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Starting a high-tech business?

May 29th, 2013 / By: / Industry News, Management

Looking to start or grow your high-tech entrepreneurial venture? Need financing to help fund research and development (R & D) efforts and realize your business potential? The U.S. federal government may be able to help. In 2012, nearly 5,000 small businesses received more than $1.8 billion in federal government grants and contracts to help them carry out the R & D necessary to develop and bring high-tech products to market.

Here’s what you need to know:

If you are starting or already operate a high-tech startup, high-growth or high-impact firm, you may be eligible for grants and contracts that help fund R & D and product commercialization under the federal government’s Small Business Innovation Research Program (SBIR). The risk and expense of conducting serious R & D efforts are often beyond the means of many small businesses. By reserving a percentage of federal R & D funds for small business, SBIR helps small businesses to compete on the same level as larger businesses. In turn, SBIR helps the federal government meet its own R & D needs in areas such as defense, health care, environmental protection and more. Eleven federal agencies set aside a portion of their budgets each year to fund the SBIR program, with the Small Business Administration (SBA) acting as the coordinating agency.

How does the SBIR program work?

The federal government has specific scientific and technological goals and priorities, all of which are reflected in these solicitations from participating agencies and federal grants (listed at Grants.gov or on individual agency sites). You can search and explore these solicitations and grant opportunities to see where your R & D efforts may align with the government’s needs. Then follow the application process described below (see “How Do I Get Started?”). Each agency reviews proposals based on technical merit, qualifications and potential benefits to industry and society. Once agencies grant awards to small business, they embark on the R & D process.

The awards process

SBIR awards are structured in three phases to reflect the R & D development cycle:

  • Phase I: These awards are usually below $150,000 and cover a time frame of less than six months. During this initial stage, the small business and sponsoring agency explore the feasibility of the project in order to get a better sense of its commercial potential and technical requirements.
  • Phase II: These awards are available only to small businesses that have already received Phase I awards. Phase II enables a longer-term commitment. Awards can be made for up to $1 million for two years. During this period, R & D is expanded and commercial viability can be assessed.
  • Phase III: During this stage, innovations transition from the lab to the market, and small businesses begin the search for private sector investment. Keep in mind that the SBIR program does not fund Phase III; funding comes from private sources or other government grants.

Who is eligible for SBIR?

The eligibility requirements for SBIR are straightforward—your business must be for-profit, have less than 500 employees, be independently owned and operated and located principally in the U.S. It must also be majority-owned (51 percent) by U.S. citizens or permanent resident aliens and the principle researcher must be an employee of the company.

SBIR.gov includes information for applicants, but, as mentioned above, the application process starts with research:

  • Check the list of open solicitations at SBIR.gov. Each solicitation explains the areas of R & D that agencies are interested in.
  • If you have questions, contact the individual agency. Refer to the contact list.
  • Register your business with SBA’s Company Registry prior to submitting an application.
  • Get tips and training on applying to the SBIR program.
  • Search for grant opportunities on Grants.gov.
  • Submit a proposal. Typically, an SBIR Phase I proposal submission package has the following components: a business plan, executive summary, cost and technical proposal. (Grants.gov is a good place to start looking for SBIR/STTR program opportunities; just type “SBIR” in the basic search to get started.)

Source: Caron Beesley is a community moderator for the U.S. Small Business Administration

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