September 2020

The topic for our conversation today is cost – a real (but hidden) cost of SBIR funding. No, not the “allowable costs”, nor “indirect costs” – those are very important, but today I’d like to talk about what it actually costs you to go after SBIR or STTR funding. Some of you will ask, “What cost? The whole point of SBIR funding is that it is non-dilutive, aka free!” Yet the hidden cost of SBIR funding is very real and should be factored in your decision whether to apply for it. And that cost is not necessarily in out-of-pocket $$ (unless you choose to hire a grant writer), but in time, effort, and potential opportunity cost as you may be distracting yourself and your team from working on things that are critical for your business right now.

First, putting together a winning SBIR proposal is a ton of work. Typical amount of time spent on writing a good proposal could be in the range of 100-150 hours or more, and would likely have more than one person involved.

But more importantly, the biggest potential cost to your business is that in order to fit the solicitation, you may deviate from the path to the market for your primary product or technology! Yes, when your fledgling startup’s bank account is running dry, it could be very tempting to jump on an opportunity to get a non-dilutive grant or contract. So what if you’d have to sidestep what you were set to do to bring your product to the market and instead work on another R&D project your team has an expertise and capabilities for? And if you squint really hard and tilt your head just the right amount, maybe there is even a connection between your target product and what you’d be working on.

That thinking is not uncommon, but potentially quite detrimental to long-term goals of your company. Delays in getting your product to the market could prove to be very costly for the ultimate long-term value your company is striving to create. You need to be laser-focused in executing the steps predicated by your business model (naturally, adjusting as needed as your continuous customer discovery informs you). Taking on research projects that are not on a direct path to the market could distract you and your team and jeopardize your ultimate success.

To summarize, SBIR funding is a terrific way of underwriting your business, but you need to be very precise in identifying and following only those opportunities that are fully aligned with your company’s path to the market.

So that’s it for today – please stay safe and healthy, and reach out to us via [email protected] or take our short questionnaire to let us know how we could help you think strategically about aligning various SBIR/STTR and other non-dilutive funding opportunities with YOUR unique path to commercialize your technology or product faster, so that your innovation could make a difference in people’s health and lives sooner.

SBIR_Corner

Eugene Krentsel
Chief Scientific Officer, XLerateHealth, LLC