TL;DR: EIT Manufacturing, an EU-backed body that wrote cheques of around €500,000 to startups, filed for liquidation on March 19, 2026, leaving over 200 companies, half of them SMEs and startups, waiting for funds they were already promised. This is not a one-off fraud story. It is the latest and most visible symptom of a structural problem I have been writing about for years: the EU funding system is designed to protect itself, not the founders it claims to serve. You can apply anyway. Just go in knowing the odds.
Over 200 companies are sitting right now waiting for grant money that may never arrive. Some of them built their hiring plans around it. Some signed leases. Some turned down other investors because they thought the EU grant was locked in.
It was not.
EIT Manufacturing, the EU-backed body tasked with digitising Europe’s industrial base, filed for liquidation in late March 2026 after going almost two years without receiving funds from its parent organisation, the European Institute of Innovation and Technology (EIT). The total outstanding obligations sit at around €15 million. The money owed to those 200 beneficiaries.
I read about this in a Sifted piece by Freya Pratty published on April 2. And it sent me straight back to my desk, because this story is one I have been watching build for a long time.
Let me tell you why this is bigger than one collapsed body.
EIT Manufacturing: What Actually Happened
Here is the timeline, because it matters.
EIT Manufacturing (EITM) was launched in 2019 as one of nine bodies funded through the EIT, an independent EU agency created to boost university-business collaboration. Through its Accelerate programme, EITM wrote cheques of around €500,000 to manufacturing startups across Europe. The model was real and the money was real, until it was not.
In 2024, the European Anti-Fraud Office (OLAF) launched an investigation into EITM’s activities between 2020 and 2022. The EIT froze payments. OLAF’s investigation found “serious irregularities and breaches of obligations.” EITM maintained that the investigation was about mismanagement of investment documentation, not mishandling of funds. The distinction matters legally. It does not matter to founders waiting for €500,000 that never arrived.
In October 2025, after EITM implemented new governance structures, the EIT agreed to allocate €163 million to the organisation. Founders waiting on payments probably exhaled.
Then in February 2026, a second OLAF report landed. The EIT said the new instance established that “irregularities went well beyond those identified initially.”
EITM disputed this. CEO Caroline Viarouge told Sifted the instance also relates to the 2020 to 2022 period, which had been previously investigated.
The EIT refused to issue a letter confirming the €163 million was coming, which EITM needed to secure a bridging bank loan.
Without the letter, there was no loan. Without the loan, there was no runway. On March 25, EIT Manufacturing filed for liquidation. Its outstanding financial obligations reach €15 million in funding to 200 beneficiaries.
Viarouge told Sifted: “EIT, as the grant authority, are the ones that need to step in and pay for these companies.”
The EIT said it would try to cooperate with the liquidator and was “particularly mindful of the impact on start-ups.” Some targeted payments to the most vulnerable beneficiaries were reportedly authorised. But the situation for the 200 waiting companies remains unresolved as of this writing.
The Part the Press Release Does Not Say
There is one line from this story that I want you to read slowly.
Viarouge said: “The KICs are put in a really unnecessarily fragile position in the current setup of the EIT framework. We really need to think of setting up a stable, transparent and simplified framework for them, with clear governance from the coordinating body at the commission. We truly need strong leadership in the coordinating body.”
She is the CEO of the organisation that just went bankrupt. She is not calling out fraud. She is calling out the structural setup that made the collapse possible.
And she is right.
The KIC model, which stands for Knowledge and Innovation Communities, groups large partnerships of universities, research centres, and private sector organisations into thematic areas. EIT Digital, EIT Health, EIT Manufacturing. Each receives funding from the EIT, which itself receives money from the EU’s Horizon Europe programme.
Jan Palmowski, secretary general of the Guild of European Research-Intensive Universities, told Times Higher Education that the collapse of the KIC had raised serious questions about the EIT model itself.
The EIT’s official response was to say this was a specific case, not representative of the broader model. “It is important to underline that this is a specific case concerning only one of the 10 Knowledge and Innovation Communities and does not affect the operations or financial stability of the other KICs,” the spokesperson said.
This is the institutional reflex I have been writing about for years. One case. Not representative. Move along.
Except the startups waiting for their €500,000 cannot move along.
I Have Seen This Pattern Before
In 2023, I wrote a piece for Sifted asking why applying for EU funding is such a nightmare. That article focused on the absurdity of the application process: contradictory evaluation letters, redress channels that loop back to the same evaluators who rejected you, consortiums that are structurally closed to new entrants.
Then I wrote a follow-up for Mean CEO about how EU-funded projects, including the Epic-X Acceleration Programme, take public money to support female entrepreneurs, then ask those same female entrepreneurs to deliver workshops for free while €1,000-per-hour consultants are pre-selected to receive one third of each startup’s grant.
Both pieces were about dysfunction in the system.
The EIT Manufacturing collapse is a different category. This is dysfunction that leaves founders unable to pay their bills.
And what makes it genuinely enraging is that the founders affected did nothing wrong. They applied. They were selected. They were told the money was coming. Some received partial payments in tranches. The 40% upfront, 40% mid-term, 20% on final report structure that is standard across EU programmes means some of them have already done the work and are sitting on an empty invoice.
The system failed them while asking them to trust it.
What the EIT’s Own Budget Numbers Say
Let us look at the context around the EIT, because the numbers tell a different story than the reassuring official statements.
In October last year, the EIT was handed €1bn to fund the organisations in its network. One billion euros, distributed across nine KICs, which includes the eight still operating after EITM’s collapse.
And yet the EIT could not provide a letter confirming €163 million to prevent EITM from going bankrupt. A letter. Not even new money. A letter confirming that money already allocated was coming.
Also worth reading: in a proposed EU budget covering 2028 to 2034, there was no mention of any funds at all for EIT. The EIT as an institution may not survive the next multi-year budget cycle. The €38 billion proposed for the European Innovation Council and “innovation ecosystems” in that same budget has been interpreted by many as covering KIC functions, but the EIT parent body is not named.
So you have an institution that just let one of its bodies collapse, leaving €15 million owed to founders, and that same institution faces an uncertain future past 2027.
And they want you to trust the application process.
The Structural Incentive Problem
Here is the diagnosis I keep arriving at, no matter which part of EU funding I examine.
The organisations running EU-funded programmes are not evaluated on whether the founders they support actually succeed. They are evaluated on process compliance: reports filed, events held, funds disbursed, governance structures in place.
This means the path of least resistance is always to protect the institution, not the founder.
When OLAF flagged irregularities at EITM, the EIT’s job was to protect EU funds. It did that by freezing payments. Understandable from a compliance perspective. Devastating from a founder perspective. And the founders had no recourse, no appeal mechanism, no way to get their money from somewhere else. They just waited.
The same structural incentive runs through every layer of the system I have written about. The consortium trap I described in my Sifted piece locks startups out of large grants because eligibility rules require programme-specific experience that only existing members have. The Epic-X coaching budget pre-selects consultants that startups cannot choose, routing one third of each grant to firms the founders never agreed to work with. And here, the oversight mechanism designed to protect public money made it impossible for 200 founders to access money that was already theirs.
The system protects itself at every level.
The people paying the price are always the ones who built something real.
A Real Question for Every Founder Reading This
I still believe European founders should try for EU grants. I said it in my Sifted piece and I stand by it. The runway matters. The non-dilutive capital matters. And for some programmes, the network and visibility genuinely add value.
But you need to apply with clear eyes.
Here are the questions I would ask before committing to any EU-funded programme, grant application, or partnership:
Who is actually holding the money? The EITM situation shows that the body handing you a promise is not always the body controlling the funds. Understand the chain: is there a parent institution, an EIT or a Horizon programme, that has final say on whether the money flows?
What happens to your tranche payments if the funding body is investigated? No programme documentation explains this, because no programme wants you thinking about it. But EITM’s founders found out the hard way.
What is the payment structure? The standard EU model of 40% upfront, 40% mid-term, 20% on final report means you are exposed on the back end. If the body collapses between your mid-term and final payment, you are doing work without compensation.
Is this the only funding source you are building on? Structuring your runway around a single EU grant is the equivalent of building on sand, especially if the grant comes through a multi-layer consortium arrangement.
And if you are signing up to speak at or contribute expertise to a EU-funded project, ask for the budget breakdown first. If they have public money for coordination and dissemination but cannot pay you for your time, that tells you everything you need to know about where their priorities actually are.
What Good EU Funding Infrastructure Would Look Like
I want to be clear: the EIT Manufacturing collapse was not caused by the founders. It was not caused by the startups waiting for their money. It was caused by governance failures in the 2020 to 2022 period, under previous leadership, in a model that concentrates too much financial control in too few institutions with too little direct accountability to the founders they serve.
Viarouge said it plainly: the KICs need a stable, transparent, and simplified framework with clear governance. She is right. The current model creates fragility at the level where it hurts most, at the point where the money was supposed to reach the companies building real things.
A better model would look something like this: direct relationships between the funding authority and the startup beneficiary, with the consortium playing a coordination role rather than a gatekeeping role. Clearer language in every grant agreement about what happens to promised payments if the intermediary body faces legal or financial trouble. A dedicated recovery mechanism for founders who are caught in institutional disputes they had no part in causing. And evaluating the KICs and their equivalents not on reports filed and events held, but on whether the companies they supported actually grew.
None of this is technically difficult. The political will to do it is the hard part.
Next Steps
If you are a founder considering EU grants in 2026, start by understanding which layer of the system you are actually dealing with. Is it a direct EIC or Horizon Europe application? Or is it a cascade grant through an intermediate body like a KIC or a consortium programme like Epic-X? The risk profile is completely different.
Read the payment structure before you build your cash flow plan around the grant. Know when each tranche arrives, what triggers the release of each tranche, and who has final sign-off authority on each payment.
And watch the EIT Manufacturing story develop over the coming months. The EIT says it will cooperate with the liquidator. The 200 companies waiting for money will find out what that actually means in practice.
If you have been affected by the EITM collapse, or by a similar situation where a EU-funded body failed to pay promised grants, I want to hear from you. The more we talk about this publicly, the harder it becomes for institutions to handle it quietly.
