What is Cascade Funding?

The funding model all founders should know about

Most founders understand grants in a very traditional way.

A government department opens a funding round.
You read the guidelines.
You prepare the application.
You submit directly to the funder.
Then you wait.

In Europe, there is another model founders need to know about.

It is called cascade funding.

Technically, within the European funding system, it is known as Financial Support to Third Parties, or FSTP.

That name is not exactly founder-friendly. But the model itself is worth understanding, particularly if you are building in areas like climate, sustainability, circular economy, AI, advanced manufacturing, mobility, energy, or deep tech.

So, what is cascade funding?

Cascade funding is a way for European public funding to reach startups, SMEs and other innovators without every founder needing to apply directly to the European Commission.

Instead, the European Commission funds a large project consortium. That consortium might include universities, research organisations, industry bodies, corporates, technology partners, or regional innovation organisations.

As part of the project, the consortium becomes the funding administrator and is required to distribute part of the funding to third parties. Those third parties are often startups and SMEs. That is where you as founders come in.

The consortium (administrator) launches its own open call, founders apply through that process, and successful applicants receive a smaller grant to test, validate, pilot or develop a specific solution.

Successful founders receive non-dilutive funding to fund project objectives. It is public funding, but it does not always look like a traditional government grant.

Why this matters for founders

For many founders, European funding can feel out of reach.

The programs can look complex.
The language can be dense.
The application process can feel designed for institutions rather than entrepreneurs.

Cascade funding changes that.

It creates smaller, more targeted opportunities where startups and SMEs can contribute to a defined innovation challenge without needing to lead a large European consortium themselves.

The amounts vary, but many cascade funding opportunities sit in the tens of thousands of euros. Some are higher. Some include access to testing environments, industry partners, technical support, mentoring, pilot sites, data, or commercial validation.

For an early-stage or growth-stage founder, the value is not always just the grant.

The real value may be:

• funding to test or validate a solution
• access to an industry partner
• credibility through association with an EU-backed project
• a structured pilot pathway
• entry into a European innovation network
• evidence that can support future funding, investment, procurement or commercial partnerships

What kind of work is this funding designed to support?

When you look across the cascade funding model, one thing becomes clear. This is not general business funding. Like most grants, it is not designed to fund ordinary operating costs, vague growth plans, or general marketing activity.

It is designed to help Europe solve specific innovation, industry and policy challenges.

The priority areas appear to cluster around a few major themes.

Digital innovation

Many cascade funding opportunities support the uptake or development of digital technologies. That can include AI, data platforms, automation, digital twins, advanced software, cybersecurity, digital infrastructure, and tools that help industries modernise.

Climate and sustainability

A strong share of the funding aligns with decarbonisation, clean technology, energy efficiency, climate adaptation, and emissions reduction. This is especially relevant for founders building products or services that help industries reduce waste, improve efficiency, or transition to lower-carbon systems.

Circular economy

This is a particularly important area to watch.

The EU is placing increasing emphasis on circular economy policy, including secondary raw materials, recycled materials, reuse, repair, remanufacturing, and circular supply chains.

For founders, this could include solutions connected to waste-to-resource models, product lifecycle tracking, reverse logistics, materials recovery, sustainable packaging, battery recycling, textiles, construction materials, or industrial by-product reuse.

Mobility and transport

Funding also appears across mobility, logistics, transport systems, clean mobility, electric vehicle infrastructure, battery systems, and smarter movement of goods and people.

Industrial innovation

A lot of cascade funding sits close to industry. That means the strongest applicants are often not just building “interesting technology”. They are solving a problem that matters inside a supply chain, manufacturing process, infrastructure system, research program, or commercial environment.

Cross-border collaboration

Because this funding sits inside the European system, there is often a strong interest in solutions that can operate beyond one local market. Founders do not always need to be large or fully international, but they do need to understand how their solution fits within a broader European challenge.

The strategic opportunity

Cascade funding is not usually asking founders to present a broad business case in isolation. It is asking founders to show how their solution can contribute to a defined challenge.

You need to be clear on:

• the problem your solution addresses
• the technical or commercial stage you are at
• what can realistically be tested or validated during the project period
• why your solution fits the specific open call
• what evidence you already have
• what you will deliver with the funding
• how your work contributes to the broader project outcomes

Because these calls are specific. A generic application will not work.

The catch: the windows can be short

Cascade funding opportunities can move quickly.

Application windows may only be open for a short period. Some calls are open for 30 to 60 days. The documentation may be lighter than a major European grant, but the strategic thinking still needs to be strong.

That means founders need to be prepared before the right opportunity appears.

At a minimum, it helps to have:

• a current pitch deck
• a clear description of your product or solution
• evidence of traction, testing, validation or customer need
• a simple project plan
• a clear budget
• founder and team bios
• company registration details
• financial information
• a short explanation of your technology, methodology or innovation
• a clear view of the markets, sectors or policy areas your business aligns with

The founders most likely to benefit are not necessarily the ones who find the opportunity first. They are the ones who can recognise fit quickly and respond with clarity.

Where to find cascade funding opportunities

There are two useful places to start. The first is the official EU Funding & Tenders Portal, where cascade funding opportunities can be filtered under Financial Support to Third Parties.

The second is specialist aggregator platforms such as Cascade Funding Hub, which track open calls across Europe and allow founders to search by theme, funding amount, deadline and sector.

These tools are worth checking regularly if your business sits in a relevant field.

Why I’m watching this model

I am sharing this because many founders overlook funding models that do not look familiar. They search for grants in the way they have always searched for grants. But different funding systems use different structures.

Cascade funding is a good example.

It is not always obvious from the outside. It may sit inside a larger European project. It may be described using technical language. It may not look like the kind of funding round you are used to seeing. But for the right founder, it can provide non-dilutive capital, industry access, validation, and a pathway into larger European innovation ecosystems.

That does not mean every founder should chase it. It does mean more founders should know it exists. Especially if you are building in AI, climate, circular economy, mobility, energy, advanced manufacturing, sustainability, deep tech, or industrial innovation.

Because sometimes the right funding pathway is not the most obvious one. And sometimes the opportunity is not in the headline grant.

It is in the funding that cascades from it.

[lol - did you like what I did there!]