One of the most persistent myths among would-be business owners is that Uncle Sam and other organizations dole out free, no-strings-attached grants to business startups. With rare exceptions, it doesn’t happen. Yet the fairy tale persists and “small business grants” has long been one of the most popular searches online.
There is, however, one small business grant program that really does exist. It’s called the Small Business Innovation Research (SBIR) program. SBIR offers specialized high-tech development grants and is administered by the U.S. Small Business Administration.
Eleven different federal agencies participate, including the Departments of Energy, Education, Agriculture, Commerce, Defense and Transportation, plus the Environmental Protection Agency, NASA, National Science Foundation (NSF) and others. These agencies openly invite small firms to submit their technology problem-solving proposals for possible funding.
Be aware, however, that SBIR is a highly-competitive and highly specialized program focused exclusively on developing new technologies and rarely if ever funds startups.
But if that’s what your business does, SBIR is definitely worth a shot. The SBIR Program stimulates technological innovation in the private sector by funding research and development (R&D) at small companies.
Consider Irvine, CA-based ChromaDex Corp., a small firm that develops novel, natural ingredients to fill unmet needs in the dietary supplement, food, beverage, cosmetic and pharmaceutical markets. ChromaDex was recently awarded a $500,000 SBIR grant to fund commercial development of plant-based antioxidants (called anthocyanins) for use in nutritional products.
Anthocyanins are naturally occurring plant pigments or colorants which contribute to the vivid coloring of berries and are proven to aid in protecting against oxidative stress and control blood glucose levels to assist with weight management and diabetes. The grant money came from the National Science Foundation.
ChromaDex will use the grant, along with its own resources, to complete the work necessary to commercialize anthocyanins. It then plans to market and license these anthocyanins to food, beverage, cosmetic and dietary supplement manufacturers.
Funding R&D in a small company is tricky business, often requiring large amounts of cash with an uncertain outcome sometime in the future. The beauty of an SBIR grant is that it generally comes with no strings attached. And the federal government has over $2 billion it must spend annually on small business technology development. Money is used for all stages, from concept to prototype to marketplace.
A typical SBIR grant is about $850,000, but can go to $2 million or more, according to Fred Patterson, who co-founded two companies that received almost $50 million in SBIR grants. Patterson now runs SBIR Coach, which counsels business owners on how to seek SBIR funding. He says that while about 15 percent of SBIR proposals are funded, the odds can be as high as one-in-three at some agencies.
Government agencies that participate in the SBIR program regularly solicit proposals from small business to solve specific tech-related problems. Business owners and entrepreneurs can search the listings to find topics in their market or industry. Agency listings will also include details on proposal content and submission guidelines.
“The agencies review the proposals, and rate and rank them according to the degree of originality and innovation, technical merit, credibility of the proposing team and the future market potential,” says Patterson. The best proposals – about 1 in 7 on average – get the grants. There’s no interest and no equity to give up.
The basic qualifications to apply for an SBIR grant are simple: The business must be organized for-profit, more than 50 percent American-owned, located in the U.S. and independently operated. The principal researcher must also be an employee of the business.
For more details, start at the main program website, SBIR.gov. From there you can link to current solicitations, SBIR conferences and events, state resources and past awards. The part awards in particular are helpful to see the types of projects that have been funded, which agencies funded them, and the type of small business that was awarded the grant.
SBIR Gateway is another helpful site to visit.
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About the Author: Daniel Kehrer, Founder and Chief Content Officer of BizBest Media, is a senior-level leader in digital media, content development and online marketing with special expertise in startups, SMB, social media and generating traffic, engagement and leads. He holds an MBA from UCLA/Anderson and is a passionate entrepreneur (started 4 businesses), syndicated columnist, blogger, thought leader and author of 7 business and financial books.