America’s Seed Fund Week 2023 | Welcome & Small Business Innovation Research (SBIR) 101

Foreign. Welcome to day two of America C Fund Week. I'm really grateful to have you all join us today. What I'm going to do today is spend a little time with America Seed Fund 101. And I really want to start with the underlying value proposition for America Seed Fund. I think it's a very simple value proposition. One, it's funding. Funding to support your tech startup. Funding to transition your innovative research and development into commercial products and services. Two, you keep the equity. This funding does not reduce your ownership. You lead your company and the technological development. It's entirely your call in terms of the process of your development. Three, you own the intellectual property. It's yours. You own it. You commercialize it. Those three factors really underpin America's C Fund. And through those things, we think you have the opportunity to sort of change the world. Accessing America's Seed Fund is a process, but it's a process worth pursuing and the payoff is tremendous. My name is Eric Page Little Ford. I am the acting Director and Program Manager for America's Seed Fund here at the sba. During this presentation, I will discuss the program basics. Provide a shared understanding of the opportunity that America Seed Fund provides. All right, and again, I'm going to start with the end. America's Seed Fund provides you with the funding credibility and network that can allow you and your innovation to change the world. So let's begin. America's Seed Fund provides geographically dispersed funding at a significant scale. On average, 4,000 firms are funded annually at its core and for these companies, America's Seed Fund represents funding for research and development that has the potential for commercial success. These companies range in size from 1 to 500 employees and represent every state in multiple US territories. Last fiscal year, America Seed Fund provided $4.6 billion in funding annually. America's Seed Fund provides over 4 billion in funding and this funding accelerates the transformation of innovative ideas and research into commercial products and services. And again, the government is a partner with America's Seed Fund, not an owner. Despite that this is federal funding. The government is just a partner. It provides the funding. It enhances the recipients credibility. But you, the innovator, you remain the owner and you retain all of the intellectual property rights. This is the point that we will discuss a bit further. So the reason this is true is because America Seed funding is non dilutive. This non dilutive funding is one of the most salient program features. Non dilutive funding represents capital capital that doesn't require a business owner to give up equity or ownership. It Means America's Seeds Fund allows you to chart your own path towards commercialization, following your vision. It provides the capital to de risk the technology which also will enhance your future capital fundraising activities. It's giving you a longer Runway to do your development right again. America Seed funding is non dilutive. It is federal funding. America Seed Fund is federal funding and is provided through our 11 participating partners, our 11 federal agencies. And I will add, when you think about the program, it's really a brilliant design. The funding is actually based on what our largest federal research and development agencies Fund for external research. The program basically says if you're going to fund external researchers to do R and D and if you have a budget over $100 million, 3.2% of it has to go towards competitive opportunities for small businesses. In doing so, it really creates a broader competitive research and development landscape by competing those funds amongst our small innovative firms. This allows the government to harness small business ingenuity. Similarly, there's a sister program to America's Seed Fund to the SBIR program. This is the Small Business Technology Transfer Program, sttr. What this says is for the very large agencies, it's six in total with over a billion dollars in what we will call extramural research and development. This R and D funding that's going to be done outside of the the federal agency, they had an additional assessment to implement the STTR program. And really what the STTR program does, it facilitates technology development and transfer between small businesses and nonprofit research institutions. It's a partnering program between the small business and the nonprofit research institution. A little more about the two programs that underpin America Seed Fund, the SBIR and STTR programs. They basically provide you the innovator, the small business, the startup. Two paths, right? It's really your choice in terms of what path makes the most sense to go. 1 88% of America's seed fund is actually comprised of of funding for the SBIR program. It's the larger group within the mix. And within the SBIR program, the company you, the innovator, you choose to either pursue the research and development efforts on your own or you can choose to partner. But that's just a solely independent choice that you make with the STTR program. Right. As I mentioned earlier, it's executed by six of the largest agencies. It does require a partnership between the small business and a nonprofit research institution. So you can think about a university, academia, some about federal labs. They all can satisfy this particular question definition of a nonprofit research institution. When you're thinking about the STTR program and taking that path. Really think about it this way. It's a great mechanism to sort of supplement capacity to provide your company access to either specific or unique expertise and equipment. Or for university based technology, spin out opportunities to bring the innovations from the university labs into a small business to commercialize those opportunities. No matter which path you choose, SBIR or sttr, the small business will always be the recipient of the award. So even if you partner with a research institution, you as the small business are the recipient of the award and you're guiding that effort. One of the core goals of the SBIR STTR programs, which we refer to as America's Seed Fund, is to really make sure that there's an equitable opportunity for our innovators, irrespective of where they are, their gender, their race, their geographic location. It's one of the core underpinnings and it's something we track, we look at it closely. I'm happy to say that when we looked at the Data Most recently, 33% of the initial winners for our American CDFUND funding were received by underserved communities. This includes women owned businesses, minority owned small businesses, veteran owned small businesses, as well as those in our hub zone or our rural areas. So it really is an equitable opportunity to provide innovative seed funding to our researchers. So make sure that you understand American Seed Fund is opportunity for all. All right, so how does it work? America Seed Fund provides a basic, very thought out, structured process for most companies, most innovators, most startups. It really starts at what we'll deem phase one out of a three phase process. Phase one is really the front door for most applicants. It's really the proof of concept phase. A very short duration, you typically 6 to 12 months, anywhere from 50,000 to $275,000 to really take your innovative concept, your innovative ideas, improve their feasibility, develop that proof of concept that can show that what you're proposing is doable, science allows it to happen, and that there is opportunities in the commercial marketplace. If it's successful, those who are successful at phase one then have the opportunity to compete for phase two of the program. Phase two is really the heart of the development. It's the heart of the research and development. So this technology development phase for most is really going to result in them developing a prototype. This is where companies really do leverage America's Seed Fund to de risk their technology, develop their initial prototypes, and in some instances they get it very close to a final product. This period varies, but it can last up to 24 months and the funding can range from a few hundred thousand dollars to just under $2 million. And again, non dilutive funding. Now this third phase, I must be honest, it gets people a little confused. So I'm going to spend a little time just talking about phase three and its simplest form. Simplest form, Phase three represents the return on investment of phase one and phase two. It's the commercial payoff of these investments in America Seed fund. So for some companies, phase three is their ability to sell their development, their technology in the commercial marketplace. You leverage this funding. Now you have a product and it's being sold to commercial marketplace. You're growing your company, you're seeing those revenues, you're seeing that profit. That's commercialization, that's phase three. For other companies, those who are providing work, say to our national defense, say the Department of Defense, phase three may just result them taking their technology and receiving either additional funding or selling it to the Department of Defense as the actual product or service. The key here is this. If your technology is something that the federal government, rather it's the Department of Defense or any other other agency needs that they can procure from you, they can do so without an additional competition. Right? This is a very powerful tool within the SBIR and STTR program. It's a powerful tool for America's C Fund because it allows you, once you've gone through this process for phase one and phase two to really unlock the ability to get sole source, so non competitive awards to either procure your technology or continue its development. The tricky part is that although this is a part of America's seed fund, these funds are not considered America seed funds. It's really the payoff, the return on the America Seed fund investment. So this is something you should be aware of, you should think about. It really comes into play further down the line, but it's a very powerful tool, especially if your innovation is going to be beneficial to the federal government. All right, Are you eligible? One of the core questions for check marks, very straightforward one. To be a part of America's seed fund, you must be a for profit business located in the United States. The number of employees within your firm have to be between, let's say 1 and 500. Right. That allows you to satisfy the requirements of remaining so small for this program's purposes. You must be owned and controlled by US citizens or permanent residents. Right. And it doesn't matter if you're a startup or an established company, America Seed Fund provides funding for them all. There are other elements of eligibility we have an eligibility guide on sbir.gov that you can always take a look at. But if you can say yes to these particular boxes, chances are you're eligible for America's Seed Fund. Right? So what does IT fund? I'll tell you this. It's broad in terms of the investment portfolio of America's Seed Fund. Our federal agency partners provide the funding throughout the year and what we call safe topics. A topic is basically just a technology area. It's either going to be a broad technology area of like you are able to see on the slides, for example robotics, where they're going to say, hey, you give us your best innovations, your best thoughts on what you can do to develop a robotics type application that's going to have commercial success. Or it may be more specific requirements to meet a particular need that they may have. For example, the Department of Defense often has specific requirements and needs to fulfill its national defense mission. The key is across our partners, the array of technology areas they are able to invest in is very vast. And what you really want to do is to start that process of identifying the one or two federal partner agencies that could fund research and development within your technology area. All right, so here's a few ways to think about that. One way to think about that is to think more so about your approach and your innovation. Ask yourself this question. If my idea is successful, if I'm able to develop it and it finds success, whose problem will it solve? If it will solve a commercial or a broad societal problem. Right. Then you should really consider thinking about some of the market driven agencies. The market driven agencies, the way we like to think of them is they're more externally focused. What it means is for them they're going to provide funding through America's seed fund, but they're not necessarily going to be your customer. They may provide the funding to really help address a broader mission area, but your customers are probably going to primarily be the commercial sector. The commercial market, many of them look for just the most innovative, brilliant ideas, provide that funding, provide the support, and then you will ultimately reach your success in the commercial marketplace. If your idea, if it's successful, is going to more so benefit general commercial markets, you may want to really think about those market driven agencies to sort of start your search. Now, mission driven agencies are a little different. What they're looking for when they're making America Seed Fund decisions is the opportunity to leverage dual use technologies. And here's what we mean. They have a primary interest in the technology. They are funding these innovations because it meets a need that they may need to solve. Think about national defense or space technologies, Department of Defense, NASA. They're in those realms where they are actually actively undertaking activities where they can leverage your innovations. So they may be the ones to fund it because they want to leverage it and utilize it. But it's dual use, meaning this these investments also will have commercial opportunities, meaning you'll be able to develop it, sell it, or transition it to the federal marketplace as well as in the commercial marketplace, depending on the actual investments. But the primary driver for the mission agencies is developing innovations to solve their mission needs. But let me give you a little advice. Regardless if it's market driven or a mission driven agency, here's some advice in terms of how you can start that process. 1. Start by casting a wide net. Don't necessarily zero in on market driven or mission driven. Start with your innovation or your technology area. If you're working on artificial intelligence technology, start there. Look at the think about some of those keywords around what your innovation can bring around the development that it's going to allow us to leverage. And then visit sbir.gov and you can search within sbir.gov across the entire landscape of all of the previously funded America Seed Fund awardees. In many ways, what I'm telling you to do is a little market research. By using your keywords for your technology area, what you're going to quickly learn is which agencies, which of our emergency fund partners have made investments in that space. And through that process, you're going to see one to two agencies, maybe more, depending on the technology area that had made investments there. You're also going to get a sense of some of the state of the art of what's been happening in that particular investment area. But here's the key. It's a great indicator of who's going to be making investments in that space in the future. So through that process, you can really zero in on one or two of our federal agency partners who will be most likely in the position to fund your research and development, to fund your innovative idea. But here's the thing. One of the focuses of SBA is Small Business Administration is to make sure you're not on this path alone. As the coordinating agency across America's seed fund, across all 11 participating partners, we've really spent a lot of time and energy in developing the ecosystem to support your process, so you don't have to figure these things out by yourself. One thing is this. On sbir.gov, we maintain a local assistance tool and this tool identifies entrepreneurial support organizations in every state, every territory that could be helpful to you as you navigate America C Fund as you consider this as a part of your process and a part of your journey. So I encourage you to start there. And I also want to lift up one particular program that our office runs and executes. It's the Federal and State Technology Partnership Program in the government acronym, we call it fast. The key takeaway here is this. We currently have active FAST organizations in 44 states and territories. Our FAST program is really based on entrepreneur support organizations with a particular focus. Their focus is to provide the state or regional programs to increase the number of America's C Fund proposals from female and socially economically disadvantaged or rural based technology focused entrepreneurs. The key is if you're in any of these states, you have a FAST resource who can walk you through the entire process from the beginning to the end, provide advisement, understand where your innovative ideas may land, help you target particular federal agency partner investors. So I encourage you to think about FAST as a tool that can help you through this process. Right. If we don't have a FAS recipient in your state, rest assured through our local assistance tool, there's going to be one or two other organizations that may not be FAS recipients, but are also geared towards ensuring that America's CD Fund is an open opportunity and to help you understand the best way that you can take advantage of of it. So remember, throughout this process, you are not going through it alone. Success. Throughout America's Seed Fund history, we've had many notable awardees where America Seed Fund played a catalytic role in their development. I'll just share a few of them with you and I'll also share a recent example I also like to lift up. So Companies like Qualcomm, Illumina 23andMe iRobot America Seed Fund was able to play a catalytic role in all of their development. If you joined us yesterday, you witnessed nine founders as a part of our Startup Expo where America C Fund is actively playing a role. But the example I want to get is more recent in this sense. I don't know if you remember, but In September of 2022, NASA had a mission. They called it their dart mission. It was a double asteroid redirection test. In short, they wanted to test to see if they could deflect an asteroid, which is, if you're in the space, just pretty cool. The wings that took that satellite, took that spacecraft into the asteroid were developed with America's Seed Fund funding, right? So in many ways A lot of times we look around us, we may not know or see the lineage, but America's Seed Fund is supporting so many companies, so many innovators, so many innovations. And we really want you to be a part of that journey, to be a part of that. We want you to be the next leg of those successes and those stories. So let me talk quickly one more time, just briefly about yesterday's activity with the Startup Expo. We had these nine founders with active sbir STTR awards. So they're still actively on their journeys. But the diversity in their innovations and their stories is really illustrative of the opportunity that America's Seed Fund provides. These innovators spanned from advanced computing and materials to biotechnology and public health. It was a range of small businesses, some pretty small, others fairly large in terms of the number of employees. In one instance, one of the companies indicated that the underlying technology that they're using, America's Seed Fund to commercialize, was 25 years in the making within an academic research environment. America Seed Fund was the funding that allowed them to move it out of the academic lab and to begin the process of commercializing it into the marketplace. On the opposite end of the spectrum, another one of the companies had already had commercial success. They were already selling their innovations within the commercial marketplace. America Seed Fund, what it did for them was allowed them to to modify, enhance and refine that innovation so we can then serve a Department of Defense need to support a Department of Defense mission. Wherever you are on your innovation journey, America's Seed Fund and our ecosystem support partners are here to help. I hope you've enjoyed this overview of America's Seed Fund. I'm also going to ask you to sort of stay tuned because I think in a few minutes our next panel, which is a real treat, will help you understand this key question. Is America Seed Fund for you Again, thank you all for joining us for America Seed Fund Week. Thank you for your time and stay tuned for the next panel.