Innovation to Commercialization: Using Government Funding to Kick Start Your Start-Up

moderator: Bruce Gellerman, Living on Earth
author: Thomas Allnutt, The National Science Foundation
author: Milton Chen, The George Lucas Educational Foundation
author: Christopher Loose
author: Bill Townsend, Barrett Technology
published: Aug. 7, 2012,   recorded: June 2008,   views: 3028

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This informative roundtable provides useful tips to wanna-be small biz entrepreneurs on snagging government dollars. Through conversation and Q&A, moderator Bruce Gellerman elicits some key dos and don’ts from a National Science Foundation small business program officer, and from tech CEOs who have benefited from the government’s programs.

Thomas Allnut says that NSF is but one of 10 agencies that distribute money to small businesses, and that his program is “in the middle of the pack, with $110 million per year to give away to responsible small businesses to get technology into the market place.” All told, in 2007, the government gave away $2.5 billion to businesses of fewer than 500 employees. While some agencies, like Department of Defense, have mission-driven solicitations (e.g., better bullets or vests), NSF has a broader mandate.

While NSF’s first phase grants of $100 thousand and second phase grants of $750 thousand per year may seem small potatoes to some entrepreneurs, Allnut says, “We want to take small companies without…capitalization, who can’t afford to take a huge risk on technology and give them a little boost to try something they wouldn’t try otherwise.”

For Milton Chen, an assortment of small business grants at vital times during his company’s evolution “let me sleep a little easier.” His real-time video conferencing software company, VSee, had begun shipping its product, and cash flows were zooming up and down. “Having extra money helped; we hired some extra people.” Looking back, he says, it was a good move not seeking venture capital funding at this time, since they expected a rapid ramp up to profitability, and government funding bought VSee the time to work on “subtle, hard science issues” before facing the vicissitudes of the marketplace.

Christopher Loose began a company out of the MIT 100k Competition, developing “cutting edge functional surfaces to prevent infections.” He’s completed NSF first phase funding, which enabled Semprus Biosciences to develop a broad package of data about safety and efficacy. He recommends talking to program directors before writing a grant application, in order to “work within the spirit of SBIR.” He also thinks the very process of applying is “a good exercise,” forcing you to “think through your development plan critically.”

Bill Townsend has been building his business for 20 years, and credits SBIR grants with “helping out tremendously.” His robotics company “had a hard time raising money. Robotics might look interesting on the outside, especially to engineers, but it’s 1/3rd the size of the scented candlestick market.” His was “not a compelling story for VC.” He sold the government on the “long term bet” of robotics. Small business grants prove perfect for medium growth, he says –“it’s one of the few ways to get money other than credit cards.”

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