prevents a single failure from threatening the entire initiative. If one project underperforms, others can still deliver value. This approach is particularly important in innovation ecosystems, where uncertainty is not a weakness—it's a natural condition..

[Audio] Agri-innovation operates in one of the most complex environments imaginable. Agriculture is affected by climate variability, price fluctuations, policy changes, and social acceptance—all at the same time. When innovation projects rely on a single technology, a single market, or a single funding source, they become extremely vulnerable. A policy shift, a drought, or low farmer uptake can suddenly derail years of work. Portfolio diversification acts as a buffer against these uncertainties. By supporting multiple approaches, regions, or technologies in parallel, projects can continue progressing even when some elements face setbacks. In this sense, diversification is not just a financial safeguard—it is a way to protect innovation momentum and long-term impact..

[Audio] Risk balancing is about making conscious choices regarding how much uncertainty the portfolio can absorb. Not all risks are equal. Technological risk refers to whether a solution will actually work. Market risk concerns whether users will adopt it. Regulatory risk depends on policy frameworks. Financial risk involves cash flow and sustainability. A well-balanced portfolio includes a mix of these risks. For example, a project might combine high-risk innovation pilots with lower-risk capacity-building or advisory actions. The stable components provide continuity, while the riskier ones create opportunities for breakthrough impact. What matters is not avoiding risk, but ensuring that risks are distributed and intentional, rather than accidental..

[Audio] When used properly, portfolio diversification becomes a strategic management tool, not just a financial concept. It helps project leaders answer critical questions: Where are we overexposed? Which activities are consuming resources without delivering sufficient value? Where should we invest more to increase long-term impact? This perspective also improves communication with funders and partners. Instead of justifying each project individually, managers can explain how each activity contributes to a balanced and resilient whole. In EU-funded agri-innovation projects, this strategic clarity is especially important for accountability, transparency, and long-term planning..

[Audio] Let's now turn to cost-sharing mechanisms, which are essential in multi-partner projects. In most agri-innovation initiatives, costs are not borne by a single organisation. Instead, they are distributed among partners according to roles, capacities, and expected benefits. Cost-sharing defines who pays for what, and why. Effective cost-sharing is not just about numbers. It is about fairness, trust, and feasibility. When partners feel that costs are shared equitably, collaboration becomes stronger and more sustainable..

[Audio] In collaborative environments, poorly defined cost-sharing can quickly become a source of tension. If one partner feels overburdened, or another benefits without contributing proportionally, motivation declines. Over time, this can lead to disengagement or conflict. Clear cost-sharing mechanisms prevent these problems. They align financial contributions with responsibilities and benefits, making expectations explicit from the start. In EU-funded projects, transparent cost-sharing is also critical for compliance, audits, and financial reporting. It protects both the consortium and individual partners..

[Audio] There are several common cost-sharing models used in agri-innovation projects. One is proportional cost-sharing, where costs are distributed based on budget size or organisational capacity. Larger partners contribute more, smaller ones less. Another model is activity-based cost-sharing, where each partner covers the costs directly linked to their assigned tasks or work packages. This model increases accountability and clarity. In many projects, centralised costs, such as coordination, IT platforms, or dissemination, are shared across all partners using agreed formulas. The key is that the model is clearly defined and accepted by everyone..

[Audio] Cost-sharing can also extend across multiple projects, particularly when organisations participate in several initiatives simultaneously. Shared infrastructure, staff, or digital tools can be allocated across projects to increase efficiency and avoid duplication. However, this requires careful accounting and transparency. EU rules strictly prohibit double funding, so financial tracking must clearly show how costs are divided. When done correctly, cross-project cost-sharing improves sustainability and resource efficiency..

[Audio] Effective cost-sharing depends on strong governance. Arrangements should be clearly documented in the consortium agreement and aligned with the grant agreement. Regular financial monitoring allows adjustments when conditions change. Transparency builds trust. When partners understand how costs are allocated and monitored, collaboration becomes smoother and more resilient..

[Audio] At this stage, we've discussed how funding is structured, diversified, and shared. The next logical question is: How do we know whether all of this is actually working? This is where Key Performance Indicators, or KPIs, come in. KPIs allow us to step back and evaluate performance objectively. Without them, portfolio management becomes a matter of intuition or perception. In agri-innovation projects, KPIs help us understand whether financial resources are being used efficiently, whether risks are justified, and whether the portfolio aligns with long-term strategic goals. They transform financial management from a reporting obligation into a decision-making tool..

[Audio] Let's start with Return on Investment, or ROI. At its core, ROI compares what we gain from an investment to what it costs us. In traditional finance, this usually means profit. But in agri-innovation, ROI needs to be interpreted more broadly. Returns might include productivity gains, cost reductions, improved efficiency, or better environmental outcomes. For example, if a digital tool reduces fertilizer use or saves farmers time, that value should be captured in how we assess returns. What matters is that ROI helps us ask a critical question: Are the benefits generated by this activity proportional to the resources invested? Used wisely, ROI encourages accountability while still allowing space for innovation..

[Audio] Another important KPI is the Internal Rate of Return, or IRR. While ROI gives us a snapshot, IRR helps us understand performance over time. IRR takes into account when costs occur and when benefits materialize. This is particularly relevant in innovation projects, where investments often happen upfront, but returns emerge gradually. For example, an early-stage pilot may not show immediate benefits, but its long-term impact could be significant. IRR allows us to compare such investments with more mature solutions on a consistent basis. In portfolio management, IRR is especially useful for balancing short-term and long-term initiatives, ensuring that today's experiments support tomorrow's outcomes..

[Audio] The leverage ratio focuses on a different dimension of performance: amplification. It measures how much additional funding is mobilized in relation to an initial investment—often public funding. In EU-funded agri-innovation projects, leverage is a key indicator of success. A high leverage ratio means that public funds are acting as a catalyst, attracting private investment, co-financing, or revenue generation. This is particularly important when public budgets are limited and impact needs to be scaled. Leverage shows not just what a project achieves directly, but how effectively it multiplies resources..

[Audio] While each KPI is useful on its own, their real value emerges when they are used together, at the portfolio level. Looking at ROI, IRR, and leverage collectively allows decision-makers to identify patterns. Which projects consistently underperform? Which ones deliver strong impact relative to cost? Where is risk justified, and where is it not? When combined with non-financial indicators—such as environmental impact, social inclusion, or adoption rates—KPIs provide a comprehensive view of portfolio health. This holistic perspective supports better resource allocation and more informed strategic choices..

[Audio] To make portfolio analysis more intuitive, many project teams use a portfolio heat-map. A heat-map is a visual tool that positions projects according to two dimensions: risk and expected return. Instead of spreadsheets full of numbers, it provides an immediate overview of where the portfolio stands. For agri-innovation projects, this kind of visualization is especially valuable, because it helps translate complex financial and strategic data into something that can be discussed collectively..

[Audio] The heat-map is built around two simple axes. The horizontal axis represents risk, which can include technological uncertainty, market readiness, regulatory exposure, or financial volatility. The vertical axis represents expected return, which might include financial returns, cost savings, leverage effects, or strategic value. Defining these axes clearly is crucial. It ensures that all partners use the same criteria and language when evaluating projects. Without this shared understanding, the tool loses its effectiveness..

[Audio] Once projects are plotted on the heat-map, patterns begin to emerge. Low-risk, low-return activities often represent stable but limited-impact actions. High-risk, high-return initiatives are typically innovation pilots or disruptive technologies. The most concerning area is high-risk, low-return. Projects in this zone may require redesign, closer monitoring, or difficult decisions. The strength of the heat-map lies in how quickly it highlights these dynamics and supports evidence-based discussions..

[Audio] A portfolio heat-map is not meant to be static. Over time, projects evolve. Risks decrease as technologies mature, and expected returns become clearer. Updating the heat-map allows teams to track progress and adjust strategies accordingly. Used regularly, the heat-map becomes a living management tool, supporting governance meetings, funding decisions, and strategic reviews..

[Audio] In EU-funded contexts, heat-maps also support transparency and accountability. They help justify funding allocations, explain decisions to stakeholders, and demonstrate responsible financial stewardship. When combined with KPIs and impact indicators, they provide a strong foundation for both internal management and external reporting..

[Audio] Beyond individual projects, agri-innovation portfolios often interact with broader EU financial instruments, particularly the Common Agricultural Policy, or CAP, and InvestEU. These instruments are not alternatives to project funding—they are complements. Understanding how they work opens up opportunities for scaling impact and increasing financial sustainability..

[Audio] Now, let's watch a 13-minutes video about the EU's Common Agricultural Policy.

[Audio] Synergies between project funding, CAP, and InvestEU create several advantages. They allow projects to expand beyond pilot stages, reduce dependency on a single funding source, and align more closely with EU policy objectives. For example, CAP funding might support farmer adoption, while InvestEU financing supports infrastructure or scaling. Together, they create a pathway from innovation to real-world impact..

[Audio] To realize these synergies, project teams must plan strategically. This involves mapping funding sources to specific activities and timelines. CAP is often well-suited for operational support, while InvestEU is more appropriate for scaling and commercialization. Creating a clear funding map helps avoid overlaps, ensures compliance, and maximizes efficiency..

[Audio] Combining funding instruments also increases complexity. Each source has its own rules, reporting requirements, and audit standards. Clear governance structures and well-defined responsibilities are essential. Financial officers play a critical role in ensuring compliance and preventing misallocation or double funding..

[Audio] When used strategically, CAP and InvestEU synergies significantly enhance both financial sustainability and project impact. They support scaling, improve adoption, and help projects move from experimentation to systemic change in agriculture. To conclude, effective funding mix and portfolio management are not about complexity for its own sake. They are about resilience, accountability, and impact. By diversifying funding sources, balancing risk, using performance indicators, and leveraging EU instruments strategically, agri-innovation projects can achieve lasting results..

thank you!. TALLHEDA has received funding from the European Union's Horizon Europe research and innovation programme under Grant Agreement No. 101136578. Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the granting authority can be held responsible for them..