Updated: Jun 28
SBIR grants are, in my opinion, the best grants for technology startups.
These grants are specifically designed to fund innovative research and development at technology companies building new tech products. You can’t beat this source of non-dilutive capital.
I’ll share how I used SBIR grants to fund my technology startup and tips on writing and winning them.
Why SBIR grants are the best grants for technology startups
What makes SBIR grants so great? Here’s my own criteria for what makes the best grants for technology startups.
Non-dilutive. This is probably one of the primary reasons you are looking at grants to begin with. You don’t want to give up equity for your startup in its earliest, riskiest days. That makes sense. This is the most expensive equity you will ever give up! Well, SBIR grants are completely non-dilutive. No equity, period.
They’ll bet on risky technology. It is hard to find risk capital at the start of a new research and development process. The technology is risky. Your technology may not even be feasible! Good luck finding investors willing to take that bet. There may be some lucky ones out there, but for those who still need funding to vet the earliest of R&D in ground-breaking technology ventures, the SBIR is your saving grace.
Substantial capital. Technology development usually requires a decent amount of funding to get anywhere. While most incubators and accelerator programs provide somewhere between $50,000 - $150,000, most SBIR Phase I grants approach a quarter million dollars. And if your technology and your company are doing well, by Phase 2 you can net over a million dollars. Still, 100% non-dilutive.
Brand name recognition. When speaking with potential customers, investors, and new hires, large government agency brand names go a long way. The ability to slap logos like the NSF, the NIH, or the DOD on your funding and development history adds substantial weight to your claims.
Accelerator-like training. Accelerators provide capital, training, and a network. But the SBIR program is fast becoming a strong competitor along all of these fronts. In addition to capital that often outpaces the accelerators, and in addition to its non-dilutive nature, several agencies now provide training programs like the NSF Bootcamp, the NIH C3i program, and the NSF and NIH I-Corps customer discovery programs.
My experience winning grants for my own technology startup
One reason I believe SBIRs are the best grants for technology startups is that I’ve used them to fund my own technology startup.
These grants allowed my company to grow from idea to a commercial product without requiring a loss in equity.
I was first awarded $225,000 with an SBIR Phase I grant from the NSF, quickly followed by a $150,000 SBIR Phase I grant from the NIH NIMHD. Suddenly, in a matter of two months, my company had around $375,000! This helped grow the team from about one and half to three full-time members.
Shortly thereafter, we took advantage of the NIH I-Corps grant program, successfully earning another $55,000.
In about a year, we first won a $1M SBIR Phase II grant from the NSF before being awarded a second SBIR Phase I grant for $225,000 from the NIH NHLBI.
Now with an additional $1.2M in runway, we grew the team some more and made our way to the market with our first product and first sales!
Throughout this grant period I’ve learned a lot.
I learned how to win grants, and I learned how to lose grants.
I learned how to manage grants internally as the principal investigator, and I learned how to manage grants externally with program directors.
I’ve also learned how to align grant timelines and development work, to ensure you maximize the grant funding for optimal, targeted R&D that helps validate your technology, build your product, and grow your business.
Along the way, I also became an SBIR grant reviewer for the NSF, reviewing both Phase I and Phase II SBIR grants.
Other grants for technology startups
You may have noticed in between the SBIR grants in my story I also was awarded an I-Corps grant.
I am also a big fan of the I-Corps program, but I’d imagine this may be a more controversial topic among the grant forums.
I-Corps is designed to teach new entrepreneurs in technology startups the process of customer discovery.
In a nutshell, the program requires a team of 3 to conduct at least 100 customer discovery interviews throughout the course of the program and regularly present their findings to the group.
The process is onerous. I will not argue this. Therefore, the criticism comes from the time and effort required to participate and succeed in the program and necessarily the time and effort diverted away from normal business operations.
This will be a decision for each company and depends upon the makeup of its members.
But I believe this process is likely beneficial for all companies, regardless of their experience with customer discovery activities.
It is a vital process for all new product introductions, particularly in the realm of innovative products and technologies.
For those who already participate in this activity, then it likely is not a substantial burden on your regularly scheduled activities. However, if this is not something you are familiar with, you will find yourself struggling to acquire interviews and may also become jaded with the process.
Don’t brush it off.
The process is both useful, and often, necessary. Useful in that it may require longer upfront validation but shorter long-term product feature identification. And at times, necessary because you may discover there is no hope for the product at all. Better to save yourself the money, effort, and years of your life knowing you’re getting off on the wrong foot now rather than later!
NSF vs. NIH?
The NIH adopted the I-Corps program (and many of its instructors) from the NSF program. The NIH I-Corps program is currently only available to companies that have already been awarded an SBIR award.
However, the NSF I-Corps program is available to any small technology startup, not just SBIR-awardees. Though the grant is not substantial funding, it is a great tool for bolstering your customer discovery processes, provides some amount of funding, helps build your network, and improves your chances of winning an NSF SBIR down the road (reviewers look fondly, as they should, on companies that have demonstrated a strong emphasis on customer validation of the problems they are solving).
I also mentioned brand name recognition as a benefit of SBIR grants for technology startups, but this can also be garnered from other organizations with smaller checks.
For those in the healthcare space, patient advocacy groups or specific healthcare agencies may offer grants for technology startups.
For example, we won a KidneyX Innovator grant which, although was small monetarily, gave us a great brand name to add to our list of backers because it was supported by The National Kidney Foundation and The American Society of Nephrology.
But in the end, the best grants for technology startups are SBIR grants. These equity-free, early-stage technology grants are worth the effort.