If you’re looking for startup capital, consider applying for a federal grant. Each year, agencies like NASA, the Department of Defense, and the Department of Agriculture are required to invest millions in small businesses — and they run highly competitive grant programs to pick the most promising ideas.
Small Business Innovation Research (SBIR) grants are awarded to companies innovating in a wide range of industries from science to defense to the humanities. Grants range from $50,000 for a six week period of performance to $250,000 for six months to $1.7 million for two-and-a-half years. These grants don’t require founders to give up equity in their companies, and don’t need to be paid back. If you decide to raise money from angels or venture capitalists afterwards, many agencies will match it 50 cents on the dollar up to $1 million.
Jessica Ochoa Hendrix is an expert at successfully applying for government funding. She’s the CEO and co-founder of Killer Snails, an education company that makes science more accessible through tabletop board games and virtual reality apps. Her company has raised more than $1.3 million from the National Science Foundation and the Institute of Educational Sciences.
“These grants are especially powerful for people who don’t have a wealthy network around them,” she said. “They allow people to raise money in a relatively quick period of time.”
Another positive? Government agencies tend to focus on earlier stage projects that sometimes are overlooked by VCs.
“Venture capitalists want to see traction,” said Ochoa Hendrix. “The government is looking for innovative projects that VCs may not be ready to fund yet.”
In a recent workshop at LIFT Labs PHL, Ochoa Hendrix offered these 10 steps for writing successful SBIR grant proposals to fund your startup and keep your equity:
1. Research, research, research
If you’re serious about getting government funding, SBIR.gov is a great resource. Read about the requirements, check out proposals that have been successfully funded, and learn how to best position your startup.
2. Figure out which agency to pitch
Picking the right agency can be a challenge. Should you pitch the Department of Defense? The National Science Foundation? To choose the right one, read their requests for proposals, which detail what types of ideas they’re hoping to fund.
3. Talk to the program director
They’ll explain what type of projects they typically fund, and what pitfalls to avoid. (And, they might even remember you when they see your grant application come through.)
4. Start writing!
Outline the intellectual merit of your project, why you think it’ll be a success, the impact it’ll have on the commercial market and society — and most importantly, what makes your idea new and different.
5. Use customer metrics and published research to back up your claims
Include surveys or quotes from customers, as well as scholarly research. It will help you convince the agencies that your idea is trending in the right direction.
6. Form partnerships
Partnerships with larger entities like universities, corporations, museums, or non-profits can set your idea apart. If you’re new to your field, it adds credibility to show that a big-name player trusts your business.
7. Add letters of support
Have potential customers or potential partners tout your passion and abilities.
8. Review your application
In many cases, the people reading your application aren’t subject matter experts, so ask some friends to review your proposal. If it’s clear to a layman, it’ll be clear to the application judges too.
9. Remember, agencies have different budgets, timelines and evaluation formats
In some agencies, the program director makes the final decision. In others, it’s a group decision. Some agencies pick varied projects. Others just pick the best projects even if they happen to be similar to one another. Knowing these nuances can give your proposal a slight nudge forward.
10. Be patient.
Government timelines are long. After you send in your application, be prepared to wait upwards of six months to learn if you’ve received funding.