It's tax season and I just wrote a large check to the US government. I often wonder exactly where my money is going? Some MRE's for a soldier hoofing it in Afghanistan, a new trail in Rocky Mountain National Park, or a shrimp cocktail on Air Force One. But one small slice of my tax check goes to the National Science Foundation, and an even smaller slice of that goes to the Small Business Innovation Research (SBIR) fund.
Last week, I had the honor or helping our federal government give that little tiny slice of my tax check to some very well deserving startups. The intent of these grants is "to provide funding for some of the best early-stage innovation ideas -- ideas that, however promising, are still too high risk for private investors, including venture capital firms." This is goodness. I have been engaged with the Venture Capital community long enough to know that they take calculated risks. Investing in technology or products that are clearly innovative, but don't have a near term potential for massive market growth is something that most VC's, and most angels for that matter, avoid. But then you say, why should anybody invest, just wait until the market is ready. Well, sometimes technology needs to pushed along a bit until the commercial application becomes apparent.
Some examples of success from the NSF SBIR program – the bar code and the technology behind CDMA (Qualcomm), so now you can check-out by yourself and make cell phone calls that don't drop. But the NSF continues to press the envelope. My participation is part of the grant review process where industry and academic professionals are brought together as a panel to help review the proposals. From academia you have scientists that understand the core technology being presented, and to some degree, how their education programs can develop more technology around what is being proposed. From the private sector, VC's, entrepreneurs and corporate venture folks like me, help decide whether the technology can be brought to market, whether it is commercially viable and if the business management in place has a chance. It is a well run process, and one that does select the right proposals.
The competition is tough to get an NSF SBIR grant, so you need to be on your game and it is more of a documented proposal than you may be accustomed to with most VC pitches. But these are grants, so you do not have to commit any of your company's equity to the US government. If you execute against the milestones, you get your payments, and you can grow your company as you see fit. There are 3 phases that are available. SBIR Phase I grants range up to $150,000 and are essentially seed capital for your idea. SBIR Phase II grants are proposed based on successful execution of your Phase I grant and is essentially an angel round to get the company functioning or launch the product deeper into the market. Phase II grants can be up to $500,000 but can include up to an additional (Phase IIB) $500,000 to match private investment if it is acquired. The goal of Phase II is to develop the technology, company and product to the point that private investors will fund the company to prosperity from there. Do you want to apply – go here: http://www.nsf.gov/eng/iip/sbir/index.jsp .
Hey, now, every tax payer has just a little bit of angel investor in them.
I'm good with that.
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