On the earth of small enterprise and startup funding, enterprise capital is the “soup du jour”. However entrepreneurs can be clever to diversify their funding sources, particularly given the present liquidity tightening that we’re seeing throughout the non-public fairness markets.
Sean O’Brien, Managing Companion at Overline, a $40 million seed-stage enterprise fund primarily based in Atlanta, Georgia, has been advising his founders to “tighten their belts, be deliberate about spending and be sure that they’ve ample runway” as a result of the fact is we’re not seeing that “inexhaustible entry to capital anymore.”
Some companies have discovered much-needed seed capital from an sudden supply – the federal authorities, and extra particularly, the Small Enterprise Administration’s Small Enterprise Innovation Analysis (SBIR) and Small Enterprise Know-how Switch (STTR) packages. These twin-programs present US-based for-profit companies with non-dilutive grants over fastened time durations, in quantities starting from $50,000, to $2 million, for the event of a broad vary of leading edge applied sciences.
Now it’s no secret for entrepreneurs that the universe of presidency grants is crammed with dizzying acronyms, daunting technical necessities in addition to prolonged time delays. So I tapped one founder who has managed to interrupt by all of those obstacles, to share her recommendations on the right way to navigate the SBIR/STTR’s $3.5 billion pool of capital to speed up enterprise progress.
Heart specialist and entrepreneur, Dr. Elizabeth Ofili, has raised roughly $2.2 million in SBIR grant funding from the Nationwide Institutes of Well being (NIH) for her startup Health 360x, a affected person centered platform for inhabitants well being administration and scientific trial variety. And the funding she obtained, enabled her to go after giant business contracts, as she not too long ago inked a partnership with Amgen, to carry-out a 5,000-participant examine centered on coronary heart illness within the African American group.
Let’s break down how Dr. Ofili secured the bag.
STEP 1: Understanding the SBIR/ STTR Packages
First, a little bit of historical past. The SBIR program was initially established in 1982 by the Small Enterprise Innovation Improvement Act, and was expanded in 1992 with the addition of the STTR program, and has been constantly renewed by Congress since that point.
Dr. Ofili explains the excellence between the 2 packages, which largely boils right down to who controls the price range. “The SBIR is designed as a collaboration with a college or analysis establishment, so the establishment is often the sub-contractor and the small enterprise is the prime, whereas within the STTR mannequin, the establishment is the prime and the small enterprise entity is the sub.” In Dr. Ofili’s case, she partnered with Morehouse Faculty of Drugs, because the analysis establishment and remained the prime on the contract.
For the rest of this text, I take advantage of “SBIR” interchangeably with SBIR/STTR, for ease of reference.
STEP 2: Deciding Which Company to Apply To
One of many first issues you have to do is establish the companies which are most related to your online business. There are 11 federal agencies that take part within the SBIR packages, every with its personal grant alternatives, operational priorities and funding budgets.
Division of Protection. The Division of Protection (DoD), which incorporates the Navy, Airforce, Military and Protection Logistics, maintains the most important price range, clocking in at roughly $2.2 billion in funding per 12 months. Nonetheless, this program points solely contracts, not grants, and is a requirement-driven course of led by procurement workplaces. To use for DoD contracts, go to the DoD innovation portal and evaluation the solicitation requests – additionally known as Broad Company Bulletins (BAAs).
Division of Well being and Human Providers. As a health-tech founder, Dr. Ofili’s company of selection is the Division of Well being and Human Providers (HHS) and extra particularly, the NIH. This company has a hefty $1.3 billion price range, and is in actual fact, the most important granting establishment collaborating within the SBIR program. With NIH protecting 90-95% of the HHS SBIR price range, you usually hear individuals communicate solely in regards to the NIH packages. The particular solicitations supplied by the completely different companies underneath the NIH (ie, Nationwide Coronary heart Lung and Blood Institute – NHLBI, or Nationwide Most cancers Institute – NCI) might be accessed on their website.
Nationwide Science Basis. One other company of observe is the Nationwide Science Basis (NSF), affectionately generally known as America’s Seed Fund. With a $200 million annual price range, the NSF funds loads of high-growth tech corporations that may ordinarily go for enterprise capital, together with robotics, synthetic intelligence/machine studying, superior manufacturing, augmented and digital actuality, cloud computing, cybersecurity, and blockchain expertise companies. In actual fact, throughout fiscal years 2016 to 2022, NSF-funded startups noticed round 300 exits and greater than $20 billion in non-public investments. There’s a rolling course of to submit a pitch, with the steps outlined on the program website.
STEP 3: Shifting Via the SBIR “Phases”
The SBIR program is damaged down into three distinct phases – Part I, Part II and Part III. In deciding which path is finest for you, be sure to seek the advice of with this system officer or coordinator on your particular company for steering.
Part I. It is smart to start out right here if you’re on the idea-stage, and nonetheless determining the feasibility and market potential for your online business. If chosen, you obtain roughly $50,000 to $250,000 over a set interval – six months to 1 12 months.
Part II. The purpose right here is to proceed the R&D efforts from Part I. Funding, which ranges from roughly $750,000 to $2 million over a two to a few year-period, relies on the milestones achieved in Part I, in addition to the scientific and technical advantage and business potential of the venture proposed in Part II. Dr. Ofili elaborated, “finally the SBIR is designed to maneuver you thru to commercialization,” or in different phrases, develop a product out there.
Part III. That is the “unfold your wings and fly” stage of the SBIR course of. Firms which graduate into Part III obtain coaching, help and introductions to potential traders and prospects, however no funding is allotted right here.
Quick-Monitor. Very not too long ago, the SBIR got here out with what they name ‘Quick-Monitor’ for extra mature companies. Dr. Ofili defined, “In case your concept is effectively developed and you have already gathered some preliminary traction, you’ll mix Part I and Part II…and so that’s the path I went down, upon recommendation from this system officer.”
STEP 4: Submitting Your Proposal
The truth is, it could actually take anyplace from six months to a 12 months to arrange and submit your SBIR proposal. So don’t hesitate to interact an exterior marketing consultant that will help you construct the whole lot out – for instance – KeepYourEquity.co.
The Pitch. For Dr. Ofili, step one was creating a one or two-page Particular Goals doc – a concise pitch, or an govt abstract. She labored with the expertise switch workplace at Morehouse Faculty of Drugs, to get coaching and help from advisors who advised her, “that is what a very good SBIR seems to be like”. And after submitting the Particular Goals, NIH program officers scheduled a gathering to offer suggestions and join her with extra sources to arrange the complete proposal. Every company may have webinars and designated program officers accessible to elucidate the subsequent steps within the course of.
The Proposal. The meat of the proposal is what is known as the commercialization plan – which isn’t too completely different from what would go in a typical investor pitch deck. It’s a must to describe your crew, product, aggressive panorama, market dimension and go-to-market technique. Dr. Ofili laughed, “I went to loads of lessons to learn to write the plan. I had sufficient to get my MBA!”
Letters of Help. As talked about beforehand, SBIR functions have to be submitted in partnership with a analysis establishment or college. And so, the establishment would wish to offer a letter of help outlining the completely different sources (amenities, expertise, human sources) it’ll deliver to the venture. Different letters of help come out of your collaborators, key crew members and different important contributors.
STEP 5: Awaiting a Funding Choice
After submission, the SBIR software goes by a peer evaluation course of – with consultants of their fields (together with scientists and enterprise individuals), who assess the deserves of your software.
Dr. Ofili defined, “often you submit one thing within the fall. The evaluation takes place someday within the spring, possibly winter, as a result of [with the NIH] it has to go to by what is known as ‘examine part’ for scientific peer evaluation. After which it goes to the advisory council at NIH that’s answerable for that institute to approve, so you’re in all probability a interval of about 9 months.”
It goes with out saying, your online business can’t survive whether it is reliant on receiving SBIR funding to proceed working. In actual fact, Dr. Ofili leveraged different smaller grants to maintain afloat and maintain her enterprise, Well being 360x going. And the fact is, SBIR isn’t for everybody – particularly these with short-term funding wants.
However earlier than you “exit stage left” on this course of, persistence and persistence can repay. $2.2 million in non-dilutive funding (which is what Dr. Ofili was finally awarded) is a game-changing sum of money for a small enterprise. And, this may very well be you subsequent!