In 2006, Matt Silver, an engineering student in the Ph.D. program at the Massachusetts Institute of Technology, dreamed up a new method for converting organic waste into power. All he needed was some capital to prove the concept.
Silver's savior: the National Aeronautics and Space Administration, which granted his IntAct Labs $75,000 to pursue the research. On space shuttles, every last kilowatt-hour counts, so being able to convert any kind of waste to usable energy is critical.
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When NASA shut down the program months later, Silver parlayed his progress into a second grant, worth $89,000, courtesy of the Department of Agriculture (farms produce plenty of convertible waste, too). Now, venture capital firms are starting to sniff around.
"Our strategy is to maximize the extent (to which) we can get public funding before going to private investment," says Silver, 29. "The more that we can prove our technology before going to venture capitalists, (the better position we'll be in, with respect to) how much of the company we'll be giving up for the funding."
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There's plenty of government grant money for plucky start-ups that know where to look. Connections help too--Silver invited his masters' adviser from MIT, who also happened to be an astronaut, to join IntAct's advisory board--but leaving with the goods requires a lot more.
The two main grant categories are Small Business Innovation Research grants and Small Business Technology Transfer grants. Total size of that considerable kitty: about $2.2 billion.
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SBIR grants, $2 billion of that total, are doled out by 11 federal agencies, including the departments of Agriculture, Defense, Energy, and Health and Human Services, among others. These funds go toward researching technologies in line with the agencies' missions, but ones that also have serious commercial potential--say, a cure for AIDS or a new source of renewable energy.
Only five agencies (Defense, Energy, Health and Human Services, the National Security Agency and NASA) offer SBTT grants. To nab these funds, entrepreneurs must be teamed up with a university or other nonprofit institution tasked with doing 30 per cent to 60 per cent of the work.
There are two phases to the pitching process. Phase 1 grants, generally worth up to $100,000 apiece, are meant to support early-stage market research. Phase 2 grants involve spelling out in far greater detail the market opportunity, as well as the nuts and bolts of the technology. It's more legwork, but the payoff is sweet: up to $750,000 per grant. SBTT grants work the same way.
All things considered, the odds for success are pretty compelling. While just 13 per cent of Phase 1 proposals are accepted, the hit rate for Phase 2 apps jumps to roughly 45 per cent, estimates John Mills, director of the SBIR assistance program in Georgia.
If you want to bag SBIR funding, you'd better be able to communicate precisely how the research is going to lead to a salable product. "Most entrepreneurs we work with find it's a challenge to discuss how their technology is commercialised," says Mills.
Federal agencies typically announce grants by posting "solicitations" a few times a year on grants.gov. Depending on the agency, the requests can be fairly opaque.
Recently, the National Institute of Health was looking for "novel grant applications designed to develop innovative new technologies that support interdisciplinary integration of human social and/or behavioral research with tools from other disciplines."
The National Science Foundation got a bit more down to the point in its appeal for "reactor engineering applications" (including, but not limited to, membrane reactor systems and supercritical fluid applications).
But don't wait for the announcements. If you have a compelling idea that needs funding, contact the appropriate agency directly. "They want to stay current and accurate, so officers want to talk to people who work in technology every day," says Stephen Fleming, chief commercialisation officer at Georgia Institute of Technology. The agency could be inspired enough to write a solicitation for research you may already be working on.
When applying for grants, hedge your bets. Multiple agencies may be interested in the same technology but for different applications. Silver, for example, received offers from both the Department of Agriculture and the National Science Foundation.
If you can, bolster your argument by rounding up testimonials from customers saying they would be very interested in your technology were it to come to fruition--and scratch their backs in return by helping them get some positive press for supporting your efforts.
Try, too, to the hit the conference circuit. There are typically two SBIR and SBTT conferences a year; the next SBIR gathering will be Nov. 11 to 14 in Hartford, Conn. Cost for these three- to four-day events: $350 to $400 per start-up.
Specific agencies hold their own conferences as well. The Department of Defense will hold one in Palm Desert, Calif., in early December. If you're looking for grant money, there are few better networking opportunities.
"I don't think anyone ever comes and doesn't get a chance to talk to someone from the agency," says Joseph Hennessey, program officer at the National Science Foundation. "That's why we go there. We're trying to provide that interface."
A final warning about the great grant chase: "This money can be very seductive," says Fleming. "You get to work with really smart people and they pay your bills, but that sometimes distracts you from (building) a stand-alone company."