Innovation Funding Incentives: Denmark

Denmark has established a highly supportive and dynamic ecosystem for innovation, driven by a combination of robust public funding, attractive tax incentives, and a thriving venture capital landscape. The nation’s strategic focus on research and development (R&D) and fostering entrepreneurship aims to enhance its global competitiveness and address societal challenges through technological advancement. This report will outline the primary innovation funding mechanisms available in Denmark and their collective impact on the country’s vibrant innovation landscape.

Key Funding Incentives

1 | R&D Tax Credit and Enhanced Deduction

Denmark offers significant tax incentives to encourage companies to invest in R&D, making it one of the most attractive regimes in Europe.

Mechanism: Companies can receive a tax credit equivalent to 22% of their R&D expenditure deficits, up to a maximum of DKK 25 million (set to increase to DKK 35 million from 2027). This mechanism allows companies, particularly those in a loss-making position, to receive a cash payment for the tax value of their R&D costs, effectively improving their cash flow.

Enhanced Deduction: Beyond the tax credit, Denmark also provides an increased tax deduction for R&D costs. This rate has been gradually increasing and is set to reach 120% by 2028. This means companies can deduct more than 100% of their R&D expenses from their taxable income. Capital expenditures for R&D can also be immediately written off.

Eligibility: These incentives apply to a broad range of R&D activities and are available to companies of all sizes.

Impact: These tax incentives significantly reduce the net cost of R&D, encouraging businesses to undertake ambitious projects and providing crucial liquidity, particularly for R&D-intensive startups.

2 | Direct Grants and National Funding Programmes

Denmark boasts a diverse portfolio of national funding programmes, primarily administered by Innovation Fund Denmark (Innovationsfonden), which invests in research and innovation to solve societal challenges and create value.

InnoBooster: This programme accelerates innovative ideas from Danish SMEs, startups, and enterprising researchers. It provides grants up to DKK 5 million for knowledge-driven projects aimed at developing new products, services, or process improvements.

Grand Solutions: Targeting high-risk, ambitious projects, Grand Solutions fosters collaboration among companies, universities, and research institutions. These projects drive new knowledge, growth, employment, and societal solutions, typically receiving grants of DKK 5-30 million.

Innofounder: Specifically designed for entrepreneurs, Innofounder supports early-stage R&D by providing a monthly grant (e.g., DKK 27,500 for a year) and a development grant (e.g., DKK 100,000), enabling founders to work full-time on validating market needs and developing prototypes.

Strategic Green Funds: Denmark has a strong focus on green innovation. Programmes like the Energy Technology Development and Demonstration Programme (EUDP), Environmental Technology Development and Demonstration Programme (MUDP), and Green Development and Demonstration Programme (GUDP) support R&D in green energy, environmental technologies, and sustainable food production, aligning with Denmark’s ambitious climate goals.

Industrial PhD and Postdoc Programmes: These initiatives support collaborative research projects between companies and universities, fostering knowledge transfer and talent development.

3 | European Union Funding and International Cooperation

Danish companies and research institutions actively participate in various European Union funding programmes, leveraging these opportunities to enhance their innovation capacity and international collaboration.

Horizon Europe (EIC Accelerator, Pathfinder, Transition): These highly competitive programmes provide significant grants and equity investments for ground-breaking, market-creating innovations and visionary research.

Eurostars: As part of the European Partnership on Innovative SMEs, Eurostars provides funding for international R&D projects led by SMEs, facilitating cross-border collaboration for commercialisation.

Global Innovation Network Programme (GINP): This national programme facilitates international research and innovation partnerships, supporting networking activities like joint workshops and researcher exchanges.

4 | Venture Capital Landscape

Denmark’s venture capital (VC) ecosystem is robust and growing, attracting significant investment, particularly in technology and green sectors.

Growth: Denmark’s VC market has demonstrated resilience and growth, with a notable increase in investment rounds and significant funding directed towards life sciences, fintech, software-as-a-service (SaaS), and especially cleantech. The country has a high number of “rising unicorns” per capita in Europe.

Key Players: The Export and Investment Fund of Denmark (EIFO) plays a significant role, often co-investing with private funds like Seed Capital, byFounders, and Heartcore Capital, supporting early-stage to growth-stage companies.

Impact: A collaborative innovation ecosystem, combined with strong government backing and a growing influx of venture capital, positions Denmark as a leading hub for startups and innovation in Northern Europe.

Conclusion

Denmark’s comprehensive approach to innovation funding, characterised by generous R&D tax incentives, a diverse array of national grant programmes, and active participation in European and international initiatives, creates a highly conducive environment for research, development, and entrepreneurship. This robust public support, coupled with a thriving venture capital landscape, effectively de-risks innovation and provides crucial capital for businesses to scale. This integrated strategy is fundamental to Denmark’s continued success in fostering technological advancement and maintaining its competitive edge in the global economy.