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Give Away Your Company or Let the Feds Fund Your Development?

Let’s face it, Venture Capitalists are not interested in you. They want your company’s equity. You want to keep it. What are your alternatives?

We’ve all heard the horror stories of people with great ideas who accepted money from VCs and ended up without the mega-dollars they envisioned and without control of their companies. Life doesn’t need to play out like that.

Years ago, the federal government started a program to embrace small businesses and to make sure small businesses can compete with giant, multi-national corporations.

With the advent of the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs, small businesses can participate in research and in research and development alongside huge corporations.

The idea behind SBIR and STTR is that great ideas and outstanding innovation often hide inside small businesses without the resources to bring them to light. With money from the federal government, SBIR and STTR hope to unleash these ideas and innovations to help various governmental agencies and to commercialize those ideas and innovations to benefit small business growth.

Money from SBIR and STTR awards usually follow the Phase I, Phase II, and Phase III format. Phase I provides funds for investigation of a problem or need identified by a government agency, and those agencies are looking for possible solutions for that problem. During Phase I, a company usually completes an investigation of the problem or issue, identifies how the company may solve it, and provides technical details to support the solution. Normally, companies produce only a paper response during this phase. Note, agencies may commit several Phase I awards to different companies to see what solutions they propose.

If the agency identifying the topic accepts your Phase I report as something you can accomplish, and if they see your solution as viable for the problem, they may invite you to submit a proposal for a Phase II award on the same topic. Phase II awards bring substantial monetary support with them, and agencies expect you to flesh out what you said you could do in Phase I. While Phase II work often does not result in a completed product, agencies do expect companies to make substantial progress and create something that proves the offered solution does work. As with Phase I awards, agencies may commit funds to several companies working on the same topic.

Finally, Phase III is the level companies want to reach. If invited to participate in a Phase III award, you must bring your commercialization plan to the highest order. In short, you must identify how you will take the completed project to market. Agencies participating in SBIR and STTR are not looking for one-off products. They expect your solutions to the topics to represent both deep and broad solutions, and they expect you to create products that will generate interest in the commercial arena. So, if you win Phase I and Phase II awards from the DoD, for example, they want to know how your solution will benefit them and a broader audience nationally or internationally.

The mission of the SBIR/STTR programs is to support scientific excellence and technological innovation.

With goals that focus on innovation, on federal R&D needs, entrepreneurship, and private-sector commercial products, the SIBR program embraces small businesses that can deliver in each of those areas. The STTR program works to foster cooperation between research universities and small businesses. While many know about SBIR, the STTR piece grabs less attention because of some of its complexities. Still, for small businesses, both SBIR and STTR provide viable options to VC money and allow small businesses to manage themselves and keep more of the money that helps grow their companies.

Why do so few small businesses participate in SBIR or STTR? First, even though the government works hard to spread the word, the information does not seem to reach far enough. Second, those who do know about the programs often believe they require too much effort.

Winning grants through the SBIR and STTR programs can allow your company to research, develop, and commercialize what you know best—innovation that can become valuable both to our nation and to the growth of your company.

We all know that building a business requires hard work and, often, considerable money. With SBIR, you can win awards to prove your concepts, to develop your ideas, and to commercialize what you create. Additionally, provisions exist in the program to allow partnerships with large, established, multi-national companies that need your expertise to perform their work. Most contracts require such partnerships. Once established as a partner with one of those large companies, even greater opportunities exist for small businesses.

Partnering with academic institutions in the STTR program to work on technology they develop together with your business also opens doors that most small businesses only dream of. Many large government contracts for academia mandate a small business component. The opportunities for both SBIR and STTR programs grow by billions of dollars each year.

Participating in the STTR program is much like the best minds at universities around the country working on R&D for you! Universities patent hundreds of products each year—most without a good way to develop or commercialize them. STTR allows small businesses to tap into that rich reservoir of product patents and share in the results of the work. Admittedly, the STTR program is a bit complex but can be more than worth it for companies that establish good, working relationships with research universities.

If you’re interested in knowing more about how to successfully create proposals for SBIR and STTR topics, be sure to follow my series here where you’ll also find tremendous resources for SBIR/STTR processes, application, and fulfillment. I will write a series of articles to help guide you. Meanwhile, now that you understand the basics of SBIR and STTR, take a deeper look and learn about what it takes to win a SBIR or STTR grant. You will find advice for everything from putting together your proposal to showcasing your team. Check out the resources section of aShoGi.com. My free in-depth e-book is there to help you maximize your chances of receiving a SBIR or STTR grant. Check it out (Free eBook) and thanks for reading!

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