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The Government Wants to Give Startups Money. Here's How You Can Get Some
Feeling unloved by venture capitalists not interested to invest in your idea? Try Uncle Sam instead.
November 20, 2013
3 Min Read
Unless you are living on a different planet, you are well aware that there has been a large-scale flight of venture capital from the medical technology industry over the past few years.
"The healthcare VC asset class is like the red-headed step child to the pension funds, funds of funds," and other institutional investors from whom venture capitalists raise money, said Conrad Wang, Senior Director of Corporate Development at Medtronic, at a Minneapolis medtech conference Wednesday, organized by Lifescience Alley, a regional trade associatio
But the good news is that there are other sources of capital that may be pursued especially by early stage medtech startups desperate for cash.
And one source of capital is the federal government and its Small Business Innovation Research grant program. Recently, the government has loosened up its requirements by which companies who have been able to raise capital from VC firms can also apply to get federal funding, said Barb Rummel, partner at Minneapolis law firm Lindquist and Vennum LLP, who moderated the panel Medtronic’s Wang was on.
So, how can you get your hands on some of that money? Doug Freitag, owner of Bayside Materials Technology, and Brian Lawrence, Co-founder and CEO of Seryx Biomedical, who is pursuing alternative funding routes and successfully received federal money, shared some tips on how best to approach the National Institutes of Health for SBIR grants. Bear in mind though that the process is long. From submitting a proposal to receiving the cash can take any where from six to nine months, Lawrence cautioned.
Know that only high risk/high reward projects are funded. Just like traditional VCs, the federal government is not interested in incremental innovation.
It’s important to know what areas the grant officers consider “hot” and worthy of investment. Call them to know what they are interested in. They like to put a face to the paper proposal in front of them.
Grant officers want to see some academic collaboration. Lawrence’’s co-founder was his Ph.D. adviser.
The federal government want to fund the actual research. Keep indirect cost rate below 20%.
Proposal should highlight core capability but expands technical capability.
Project officers have a portfolio. Even a good company may not get funded if the officers feel too much has been invested in one area. So, call to find out what’s important.
Focus on two ot three technical milestones that are direct and achievable
Have an answer for why the private market won’t fund the idea
Aside from the above, there are obvious things an entrepreneur can do to increase chances of fundraising. Lawrence suggested that proposal authors read instructions closely and be aware of all deadlines.
A successful proposal is as much about the idea as it is about the people..
“The federal government’s money is for public good,” Freitag said. “They will look to see whether you have the right people to be successful, the right facilities to be successful.”
[iStockphoto.com user ARTPUPPY]
-- By Arundhati Parmar, Senior Editor, MD+DI
[email protected]
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