It”™s no secret that entrepreneurial ventures are the breeding ground for new technologies and products that have transformed modern life. Yet getting the necessary funding to bring an innovative product or technology to market is one of a startup”™s biggest challenges.
At the Hudson Valley Center for Innovation”™s monthly breakfast March 28 in Kingston, speaker Frank Madison Jr. described a funding source few entrepreneurs may have heard of: the federal government”™s Small Business Innovation Research Program (SBIR) and Small Business Technology Transfer Program (SBTTP).
Madison, who is based in Manhattan, is the regional specialist for SBIR and works one-on-one with CEOs of high-tech companies, providing assistance with business plan development, getting access to capital from private and public sources, and creating strategic partnerships. His message: The federal government is keen to develop new technologies for a variety of applications, with 2.5 percent of federal agencies”™ budgets allocated to small-business concerns. Eleven agencies, including the Department of Defense, the Department of Education, the Department of Energy and the National Institute of Health, award $2 billion worth of grants to small businesses through SBIR. Five agencies award monies totaling $3.6 billion to companies that have partnered with a research institution through SBTTP.
High-tech help
The talk, attended by some 30 people, was one of a series of initiatives by the business incubator aimed at jump-starting economic development in the Hudson Valley. Such a push is direly needed in the region, whose development in the tech sector has lagged behind.
“Right now there are very few grants applied or awarded to companies in the Hudson Valley,” said the center”™s managing director, Les Neumann. “Generally, small businesses apply for funding as part of a federal research grant or through a university or other incubator. We wanted to let people know there are other sources of funding available.”
In general, Madison noted that if a startup tech provider is able to partner with a university or other research institution, it has more clout and a better chance of success in the highly competitive grant proposal process. Funding in both programs is awarded in two phases ”“ up to $100,000 in the initial phase to explore the commercial feasibility of a technology and up to $750,000 in the second phase to further develop the commercial application. Phase three involves bringing the product to market (no money is rewarded).
Among the types of technologies and applications that are in demand by the government are fuel cells, software (which Madison said comprised 65 to 70 percent of all SBIR and SBTTP grant money), water filtration systems, new methods of learning, sustainable products and sleep measurement. To be eligible a company must be for-profit and American-owned, have fewer than 500 employees, and not be the dominant player in its field. Applications for the grants, along with other information, are posted on the sba.gov Web site.
Tips for applicants
As well as researching the viability of their product and why the government might be interested, applicants should take care to put together an engaging, easy-to-read proposal, Madison said. “Remember these guys are bureaucrats,” he said. “Sometimes it”™s a sales job; you need to market to them. They care how you will get them what they need and whether you can create something viable for the market.”
Among the “tactical success factors” he listed were keeping the proposal simple (“give it to someone who doesn”™t have a clue about your product. If they get it, you”™re on the right track”); having a clear vision of the customer; coming up with a strategy on how you”™ll leverage federal and state resources; getting letters from potential customers; and developing partnerships with organizations.
In selling their idea, grant applicants need to educate themselves about their competitors. They also shouldn”™t be afraid of livening up their proposal with pertinent facts about themselves or incorporating other human interest angles. “With so many of the proposals I”™ve read, I”™m snoozing by the first line,” Madison said.
He noted that all grant winners retain 100 percent control of their intellectual property. In answer to a question about protecting confidentiality of proprietary information, he said the applicant can describe what the technology does without necessarily revealing trade secrets. If he or she clearly notes on the application which data is proprietary, the agency will redact it, he added.
Other funding sources small-business owners should consider are the grant programs administered through the New York State Office of Science, Technology and Academic Research. These include the Technology Transfer Incentive Program, which provides matching grants up to $750,000 for companies partnering with research organizations to commercialize a new technology, and the Center for Advanced Technology Program (for “technologies that are way out there,” Madison said). New York State Energy Research and Development Authority, which focuses on how companies can become more energy efficient and socially responsible, also is a source of grants for small businesses.
Madison said 23 companies in the Hudson Valley had been awarded SBIR grants, although most were located in Westchester County (one exception was Materials & Technologies Corp., based in Poughkeepsie). The dearth in the mid-Hudson Valley reflects not just lack of awareness of the program, but also the general absence of tech initiative, said several breakfast attendees.
One reason for this, according to Thomas G. Phillips Sr., executive director of the Hudson Valley Technology Development Center Inc. (HVTDC) in Fishkill, is the lack of research universities in the region. “Creativity and research is associated with these institutions,” he said, adding that getting the center for innovation”™s incubator up and running is a key to filling in the gap. The center is affiliated with Marist College and SUNY New Paltz as well as Rensselaer Polytechnic Institute and Polytechnic University, based in Brooklyn. It also coordinates its efforts with the HVTDC.
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