There Has to Be Another Way

2. Grants

This is probably the most talked about and least understood source of business financing. For the record, there are no general small-business start-up grants. But you can find grants tailored for specific needs.

The largest of these are two programs operated by the federal government: the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

Obtaining an SBIR requires strategy, says Chris Berka, CEO and co-founder of Advance Brain Monitoring. "It's very important that your idea fit some framework of one of the government agencies [participating in the SBIR program]. At first, [our applications] didn't interest any agency," explains Berka, whose Carlsbad, California, firm won three grants after a couple tries. Their first success: a $100,000 award to create and demonstrate a prototype of a baseball-cap-style alertness-monitoring device.

Entrepreneurs nationwide can apply for SBIR/STTR grants from any of the 10 federal agencies involved in the program. Phase One grants money for finance development and testing of a prototype; after the prototype is completed, companies can seek Phase Two grants in amounts of up to $750,000 to start them on the road to commercialization.

"A lot of people get Phase One grants, but Phase Two is extremely competitive," says Berka. "We went through several rewrites and finally figured out the formula." Thanks to these grants, Berka and her co-founders, Daniel Levendowski and Zoran Konstantinovic, should have their product ready for the market by 2001.

Only two of the 10 agencies--the National Science Foundation and the National Institutes of Health--actually use a grant system to award money. The others use either the Federal Acquisition Requirement (FAR) process or federal contracting.

"These grants are not giveaways," stresses Arthur Collins, acting assistant administrator for technology in the SBA's Office of Technology. "It's a competitive process in response to specific agency needs. Each agency will put topics out there that meet mission needs and lend themselves to commercialization."

According to Collins, the difference between the programs is that, while SBIRs focus on funding new technologies, STTRs require a nonprofit research organization and a business to jointly focus on technology transfer. Organizations around the country help entrepreneurs apply for these awards. To learn more about the program, visit www.sba.gov/sbir.

The Inventions and Innovation Grant is another government program operated by the Department of Energy Office of Energy Efficiency and Renewable Energy. Its goal: to encourage development and adoption of renewable energy and energy efficiency. Inventors and small technology-based companies can review solicitations issued annually that spell out what the agency is seeking and include instructions for completing proposals. Up for the taking are grants of up to $40,000 to fund development, or of up to $200,000 in prototype development or commercialization grants.

The National Institute of Standards and Technology, through its Advanced Technology Program, can award a single company up to $2 million over a period of up to three years for research and development. The program invests in cutting-edge technologies that promise significant commercial payoffs and widespread national benefits. For details on past winners and applications for the next competition, call (800) 287-3863 or visit www.atp.nist.gov. A number of states and cities have their own targeted grants. For example, the Illinois Recycling Grant Program encourages private organizations to apply for grants that promote diverting recyclable commodities. North Carolina's Division of Pollution Prevention and Environmental Assistance offers several grants, including up to $20,000 in matching funds to develop and implement projects that eliminate, prevent and/or reduce solid waste.

In the Savannah River Region of South Carolina and Georgia, entrepreneurs starting tech-based or manufacturing companies can apply for several grants. The Small Business Seed Fund for Technical Innovations offers two-year loans of up to $50,000 to support startups or business expansions offering new products or improvements of old ones. Those who successfully complete this grant can apply for a two-year grant of up to $250,000 from the Challenge Fund Program for Technology Development.

These are just a few of the grants available. To find others takes persistence as well as some creative and strategic thinking. Start by finding the government office that handles business or economic development; then ask for more information.

Hot Opportunities

  • Thornton, Colorado, has a promotional and facade Improvement grant for companies located in the Urban Renewal Zone. For details, call (303) 538-7358.
  • Low-income residents of California, Connecticut, Iowa, Maine, New Jersey, New York, Pennsylvania and Vermont can apply for grants of up to $700 in two phases to start a business through the Trickle Up Program. This national effort operates in conjunction with local partners. For the nearest Trickle Up Program, call (212) 362-7958.
  • Pennsylvania's Alternative Fuels Incentive Grant Programs will cover up to 30 percent of the cost associated with field testing and evaluating new and innovative alternative-fuel technologies. Applications are available beginning in August. For details, call (717) 783-9242.
  • The Energy Innovations Small Grant in California provides up to $75,000 to small businesses, small nonprofits, individuals and academic institutions researching the feasibility of new and innovative concepts. For details, contact the California Energy Commission at (619) 594-1049 or visit here.
  • Minnesota offers a number of environmental assistance grants for startups with relevant innovative technologies related to pollution prevention, recycling market development, environmental education, sustainable communities development and/or resource recovery. These are one-to-one matching grants (match can be cash or in-kind). For details, call the state's Office of Environmental Assistance in early spring, call (800) 657-3843 or visit here.
  • Iowa's Entrepreneurs With Disabilities programs provides technical and financial assistance grants of up to $10,000 each to qualified individuals who are active clients of the Iowa Department of Education Division of Vocational Rehabilitation Services or the Iowa Department for the Blind. Proceeds can be used to pay for business-related consulting services leading to development of a business feasibility study or business plan and for other startup costs.
  • The Defense Advanced Research Projects Agency (DARPA) offers research and development grants, contracts and innovative agreements to individuals and small businesses that have scientific and technological ideas related to its strategic mission. For more information, read the Commerce Business Daily, a daily list of U.S. government procurement invitations, contract awards and foreign business opportunities or visit DARPA's site or call (703) 526-6630.

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This article was originally published in the July 2000 print edition of Entrepreneur with the headline: There Has to Be Another Way.

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