Startup Grant Funding: How to Raise Non-Dilutive Capital from Uncle Sam

Hello everyone, welcome to the Founder Institute Startup Grant Funding Webinar. My name is Ryan Micheletti and I'm Head of Global Operations for the Founder Institute. My role here is to work with all of our director teams around the world that operate our program in over 185 cities globally. So for those of you who have not heard of the Founder Institute, we're the world's largest pre-seed startup accelerator. Since 2009, we've created over 4,000 companies across 185 cities with our global mentor network of 15,000 mentors. So if you're interested in learning more about the Founder Institute and how we can help you build your company, you can go to fi.co/enrolling. We're currently enrolling across 6 continents. So for the topic today, this is one of the, the largest societal disruptions since World War II. And the U.S. government is stepping forward with lots of grant opportunities and loans. And so today's topic is not so much about the PPP loan and all the recent stimulus packages. It's more about the real deal grant opportunities that are out there to help you grow and scale your company. And so today we have two really great experts who will be talking a little bit about that. And so I'd like to first introduce you to Ron Flavin. Who is not only a friend, he also helped run the San Francisco Founder Institute, but he's probably, as I like to call him, one of the top grant experts in the world across all the different grant categories. So Ron, why don't you give a quick introduction about yourself?

Sure.

Thanks, Ryan. I'm really happy to be here. I've been working in government grants and non-traditional, non-dilutive funding for about 20 years now. And I've worked with companies of all sizes, from the idea stage all the way up to global corporations. And I've brought in well over— I stopped counting after $400 million in non-dilutive funding. So I live and breathe government grants and non-dilutive funding instruments.

Amazing. Well, welcome. Next, I'd also like to introduce Dan, who is the Mid-Atlantic Regional Director of the National Security Innovation Network. Dan, why don't you give a quick bio on yourself?

Yeah, hi. Yeah, my name is Dan Madden, Regional Director for the National Security Innovation Network. Served the Marine Corps, worked on the Hill for a few years for Chair of Oversight and Investigations on the Armed Services Committee. Spent about a decade at a think tank called the RAND Corporation doing capability requirements and modernization funding. Studies for the Department of Defense, and I've spent about 2 years here at the National Security Innovation Network based at— I'm based out of New York City at Columbia University. Really excited to talk to you guys today.

Awesome. Well, welcome to you both. So the brief overview of the agenda is pretty simple. Dan's going to give a quick presentation that will give an overview of some of the grant opportunities that are out there and how you can take advantage of them. And then we'll just jump right into Q&A. So this is live. If you do have questions, go ahead and pop them into the chat. And then after the presentation is done, we'll go through some of your questions and answer them live and on this webinar. So, Dan, why don't you take it away with your presentation?

Fantastic. So again, I represent something called the National Security Innovation Network, NSIN. The reason why I'm talking to you today and why I think you should be interested is that the Department of Defense is a huge market. Annually we're spending over $80 billion, over $80 billion in research and development funding, and over $120 billion in procurement. Many of the same technologies that are exciting on the commercial space are also exciting on the defense side. So the Department of Defense CTO's top priorities are gonna sound very familiar: AI, machine learning, cybersecurity, autonomy, quantum. So if you are in some of the most exciting places on the commercial side, then probably you have something that's going to be of interest to the Department of Defense. But that said, the commercial market is exciting. There's a lot of places that you guys can go with the technology that you're developing. And the defense market can be somewhat challenging for you to enter. There are binary outcomes. There— it can seem to— that there are only a handful of customers. The sales cycle can be long and complex.

If you could reshare your screen, it looks like the presentation—

Yep, apologies. There you go. And sometimes it can feel like you hit this valley of death between the funding you receive for technology development and product development. That said, my organization, as well as many others in the defense innovation space, are here to help you. My own organization is focused on bringing new people, new ideas, new partners into the Department of Defense. But in particular, today we're here to talk about the nondilutive funding opportunities that exist within the Department of Defense, in particular what are called Small Business Innovation Research awards as well as Small Business Technology Transfer awards, sometimes called SBIRs and STTRs. So this is a congressionally directed set-aside of about $3 billion annually That's about 3.2% of the R&D budget for the major research and development programs in the federal government. So for the Department of Defense, it's about $2 billion annually. Traditionally, many of these SBIRs and STTRs have been going to what have been sometimes disparagingly referred to as "cibermills." So that means a small business that's really just doing kind of cottage industry R&D, and they don't have a clear strategy for actually turning it into a product and selling it, selling at scale. We've been redesigning the program in certain places in order to make it a better fit for startups. So one of the things that we've been doing is structuring these, some, at least some of these topics as open innovation topics. So rather than entering into it with the notion that the Pentagon and the folks in Washington, D.C. know precisely what's going to bring the greatest benefit to the Department of Defense. We're sort of opening it up so that innovators outside the Department of Defense, whether from Silicon Valley or somewhere else across, across the country, can come in and pitch us with what their best ideas are. As a part of that, we've been requiring evidence of market traction for, for these kinds of these open innovation separate topics. That might be— the best evidence of traction is traction, revenue. But that will also accept investments from VC and sometimes will also accept participation in an accelerator, although that comes with some caveats. There is the risk of requiring traction. There's the risk that that's gonna drive out some of the more cutting-edge technologies, some of the pre-revenue. Companies. So for those, we're refocusing the CITR programs on companies that are commercializing university-based technology. So this is the overall structure of the CIBER and CITR awards. So traditionally, and this is still the bulk of the topics, a Phase I award will last about 6 months and go for $150,000 to $250,000, 6 months to a year. Phase 2 will end up lasting for about 24 months, and for up to 24 months, and will be an award of over $1 million. And then the Phase 3 is where we talk about commercialization. The open innovation strategy, we sort of downscoped the size of the Phase I award in order to more rapidly qualify you for the Phase II. So $50,000 for the Phase I, 3-month period of performance, and then $750,000 for the Phase II. Historically, between— let's see. But before— to get from a Phase I to a Phase II, the direction that the Air Force and increasingly the joint— the joint— sort of Department of Defense community is requiring a memorandum of understanding from an interested Department of Defense customer, sort of prima facie evidence that there is a valid market need within the Department of Defense for your capability before we transition you from a Phase I to a Phase II. Now, historically, actually the biggest challenge has been transitioning from Phase II to a Phase III. And that's sometimes been referred to as the valley of death, right? This transition from the funding that's available for technology development and the funding that's actually available to buy your product at scale. The Air Force has been particularly innovative and forward-leaning on this front. They've developed what they're calling a STRATFI award as sort of a bridge between the technology development and buying your products at scale. Those have been about $5 million plus. Just about a month ago, they issued the first round of these, and inside of about a week, they were issuing about $550 million. So, that's a very exciting opportunity in changing the landscape. There are other opportunities out there for leveraging federal government assets and, Beyond dilutive capital, you can also leverage IP that's been developed in DoD labs. These are just a couple of examples in fields of energy, disinformation, communication, cybersecurity, IP that's developed at DoD labs that you could license. We work with a lot of different universities across the country to try and form part— partnerships to leverage the IP that they're developing and see it commercialized. Some of the startups I've worked with in the past, when they're pursuing an STTR, they end up forming partnerships with some of these universities. One of the principal differences between an SBIR and an STTR, with an SBIR, you actually have to qualify— 70% of the funding has to be executed by a small business. With the STTR, at least 30% of the funding actually has to be executed by a university partner. And so that's two slightly different models. And again, the vision of that STTR is to see the more rapid commercialization of university-based technology. Yeah, as part of this vision of bringing more non-traditional performers, more startups, more folks at the bleeding edge of tech into the Department of Defense. We work with a lot of different— a lot of different partners in the venture community. And here's just a few examples of companies that we've seen that are on their way to being successful within the Department of Defense. Androl was co-founded by Palmer Luckey, who you're probably familiar with. These companies range in maturity from heavily VC-backed— I think Androl was valued at around $1 billion— to Project Owl down there on the bottom. I literally met these guys when they were working out of their house. I think that they've won now, in the last year, they've won 3 SBIRs and STTRs, as well as an Army Tech Challenge. So lots of exciting opportunities. I think I'll end it there and open it up to discussion.

All right. Thank you, Dan. We're getting a lot of really great questions from the audience, so appreciate that. I guess, like, you know, just to start off, like, how do, how do people, specifically entrepreneurs, find out what the DoD needs are? Like, where do they go?

Yeah, so in the context of the SBIRs and STTRs, a good place to start is the website, which if you just Google DoD, uh, and SBIR, you'll find the Department of Defense website for SBIRs. But it's also, in terms of broader sort of business development strategy, it's a good idea to be going to the kinds of conferences that are aligned against your technology needs. It may not be in your best interest to go to some Department of Defense conference that is covering the entire gambit of global technologies. You probably want to go to something a little bit more focused. Where the people that are interested in your technologies are gonna self-select in. You'll also want to be going to— there's another site called the Defense Innovation Marketplace, and I'll go ahead and include that here. It actually has— if you sort of dig through it, it actually identifies has some PowerPoint decks that lay out here a broad range of capability gaps that the warfighters are currently facing. That can be another good place. But in general, another good strategy is to take a look at past SBIRs and STTR awards, see who the technical points of contact, the topic authors were, and reach out to them. And see what they're working on right now. If they were interested enough to spend money on, on your problem set before, um, they might be interested in what you're working on now. So, so those are a few, um, a few ways to approach it.

So Ron, this, this question is for you. Um, you've written countless grants, uh, and each one of them is probably very, very different, uh, in, in terms of the, the structure and what you need to do, but You know, the process is very convoluted, and for you, you could probably do with your eyes closed, but if you were to just like distill it down to like the 3 to 5 steps of like going through this process from someone who's starting from like step 0, what does that look like from a very high level?

Um, I would say the most important thing that— or the, the most common mistake or, or challenge that I see, uh, founders is they have a vision in their head, but they don't articulate that in a measurable, achievable way. So they talk about what they want to accomplish, but it's all very general, and that doesn't— that isn't— doesn't work through that process to secure grant funding. So you need to have a clear plan with specific measurable objectives, benchmarks, milestones, and a well-defined plan for getting from point A to point B in, in the Phase 1, what you're going to accomplish in that 6 months, because If you don't get through Phase I, you're not going to get Phase II.

So do you, do you have to start at Phase I, or could you go direct to Phase II?

No, you have to start at Phase I.

So I have a caveat to that. So typically, yes, you do have to, uh, you do have to go after Phase I. The Department of Defense at least has some direct Phase II awards, um, getting Getting those is— can be quite challenging though. And so if you're gonna go after those, you really want to make sure that you understand the Department of Defense customers that you're gonna be pursuing. And so that's the kind of place where you're gonna want to walk into it with a memorandum of understanding with a potential customer from the Department of Defense, and in an ideal world, even a sort of statement of contingent funding. So let's say you're doing something on cybersecurity, right? So you're gonna, you're gonna do a quick review of who in the Department of Defense works on cybersecurity issues. You might discover, hey, there's the Air Force Research Lab Information Directorate that focuses on cybersecurity, and there's this thing called the 16th Air Force, which is the Air Force's lead on cybersecurity. You're gonna stalk them on LinkedIn, you're gonna stalk them at conferences, and you're gonna get that meeting. And you're gonna convince them that you have a really unique capability, you have a really unique value proposition that's gonna solve one of their problems. And then as part of your submission for that Direct-to-Phase-II, you're gonna lay— you're going to include that memorandum of understanding that's at least laying out this is how we're gonna work with them going forward. And hopefully they even say, hey, if the Air Force ends up funding this with a Direct-to-Phase-II, then we'll bring in some follow-on funding.

One thing I do want to— I forgot is there is also, for some of the SBIR funding agencies, they offer what is called a fast-track, where you can simultaneously apply for Phase I and Phase II. So that eliminates some of the lag time between Phase I and Phase II, but that is on an agency-by-agency and opportunity-by-opportunity basis. It's not just they're all like that.

Would you recommend, let's say someone's like ready for Phase 2 or they're a little bit further along, would you recommend that they just go back and start at Phase 1 instead of going the direct to Phase 2 route if there's no fast track available?

It, it would really depend on if it's going to sidetrack them from their, from their goals because like Dan said, the, the Phase 1 award is going to be from $100,000 to a max of, say, $250K. So if going back to Phase I for that chunk of cash and then investing all that time and resources into Phase I and then developing a Phase II to get up to, say, $1 million, if it's going to sidetrack you from achieving your longer-term goals, then I'm not sure that it would necessarily be a really good idea. So it would really depend.

So— oh, go ahead, Dan.

Yeah, you know, apologies. I, uh, when I mentioned fund matching, occurred to me I didn't quite go over that during the brief. Um, so the, the Air Force at least has actually developed an initiative to encourage VC -backed companies to engage with the Department of Defense through these SBIRs. So what they've started doing, and this sort of changes a little bit from cycle to cycle, what they've started doing is if you come into a Phase II and you've got that memorandum of understanding from a DOD customer, from an Air Force customer, and that Air Force customer says, I'm gonna bring x additional dollars to the table on this program, then Air Force headquarters will come in and match that, and match that or more. So they'll bring in additional dollars. If you come in and say, I've got a DOD customer, and I've got a VC coming in, that's going to bring in additional capital, then again, the Air Force will come in and bring in additional matching dollars. So they're using that as an incentive to enable the Department of Defense to better leverage private sector capital. That, depending on the timing of it, that's something that could benefit many of your— many in your community.

So it sounds like, you know, the government is very friendly towards VCs and want them to be investing in these companies. How do the VCs feel about the government grants, right? Are they a fan? Do they think it's a distraction? What are the opinions out there in the venture community?

In my experience, most VCs tend to be pretty favorable to non-dilutive funding as long as it keeps the company on its growth track and is aligned to the vision. For the most part, I don't really see a lot of VCs that have an issue with it. Because it doesn't— go ahead, Dan.

Yeah, I mean, that's largely been my experience too. I think it's really worth pounding the table on the issue of making sure you're not— it's not pulling you off thesis, right? So if your thesis is you're going to become a defense company, then there's no dilemma, right? Get after it. If your thesis is that actually I'm gonna be what's sometimes referred to as dual use, I'm gonna be pursuing both the defense and commercial market simultaneously, then you have to really think very carefully about how well aligned your defense product and your commercial market are going to be. So you don't wanna be in a place where you end up not, you end up having to almost build two separate companies to pursue the two different markets. Where you want to be, you almost want to do what Boeing does, right? So Boeing's sort of a perfect example of a dual-use company. They use upswings in their commercial market to give them a competitive advantage on the defense side by using the resources they got on the commercial side to build their IP portfolio. And when the commercial market falls down, like say right now, then they can use the funding that they're getting from federal contracts on the defense side to continue to build, you know, one, to continue to sustain their revenues during down cycles on the commercial side, but also again, to build their IP portfolio and to build a competitive advantage that they can exploit on the commercial side.

So we have an international audience here today. Do you have to be a US company or do you have to be a US citizen? Say you live in another country, but you have a Delaware C-Corp. What are the rules and regulations around that?

Um, typically most programs that I've seen, they require, uh, at least 50%, 51%, I think, um, be by a U.S.-based person, resident or a citizen, or I don't recall if a permanent resident is qualified, but at least 51% generally has to be based here with, and with a U.S. citizen.

Yeah, and so it may be a little bit different from agency to agency, but that's right. So it has to be at least 51% US-owned. I do not believe that there's a requirement for citizenship, but it does have to be US-based. I have seen— so you can subcontract pieces of the work. So I've seen cases— so I think the constraint on that subcontracting, your sub— excuse me, for an SBIR, for instance, is about 30%. So I have seen instances where a critical piece of technology was actually coming from overseas, and so that was who it was subcontracted to. And actually, on that point, you can actually sub to a major prime, to a major prime contractor, right? So you could be developing technology X for the Army or for the Navy, as a small business and you've won this SBIR, and— but as part of pursuing it, you could actually form a partnership or a joint— with, say, a Raytheon or a Lockheed or some other big company that could be part of your longer-term business strategy if you think, actually, the way that I'm gonna get into this market in the long term, I'm not gonna be selling directly to the Department of Defense.

In the long—

in the medium term, at least, I'm gonna be selling directly to this big defense prime. And so actually, a part of my capture strategy for the SBIR is going to keep in mind a little bit of my longer-term strategy for how I'm gonna navigate this market in the future. You know, same thing, you could sub to a university partner. That, you know, I have heard good things and bad things. The risk of subbing to a university partner, and this is something that you would experience in an SBIR, STTR too, is that academics typically are going to be on a different sort of battle rhythm than you as a small business, in particular as a startup. And they're going to have different— they very often will have different sort of KPIs for what's going to count as success for them coming out of this than what you have as a key performance indicator. And so making sure that you're kind of getting into bed people with people that you have a fairly clear alignment of interests and sort of a sense of how you're gonna operate through this agreement, I think is probably an important step.

Yeah, that's a really good point. Those relationships really have to be very carefully structured and very carefully aligned because I've seen instances where grants and projects have imploded specifically because there wasn't an alignment between the small business or the startup and the university or other partner, and in terms of KPIs, timelines, budgets, and if— roles and responsibilities. And if all of that isn't very clearly spelled out, it can definitely mean trouble.

So that's great to know. Let's talk a little bit about IP, right? Because if you're going after a government grant, you submit an idea, Are there any ownership rights that the government takes?

Dan, I'll let you take that one since—

Yeah, I know. So I'm not a deep expert on the IP front, but so you're still going to own all your IP. I believe that the government keeps what's referred to as march-in rights, so they can use your IP, but they can't sell it to anyone else. They can't, you know, if you develop some critical IP through through the course of this. In practice, there have been no cases where, to my knowledge, that the government has sort of used these rights to, say, take IP that you developed and then hand it off to a competitor in order to create competition and sort of squeeze you on price. So that is something that you're gonna wanna be thoughtful about. It's something that you're gonna wanna look at. Actually, on a related note, you're also going to want to be thinking about, at least for the Department of Defense, ITAR issues. So ITAR, like many acronyms, I'm forgetting what it stands for. International Traffic in Arms Regulations. So ITAR is essentially designed so that if you are developing technology that's of critical national security interest, that you don't export it to one of our adversaries. One of the things to keep in mind is that you will still be covered by ITAR whether or not you are developing a technology for the Department of Defense or not. So I hope that that doesn't end up being any particular obstacle. And obviously there is in fact an international defense trade. So there are still ways to exploit that market on a global scale.

So one of our partners for the Founder Institute Silicon Valley program is NASA, and one of the big topics that we cover is, you know, how do you take NASA technologies and implement it into your startup? So I would imagine there's probably an IP portfolio for the DOD and other organizations, and they're looking for entrepreneurs to help commercialize them. What resources are out there for people to find out more information about these, these tech transfer or IP opportunities?

Are you talking about past or opportunities that are available right now?

I would, I would say probably opportunities that are available now.

I've got a couple—

Go ahead, Rob. Go ahead, Dan.

Okay.

I was just going to say, typically, you have to go agency by agency to look at what's going on. So, like, you know, if you were looking for Department of Defense, you go there. The NASA site has information about past projects that they funded. And what they've got going on right now and topics of interest and, and whatnot. But there really isn't a centralized site for that, that I'm aware of anyway.

Yeah, so I just shared, shared in the chat a link to something called the TechLink Center. So I believe the Department of Defense contracts with these guys to essentially curate DoD patents. So that's, that's, that's one site that you could go to. A program that, that my organization is running called the Defense Innovation Accelerator, DIA, is essentially sort of like an I-Corps program where we'll pair you with some— we'll give you an opportunity to select from some, some DOD IP. The goal there is we're hoping that, that you'll come in with an innovator and a founder's eye and come up with a great, great way to exploit the technology and exploit a new market with it. But that's— so those are, those are two paths. I have another colleague, though, that I trust quite a bit on this stuff. When I talked to him about how he would approach identifying IP that he might think about licensing. He talked a lot about actually going through journals where these different labs were— where researchers from these different labs were publishing, going to the marquee journals, the peer-reviewed journals, and seeing what looked the most exciting and like it was going to be hitting sort of a big macro— sort of well-aligned with a big macro trend in the market, something that he felt was going to have a big future. So those are sort of 3 approaches that can be helpful, I think.

So let's talk a little bit about non-DoD grant opportunities. Ron, you know, prior to this call, we were talking a little bit about the other organizations that are out there. So maybe you could give us a brief overview of other types of organizations that are out there.

Sure. Well, there are 26— well, around 26 federal agencies that provide grant funding. So, not all of them provide grants to businesses, but there are agencies like the National Institutes of Health, Department of Energy, the USDA has funded a surprising number of Tech Forward startups. I've done some— I've gotten significant funding from— for tech startups from the USDA for all kinds of different technologies. But you can go to websites like the— like SBIR.gov, and they have a list of topics and agencies. That are open. It is— we were talking— we were talking before the webinar started. There is a lag, so it doesn't have all of the Department of Defense opportunities or topics yet, but you can go to SBIR.gov. You can go to Grants.gov and use their advanced search function. And you can search by eligibility and just click small business, and that'll return a list of all funding opportunities that are available to small businesses, and it'll list them by— you can sort it by agency, search by keyword.

So You know, when you're assessing these grant opportunities, if you're a first-time founder and you've never written a grant, you know, is this a simple enough process where as long as you're reasonably smart, you can get through it and you're able to submit it? Or is this something where you should really be outsourcing this to a professional who can help?

It really requires a pretty high level of, of expertise to be successful. In my experience, in the years I've worked in this, in this field, a very small percentage of proposals that are submitted actually get funded. So unless you have somebody within your organization who is, who is knowledgeable about the process and is able to understand what they're looking for, I would say it's probably a good idea to seek outside resources, at least initially anyway, until you can learn more about the process and expectations, and then maybe bring it in-house.

So go ahead, Dan.

Yeah, no, I think I agree with that. I mean, I think in some ways it It really depends. So I think on average, I've heard that people will put about 100 hours into submission for one of these SBIRs, STTRs. One woman, one New York City-based founder that I spoke to, she built her cybersecurity company on SBIRs. That's how she built her IP portfolio for it. I think that she tended to put like a couple hundred hours into it. But that said, I also know a small startup, New York City-based startup, that after I talked to them about it, they probably put all of 20 hours into it, and they won a Phase I. I think it really depends on the agency that you're going after and the topic that you're going after. I think that there can be high variance in what they're looking for and how competitive they are. I think for the Department of Defense, I've got deeper insights into the SBIRs and STTRs for the Air Force and some of the other elements in the Department of Defense. And there have been points, and I don't know this to be the case, say, this cycle or last cycle, but there have been points in the last couple of years where the win rate for Phase I was like 50%. So, and for the STTRs within the Air Force, at least for the open innovation topics, they were less competitive than the SBIRs. So, but even for you to know that is probably gonna require you to talk with some people that are familiar with the space. So it's probably, if you don't have that sort of knowledge organic to your organization, One of the strategic decisions that you will have is what your human capital strategy is for pursuing this market, right? And, you know, that's sort of like, you know, do you rent? Do you buy? I think typically people don't think about sort of insourcing a BD guy or gal specifically for the Department of Defense until they're a fairly mature company, like say Series B kind of a thing, particularly if they are focused on a commercial market first and the Department of Defense is sort of a nice thing on the side. But I've seen much earlier-stage companies, like idea stage, seed stage, Series A, successfully going after these grants and these contracts with the Department of Defense. In terms of how do you approach this before you make the decision to buy somebody, consultants can serve lots of different roles and have very different sort of price structures. And so, you know, looking at the— was it procurement technical assistance centers, the PTACs, that every state has, and are not infrequently they're university-based, and for just sort of having somebody sort of review how you put the— like, just giving you a course on like, how do I fill this stuff out? I'm not sure how helpful they're going to be in terms of thinking strategically about your business and what you're going after, but in terms of just having somebody go through it who understands how the forms are supposed to be filled out, those kinds of people can be probably be quite helpful. Although there's— my sense is that there's high variance across PTACs. I know consultants that really just focus on helping you knock out a Phase I. I know other consultants that help you figure out your sort of broader sort of business capture strategy, others that help you figure out how to make sure that as you sort of scale up and your product's more mature and you're ready to sell to the Department of Defense at scale, all the pieces are in place so that there's all the appropriate funding is in place to actually enable the Department of Defense to procure that capability at scale. So as you get into this, again, just the human capital strategy is going to be really important to you.

So let's talk a little bit about when you don't get the grant funding. We've had a couple questions around this. If you apply, you don't get it, and you're not accepted, will they communicate that to you, and will they give you feedback, or is it just sort of like it goes into a black box and you never hear from them again?

It tends to be on an agency-by-agency basis and program-by-program. Not all programs will provide feedback. Sometimes they do, but some don't. They generally will send notification that you were not selected for award, but I've seen cases where they've not heard anything, but I just spoke with a client who had— a new client who had submitted two Phase I proposals last year and had gotten feedback on both. So, so for that— and that was through the USDA, and they did provide feedback on why they didn't fund it or select it?

Yeah, so for at least the open innovation topics I've been more heavily engaged in, they've been reasonably good about providing feedback. Um, you know, so there's always been the response and some characterization of why you didn't get it. Um, whether or not that makes you a happy person or not is a different question.

So we've got some questions around budgeting. You know, how does a "how does budgeting in a proposal work? Should you just budget for the amount in the grant, even if you need more funding?

What are some of the best practices around that?" If you're preparing a budget for a grant, then, and the maximum request is, for a Phase I is, say, $150K, then that's— and there is no matching funds requirement— then that is what the budget they're going to be looking at. So you don't want to go above— you certainly do not want to go above the award ceiling for a Phase I or Phase II. There are some programs that I've seen where they have specifically mentioned that they do not want to see any type of other matching, any other type of funding source other than what is going to be part of that grant request.

Yeah, I know. Yeah, I think you just, you want to budget to the allotted amount. In terms of the fund matching stuff that I was talking about before, I would not bring up, you know, what else you need in order to execute your goals unless you've actually secured those MOUs and that funding.

Right. And that could generally be addressed in the narrative portion and not necessarily in the budget document itself. But it depends. Every program might have a little bit different requirement.

So let's talk a little bit about previous success cases, because I think like you could kind of look at those and, and, you know, they might be archetypes for some of the founders here. Um, does the DOD or these other organizations, do they, uh, promote, or is there a way to see like the, the companies that have successfully achieved this, or is it still pretty hidden, um, and behind the scenes?

So I— how good of a story, how good of a job the Department of Defense at least does telling a story, I think is, you know, an open— it's an open question, right? In terms of the data being there, I think that you can go to like usafederalspending.gov and do a data pull on every award for everything that the federal government spent money on. And there's even a data cell that you can go in there to divvy out which of those awards were for SBIRs. In terms of the big success stories that you'd wanna sort of think about as models, I think taking a look at the winners of the Air Force StratFi award are probably, going to be the stories that resonate most with sort of VC-backed founders. So these are companies that, you know, one of the examples, and probably the most famous example there is, you know, this Palmer Luckys, the Anderall, you know, they won $10 billion, goodness, Excuse me, I did not mean to say $10 billion. I think they won around $10 million in this last cycle from the Air Force. Virtualitics was another company that was mostly, I think, started off a couple years ago, I think, with mostly a lot of university faculty, not necessarily the people that you think of as being sort of startup founders. They successfully competed for a pitch event that I was running last year for the Joint AI Center, and this year they successfully pitched and received another, I think it was like $8 million award from the Air Force. And they essentially do sort of intersection of virtual reality and big data and analytics.

So let's, uh, let's talk a little bit about the elephant in the room, COVID-19. How has this affected the submission process? Has it affected the, the selection that the, the government or the, the awarding agency makes, uh, in terms of the types of companies that are, are getting awarded the grants?

In, uh, From a general broad perspective, COVID-19 has impacted timelines for a lot of different programs and pushed those back. So response times, award notifications, in a lot of cases have been pushed back, and in some cases those are— that's still to be determined when that's gonna be announced because of that. And the other, what the other impact I've seen with the COVID-19 is that there are more opportunities available for companies that are, have innovative solutions that could be utilized to combat COVID-19 or future pandemics. Pandemic situations. So that's the biggest impact I've seen from a broad perspective.

Yeah, I mean, I think at least for the Department of Defense, they're— so on the positive side, I think that there is a general sense that we had to play whatever role we could in being supportive of the response. And aside from the sort of operational and logistical things, and like having National Guard help build field hospitals and all these kinds of things, a part of the, I think the department's thinking about this was that we wanna, we want to rapidly execute our funding in order to help address the, the finance, the sort of financial and economic collapse that we're witnessing. You know, the Department of Defense, you know, it's a big animal, it's, you know, 2 million people and, you know, $700 billion annually. But even that's not quite big enough to have a dramatic impact on what's going on economically. But so as an artifact of that, the Department of Defense, we ended up issuing a variety of what are called broad agency announcements or commercial solution openings, a bunch of different kinds of contracting vehicles that were focused on COVID-19 responses, I think at the scale of hundreds of millions of dollars for this summer that just closed out kind of recently. But as an artifact of executing that, the Air Force in particular, which is sort of the lead agent for a lot of the Department of Defense's acquisition on the COVID-19 front, ended up pushing back their SBIR solicitation that normally would go out last week. They've pushed that back to the fall because of the dramatic impact that COVID— the large level of effort that's been engaged in responding to COVID-19 has put on their contracting workforce. But that said, I should highlight that this summer's— SBIR and STTR cycle did open up last week, and so you've got a month in what's called the pre-release period that we're in right now, in which you can look at those sort of draft topics, and next to those draft topics will be listed the topic author and their email address and sometimes their phone number, and so you can start reaching out to them now. And before you spend 100 hours or whatever working on a submission, you can have a pretty frank discussion with them about, this is what I'm working on. Is this the kind of thing that's going to be of interest to you? Is this relevant to what you're trying to get after? And that can help you figure out whether or not you're headed in the right direction. After that pre-release period ends at the— about a month from now, a little less than a month from now, the application period will be open for—

So, you know, with only a couple minutes left on the call here, I'd like to ask the two of you if you have any final closing tips for founders at this time. Ron, maybe you want to go first. What are some tips or best practices you can share with us?

Well, I would just— I would want to follow up on what Dan was just talking about, is look out— look for the— seek out those points of contact for the different programs that you're interested in applying to. And if they will speak with you, definitely take advantage of that. I've seen more and more programs where they are strongly encouraging potential applicants to reach out to those POCs and discuss the project first before investing that time. I would say that that's probably the most important tip that I would have is to try and make that contact and discuss it to see if it's of interest to them.

So before spending 100 hours writing the grant, build your network, get some expert feedback, and really find out if they want what you're selling. Dan, what about you?

Yeah, I think that's right. I think thing one for me is when you're looking at one of these solicitations, and again, just make sure it fits with your broader strategy for what you're trying to do with your business. You don't want to be in this place where You're fragmenting your business. Yeah, I think too, yeah, sort of customer discovery. Within the Department of Defense at least, customer discovery and end-user discovery are slightly different propositions, right? So the people that are actually gonna end up using your product are not necessarily the folks that are gonna end up making a buy decision or resourcing decision on your product. So understanding, coming to— even after you get that Phase I, using that— part of that Phase I to better understand the defense market that you're trying to get into, I think is going to be an important effort. And then, thing 3, thinking about that human capital strategy kind of broadly. Who are the people that you're going to need on your team? And what's the way that you need to get them engaged to help you both, one, capture the business, but then two, successfully execute it.

Okay, that sounds good.

Yep.

Well, so I think this has been a really great discussion. Just for everyone who's viewing right now, we will be sending this webinar out to you within the next couple days via email. So if you register for this, then you'll get a follow-up email from us. Again, if you're looking to raise grant money and you're interested in learning more, go back into this chat, look at the links. We'll send a couple out there via email as well. And really do your research. There's a lot of great opportunities out there. For founders who are looking for expert guidance to help them launch their company, I highly recommend joining one of our 180 Founder Institute chapters all over the world. And I hope everyone stays healthy and stays safe. Thank you so much, and thank you to the panelists.

Thank you. Thank you.

Thanks so much. Take care.