On the planet of small enterprise and startup funding, enterprise capital is the “soup du jour.” However entrepreneurs can be sensible 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 Associate 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 adequate runway” as a result of the truth is we’re now 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 and Small Enterprise Know-how Switch (STTR) packages. These twin-programs present US-based for-profit companies with non-dilutive grants over mounted time intervals, 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 full of dizzying acronyms, daunting technical necessities in addition to prolonged time delays. So I tapped one founder who has managed to interrupt by way of all of those obstacles, to share her tips about how one can 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 Well being 360x, a affected person centered platform for inhabitants well being administration and medical trial variety. And the funding she obtained, enabled her to go after giant industrial contracts, as she lately inked a partnership with Amgen
AMGN
, to carry-out a 5,000-participant research 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 Applications

First, a little bit of historical past. The SBIR program was initially established in 1982 by way of 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 all the way down to who controls the finances. “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 exploit “SBIR” interchangeably with SBIR/STTR, for ease of reference.

STEP 2: Deciding Which Company To Apply To

One of many first issues it is advisable do is determine the businesses which can be most related to your corporation. There are 11 federal businesses 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, which incorporates the Navy, Airforce, Military and Protection Logistics, maintains the most important finances, clocking in at roughly $2.2 billion in funding per yr. Nevertheless, 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 evaluate the solicitation requests – additionally known as Broad Company Bulletins.

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 and extra particularly, the NIH. This company has a hefty $1.3 billion finances, and is in actual fact, the most important granting establishment taking part within the SBIR program. With NIH masking 90-95% of the HHS SBIR finances, you usually hear folks converse solely in regards to the NIH packages. The particular solicitations supplied by the totally different businesses underneath the NIH (ie, Nationwide Coronary heart Lung and Blood Institute – NHLBI, or Nationwide Most cancers Institute – NCI) will be accessed on their web site.

Nationwide Science Basis. One other company of notice is the Nationwide Science Basis, affectionately often known as America’s Seed Fund. With a $200 million annual finances, the NSF funds plenty of high-growth tech corporations that might 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. Actually, 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 web site.

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 certain to seek the advice of with this system officer or coordinator on your particular company for steering.

Part I. It is sensible to start out right here in case you are on the idea-stage, and nonetheless determining the feasibility and market potential for your corporation. If chosen, you obtain roughly $50,000 to $250,000 over a hard and fast interval – six months to 1 yr.

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 industrial potential of the venture proposed in Part II. Dr. Ofili elaborated, “in the end the SBIR is designed to maneuver you thru to commercialization,” or in different phrases, develop a product available in the market.

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 lately, the SBIR got here out with what they name “Quick-Monitor” for extra mature companies. Dr. Ofili defined, “In case your thought is nicely 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 fact is, it could possibly take anyplace from six months to a yr 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 growing a one or two-page Particular Goals doc – a concise pitch, or an government abstract. She labored with the expertise switch workplace at Morehouse Faculty of Drugs, to get coaching and help from advisors who informed her, “that is what SBIR appears to be like 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 following steps within the course of.

The Proposal. The meat of the proposal is what is known as the commercialization plan – which isn’t too totally different from what would go in a typical investor pitch deck. You need to describe your group, product, aggressive panorama, market measurement and go-to-market technique. Dr. Ofili laughed, “I went to plenty of courses to discover ways to write the plan. I had sufficient to get my MBA!”

Letters of Assist. As talked about beforehand, SBIR purposes 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 totally different sources (amenities, expertise, human sources) it should deliver to the venture. Different letters of help come out of your collaborators, key group members and different vital contributors.

STEP 5: Awaiting A Funding Determination

After submission, the SBIR utility goes by way of a peer evaluate course of – with consultants of their fields (together with scientists and enterprise folks), who assess the deserves of your utility.

Dr. Ofili defined, “often you submit one thing within the fall. The evaluate takes place someday within the spring, possibly winter, as a result of [with the NIH] it has to go to by way of what is known as ‘research part’ for scientific peer evaluate. After which it goes to the advisory council at NIH that’s in command of that institute to approve, so you’re most likely a interval of about 9 months.”

It goes with out saying, your corporation can’t survive whether it is reliant on receiving SBIR funding to proceed working. Actually, Dr. Ofili leveraged different smaller grants to maintain afloat and maintain her enterprise, Well being 360x going. And the truth is, SBIR will not be for everybody – particularly these with short-term funding wants.

However earlier than you “exit stage left” on this course of, endurance and persistence can repay. $2.2 million in non-dilutive funding (which is what Dr. Ofili was in the end awarded) is a game-changing sum of money for a small enterprise. And, this might be you subsequent!