Funding Support

Aug 24, 2012

by Dan Ferber Senior Editor, Mechanical Engineering Magazine

Money Tree

If you haven't looked into it before, you may be surprised at the number of government agencies that make grants to entrepreneurs, or otherwise collaborate with businesses, in projects judged to be in the public interest. Funds are available at both the federal and state levels; as you'll see below, the emphasis is on innovation and technology.

Federal

Advanced Research Projects Agency - Energy (ARPA-E). ARPA-E's mission is to improve energy efficiency across all sectors of the U.S. economy, and to ensure the U.S. maintains leadership in advanced energy technologies.

Defense Advanced Research Projects Agency (DARPA). DARPA's mission is to maintain the U.S. military's technological superiority through research by businesses (large and small), universities, nonprofits, government laboratories and other research organizations.

Department of Energy (DOE) Technology Commercialization Portal. The U.S. Department of Energy (DOE) has more than 200 marketing summaries on its Technology Commercialization Portal to help investors, entrepreneurs and companies that seek cutting-edge energy efficiency and renewable energy technologies available for licensing.

The Technology Commercialization Portal is an online tool that identifies opportunities to invest in the work of DOE laboratories and participating research institutions. The tool also helps speed moving laboratory discoveries into the private sector.

Federal Laboratory Consortium (FLC) Locator. For industry and other technology seekers, the FLC Locator Network is a point of entry to federal laboratory expertise and technology. Through its network of representatives, the FLC matches potential partners with federal laboratories working in specific areas of interest. Once the FLC identifies contacts, arrangements for technical exchanges are between users and the labs.

GRANTS.GOV Portal. Grants.gov is a central U.S. government information storehouse that currently holds more than 1,000 grant programs and provides access to about $500 billion in annual awards.

National Institute of Standards and Technology - Technology Innovation Program (TIP). TIP supports and accelerates innovation in the U.S. through high-risk, high-reward research in areas of critical national need.

National Innovation Marketplace (NIM). NIM is a service of the Manufacturing Extension Partnership (MEP), a national network with hundreds of specialists who understand the needs of small and medium-size manufacturers.

The partnership has worked with thousands of manufacturers. They helped save $1.44 billion in annual costs and create $10.5 billion in increased or retained sales in their first year of operation.

National Science Foundation (NSF). Created by Congress in 1950, the NSF is the only federal agency whose mission includes supporting fundamental science and engineering. The agency also supports high-risk, high-payoff ideas, novel collaborations and numerous like projects. Educators, researchers, and small businesses may find funding here.

Small Business Innovation Research Program. This program provides essential seed funding for technology-based small businesses to complete vital but costly product development.

Phase I of the program establishes a project's technical merit and potential for commercialization. Phase II awards larger grants for continued product development, contingent on achievements in Phase I.

U.S. Small Business Administration (SBA). The SBA's mission is to fund, counsel and protect the interests of small businesses.

U.S. Department of Agriculture (USDA). The USDA's rural development initiative primarily supports loans for improving economies and quality of life in rural America. Funding opportunities exist for rural individuals and small businesses. Typically, rural is defined as an area other than city or town with a population of 50,000 plus and not located directly adjacent to a city or town of this size.

State

State governments often step up to help sustain the state's business environment. Over the last decade, state economic development strategies have shifted from focusing solely on attracting new businesses into the state to fostering home-grown businesses through innovation and entrepreneurship.

A state government will frequently look to collaborate with the state's most competitive and innovative assets: universities, private and federal research and development laboratories and concentrations of specialized workers.

Seed capital funding.

Seed capital often resembles early venture capital. The state takes equity or debt positions in high-tech companies to help grow and retain them in the state. Two examples:

  • Oklahoma Seed Capital Fund (OSCF), a $7.025 million venture capital fund, provides seed and startup equity financing to small, technology-based Oklahoma companies. OSCF operates like a conventional venture fund, boosting state economic activity by bridging the early-stage funding gap between personal and traditional sources of venture capital.
  • Vermont Center for Emerging Technologies (VCET) makes convertible debt investments in early-stage companies and equity investments in later-stage companies. Any Vermont-based startup, emerging growth firm, or team seeking to relocate or expand into Vermont is eligible for consideration. The company must be a high-tech, high- growth concept with up to $3 million in revenue.

Proof-of-concept funding.

Proof-of-concept funding helps establish the feasibility of new commercial technologies. In general, selected technologies are refined at local institutions with an eye toward an ultimate transfer to business settings.

The Edison Innovation R&D Fund New Jersey (EIRDFNJ) is one example. In partnership with a New Jersey research university, company or institution, Edison provides funding to in-state technology companies for proof-of-concept R&D needed to commercialize technologies. Awards range from $100,000 to $500,000.

Edison Innovation R&D funding promotes collaboration between universities and the private sector, increases the amount and value of intellectual property, provides early-stage financing and commercialization support and helps grow technology businesses in New Jersey.

Accelerator funding.

The accelerator concept creates supportive environments for young companies. Best results are often achieved with mission-oriented support around similar emerging technologies or market applications.

For example, the Eastern Kentucky University (EKU) Business and Technology Accelerator Program (BTAP) is a university-based economic development enterprise that focuses EKU's energy, skills and intellectual capital on enterprise creation and expansion.

Specializing in small business services, entrepreneurship, technology and high-tech ventures, BTAP offers programs and resources to enhance the regional economy through new business formation.

Funds of funds.

Funds of funds use state funding to invest with private investment firms that in turn provide leveraged capital for private investment in selected areas.

A case in point is the Utah Fund of Funds (UFF), a $300 million economic development program that gives Utah entrepreneurs access to alternative or nontraditional capital. The UFF invests in venture capital and private equity funds that commit to investing in qualifying companies and to working with the UFF and the state's startup and business communities.

Economic gardening funding.

Economic gardening grows existing second-stage businesses. It's an innovative, entrepreneur-centered strategy that helps balance the traditional practice of business recruitment – often referred to as economic hunting.

GrowFL, for example, provides high-end, high-speed technical business tools to companies that have grown beyond startup. Typically, these companies need information and decision-making resources: database research, search engine optimization, geographic information systems, network mapping, social media, strategic analysis, management-team assessment, capital or labor referrals.

University seed funding.

Some universities advance technologies and spinoff companies through early-stage seed funding.

At Indiana University, the Innovate Indiana Fund (IIF) invests in technologies developed at IU and helps bring them to market. The IIF will help translate technologies into innovative commercial products, services and treatments, and set up new technology-based companies to further develop them.

Venture associations.

Local venture and business associations can bring together the financial players needed to grow new businesses. One such association is the Connecticut Venture Group (CVG), which encourages investment in high-growth companies through technology-focused seminars and expositions, updates on financing and market trends and an annual Venture Show.

Other state-based resources include:

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