Grants Available for Start-Up Companies & Winning Tips
Originally published on December 17, 2015
Updated on August 15th, 2022
Typically, the federal government does not grant monies to for-profit small businesses, but there are some exceptions. If the company provides an innovative product or is focused on advanced technologies, there are grant opportunities from the Small Business Innovation Research (SBIR) or the Small Business Technology Transfer (STTR) programs.
The SBIR program reserves specific monies in the federal budget to fund small businesses that have an idea with commercialization potential that meets specific US Government needs. Providing these grants allows smaller companies to compete with their larger counterparts with significantly higher budgets.
The STTR program is similar but focuses on collaboration between research institutions and commercial businesses. Thus, the awards require a joint venture between a small business and a nonprofit research institution. This program helps bridge the gap between the science behind the technology and its ultimate commercialization.
The grants typically work in three phases:
- Phase I is the startup phase from 6 months to one year for exploration of the idea, technology, and commercial potential. Funding does not normally exceed $150,000.
- Phase II continues the initial efforts if the company merits additional attention. Normally, phase II covers as many as two years with $1,000,000 in total funding.
- Phase III moves the product from the testbeds to market but does not include any additional grant monies. At this phase, it is the program’s expectation that further funding is obtained from the private sector, sale of the product/idea, or other means.
Each program is incredibly competitive and requires a very detailed grant application to be considered.
If you’re looking for some tips for getting one of these grants, NSF-SBIR program director, Ben Schrag, shared some of his Do’s and Don’ts when applying to their program:
- NSF seeks to support early stage companies, with clear scalable ideas and a focus on commercialization. The purpose of these grants is to fund companies that might be seen as “too risky” for VCs so the grant should ultimately minimize the risk and help lead to VC or Angel backing.
- The SBIR program seeks out products and services that are technical in nature. Candidates need to demonstrate that they have a technical product or service that must be designed and implemented.
- Demonstrate high technical risk. Remember, you should only need an R&D grant if your product isn’t proven. Show that your product alleviates a customer pain and has potential for commercialization.
- Highlight your team and their desire and enthusiasm to bring your product to market and also discuss their good track record of bringing other products to market.
- Show the SBIR that the grant will bring “move the needle” for your company.
- While you don’t need to be an expert grant writer, you do need to tell a compelling story and clearly state your message.
- The NSF focuses 100% on innovation, so don’t worry about specific topics or themes when applying. Use your freedom to choose any tech area where you feel your product will make the most technical impact.
- Don’t worry about what the SBIR “needs”. You have the flexibility to determine how to monetize your opportunity. Focus on keeping your story consistent and responsive to your market landscape.
- Apply for numerous grants! Don’t just apply for an SBIR grant, apply for other grants!
Funding your company is one of the biggest hurdles you’ll face as an entrepreneur. SBIR and STTR grants are a good option for companies deemed “too risky” to VCs and angel investors. These grants can also help lower the risk of investing in your company and ultimately lead to additional funding from other sources.
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