Winning SBIR funding: from a grantee’s perspective

Winning SBIR funding: from a grantee’s perspective

Today at the Serious Play Conference, we presented a brief talk on how to apply, persevere, and win SBIR funding for your learning game.

What is SBIR, you ask? It is perhaps the best kept secret for funding startups (and not-so new, not-so-small businesses). The acronym stands for Small Business Innovation Research. You can learn more here, but in a nutshell, federal agencies (e.g., DoD, NASA, NSF, NIH, Department of Education, and others) that fund more than a billion dollars in extramural R&D must set aside 3.2% to 3.65% of those R&D funds for small businesses to win and use. Quick arithmetic demonstrates that even a small percentage of several billion adds up to serious money.

What’s the catch?

It’s a competitive process

You must make the case that your team, and your idea, are innovative, address an unmet need that is aligned with the federal agency’s mission and goals, and, perhaps most importantly, that your project has a good chance of being commercially successful.

The benefits are obvious

The government is providing non-dilutive funding for your early-stage project. Outside investors would likely look at your company, and pass on, because you are either too small, or the technology is still too immature, which contribute to business risk. If an angel investor did find your team and your plan promising, you would still need to trade equity in your company for money. If you can win SBIR funding instead, use these funds to de-risk the project, and start finding paying customers, you will be in a much better negotiating position when seeking outside investors, and at a time of your choosing.

There are downsides

It takes time to apply. It takes further time for your application to be reviewed, and more time to make certain that you have all the assurances and certificates in place before you can accept the award. From submission of the SBIR application to winning the award may take more than 6 months. Preparing the application can range from weeks to months. And, more likely than not, you will not win funding the first time around. If you are able, you can submit a revised application based on the feedback from the reviewers, and try again. You must be patiently persistent.

You are dealing with the government

Some may consider this a serious downside, but I am more ambivalent. Yes, you must jump through many regulatory hoops. Yes, the rules can be contradictory, confusing, and violation of some could land you in jail. But learning to navigate this bureaucratic jungle, and passing competitive review of your plan will put you and your firm in a very good place. Following these regulations will protect you and your business from liability. Showing fiduciary responsibility with government funds will keep your accounting books in order. Working on commercialization in parallel with your R&D will keep your project headed in a direction that will keep your product or service viable after the grant money ends. All of these things will only make you more attractive to outside investors, potential business partners, or larger firms that may wish to acquire your technology.

You and your firm can easily become distracted

Probably the biggest risk to seeking SBIR funds for your business is confusing your goals with the federal agency’s goals. Just because you can do a project that the agency wants, doesn’t mean that you should. If an SBIR project helps keeps the lights on, but doesn’t do much to develop your core technology, or sends you on a wild goose chase that has little chance of finding a paying customer, you are wasting your time.

Remember: the government is (almost always) not your customer

SBIR is set up with most agencies to help small businesses to develop a technology that will find success in the marketplace. The agency may fund your R&D, and may provide assistance in helping commercialize it, but in most cases, they won’t be buying it. The grand exception is the Department of Defense. They will be the customer. It is up to you, however, to keep that customer happy. More than once, a firm has successfully completed all its objectives through the SBIR program, only to find that the customer has changed its mind, and no longer wants to buy it. And, if you believe that dealing with the government during the SBIR process is laden with red tape, you may find that the procurement process for the armed forces is an even more formidable jungle.

You are not dissuaded by the downsides, and you would like to learn more

In a following article, I will elaborate on the following. In the mean time, feel free to contact us.

  • Talk to other awardees
  • Prepare for, and then schedule a brief talk with a program officer
  • Talk to future customers
  • Attend one of many SBIR meetings

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