Editors note: This is the third article in a three-part series on starting small businesses.

In Part 1 and Part 2 of this series, I discussed ways your Small Business Development Center can help you with counseling and training. This last part talks about ways that some SBDCs can help you with funding that does not involve borrowing money.

SBDCS and equity funding

If your business needs equity funding, the counselor typically can give you an introduction into the equity funding process, and may have contacts with local angel capital networks or state economic development funds to which you may apply.

Raising equity capital can be a difficult task, and you will need to consider a number of critical issues that may affect your decision to seek this kind of investment. Most SBDCs will have a counselor available who can discuss this with you, and provide you access to resources; if not, they will be able to send you to someone who can help. Many SBDC state or regional offices have specialty centers that can provide expertise that may not be available at the local level.

Technology commercialization and research funding

Many of the SBDCs either have the special Technology Development Center designation, or otherwise have the capability to help small businesses take advantage of the availability of federal government research funds under the Small Business Incentive Research (SBIR) or Small Technology Transfer Research (STTR) programs. These are mandated programs under which federal government agencies that have extramural research budgets of more than a certain amount must set aside a percentage of their budgets for contracts to be awarded to small businesses. Right now this total amounts to more than $2.8 billion per year.
These awards are contracts for service, not equity investments; the recipients retain sole ownership of their businesses and their technology. They are awarded as a result of a competitive evaluation process, in three phases:

• Phase I – Concept Feasibility: These awards are for up to $150,000, and require a six-month effort. The small business must perform at least two-thirds of the research in-house, rather than contracting it out.

• Phase II – Primary Research and Development: Thee awards — made only after successful completion of Phase I — are for up to $1 million, and require a two-year effort. The small business must perform at least one half of the research in-house.

• Phase III – Commercialization: Awards are made only after successful completion of Phase II. Money comes from private funds or non-SBIR federal funding.

STTRs

STTR grants are modeled after SBIRs. The grants are awarded to small businesses in collaboration with universities or research institutes. The small business must perform at least 40 percent of the research, and the university or research institute at least 30 percent. Funding comes from federal agencies with more than $1 billion in extramural research funding, and the agencies set aside 0.3 percent of their research budgets for this program. The phases, durations, and research budgets are similar to SBIR grants.

Application and Evaluation

Application is by responding to solicitations from specific agencies, which you can search at http://www.zyn.com/. The evaluation is competitive and depends on criteria that include technical merit, qualifications of the principal investigator and key personnel, and potential for commercialization

Your SBDC will have, or know how to find, a specialist who can help you with the application writing process, and guide you through the steps you must complete if you are awarded.

Many businesses do not succeed on the first application, but many that have persevered have gotten their start through this funding and gone forward to significant success.

Other Technology Commercialization Help

SBDCs have counselors with broad and deep knowledge and experience, who can help you ask the right questions and get the answers you need.

SBDC counselors also can act on your behalf to get market, demographic, and other relevant information on your industry from the national SBDC Network at http://www.sbdcnet.org/. While the network cannot offer services directly to the general public, your SBDC counselor can submit research requests for you and get information from public and proprietary information sources that is compiled under the direction of a professional librarian.

You can find your local SBDC and learn more about the SBDC network by clicking on your state in the map at http://www.asbdc-us.org/. Once you have done that, free help to start or grow your business is just a phone call away.

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