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April 8th, 2021

GUEST PERSPECTIVE

Federal Support for Technology-Based Businesses

By Karl Koehler, Elevate Advisor

The federal SBIR/STTR (Small Business Innovation Research; Small Business Technology Transfer) programs enable businesses to expand their technological efforts. While the programs can be competitive, they offer business development tools that are highly desirable and well worth the time required to develop a convincing Phase I proposal. In fact, the SBIR/STTR programs are the largest source of early-stage technology financing in the United States. On top of this, Elevate Ventures helps with polishing the content of your proposal and supplements the resulting Phase I award. Using state dollars, Elevate matches 50% of up to three SBIR/STTR Phase I Awards ($150,000 maximum match) per recipient.

So, why bother applying for SBIR/STTR grants? Developing a Phase I SBIR proposal takes serious thought about your technology/intellectual property and the logic behind its planned development, competitive advantage, and market – which can be a pain.  But this is what you need to do anyway! The formal organization of the SBIR proposal helps you structure your thinking about the relationships among these crucial business development elements. Creating a coherent argument addressed to national experts in both technology and business development will help you better frame your company vision for the broader investment community. And, winning an SBIR/STTR award from a federal agency brings with it much more than non-dilutive funding to move your ideas forward. The award is an important validation by a national review body of your ideas and business goals. In sum, the mental discipline of creating the proposal, the financial support (with significantly more future support implied by the Phase II process) the award provides, and the implicit validation of your vision are all important and necessary elements of growing your business.

The central focus of the Phase I proposal is a technical plan that validates your ideas and provides a solid basis for your Phase II development plan leading to Phase III, commercialization, and market entry. Phase I awards are generally between  $150,000 to $250,000 and Phase II is generally substantially more. In addition, the federal agencies backing your idea often offer financial incentives for external support during Phase II.

Now, let’s discuss timing. The federal SBIR/STTR review process is not fast and typically takes up to six or seven months after you submit your proposal. A number of things occur in those months; your proposal is assigned to an expert review group,   your proposal is given to group members, time is set aside for reading and writing a review critique, and finally, the review group is brought together to discuss the current proposal cohort and rank their quality. Often, companies complain about this ‘time lag’, but the time passes quickly, and you are not actively involved once you submit your proposal to the agency. It would be nice to have the funds in one month, but patience is often well rewarded.

Whether you win an award or not, the SBIR/STTR submission process strengthens you and your company. The process requires time management, strategic thought, direct business application planning, and patience. The agencies provide written feedback which is generally useful as you continue to craft your pitch and develop your business plan.

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