Christine E.B. Howard is passionate about equal and equitable access to funding (dilutive and non-dilutive) for historically underrepresented founders of start-ups. It is her ambition to support the innovation ecosystem and promote inclusive economic growth. She believes inclusivity is imperative for innovation, and building a strong and diverse economy where all our citizens thrive is essential.
With this in mind, she founded E.B. Howard Consulting in 2013 (celebrating 10 years this year and securing 100M+ in funding for clients), where they help startups and those that support the startup ecosytem find and apply for funding and measure the success of funding that does not take equity.
She actively mentors and advises small businesses through programs like the National Science Foundation’s Innovation Corps (I-Corps™), Columbia Technology Ventures, Verizon Forward for Good Accelerator, NYSERDA’s EIR Program, Startup Grind, and many others. She has also served as a pitch judge for start-up competitions like 43North, Female Founders in Tech & (FinTech and InsurTech) competitions, E^3 and NYBPC, and many others.
She is a Buffalo/Niagara National Association of Women Business Owners (NAWBO) Past Board Member and Past President. She has served as Sponsorship Committee Chair, Programming Committee Chair, and Nominating Committee Chair. She is also an active member of the Chapter’s Diversity and Inclusion Task Force.
Are you the founder of a STEM startup suddenly dealing with the vc pipeline closing up?
Are you intrigued by the influx of government funding especially into climate related fields, but even other sectors more broadly?
Have you ever tried diving into the wide world of government grants but quickly realized you’re out of your depth?
In this episode, Christine E.B. Howard, seasoned grant professional and founder of E.B. Howard Consulting talks about the how’s and what’s of government grant funding for for-profit startups, what you need to know and do to prepare your startup for grants, what startup founders miss about the must-have factors to qualify for government grants, especially for STEM startups, and much more.
- An overview of sources of government funding, and how federal grants differ from state grants
- How to begin your search for “right fit” grant sources
- An introduction to SBIR & STTR grants, and baseline eligibility requirements
- Pros and cons of SBIR grants
- Factors driving the success rate of grant funding, and how to assess your application’s chances intelligently
- The grant application process – a high level overview
- A simple checklist to assess your startup’s eligibility for science and technology grants
- Common mistakes and pitfalls that trip up entrepreneurs in the grant funding process
- A practical roadmap to evaluate and apply for right-fit government grants
- How to be a diligent grantee once you’ve won the grant
- Surprising benefits of applying for government grants even if you get rejected
- A quick overview of other sources of government funding support for women entrepreneurs
Links and Resources:
Grants.gov: The system that provides a centralized location for grant seekers to find and apply for federal funding opportunities.
Kauffman Foundation: Private, nonpartisan foundation that works with communities in education and entrepreneurship to increase opportunities that allow all people to learn, take risks, and own their success
SBIR.gov: The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are highly competitive programs that encourage domestic small businesses to engage in Federal Research/Research and Development (R/R&D) with the potential for commercialization.
Sam.gov: The official US government site for contract listing, entity reporting, contract reporting, etc.
E.B. Howard Consulting: The consulting firm that Christine founded and runs.
Shubha: Hello Christine, welcome to Invisible Ink! We are so excited to have you here.
Christine: Thank you for having me!
Shubha: You have done a lot of work in helping for-profits, in particular to access non-dilutive grant funding. For those of us who aren’t familiar, can you just give us a quick overview of what the landscape is of government funding and where one might find these sources?
Christine: Yes, really quick, non-dilutive funding means funding that won’t take equity from your small business or startup. That might be loans or debt or grants. In this particular case, we are not talking about loans or debt or anything that is going to be credit bearing in any way, shape, or form.
We are just talking about grants, maybe some contracts, that are going be the focus of where my domain is – where people find startups, small businesses, will find non-dilutive funding. There are a couple of different locations to find the funding, of course Grants.gov. When you go into Grants.gov, make sure you select small business or for-profit entity, and that will help filter out some of the other things that are meant for research institutions or non-profits.
Not all federal agencies will put their opportunities into Grants.gov for whatever reason. If you know an agency that you really want to work with, like DOD is a really good example of this. Not all DOD opportunities end up in grants.gov. Sometimes you can find them in Sam.gov. Sometimes you find them on the agency’s website themselves. So, there are a couple of different areas that you have to look into. It is not overly obvious, and it does require a little bit of detective work and sleuthing on federal websites.
Of course, if you are in a state that supports economic development and entrepreneurialism with for-profit entities, you can always root around on your state’s website. New York State has lots and lots of funding. I would say they have tax breaks and incentives and things going on that may be advantageous to an innovator or a startup. But there are lots of things going on in different states.
Then there is the private sector. I use Johnson and Johnson as a really good example. They have challenges that come out that are meant for for-profit entities. Depending on your space and what you are doing, look to the private sector, look to foundations. Kauffman Foundation is a really good example of one that supports entrepreneurs. But it does take a bit of detective work and sleuthing around to figure out. What’s out there? It is not a one stop shop.
Shubha: You gave an excellent example of the difference between some of the types of assistance as well as the entities that provide that assistance. Are there big differences, notable differences between grants in particular that come from the federal government versus maybe some of these other state or local governments?
Christine: Yes. As far as what they are looking for, yes. Dollar amount may play a role as well. Then there is the whole registration process at the federal level. There is the mandatory sam.gov, and I would encourage anyone seeking any type of funding to get the registration done right away. Even if you are not planning on seeking government grants for another year, do it now. It will save you a lot of headaches down the road. Just get that out of the way. But everyone has got different registration requirements, timelines, award amounts, and the applications are different from each other. I wish there was a one size fits all, but there isn’t.
Shubha: Let’s say that you are a startup founder starting the search for grant funding in particular. Is there a hierarchy that you would recommend to our founder to say, “Start here!”
Christine: Well, there are a couple of things I would encourage them to think about. “What is it that you are doing?” We always advise clients, “Funding should fit you. You shouldn’t fit to the funding.” You can get yourself into a lot of trouble as a business owner having too many irons in the fire and spreading yourself too thin – not a wrong approach, but without thinking through the funding opportunities.
I don’t know that there is necessarily a hierarchy, but it really depends on what you are doing. If you are doing something novel and innovative, for example, you are doing something with machine learning or AI. You might be better off looking at the Federal Government and maybe your state as opposed to the private sector. If you are a consumer goods startup business, a bakery, maybe a clothing shop or a consulting firm, funding isn’t going to be the same for you as it would be for an innovator where there is a potentiality for large scale economic impact. That doesn’t mean that there isn’t funding there. It just means that it is different and maybe not as plentiful.
If you are consumer goods not doing something novel and innovative say you’re, Joe’s Pizza Shack, start at state and look to private sector. Whereas if you are doing something novel like, machine learning and detecting, cavities and teeth, maybe the federal level is the place to start, but it really depends on what you are doing and what your industry is and what your sector is. Talk with mentors and advisors that could guide you on, where do you start to look for non-dilutive funding? My default response is look at federal, then work your way down. But again, it depends on your industry, and it depends on what you are doing.
Shubha: So, one thing that kind of came through loud and clear is this affiliation or affinity between scientific, technological types of domains and the greater availability of federal funding. My understanding is the SBIR STTR program is a pretty big part of that. Can you just give a quick overview for those of us who aren’t familiar, what the SBIR STTR programs are?
Christine: So, the Small Business Administration supports small business innovation research, SBIR, and then the STTR elements, the tech transfer element of it, essentially it is the same funding it, just depending on what you are doing specifically. But that funding comes through the small business administration and is administered to 11 participating agencies. National Institute of Health, National Science Foundation, DOD, Department of Education, DOT, Department of Homeland Security. Name an agency. There is probably SBIR funding in some way, shape or form for for-profit innovators.
SBIR is meant to demonstrate. There are a couple of different things that it does. The big ultimate goal is to spur on economic development and innovation with an idea that whatever you are developing or working on, there is a commercialization element for, so take your product to market. There are a couple of different stages. They refer to them as phases, so don’t confuse that with clinical trials.
So, they have a phase one, which is a small pool of money. It can be anywhere between a 100 to maybe 275, or upwards of 300 for a small period of time, like six months, maybe a year, depending on what’s going on, just to demonstrate feasibility or proof of concept. Like, “What you are proposing to do, could it work?” This is a chance for you to receive some money, to pay the people to do the work, to demonstrate that there is a potentiality there.
Then there is a phase two, which the larger pool of funding can be anywhere from $750,000 to well over a million on a larger timeline, more like a year to 18 months. That is focused on commercialization and taking your product to market. Of course, a little deeper R & D is involved. The whole purpose of those dollars is for you to pay people to do the work, to get the outcomes. You are not buying equipment or supplies or renting a building. You are going to pay developers or engineers or scientific experts and whoever is on your team to do the work.
The other notable thing about SBIR is that it is meant to be done in the US-by-US citizens, or those that are eligible to work in the US, meaning they have a green card status and that the company is owned by US citizens. So, everything has to happen within the United States. Now, the STTR element of this not too far different in phase one or phase two. There are even phase threes for SBIRs. Sometimes they are funded, sometimes they are not. Most of the time they are not. Mostly they are unfunded project periods with support from the agency. I guess that is a better way of saying it.
However, with the STTR you might be an academic affiliated with the research institution and that whole purpose of that STTR is for you to launch your product into the market space. But, you don’t have to have a research institution involved when you have an STTR. That means that there is a substantial amount of work that is going to be involved with a research institution. Maybe you are using labs and there is space, whatever it is. There is a little bit deeper nuance to it. If you are affiliated with a university or you are a professor, you might be bound to use the STTR element just given the nature of your contracts.
Whereas if you are an entrepreneur startup and you are not affiliated with the university, you are not obligated to use a university or a research institution, SBIR might be the path for you. That doesn’t mean that you can’t partner with a research institution as a subcontractor, but there are just different paths. It depends on what you are doing, where you are as an innovator, if you are out on your own or you are a part of a research institution. There is a little deeper nuance to that.
Shubha: Excellent. That really helps clarify a lot of things. So, if I am Jane Doe who has a brilliant idea in machine learning and I applied that to transportation but I’m not a PhD student or a professor, it sounds to me like the smarter path is maybe try to find an SBIR and failing which, try to go find the STTR route, in which case I might need to find some kind of research university or institution.
Christine: You would already be affiliated with the research institution for the STTR. If you are not affiliated, then yes, SSTR might be the path for you depending on what you are trying to accomplish.
Shubha : Let’s say, I found a potential opportunity through the SBIR. What should I, as a founder, keep in mind when I’m deciding if I should pursue a grant or not? There are clearly pros, cons, straight offs. What does that picture look like?
Christine: It is a big picture and there are a lot there to take in just like pursuing Series A fund venture capital funding or angel investors. When you give funding, there is work involved. So, this isn’t just winning the lottery. There is some risk involved. There is no guarantee that you are going to be funded and no reputable grant writer or grant professional can guarantee or imply that you are going to be funded. But there is going to be a substantial amount of work involved and probably just as much work as would be involved if you were securing Series A.
The type of documentation surrounding yourself with knowledge experts and making sure that you understand the commercialization space for your product is necessary. What is the potentiality? What is the cost going to be when you sell it? Are you licensing it? One of the upshots of securing funding that doesn’t take equity from you is if you are going after Venture Cap or Angel Investor dollars. This will help de-risk their investment because they will see that the Federal Government has already given you a pool of money to demonstrate outcomes. That makes it a little bit more palatable to your investors if you are seeking investors. It is helpful for that. But as far as the type of work that is involved, there is a series of registrations, there are documentation requirements, and that is just even before you even start the application. That is a whole different amount of work that’s involved. Of course, you have to be really good at time management.
Shubha: You said this feels more akin to a Series A type in terms of the preparation, yet one of the things you mentioned earlier is if it is a phase one, the amount of funding is much less than a typical, so that is a trade off right there. If I’m a founder, how should I make that trade off?
Christine: It is about giving up equity. So, when you are going for Series A, you are giving up equity. This is not giving up equity, and of course it is the Federal Government and there are all sorts of documentation requirements before the Federal Government gives up their money for you to demonstrate your outcomes. It is paperwork heavy. That is why, it is a smaller pool of money. But you are not giving up that equity element, and that is the trade-off there for you. Do you want to give up the equity? There is no guarantee that you are going to get funded either. So, it is a lot of work.
A lot of people don’t get funded, unfortunately. The success rate for each agency is different. For some agencies, it is 13%, and other agencies, it might be upwards of 30%. It is highly competitive. You have to make sure every “I” is dotted, every “T” is crossed, and every form is filled out correctly. When they say, “Font size should be no smaller than 10,” they are not kidding. They are looking for a reason to kick you out and not fund you. So, be mindful of that. If you are good at following instructions and filling out forms, you stand in line.
Shubha : Your point is well taken. Let’s say that I’m a founder. I’m clearly not living in the academic world on the grant world. I’m just trying to get my business off the ground. How do I make an intelligent assessment of where I have a shot, like with which agency am I likely to have a better shot? Is there data out there that I can pull?
Christine: You can certainly go to sbir.gov and you’ll see previously awarded companies and I advise anyone that is looking at SBIR, go see what they have funded in the past. Just because they haven’t funded exactly what you are proposing or what you want to do, doesn’t mean there isn’t an opportunity for you. But you know that if something’s near similar or maybe it is even a competitor and they’ve funded a competitor, “Okay, there’s a line in for you.”
We always say, talk to the program officer. Talk to them about what they’re focused on. We are talking about dental AI to detect cavities. That might be a really good fit in the National Institute of Health, but it might be a good fit for the National Science Foundation because you are doing something really novel and innovative with that AI that may have other applied uses outside of the dental industry. You may be able to do something in another industry or another field, have a conversation with them and see, email them, call them, talk to them. The worst that could happen is they don’t talk to you. Be persistent.
Talk to them. Have conversations about appropriateness and fit. Would they be receptive to even an executive summary from you – not a pitch deck, just an executive summary of what you’re trying to do and what you think you are going to accomplish with the outcomes?
Shubha: That is a fantastic segue into the process itself. Speaking about SBIR and STTR, what are the basic building blocks or foundational pieces that I have to have in place as a founder before I think about this?
Christine: Okay. So, the first things are federal registrations. Sam.gov is priority one. That can take six weeks to validate. You can’t submit any application to any federal agency without that being active and valid. However you registered with the IRS, including capitalization, spelling periods, you name it, make sure it is exactly the same way in sam.gov. You don’t want to give sam.gov a reason to delay your approval process.
A lot of times we get startups that come to us and say, “Hey, the application is due next week. Can you do this?” No, you didn’t even do your SAM registration. It is six weeks to validate just Sam. There are organizations out there that you can pay to have them do it for you, but I firmly believe it is in a startup’s best interest to do it themselves. It is not complex. There are a lot of forms to click through and make sure that it is set up for your business, but you will need things like your tax ID, banking information, that sort of thing. It is their system of award management, and it is for all federal agencies. If there is a one stop shop, the one thing that they have right now is sam.gov for everyone.
So, you have that, that is mandatory – six weeks to approval. You need to set yourself a calendar reminder to renew it annually. So, that is a thing that could trip you up, just because you are registered in sam.gov now doesn’t mean it will be next year. So, there’s that. You will also need to be cognizant of timelines and there are some other things that come into play there, but if you have a due date, and let’s talk about National Institute of Health. SBIR happens three times a year. January 5th, April 5th, and September 5th, three times a year.
Depending on where you are in the process of going through the registration and where you are in the calendar year, you have to think about, “What is reasonable and doable in the timeline?” If you go for the January 5th deadline, you have got a whole slew of holidays in your way. The last thing you want to do is to be threading about your proposal to NIH during the holidays. We advise our clients try to be done by December 20th, and I know that people are like, well, you got until the fifth, but your holidays are stressful enough. Be done on December 20th, and then what we recommend is to go back even farther. I would encourage someone to start working on their proposals 45 days out from the deadline.
But you need to be mindful of your timelines and think about it if it is realistic and achievable to meet the deadline. We also tell our clients be done seven calendar days in advance of the deadline. That seven-calendar day window is for uploading into their system, their platform, which as a side note, just because you did sam.gov, your registrations aren’t done yet. There are more. Each agency has their own platform and turnaround timeframe.
ERA comments can take two weeks. So, you’ve got the six week. Once that is approved, then there is an additional potential for two weeks for ERA comments through the National Institute of Health. Sometimes it is quicker, sometimes it takes longer. Depends on what’s going to, but assume another two weeks, so we are talking about eight weeks here. That could potentially be just held up before you even put pen to paper, just dealing with registrations.
So, we say seven calendar days in advance, you want to be done. That is to upload into the platform and no more editing, no more modifying, no more waiting on letters. You are ready to load. The reason we say that window is there is if it can go wrong, it will. Your internet will go out, your computer will die, there will be a major family crisis of some kind. Don’t chance it. That seven calendar a day window there is for your own sanity.
So, that is just dealing with the timelines. Then, “Are you even in a position to go for this funding? Do you have not only yourself, competency, capability, and expertise to be the lead on the project, the principal investigator, but also, do you have subject matter expertise? Do you have a development person? Do you have an AI expert with you? Do you have a development person who can help write the code? If you are talking about dental and we are talking about AI, do you have a dental clinician? Do you have an expert surrounding x-ray and someone who does this and is an industry expert on your team?
They can be a W2 employee or a 1099. You need a team. You cannot do a single person application for SVII. This is meant for a team which is going to do the work, should it be awarded? Now it can be a mix of W2 and 1099s. That is a whole separate conversation about budgets and what is allowable and not allowable. But you need to have a team of experts and advisors. You have to be able to do the work. Should it be awarded? I go back to that Series A; your work is just starting.
You have got to meet with your investors and do what they want. It is the same thing. You have got to start doing what the government wants. Surrounding yourself with a competent and capable team of doing the work and then making sure that that opportunity is a fit for you. Everything is going to look fantastic because you are going to see all these dollars running around a billion dollars in funding and you just have got to get a slice of the pipe.
I go back to the idea that funding should fit you, you should not fit the funding. Make sure you are eligible, that is important. Make sure you are capable of doing what they are looking for in the proposal. Then, of course there is the myriad of documentation that goes with the whole proposal process that needs to be completed.
Shubha: Maybe we can just walk through a high-level hypothetical. Let’s say I come to you and I’m a startup founder. I have an AI idea – something for dental diagnosis. We will run with that. So, you talked about getting through the registrations, I have the team of experts. What are the three or four basic things? How do I assess eligibility? What are the bullet points, the highlights that, you’d ask that I look for or look at before even considering applying?
Christine: The big thing is with the eligibility and if we are just talking about your business, the bigger things are that of course you need to be legally formed. You need to be able to have your team. Complete your registrations. Whatever the agency is looking for – your team members need to be in the US or eligible to work in the US, it has got to be here. You can do remote work in the US but “outside of the board” is the saying. Then your founding team, whoever that is, whoever the owners are, if you own less than 50% of your company, you are not going to be able to do SBIR. It is a limitation on that. If you are the inventor of the product and you don’t have the required expertise, you have got to surround yourself with the team and the expertise.
This is the big one, but it is not over the audience. If your company has been around for five years or more and you have had little traction, why now? Why SBIR now? No, you could have been around for 10 years, and you are now developing something, okay? But if your innovation has been around for more than five years, you are going to have a hard time selling that to the government. That doesn’t mean you are out of the loop completely, but just be careful of that as far as the technology itself is concerned – whatever it is you are developing, if you don’t have milestones, if you don’t understand technical risk and mitigation strategies that are not in place, if your product is reliant on a manual process as opposed to some type of automation, there is a problem there.
A lot of the times clients come to us and there is just not a sufficient innovation that they are like, “Well, I’m going to build an app that is not innovative in the eyes of the government. The app needs to happen” Yes, it would be useful but maybe SBIR is not for you. There has got to be a technical challenge or a technical risk behind that. If you haven’t done your background work, done the lit review, and as I mentioned earlier, go to SBIR, see if they have funded other similar or near similar start-ups, you have got to do the literature review and bring the evidence that there is a potentiality that this could work.
A lack of significant deliverables and outcomes is sometimes an issue as well. You are like, “Yes, we are going to just scan your teeth and you are going to have cavities.” Well, that’s not enough. What are the different stages of cavity in degradation? There is a whole bunch of things that have to come into play there and what does that end product look like? The other thing with this is not knowing the market at all. You have not done any customer discovery and the differentiator between what the market wants versus what the market needs. If you can’t tell the difference between that or your end user versus the person signing, the check or the one who has power of purse, being able to differentiate those things, those are important things you are missing.
Probably one of the bigger red flags, if you are desperate for funding, this is not the place. SBIR is not the place for those that are desperate for funding. This is a well thought out and methodical process. The turnaround time on grant awards is not quick. You may have submitted yesterday to NIH’s April 5th deadline. You are not going to know the outcome till maybe September, and you may not be starting until December. That is how the government is. It can be another six months before you know the outcome of your funding opportunity. So, if you’re desperate for funding, SBIR is not the place for you. It just isn’t. It is meant for well thought out investigative research to demonstrate outcomes.
Shubha: This brings up an excellent question. What I heard was that if you look at the eligibility and the requirements, regardless of which agency, there is some, what I’ll call domicile and other hygiene factors of what you need to check the box on before you can even, so that’s bucket one. Then there is bucket two, which I heard around technically, do you fit the bill? Do you bring really something innovative, and you better make sure bring the receipts to show that?
Christine: Yes, exactly. That’s a really good way of saying it. Bring your receipts.
Shubha : So, that’s bucket number two, and then the bucket number three that I heard is the commercial viability and your mastery of the commercial opportunity and being able to link that back to the technical innovation that you want to pursue in.
Christine: Absolutely. So, you have your business bucket one. That is universal across all SBIRs, doesn’t matter which one NIH, NSF, DOD. There are fundamental rules for SBIR for your business. Then there is the technical innovation requirement, and it might be slightly different between DOD, NSF, and what they’re looking for. But they all are going to ask about the market potentiality and the market risk. They’re going to want to know that there is a potentiality for traction there, should you launch this into the market space.
Shubha : So, now I’ve decided that I am going to fit the bill. I’m not fitting the funding. The funding fits me. I want to go ahead. Can you give a high-level walkthrough of what the grant application process looks like and what I need to be prepared for as a founder?
Christine: Okay, so first of all. There is a common theme here. Registrations are the first thing, do those first. Second thing is you need to confirm your eligibility. Nothing like getting halfway through the application process to realize that maybe you formed as a non-profit as opposed to a for-profit. You really need to confirm your eligibility status, and that is just dealing with the business and meeting all of the eligibility criteria for the business, things like your tax ID, SAM, all of those things.
Then there are the instructions for the solicitation. Some of them will be very nuanced about – can you have human subjects involved or can you not have human subjects involved? You have the solicitation instructions; you also have the agency instructions. So, you have to be mindful to be able to dance between those two sets of instructions. In the agency instructions, there will be things like page limitations, font, how they want tables to look. Can you highlight things in red or yellow? Like, how they want all proposals coming in the door?
Then there are the solicitation instructions which go over the questions in the order they want you to answer them. Some advice that we tell our clients is, “Well, this doesn’t flow. This doesn’t make sense. It is not supposed to flow.” Answer the questions in the order they are asking them, and don’t skip a question if you don’t have an answer, you still have to answer. If it doesn’t apply to you, say, “this doesn’t apply to me,” and then move on to the next one. You don’t want to give the reviewers a reason to think you overlooked something or you are not answering a question. You just follow the instructions. Answer all parts of the question. If you have a question statement that is like, “Is it yellow and red?” Don’t just say it is yellow. You’ve got to say it’s also not red.”
There are two-part questions with lots of run-on sentences that you have to address all elements for. There are webinars. So, attend webinars. There may be Q&A sessions, go to them, no question is too small. That is what they are there for. Some agencies have dark periods where once the solicitation is out, you can’t ask any questions from the time the solicitation comes out to the time that it is due. So, you need to be conscientious of that.
If you have questions, get a hold of them. Call them, email them, and no question is too small. my only caveat to that is, “If the question is answerable in the two sets of instructions, the solicitation and the agency instructions, don’t bog down the program officer going, what’s the budget limit?” It is in the solicitation. Don’t ask them that. It may be more nuanced questions like, “Am I allowed to spend money on Twizzlers?” that may not be obvious in the instructions. Ask the program officer, “Can I buy Twizzlers because we want to show teeth damage with sugar.” keep going back to the dental thing because I do have a dental appointment tomorrow, but it is following through with that.
Work backwards from the timeline of when you want to be done and start planning things out, collecting letters of support. If they say you are capped at three letters of support, they are not kidding. They won’t even look at letter number four. That could be the one that could have sealed the deal for you. If they say one page letterhead with a signature, they are not kidding. They want letterhead, they want a signature on that letter. So, read every single piece of detail and nuance about what is allowable, not allowable and what those expectations are. It is an undertaking, no doubt, and that is why I say that it is like going after Series A and in some instances it may be a little bit more complex, but if you just take your time, read through everything, do it the old school method, print it off, grab a highlighter and start highlighting things and have it in front of you that is the best thing to do.
Shubha: So, this gives me a really granular picture of how heavy of a lift it is. Taking a step back, again, I’m a founder, I have to create a strategy for my entire capital stack based on what you are saying, it sounds to me like if I’m going to pursue government funding as a bucket of capital, I’d better prepare for the long haul.
Christine: Yes, it is a marathon, not a sprint.
Shubha: To that point, I had better be prepared for the long haul and had better at least tweak my business model and my go-to-market approach, for lack of a better word, to align with what the government might need and then also have a backup option for funding because it feels definitely a lower probability, 13% or 30% majority of the time, you are still going to get rejected.
Christine : 30%. Yes. You are going to get, so there is an upshot to this. You are going to get rejected. This is just going to happen and that is not the end of the world if you do so. The one thing, as founders know, you are going to get told no a lot. You are going to make mistakes. You are going to screw things up. This comes with it. This is part of the screwing things up.
So, with SBIR, after that deadline, when they get into that decision making window afterwards, you will get comments and scores back from the reviewers. You won’t know who the reviewers are. It’ll be anonymous, but you will get your scores, and a lot of times, most of the time, your reviewers have really constructive things and feedback for you, and you can resubmit your application, make the modifications, adjustments based upon what the reviewers had to say.
Then you go from 13% to 30% likelihood of success. You are going to jump up to 60% likelihood of success because you are resubmitting. You are making the corrections. You are making the adjustments based upon reviewer feedback and if you address everything and score really well, you are in a much better shot. I just had a client yesterday that resubmitted their application. They scored really well, but they were a hair under fundability, and there were just minor adjustments that the reviewers, and they are subject matter experts.
They know that industry, they know mental health really well. They are like, “When you do this, you should account for that. How are you addressing this?” They are like, “Oh, it didn’t occur to us that we had to address for this.” For example, it didn’t occur to them that they would have to think about multiple languages. They are like, “Oh, English!” and I’m like, “Maybe you should consider either simultaneously developing a Spanish language version or have it as Spanish language for phase two, but make sure the reviewers know that that’s in the queue, because to them you are just doing English.” They are like, well, what about Spanish speakers? What about other languages within the United States? How do you address these things in the mental health space? It is just that aha moment.
It causes you to go back and refine things and it is an exercise in business development and your systems and your processes. So, even if you aren’t funded and you ultimately don’t resubmit and you are maybe courting investors or whatever – this really is an exercise of getting your paperwork together and really knowing your product and mapping out your timelines and what you need to do, and understanding what the true budget is to really do something like that. So, when you are talking to investors you can say, “Look, I know this is going to cost me 1.5 million just to do this,” because you have already done the research. You did it for an SBIR application. You already know that space. It makes it much easier to court investors. You have developed that knowledge and expertise. It is useful in other applied areas.
So, just because you aren’t funded, it is not the end of the world. You shouldn’t be desperate for government funding, but it will help you down the road should you pursue other funding. Of course, you can always resubmit an application in the next cohort window if you are willing to play the game for another six months.
Shubha : I just love the point you made around how there are some ancillary benefits as well even if you don’t get the funding, that point is extremely well taken. So, you have seen a lot of applications from startups for government funding. What are the most common reasons – if you had to bucket them for grants getting rejected?
Christine: Not following the instructions! We sometimes are pulled in to review an application – what client wants, can you double check and make sure we dotted our “I” and cross our “T” and we’ll go back to them and be like, “You didn’t answer the questions.” Font, page length, budgetary allotment issues, just following the instructions alone is like the number one thing.
The number two thing is not being a fit for the funding opportunity. What they are proposing doesn’t even remotely align with what the agency wants to do. They are going to build Joe’s Pizza Shack and they are chasing NSF because they think they need a pizza oven. Now, I can’t tell you how many times we have brought in people and there’s no engineering, there’s no scientific knowledge, there’s no scientific methodology involved. They’re just not even there for it. Following the instructions. Alignment. Those are the fundamental things. If you can cross those hurdles, if you can put together a compelling proposal, follow the instructions, have the research methodology in place, you are going to be given deep consideration by the reviewers whether or not you are funded – that is a different story but at least be given deep consideration.
We want our clients funded, but we want them in a position that the reviewers can give them deep consideration and give them good scores. Obviously, we want that, but we also want meaningful feedback that can help them evolve and grow as a startup. So, sometimes the end game isn’t always funding, it is their evolution as a startup is where they need to be.
Shubha : To that point, let’s assume that the registration part is done. But just for the substantive part of the grant application itself, what is a reasonable timeframe? Let’s say they are doing on their own.
Christine: For doing it themselves, I would anticipate probably 250 hours of their time.
Shubha : The founders or the subject matter experts time?
Christine : 250 hours of time. That is not like 40 hours a week, seven days a week. You have to walk away, think about things, set things down, come back, talk to someone, you are waiting for an email, that sort of thing. Minimally 250 hours of your time to do it.
Shubha : Typically, from a calendar perspective, is that like three months to four months?
Christine: Yes, it is about three months’ worth of work. As a startup you are doing other things. You have got lots of irons in the fire just to do. This is about 250 hours of time. It’s going to be about three months’ worth of work, getting everything in place, getting all your methodology, ironing out what you want to do, making sure that you have got letters of support and collaborators and subject matter experts, and that your budget has worked out and what you have proposing is doable and achievable in the time you are proposing.
Shubha : I want to touch briefly on one other source of support from the government, which is non-dilutive. You referred to it earlier in terms of contracts, maybe other tax incentives or things of that nature. Can you give a very high-level overview at the federal level of what those might be and how the founders approach to securing that support would differ.
What are the things that are different and what should they do differently to identify and then procure those opportunities?
Christine : Let’s start with contracts at a really high level. Think of them like grants. It is a similar concept. You are not going to lose your equity. You will have deliverables at the end. So, if we are talking, going back to the dental AI detection for cavities, they may come out with a solicitation that says, we need someone to build an AI model that will detect cavities in teeth. Okay? At the end of that contract, they want you delivering an AI model that can, without a doubt, 100% detect cavities and teeth. That’s what they want. they are your customer at that point. They expect it to work. They have a timeframe. So, a little bit similar to a grant, not exactly the same, but there’s a deliverable at the end.
Now again, grants.gov, great resource. Sam.gov. Have a look in there. It’s a great place to look for contracts. There are all sorts of third-party websites that are out there for that. As far as tax incentives go talk to your accountant. Your accountant should know these things already. Sometimes they don’t and there’s nothing wrong with it. But if they do, they should be making sure that your taxes reflect that you are doing R and D and that you are taking advantage of those tax credits. Now some states have different tax credits and this and that and the other things going on, and then there is a whole slew of different types of tax credits. But yes, take advantage of those. Sometimes it is workforce development credits, or you might be in an opportunity or a hub zone or something to take advantage of in your state.
Shubha: Excellent. So, I’m going to get in our time machine and jump forward. You have gotten whatever support you needed. You have gotten your grant and now you’re happy. You have got to check what the things are that the founder needs to be aware of and maintain to still stay within the borders of what the grant said their obligations are.
Christine : So, remember that you got the grant because you said you were going to do X, Y, Z. Now you actually have to do X, Y, Z. When in doubt, communicate with your program officer or whoever your point of contact is. I always say err on the side of transparency. If you have to swap out an engineer, because people change positions all the time, people leave, come, and go, make sure that their skills and ability and expertise is equal to or better than the person you are swapping out. But talk to your program officer. Let them know that you are doing it. Overshare. Tell them what’s going on. If you said you are going to do something in six months, you have to do it in six months. It is the federal. That is the first thing.
Make sure your accountant knows how to classify those grant dollars within your accounting system in your books, because it doesn’t sit in the same location that you think it does, and your accountant needs to know where that goes and where those dollars are going to. There are also reporting requirements and every agency is different as far as what they are going to look for and the type of reporting that they are going to want back. Again, communicate with your program officer about when those deadlines are, what is expected in those reports, and you can always ask for sample reports if possible.
Maybe there are NDAs that have to be signed so you can see what a completed one looks like. But again, it goes back to following the timeline. If they want something by June 1st, you have to start planning backwards of when to put it in your program officer’s hands so that you don’t get dinged for not completing reports on time not spending the dollars the way that you said you were going to spend dollars in for each of the budget line-item things. If wildly out of line, that could be a felony. I’m not kidding, like misappropriation of federal dollars is a felony. There are all sorts of government regulations for it, so I don’t want to scare anyone, but get an accountant. There is a difference between a bookkeeper and accountant. Get both. Make sure that your books are reconciled and up to date, and you are paying attention to how those grant dollars sit within your system and making sure that you’re utilizing them the right way.
It is up to you as the founder to make sure things are happening the way that you said they were going to happen. If they’re not, you have got to err on the side of transparency and reconcile that right away. So, if you said you are going to develop the AI model for the cavity recognition, guess what? It’s not a time to develop an AI model to work on toenails. No, that’s not what you said you were doing. So have got to do what you said you were going to do. You are entering into agreement with the federal government. No one wants to do that dance with the federal government if you don’t do what you say you want to do.
Shubha: Now clearly we live in a world where Murphy’s Law operates and many times, things go awry. So, it sounds like there is a red zone, which is clearly way off what you said you were going to do and outside the purpose of the grant. Understood. Then there is a green zone, which is exactly what you said you were going to do. Then there’s a yellow zone. So how big is that yellow zone and how do you navigate because things are uncertain> I mean, that is the whole point of R and D?
Christine : Right. So, let’s say you developed some objectives within your proposal, and you are not getting outcomes. There may be something else that has to be addressed. Again, go back to your program officer and talk to them. Again, I always go back to err on the side of transparency with them. Almost like a shadow team member is what they end up turning into. You want to let them know, “Look, we are not getting the outcomes. We’ve done X, Y, Z, and it’s just not working the way we thought. We are not achieving our objectives.”
You are not going to get dinged for not achieving your objectives because you tried. You’ll get dinged for not achieving your objectives if you don’t try. That’s the thing. You have to try. You have to show some good effort and meaningful effort to trying to get to those outcomes. They are going to want to see that meaningful effort and walk them through, “Here is what we did, and it is not working, and we don’t know why. Maybe we are using the wrong AI model and we are going to need a three-month extension,” talk to your program officer. Again, err on the side of caution and just be transparent with them. Things happen, hurricanes happen, tornadoes happen, power outages, floods, they get it. Those are things that are outside of your control, but again, communicate with your program officer.
Shubha : So, when the grant is given, do they say, “Hey, you, have to communicate with us. You have to submit a monthly report.” Almost sounds like they are a shadow board member if you will.
Christine : Kind of. It’s more like, depending on how long your grant award is, it would dictate how often they want reporting. It is typically like every couple of months. So, to probably be like every three to six months. If you get a six-month grant, they are going to want an interim report. They want some things in the interim. Of course, there is a wrap up report at the end but in a way, it is almost like a shadow board member. It was called like a shadow C-suite individual. They are not going to be involved day-to-day operations, but when it comes to the grant, talk to them.
When you get awarded that grant, you are going to be talking to them. They are going to say, “Hey, my name is Bob. This is what I do.” You just loop them in. Sometimes program officers will tell you how much they want to know or don’t know. They will say, “Look, only call me if someone is burning, bleeding, or on fire, or someone died,” and then you get other program officers, they are like, “Every time you blink, I want to talk to you.” So, it just depends on their capacity, what they want to see. But I always say, when in doubt, just err on the side of transparency and communicate with them.
Shubha : So, if I get a program manager who is the Bob, who only wants to be told if somebody is on fire, is it still okay? Or will I annoy them by just sending a non-intrusive monthly update?
Christine : Do it. Just do it. Then you have that record of communication to protect yourself as a small business because the last thing you ever want is, “Well, no one ever told me there was a problem!” You need to have that paper trail to protect yourself.
Shubha : Okay, so let’s say you come to the end of your three months or six months and your grant period is over. You did or didn’t achieve your outcome, but you did this job that you said you were going to do. So, you discharge your obligation to try it. Is there a closure? Does it come to an end? Then, what are your obligations? Let us say it develops some IP as a result of that. What are your obligations with regard to the grant? Then after that, if you can talk about what are your obligations with regard to any IP that you developed are, that would be fantastic.
Christine : Well, in theory, your IP was developed before you submitted the application. You own the IP. You are not giving that up to the government. The government doesn’t want your IP. They don’t want anything to do with it. I’ll say with that with the caveat that there is rare instance where they will be like, we’d be interested in buying that from you. So, it depends. It’s very rare it happens. Think DOD in that realm. So, the IP should be locked down on your end prior to grant applications. This is, submitting your patents, making sure that you have gone through that process.
As far as the grant obligation goes itself, when your six months is up, and you submit your final report then that’s it. You are done. You might be eligible talking to your program officer, they may encourage you to go on for a phase two. They may say, look it, you weren’t successful. We would encourage you to reapply on another phase one because you have got to do X, Y, Z in order to get to those outcomes. They may say that to you, but you are under no obligation to go for a phase two. You are under no obligation to go for an additional phase one. You may decide that is not worth chasing or you are going to market anyway, and you don’t need the government. That is fine too. But when you’re done, you’re done. That’s it.
Shubha : Got it. So, this may or may not be a feasible question, but have you ever seen instances, or can you think of circumstances where I might apply for more than one source of funding within that same time window? Let’s say I’m developing something that could be eligible for a Department of Energy and a Department of Transportation.
Christine: Sure. You absolutely can. There are a couple of different approach processes there. You certainly can apply to as many agencies that fit what you are trying to do. Now, I use the analogy of building a car. You can only accept one grant award for building the car. You cannot have multiple grant awards for the car. Now, if you break it down into smaller bite size chunks, maybe you are working on a steering wheel or a seatbelt or the battery or whatever, you can have multiple different grants doing multiple different things, getting you where you need to go, multiple agencies. But you can only take one steering wheel. So, there’s that.
Some agencies will let you have multiple applications in, some will not. So, you have to be careful of that. Again, it goes back to reading the instructions. Are you allowed to have multiple applications in NSF? They will only let you submit one active pitch at a time. NIH, you can have as many as you want. Hammer down. You can do phase one, you can skip right to phase two. You can do a fast track, which is a phase one and a phase two at the same time. They will let you go nuts. Hammer down. They welcome it. NSP, nope. One at a time. You need to know your agency and what they want to see. Some are very clear what they want. Some are like, “Wide open. Hammer down.”
Shubha: So, now clearly all the talk with VC funds drying up and the Inflation Reduction Act is all around funding from the government. Can you talk about what trends you are seeing from the startup side in terms of where the dollars are, what the startups are doing? That would be useful to founders.
Christine: So, what we are seeing is that everyone is taking in just a big deep breath right now. Do I need to be going for VC? Do I need to be going for angel investors? Is there a way to push this to market without that investment? Maybe I’m going to scale a little bit slower than I would if I had chased angel investors or Series A or whatever. But we are also seeing people pay attention to funding opportunities to the federal government. It’s making this space a little bit more competitive when it comes to grants. We’re also seeing an uptick in pitch competitions and accelerators where there is an inequity tied to it which is fine.
That is great. However, you can get those C dollars in the door, and you are still aiming for a specific launch date, or you have already launched, or you have some revenue coming in. Those are all good things. But we are seeing a little bit of a, deep breath right now and everyone is like, “Okay, I need to reassess what I’m doing. Should I even be chasing VC?” Our clients are talking to us, and they are saying that there is the typical due diligence, but now there is a deeper dive into how stable is that VC? Where are they doing their banking? Just being a little bit more cognizant of that. It is nice to see that there is plenty of federal dollars to go around. It is just a matter of do they fit what you are trying to do.
Shubha: Has any of that funding strategy changed on the startups? I mean, are you seeing a huge stampede at the gates of these grants?
Christine: Not really. I guess we won’t really know until some of the funding deadlines pass. When the agencies release how many applications they received. Every time there is a cohort round they say, “Hey, we received X number of applications and we’ve funded this many.” So, we really won’t know those outcomes on, was there a giant onslaught of applications coming in the door? Probably for another six months or so, because it takes the government a really long time to disclose that information. They ultimately do, but it’ll take some time.
Shubha : Got it. Then the specific focus and the sweet spot, or I guess a soft spot for this podcast is for women and diverse women entrepreneurs, do you have any words of counsel in terms of how they can tweak their sourcing strategy for non-dilutive grants?
Christine : This is something that we pay a lot of attention to for underrepresented populations. The first thing I would encourage you to do is get certified as an underrepresented founder. You can do that through the SBA. There is a self-certification process as a women owned business or a minority owned business, or an economically disadvantaged or a veteran owned one. Do the self-certification, get it done. It’s not mandatory for any funding, it you know, it’s a little badge you can have on your company website that we’re certified women-owned business, and it might help investors pay attention to you a little bit more.
Then I would encourage you to do your certification at your state level. Some states are easier than others. Again, that application process can a little arduous and time consuming. I know for myself, no knock-on New York state, but definitely was an exercise in making sure I had all my documents together, and it is a learning process for you as a business owner. You need to know where these documents are and where you storm and do you have these things and getting all your paperwork together. It is not a quick certification process at the state level. It does take time because they really do check you out and make sure that you are who you say you are.
As far as specific funding for underrepresented populations go, the dollars are out there. They are not as plentiful as they are at the federal level. You will see grants that could range anywhere from $5,000, $50,000, maybe $75,000 or $100,000, but you are not going to see a million-dollar grant for a woman owned business. It is very tiny. Whereas, the federal government could be, $275 to a well over a million depending on what is going on. The thing to be aware of is when you do your federal application, if you are doing an SBIR, there is an option to check a box, whether you are women owned, minority owned, but there are no competitive preference points if you select that box.
There is an argument to be made about not even disclosing that you are a woman owned business at the federal level, this is kind of like the dark side, or the downside of this is that reviewers are still humans, and they have perceptions about business owners. For whatever reason, they see your name, they see that you are a woman, they will ask you the same questions that a VC would be asking you. They may not have the mechanism to ask the question, but they may judge you or score you differently because you are a woman owned business. Maybe your product is women centric. That is another thing like thumb tech can maybe not be receptive to reviewers for whatever reason. Maybe because they are men, they don’t understand the applied commercial use for that.
So, there is that to deal with as well. But I always recommend – do your certifications. There is not really a competitive advantage other than just checking the box at the federal level, so that they can say how many women receive funding in minorities and economically disadvantaged and veteran owned. I wish there was a specific, competitive preference points for underrepresented populations, but there really isn’t.
It is something that I continuously am talking about on a regular basis, just even how the data is collected. I have some arguments with some agencies on Twitter about how they handle their data. I wish it was a cut and dry answer. Like I said, the women and minority and underrepresented grants tend to be smaller. They are out there; they are just as competitive as the federal level. They are not as paperwork heavy, but they are quite competitive.
Shubha : Would you say that the same holds for contracts?
Christine : Well, with contracts it is a little bit different. There are set asides, so I believe New York State, for example, they aim to have about 30%, or 15% of the contracts go to underrepresented populations. If you have your certifications in place, that will make that process a little bit easier. At the federal level, same thing. There is a certain percentile that they set aside to go to underrepresented populations. Again, your certifications are going to play a role in that, in the contract space. I wish it was a little bit easier to talk about, but that is about it. That is all there is to that one.
Shubha : Fantastic. This has been a supremely comprehensive educational and informative conversation, so thank you for really diving into the details. Just to conclude, what would you say are the top five dos and don’ts for a woman founder who is looking at government funding as a potential source of capital?
Christine : Persistence. It is the first thing; you have to be willing to come to the table many times over and over again. You are going to get rejected and just own the rejection, learn from it. Evolve from it, reapply. It is a marathon. It is not a sprint, it is not quick turnaround by any means.
The US government is very slow moving with that regard. So, those are the big things. Follow the instructions, make sure the funding opportunity fits what you want to do. Then probably the last thing is if you don’t have capacity, get help. Get consultants that can help. That can help you do an application; we can take some things off of your flight.
I dive into this a little bit, there is a perception out there among grant professionals, “Well, I’ll just have them write the grant. Well, I’m not a subject matter expert machine learning.” The funders are going to expect that you are the expert in machine learning. I can make sure that you know all your bullet points, and everything is filled out and you have really good grammar and all your budgets, in alignment. I can find logic leaps on what you are proposing to do and that sort of thing. But I’m not going to be able to write your algorithm formula for you. You should be doing that. My job is to prepare your proposal and as far as what the R&D is going to be, that’s on you.
Then the other piece of advice that I have is that when you hire a professional, whether it is a commercialization professional, whether it is a grant professional, there is fee for service. You can’t do contingency funding pay if the grant award gets funded. You can’t do that. That is not an allowable expense. You can’t use the grant dollars to pay for services rendered prior to the grant award. I go back to that conversation about misappropriation of funds and doing that dance with the IRS. No one wants to do that. So, be cognizant of that. Not every professional has subject matter expertise in non-dilutive funding, working with startups. Some focus on grassroots organizations. We work in the non-dilutive space. We work with startups all day long.
Shubha : Great. This has been superb. I think you summed it up really well. Is there anything I should have asked you but didn’t?
Christine: I don’t think so. I think the big thing is, we talked about certifications, we talked about timelines, time management, how much of a lift is it really going to be and there are advantages and disadvantages to go into funding. I’m hard pressed to think off the top of my head if there was something that we didn’t talk about, but I’m always happy to field questions. If anyone has got questions or they need time, they have some questions about funding opportunities, I’m happy to have those conversations.
Shubha : Excellent. Thank you, Christine. This has been a really amazing conversation. You have been very generous with your time, insights, and expertise. Thank you so much. It’s been great.
Christine : Thank you. Thank you for having me.