Federal Grants for Startups: A Q&A with Lance Manning 

Loren Bolton By Loren Bolton • February 27, 2018

Federal Grants for Startups: A Q&A with Lance Manning 

What is SBIR and how can healthcare-related companies benefit from it?
The SBIR.gov website explains this very well: The Small Business Innovation Research (SBIR) program is a highly competitive program that encourages domestic small businesses to engage in R&D that has the potential for commercialization. By including qualified small businesses in the nation's R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs. The Department of Health and Human Services (HHS) and the National Institutes of Health (NIH) are a great fit for health-related SBIR dollars. For example, the da Vinci® Surgical System for robotically assisted minimally invasive surgery, was first funded by Army SBIR to aid the warfighter. This robot helped offsite doctors perform surgery on soldiers in remote areas. It then received several larger follow-on investments by the NIH for further commercial development with potential applications in hospitals across the country.

 

What has your experience been with SBIRs?
Early-stage technology companies seek financial investment to grow, market a product or service, and create jobs. Once they win the SBIR grant, federal agencies provide commercialization support mentoring programs that help them win new grants, raise external funding, and forge strategic partnerships. On their own, they may have a tough time expanding their own networks that can take them from localized presence to a global reach. I was a “mentor” in one of these programs for 5 years. My role was to help my assigned companies compete for additional funding, develop a commercialization road-map, provide market-based feedback from prospects and subject matter experts, and develop relationships with industry leaders. The agencies sponsoring SBIR programs require companies to perform the steps necessary to be successful in taking an innovation to market.

What happens if I win the Phase 1 SBIR award?
Grant applications for additional funding are judged by an agency-led review panel on the technical merit and commercial potential. This means Phase I milestones have to be met and significant go-to-market progress made to qualify for Phase II funding. In addition, a company is required to submit letters of support from investors, customers, and suppliers. These letters reflect a company’s efforts to build partnerships, seek champions, and win additional financial commitments – all requiring deep investment of time and energy. Such backers not only believe in the societal impact of the innovation, but are convinced by a well-defined market opportunity, commercialization potential, and the company’s ability to execute. The Phase II process requires extensive efforts to define, plan, and prepare a professional quality document outlining the commercial potential of their technological innovation. Inherent in the development of this document is a strong momentum in building the business structure and network to make that plan succeed. The Phase II applicant success rate varies by agency, but an average is somewhere around 40%. Not 100%. Not 0%. Over half of the applicants will not win the award. With that attrition rate, a company leader must consider if the effort is worth it.

How can companies increase their odds of winning a grant?
Below are a few examples:

  1. SBIR statistics point to the fact that successful grant winning companies partner with market leaders or leading researchers in the field.
  2. As a company develops the groundwork for deriving potential future sales, bottoms up analysis of the market is required, not just a top down market analysis. Panels are instructed to make sure that some kind of effort has gone into identifying niche markets and insertion points (e.g. no reliance solely on grad student surveys or industry market reports). You have to get early-stage customer feedback.
  3. Applicants need to very clearly show their source of funding (government or private), return on investment, current business vision, business model, value proposition, potential partners, and target customers.
  4. Revenue models are critically important and scrutinized. Successful firms present best, middle, and worst case revenue scenarios whether related to projected licensing, sales or other forms of revenue.

 

We look forward to hearing more about this topic on Thursday.