How To Raise $1 Million In SBIR Funding As A Small Business

In the world of small business and startup funding, venture capital is the “soup du jour”. However, entrepreneurs would be wise to diversify their funding sources, especially given the current liquidity crunch we are seeing across the private equity market.

Sean O’BrienManaging Partner upper lineA $40 million seed-stage venture fund based in Atlanta, Georgia, advises founders to “tighten your belts, be cautious about your spending, and make sure you have enough runways.” Access to capital is no longer possible. “

Some companies have found an unexpected source: much-needed seed funding from the federal government, and more specifically the Small Business Administration. Small Business Innovation Survey (SBIR) and Small Business Technology Transfer (STTR) program. These two programs provide US-based commercial companies with: non-dilutive subsidy Amounts ranging from $50,000 to $2 million are paid over a period of time for the development of a wide range of cutting-edge technologies.

It’s no secret for entrepreneurs that the world of government subsidies includes dizzying acronyms, daunting technical requirements, and even long time delays. So I spoke to one founder who managed to break through all these obstacles and asked him to share his tips on how to use SBIR/STTR’s $3.5 billion capital pool to accelerate business growth.

cardiologist and entrepreneur, Dr. Elizabeth Ofiliraised about $2.2 million in SBIR grants from the National Institutes of Health (NIH) for her startup Health 360x, a patient-centric platform for population health management and clinical trial diversity. And thanks to the funding she received, she was able to land large-scale commercial contracts as recently. Partnership with Amgenwill conduct a 5,000-participant study focused on heart disease in the African-American community.

Let’s take a closer look at how Dr. Ofili does it secure the bag.

Step 1: Understanding the SBIR/STTR Program

First, a little history. The SBIR program was first established in 1982 by his Small Business Innovation Development Act, and in 1992 he expanded it with the addition of the STTR program, which continues to this day. Continually updated by Congress Since then.

Dr. Ofili explains the difference between the two programs, but it boils down to who controls the budget. “Because SBIR is designed as a collaboration with universities and research institutes, usually that institution is the subcontractor and SMEs play the main role, in the STTR model the institution plays the main role and Mainly small and medium enterprises.” Sub. In Dr. Ofili’s case, she was affiliated with Morehouse College of Medicine as a research institution and remained the contractual lead.

For the rest of this article, “SBIR” is used interchangeably with SBIR/STTR for ease of reference.

STEP 2: Decide which agency to apply to

One of the first things you need to do is identify the most relevant agency for your business.there is 11 federal agencies Companies participating in the SBIR program each have their own grant opportunities, operational priorities and funding budgets.

Department of Defense. The Department of Defense (DoD), which includes the Navy, Air Force, Army, and Defense Logistics, maintains the largest budget, with approximately $2.2 billion annually. However, this program only issues contracts, not grants. It is also a requirements-driven process led by the Department of Procurement. To apply for a Department of Defense contract, please visit: Department of Defense Innovation Portal Confirm the solicitation request. These are also known as Broad Agency Notices (BAA).

Department of Health and Human Services. The agency of choice for healthtech founder Dr. Ofili is the Department of Health and Human Services (HHS), and more specifically NIH (National Institutes of Health). The agency has a huge budget of $1.3 billion and is in fact the largest funding agency participating in the SBIR program. I often hear people talking only about his NIH program because NIH is responsible for 90-95% of his HHS SBIR budget. Specific solicitations offered by various NIH affiliates (i.e., National Heart, Lung and Blood Institute – NHLBI, or National Cancer Institute – NCI) include: It can be accessed from the website.

National Science Foundation. Another notable institution is the National Science Foundation (NSF), affectionately known as the Seed Fund of the United States. With a budget of $200 million a year, the NSF invests in many areas that would normally fund venture capital, including robotics, artificial intelligence/machine learning, advanced manufacturing, augmented and virtual reality, cloud computing, cybersecurity, blockchain, and more. of high-growth technology companies. technology business. In fact, during the 2016-2022 fiscal year, NSF-funded startups experienced nearly 300 exits and more than $20 billion in private investment. There is a rolling process for submitting a pitch, the steps are: program website.

Step 3: Get Through SBIR “Phases”

The SBIR program is divided into three different phases: Phase I, Phase II and Phase III. Always consult with your specific institution’s program officer or coordinator for guidance in deciding which method is best for you.

Phase I. If you are at the idea stage and do not yet understand the business feasibility and market potential, this is the place to start. If selected, from six months he will receive approximately $50,000 to $250,000 for a fixed period of one year.

Phase II. The goal here is to continue the R&D efforts from Phase I. Funding will range from approximately $750,000 to $2 million over a period of 2-3 years and will be based on the milestones and scientific and technical merit achieved in Phase I. Commercial viability of the projects proposed in Phase II. Dr. Ofili elaborated, “Ultimately, SBIR is designed to move toward commercialization, the development of products on the market.”

Phase III. This is the “spread your wings and fly” phase of the SBIR process. Companies advancing to Phase III receive training, support, and introductions to potential investors and customers, but no funding is allocated here.

fast track. Most recently, SBIR announced what it called a “Fast Track” for more mature businesses. Dr. Ofili explained: “If your idea is well thought out and you have already gathered some preliminary traction, you could combine Phase I and Phase II…and that is what I followed on advice from the programme. It’s the way.” Officer. “

Step 4: Submit Proposal

In practice, it can take anywhere from six months to a year to prepare and submit an SBIR proposal. So don’t hesitate to hire an external consultant (eg KeepYourEquity.co) to help build everything.

pitch. For Dr. Ofili, the first step was to create a one- or two-page document of specific purpose: a brief pitch or outline. She worked with the Morehouse School of Medicine’s Technology Transfer Office for training, and an advisor told her, “Here’s what her SBIR looks like.” Then, after submitting her specific goals, an NIH program official scheduled a meeting to provide her with feedback and additional resources to prepare a complete proposal. Each institution will host a webinar where designated program personnel will discuss the next steps in the process.

suggestion. The core of the proposal is the so-called commercialization plan, which is not very different from what is described in a typical investor proposal document. You should describe your team, products, competitive landscape, market size, and go-to-market strategy. Dr. Ofili laughed and said: “I went to a lot of classes to learn how to write a plan. It was enough for me to get an MBA!”

support letter. As previously mentioned, SBIR applications must be submitted in partnership with a research institution or university. Institutions should therefore provide a letter of support outlining the various resources (facilities, technology, personnel) they will bring to the project. Other support letters come from collaborators, key team members, and other important contributors.

Step 5: Wait for Funding Decisions

After submission, SBIR applications undergo a peer review process by experts in the field (including scientists and business people) to assess the merits of the application.

Dr. Ofili explained: “Usually we submit something in the fall. The review happens in the spring, maybe in the winter. [with the NIH] For scientific peer review, it has to go through a so-called “research section”. And we’re going to seek approval from the NIH advisory board that’s in charge of that lab, so we’re probably looking at a period of about nine months. “

Needless to say, the business cannot survive if it continues to operate on the funding provided by SBIR. In fact, Dr. Ofil leveraged other smaller grants to keep the business of Health 360x alive and running. And the reality is that SBIRs are not for everyone, especially those with short-term funding needs.

However, patience and persistence can be rewarded in this process before “lefting the stage”. $2.2 million in non-dilutive funding (the amount Dr. Ofili ultimately won) is a game-changer for small businesses. And you could be next!