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Other Funding Sources

Get Government Grants for Product Development

By Susan Schreter, Mg. Editor

Question My company just launched a health care product for post-surgery care. The product has been well-received in the medical community. Now I need more money for marketing and new product development. Based on lukewarm discussions with venture funds, I don't think our product line is sexy enough for investors. Where else can I go for money?

Question

Raising capital for an entrepreneurial business is very much like navigating bad rush hour traffic. Yes, you want to drive fast, pass other cars and avoid slowdowns.

But sometimes when entrepreneurs are so determined to drive in one direction, they never see how taking a different route can also get them to their destination. So how can you bypass your venture equivalent of clogged roads and pothole slowdowns?

Let's start with Small Business Innovation Research (SBIR) grants. These grants are available from various departments of the federal government, such as the Department of Defense, Department of Energy, etc. Each participating department sets specific priorities, or topics of interest, for its research dollar. Small companies which best match these broad research topics, receive grant awards.

I like the SBIR program because it can provide 'free and clear' capital for innovative, for-profit companies. This means that business owners like you can receive funding without repayment obligations or equity dilution. This is a better deal than a SBA loan or a venture fund investment. Grant recipients only obligation (not to minimize this) is to complete the proposed development work on time and within budget.

SBIR funds are granted in two phases: Phase I awards provide up to $100,000 to help businesses test the technical feasibility of a new product or service idea. This is extremely valuable to entrepreneurs who pursue less sexy business goals or have been told they are not 'far enough along' to warrant serious attention from investors.

Top performing Phase I grant recipients can then apply for a second grant of up to $500,000 to help bring their technologies to market. I'm told that there is considerable emphasis today in funding technologies that can meet US market needs plus serve our military interests in Iraq. To the extent your technologies can potentially improve the care of US causalities; you may ride the express lane to SBIR funding.

It's important to know that SBIR program administrators are supported by an elite team of technical advisors. They are highly knowledgeable in specific technical areas and favor well-researched, well-reasoned applications. They will also carefully evaluate the likely ability of a company's management team to build a prosperous business. Yes, much like venture fund investors, SBIR administrators want to fund companies with the best chances of long-term commercial success.

To improve your funding prospects, I encourage you to learn as much as they can about SBIR funding priorities before starting proposal work. Identify the names of companies that have received SBIR grants from your targeted federal government agency. Speak to the 'principal investigator' of several approved SBIR projects. Also ask how to boost the perceived technical stature of your investigative team.

There is one other benefit to the SBIR program. With extra capital in hand to achieve meaningful business progress, most grant recipients find they have greater appeal to investors and lenders. So don't give up. There are many ways to reach your destination.

TakeCommand Action Step

After you have read all about SBIR grant opportunities at the Small Business Administration's web site at www.sba.gov/sbir, then contact your local SBA's SCORE office for tactical guidance and business planning support. SCORE provides free coaching by retired business executives who love to help entrepreneurs build the business of their dreams.

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