There is a government funding program through the SBA called SBIR. The “IR” stands for Innovative Research. The SB is supposed to stand for Small Business, which the SBA has traditionally defined as 500 employees. Now for many of us, defining a company with that many employees as a small business is a stretch.
These grants were set up to help small businesses that were engaged in cutting edge research. And they are grants — this is not a loan or an investment. Once the money is granted it never gets repaid.
From the SBA website:
SBIR is a highly competitive program that encourages small business to explore their technological potential and provides the incentive to profit from its commercialization. By including qualified small businesses in the nation’s R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs.
SBIR targets the entrepreneurial sector because that is where most innovation and innovators thrive. However, the risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. By reserving a specific percentage of federal R&D funds for small business, SBIR protects the small business and enables it to compete on the same level as larger businesses. SBIR funds the critical startup and development stages and it encourages the commercialization of the technology, product, or service, which, in turn, stimulates the U.S. economy.
If the Senate Committee that oversees the SBA has its way, these monies will now be available to much larger “small businesses.” In fact, businesses with up to 1500 employees will now become defined as “small” for the purposes of SBIR grants.
This grant program was set up to help make innovation in small business more feasible and to help small firms be more competitive with larger technology firms that have access to large pools of their own and VC monies. While I fear that this is one more step toward socialized entrepreneurship in this country, it is a program that at one level I can see might have some merit. But given where this is now headed, truly small companies will likely have an even more difficult time competing for these grants.
That is why socialized entrepreneurship never works. Politics and greed will take over even the most well intentioned government program.
Do you know of any statistics for what kinds of companies receive these grants? I’ve looked into getting some similar grants – and the requirements seemed quite honerous. I even went to some professors at the university I attended and they told me that the entire thing was quite challenging to get beyond small sums of money. In fact, they said that you “pretty much need to be certain that you can get there – this is not a way to fund exploritory research.” Additionally, after reviewing quite a few grant proposals – it seemed that having a very well published name was almost a requirement for getting the grant. All factors for which a bigger company has an edge.