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Yesterday, I attended a two hour presentation on the Federal Government’s SBIR/STTR programs. Before you tune out because I mentioned “government” these two programs could potentially be a great source of funding for some of our local #VegasTech entrepreneurs.

Here’s why:

Both programs are very entrepreneur-friendly. They provide non-dilutive grants (no effect on equity) to small businesses who can solve problems posed by one of eleven federal agencies. They are not loans either. It’s an outright grant of almost $1M (see below) to conduct research and build a prototype.

Here’s how it works:

In general, it is a two-stage process. First, a proposal is written for Phase I. In Phase I, basic research is done to establish the validity of the idea. The typical grant amount for Phase I is $100K-$150K. Should the outcome of Phase I be favorable, the applicant can then apply for Phase II of the program. The grants in this phase are in the $750K range. The great part about this structure is that a non-technical entrepreneur can identify a problem, then use this funding to build out a technical team that they could not otherwise afford.

Some agencies, like the Department of Defense (DOD), have very specific problems in mind and are looking for products to solve those problems. Others, like the National Science Foundation (NSF), may simply pose areas of research they are interested in. Entrepreneurs are then free to pitch their solutions to problems in that area.

Of course, there are some drawbacks to the program:

1. The timeline tends to be long, as one might expect. Phase I, including the application process, can easily last a year, with Phase II funding expected to last the company 2 years.
2. In certain cases, such as DOD projects, the government has the right to become the sole customer and prevent sales to other parties. A short bit of thought, however, will make it clear that this makes sense. There’s actually even a positive to this one: if they choose to sole source from you, they don’t have to put the request out for bid, so you can be in very good position to get certain contracts.
3. Because it is research-based, the program is somewhat biased toward academic types. STTR, in particular, requires the applicant to work with a federally-funded research university (UNLV qualifies) or a national lab (e.g. Los Alamos).

One big tip: Don’t rely on just the name of the agency to tell what they are looking for. For example, the DOD funds work in weapons (of course) but also logistics, travel services, and health.

Thanks to Dr. Gruhe from the Nevada Small Business Development Center for leading this informative workshop.

More information is available here.

Posted by Rick Duggan — rick -at- vegasstartups.com

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