Succeeding at Securing Non-dilutive SBIR/STTR Funding for University Spinoffs and Advanced...
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www.InteliSpark.com Succeeding at Securing Non-dilutive SBIR/STTR Funding for University Spinoffs and Advanced Technology Startups Kirk J. Macolini President InteliSpark, LLC www.InteliSpark.com [email protected] (607) 277-1570
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www.InteliSpark.com
Succeeding at Securing Non-dilutive SBIR/STTR Funding for University Spinoffs and Advanced Technology Startups
Kirk J. MacoliniPresident
InteliSpark, [email protected]
(607) 277-1570
www.InteliSpark.com
SBIR Experience• Founded Centurion Technology in 2002 (transitioning to InteliSpark in
2016) to help small businesses compete effectively for SBIR/STTR proposals
• Since 2010 alone, 200+ proposals selected for award (primarily SBIR/STTR) worth over $75 million
• National average: Phase I - ~15%; Phase II - ~40%• InteliSpark + Centurion Technology : Phase I – 30+%; Phase II - 60+%• Project Fee + Incentive Fee Business Model: Client R0I > 30:1• 82.7% of clients awarded funding still in biz, 7.7% acquired, 9.6% out of
biz
www.InteliSpark.com
Representative Funded Companies
LIONANO
www.InteliSpark.com
Many with University Roots
LIONANO
www.InteliSpark.com
FEDERAL FUNDING OVERVIEW
www.InteliSpark.com
Why are you interested in SBIR funding?
You are hereVenture capitalists
invested $29.4 billion in 3,995 deals in 2013
U.S. Federal Government spent $133.5 billion on Research in 2013
…AND YOU HAVE WARTS!• Too risky• Too early• Unproven Team• Unproven Market• Unproven Technology• Limited or no resources• Etc, etc, etc
www.InteliSpark.com
Technology Development Inefficiency
Technology Choke Point
Cornell currently has 1,000+ inventions
available for licensing
Amp’d Mobile: $360 million raised, ended in bankruptcy.Procket: $272 million, sold for $89 million.Webvan: Ate through $800 million in venture capital, ended with $830 million in losses.Caspian Networks: >$300 million in funding, closed doors.Pets.com: Raised $50 million did sock-puppet ads, then crashed.Optiva: $41.5 million, crashed.Kozmo.com: $250 million, liquidated.CueCat: $185 million from investors like The Coca-Cola Co. and General Electric Co., bombed.DeNovis Inc.: $125 million, closed.AllAdvantage: $135 million in venture capital down the drain.FastForward: $54 million into the company, bankrupt.Flooz.com: $50 million, went broke.Boo.com: $120 million, went bust.
University of Rochester has
~300 inventions available for
licensing
www.InteliSpark.com
How to survive the valley of death?
www.InteliSpark.com
SBIR/STTR Funding to Survive the Valley of Death
SBIR/STTRFUNDING
In 2010, the SBIR and STTR programs collectively provided 7,104 awards, compared with just 396 seed-stage deals made by venture capitalists
Venture capitalists invested $29.4 billion in 3,995 deals in 2013
U.S. Federal Government spent $133.5 billion on Research in 2013
www.InteliSpark.com
SBIR/STTR Program Overview• ~$2.5 Billion in SBIR/STTR funding in FY 2016• SMALL BUSINESS INNOVATION DEVELOPMENT ACT OF 1982
– P.L. 112-81 (extended program through F. Y. 2017)• SMALL BUSINESS INNOVATION RESEARCH (SBIR) PROGRAM
– Set-aside program for small business concerns to engage in Federal R&D -- with potential for commercialization.
– FY 2016 3.0% of extramural funding, FY 2017 3.2%, FY 2018: TBD• SMALL BUSINESS TECHNOLOGY TRANSFER (STTR) PROGRAM
– Set-aside program to facilitate cooperative R&D between small businesses and research institutions -- with potential for commercialization.
– FY 2016 & 2017 0.45% of extramural funding: FY 2018: TBD
www.InteliSpark.com
General Eligibility
• Organized for- profit U.S. business • At least 51% owned by U.S. individuals or small businesses
and independently operated (NIH, CDC, ARPA-E (DoE) are exceptions- can be 51% owned by multiple VC firms)
• Small Business located in the U.S. • P.I.’s primary employment with small business during project
(NIH allows STTR PI to come from University) • 500 or fewer employees (including affiliates)• All SBIR-funded work must be done in the U.S.
www.InteliSpark.com
SBIR vs. STTR
• SBIR: Permits allows research partners (non-profit or for profit) – no more than 33% during Phase I – no more than 50% during Phase II
• STTR: Requires non-profit research institution partner (e.g., universities)– A minimum of 40% for small business– A minimum of 30% for research institution– Remained 30% can go to either partner or 3rd parties
www.InteliSpark.com
SBIR and STTR by Agency• DoD SBIR/STTR• HHS (NIH, CDC, FDA) SBIR/STTR• NSF SBIR/STTR• NASA SBIR/STTR• DOE SBIR/STTR• DHS SBIR• USDA SBIR• DOC (NIST, NOAA) SBIR• EPA SBIR• DOT SBIR• ED SBIR
www.InteliSpark.com
SBIR/STTR Phases• Phase I (Crawl)
– Feasibility Study– ≤ $150,000 and ~6 months (SBIR) or ~12 months (STTR)
• Phase II (Walk)– Full R&D– ≤ $1,000,000 and ~24 months
• Phase III (Run) – Continued R&D/Commercialization– Non-SBIR funded
www.InteliSpark.com
ISSUE 1: USING SBIR/STTR PROGRAMS PROPERLY (…OR YOU ARE NOT A FROG PRINCE)
www.InteliSpark.com
You are a toad with warts, not a frog prince
• Remove risk• Advance technology• Develop applications for
technology • 3rd party validation
+ ≠
• Too risky• Too early• Unproven Team• Unproven Market• Unproven Technology• Limited or no resources
+ =AMERICA’SWART
REMOVALLOTION
FOR START-UPS • Investors
• Partners• Customers• Future Employees
SBIR/STTR can help you remove enough warts so Investors, Partners, & Customers will Shake your hand!
www.InteliSpark.com
Famous SBIR Companies
None received more than $9 million in SBIR/STTR fundingTotal combined funding less than $20 million
Market Cap: $100B Market Cap: $15.64B
Market Cap: $25.44B Market Cap: $1.5B
www.InteliSpark.com
Infamous SBIR CompaniesPhysical Optics Corporation [1,219
Phase I, 451 Phase II, $433M]Physical Sciences [821 Phase I, 341
Phase II, $320M]Creare [674 Phase I, 353 Phase II,
$302M] *(353/644 (55%) N.H. Phase IIs)
Intelligent Automation [624 Phase I, 225 Phase II, $225M]
Radiation Monitoring Devices [495 Phase I, 247 Phase II, $230M]
???
1-1055%11-24
17%
25-9919%
100+9%
45% of Phase IIs go to firms >10 Phase II awards
1-10 11-24 25-99 100+
Physical Optics Corporation Awards by Year
www.InteliSpark.com
ISSUE 2: UNDERSTANDING FEDERAL AGENCIES
Understanding federal agencies will help you exploit discontinuities in the funding probabilities
www.InteliSpark.com
Every Agency is Unique
• R&D Topic Areas• Dollar Amount of Award (Phase I and II)• Receipt Dates / Number and Timing of Solicitations• Proposal Review Process• Proposal Success Rates• Type of Award (Contract or Grant)
www.InteliSpark.com
Go Fishing Where the Fish Are
$206.1 M$1.070 B $176M$180.1 M$797 M
$17.7 M$20.3M
$7.9 M $4.2 M
$8.4 M
DoD - Army
DoD - Navy
DoD - Air Force
DoD - DARPA
DoD - MDA
HHS - NIH
NSF
NASA
DoE
0 500000 100000015000002000000250000030000003500000400000045000005000000
Phase I P1 option Phase II P2 + Matching
7.5 M
www.InteliSpark.com
Avoid the Crowded Fishing Holes
DoD Operation Medicine BAA
$100 Million for ~100 projects
NIH Challenge Grants
$200 Million for 200 projects
www.InteliSpark.com
Case Study: The Crowded Fishing Hole
DoD Operation Medicine BAA $100
Million
NIH Challenge Grants
$200 Million for 200 projects
24,000+ applications for
~200 awards= >1% probability
~800 applications for ~100 awards
= 12.5% probability
www.InteliSpark.com
Narrow vs. Open TopicsNARROW TOPICS OPEN TOPICS
www.InteliSpark.com
Importance of CommercializationMINIMAL VERY
www.InteliSpark.com
Agency Selection • Seems obvious – but it’s not• Lot’s of overlap in projects funded by various agencies• Each agency takes a different perspective
– EX: DoD, NASA are trying to solve problems– EX: NIH, DoE are trying to promote research in general– EX: NSF is trying to promote research AND stimulate successful
commercialization• This leads to varying levels of acceptance by different agency• Where to apply can be extra challenging when considering
multiple granting agencies
www.InteliSpark.com
CASE STUDIES: NIH vs. NSF
proposalREJECTEDproposal
REJECTED
proposalREJECTEDproposal
REJECTED
proposalREJECTEDproposal
REJECTED
Anti-Microbial Polymer forCatheters
Catheter Ablation Device for Atrial Fibrillation
Reporter molecule for DNA screening
www.InteliSpark.com
CASE STUDIES: NIH vs. NSF
proposal
Anti-Microbial Polymer forCatheters
Catheter Ablation Device for Atrial Fibrillation
Reporter Molecule for DNA Screening
Award
Award
Award
proposal
proposal
www.InteliSpark.com
CASE STUDIES: NIH vs. NSF• On the surface all proposals were ideal for NIH• NIH has a far larger budget compared to NSF• So why were proposals soundly rejected by NIH, but funded
by NSF?– Projects were all development projects (NIH tends to be more
clinical/evaluation focused, NSF tends to be more engineering focused)
– Strong commercial stories are important at NSF, NIH barely cares• Take away message – do your homework!
– Talk to program managers– Study previous awards abstracts to see what the agency funds– Look at websites of previous winners
www.InteliSpark.com
NCI
NIAID
NHLBINIGMSNIDDKNINDS
NIMH
NICHD
NIA
NIDA
NEI
NCATSNIEHS
NIAMS
NHGRI
NIAAANIDCD
NIDCR NIBIB NIMHD ORIP NINR NCCAMNLM
Navigating NIH SBIR/STTR Budget Allocations
www.InteliSpark.com
Go Fishing Where the Fish Are…(unless the fishing hole is crowded)• Each sub-agency has own funding policy• Some publish paylines (10-90, 10 is best score)• You can request assignment to a sub-agency (otherwise NIH
will choose)• Choosing the right sub agency can be the difference between
success and failureAgency SBIR STTR Budget
NIAID 29 32 2nd Largest
NHLBI 29/19 10-40 3rd Largest
NICHD 32 25/27 8th Largest
NIA 42 44 9th Largest
NIAMS 27 26 14th Largest
NIBIB 24 ??? 19th Largest
www.InteliSpark.com
NIH Phase I SBIRs 2015
NINR (0
/62)
NIBIB (10/1
97)
NHLBI (4
7/416)
NICHD (24/2
07)
NCI (69/5
52)
NIAID (61/4
41)
NIEHS (10/7
1)
NIAMS (18/1
20)
NINDS (2
9/176)
NIDA (9/5
3)
NIDDK (49/2
73)
NLM (4
/22)
NIAAA (4/2
1)
NIGMS (
55/287)
NHGRI (7/3
6)
NIMH (1
5/74)
NIA (22/1
05)
NIMHD (1
0/46)
NEI (18/8
0)
NCCIH (7/3
0)
NIDCR (15/6
3)
NIDCD (6/2
3)
NCATS (1
2/36)
†OD ORIP-SEP
A (13/3
5)
NIEHS/Superfu
nd (7/1
1)0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
24
42
NIH Overall 521/3,426 = 15.2%
2929
3227
Interesting facts:• NCI makes the most use (~20%) of contract SBIRs• NIDA is 6X larger than NINR but got fewer applications• NIGMS is 8X larger than NIBIB but got only 40% more applications• NIA and NIGMS are great alternative locations for many technologies
www.InteliSpark.com
NIH Phase I SBIR vs STTR 2014
NIDCDNIDCR
NCCAMNIM
HDNLM NEI
NIBIBNICHD
NIMH
NIGMSNIDDK
NIAAANHLB
ININDS
NIEHS
NIAMSNIAID
NHGRINCI
NIDA NIANINR
NCATS
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0% STTR Advantage
STTR Advantage
SBIR Advantage
www.InteliSpark.com
Case Study: Navigating NIH
• Developing an intervention targeted at reducing smoking rates
• National Cancer Institute has largest budget within NIH• National Cancer Institute runs most smoking cessation
research• An obvious choice, but…..
www.InteliSpark.com
Case Study: Navigating NIH
• The WRONG choice• Proposal was targeted at National Institute on Drug Abuse
(NIDA), and was funded…based on a score that would not have been funded at NCI
• What?! NIDA has 11th largest budget, ~1/5 of NCIs• Need to do homework on NIH agencies
– Understand overlap between agencies– Look at success rates (data available on NIH SBIR homepage)– Look at competitiveness of funded projects– Look at funding commitments
www.InteliSpark.com
Being smarter than the numbers
NIDCR SBIR Phase I 56 17 30.4% $3,432,933
NIDCR SBIR Phase II 7 4 57.1% $1,864,889
NIEHS SBIR Phase I 72 22 30.6% $3,868,457
NIEHS SBIR Phase II 24 12 50.0% $5,972,947
Published Data is Backward looking…project forward!!!
Expected Phase II applications
NIDCR Last year 7 Next year 17 --funding probabilities will dropNIEHS Last year 24 Next Year 22 -- funding probabilities will be similar
www.InteliSpark.com
ISSUE 3: FINDING A TOPIC
Choosing the right topics will create high probability opportunities
www.InteliSpark.com
Selecting Opportunities is Critical• SBIR/STTR awards aren’t random drawings• Preparing a winning SBIR/STTR proposal is a mountain of
work.• The key is to pick battles that can be won• Choosing the right topic/agency is the most overlooked (and
perhaps most important) ingredient of success
www.InteliSpark.com
I Want a Grant…
YOU
I want a grant so I can…
I don’t care what you want!!!
How does your project satisfy the mission of a government agency?
www.InteliSpark.com
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Solicitations
GRANTS
CONTRACTS
www.InteliSpark.com
Technology vs. Capability Approach
$$ Awardproposals
proposalsproposals
proposalsproposals
proposalsproposals
proposals
$$ Award
proposalsproposals
proposalsproposals
$$ Award
$$ Award
proposalsproposals
proposalsproposals
Topics
proposalsproposals
proposalsproposals
proposalsproposals
proposalsproposals
proposalsproposals
proposalsTopics
TECH
NO
LOGY
CAPA
BILI
TY
www.InteliSpark.com
Head-to-Head (Technology vs. Capability)
Staff likely to have
more targeted
credentials
Preliminary Data
Better
commercialization
story
Better Focus
More SBIR/STTR
Opportunities
TECHNOLOGY
CAPABILITY
“Concentrate your energies, your thoughts and your capital.... The wise man puts all his eggs in one basket and watches the basket.”
- Andrew Carnegie
www.InteliSpark.com
Topic selection is important
• Just because you have a good hammer doesn’t mean everything is a nail. Technology companies tend to try squeeze their technology into inappropriate topics. – End result is proposals with virtually no chance of winning.
• It’s not enough to be able to solve a problem, you have be able to solve it better than (nearly) everyone else. – Don’t try to solve every problem, just the ones you can do very well.
“There is no grantsmanship that will turn a bad idea into a good one, but there are many ways to disguise a good one.”
– Dr. William Raub, Former Deputy Director, NIH
www.InteliSpark.com
Choosing a Topic
• Call topic author (if appropriate) to learn everything • Does it match the topic?• Is the solution strong? • Is it innovative? (innovation vs. evolution)• Is the company prepared to invest in this
opportunity?• How much of the work will the company do?
www.InteliSpark.com
ISSUE 4: WRITING A PROPOSAL
www.InteliSpark.com
STRATEGY: Understand the Competition• Remember: a small business is 500 employees or less
– Are a 5 person company and a 500 person company really in the same league?
• Many seasoned SBIR firms:– Physical Optics Corporation [1,219 Phase I, 451 Phase II, $433M]– Physical Sciences [821 Phase I, 341 Phase II, $320M]– Creare [674 Phase I, 353 Phase II, $302M]– Intelligent Automation [624 Phase I, 225 Phase II, $225M]– Radiation Monitoring Devices [495 Phase I, 247 Phase II, $230M]
• Previous SBIR/STTR awards place a firm at an advantage– Preliminary data, familiarity with program manager
www.InteliSpark.com
Partner, Partner, Partner!
• Improve the caliber of personnel with consultants– Universities are great sources of talent
• Improve capabilities with subawards– Large and Small Businesses, Universities
www.InteliSpark.com
STRATEGY: Invest in a Proposal
• Winners view proposals as an investment, not a binary event• Less Proposals for More Awards
– This is a quality game not a quantity game• A proposal is a product that has been invested in – the key is
capitalize on that investment• A rejected proposal may be
– Submitted to another agency– Resubmitted to the same agency
www.InteliSpark.com
Pass the “Skim Test”
• Reviewers may have 30+ proposals each 25+ pages– Do you really think they read all of them cover to cover?
• You need to get a full read by…– Having a compelling first page– Providing compelling imagery to pass the skim test
• Make your key concepts visual• Don’t actively fail the skim test• Make your document look professional
www.InteliSpark.com
How Should I Write a Proposal• A proposal is written in a similar style as a peer-reviewed
journal article…• …BUT is NOT an academic exploration – it needs concrete
goals, objectives, and measures of success• Write concisely• Use visuals to convey big ideas
– Mock-up interfaces to software• Cite your peers (especially if they might be reviewers)
– Show you understand the field• Avoid sloppy mistakes
www.InteliSpark.com
Avoid Commons Pitfalls • Fail to demonstrate innovation
– Innovative in the realm of commercial products is different from innovative research
• Overly ambitious proposals give the impression of lack of understanding of the challenges
• Insufficient pilot data to convince reviewers of plausibility• Fail to convey advantages over competing approaches• Lack of a hypothesis and/or concrete measures of success• Lack of experimental detail
– Work plan should be meat of proposal• Fail to demonstrate significance• Lack of understanding of agency needs
www.InteliSpark.com
ISSUE 5: SO, YOU WON AN AWARD…NOW WHAT?
www.InteliSpark.com
Other Issues
• Government Data Rights• Government Accounting Rules• Reporting Requirements• Cashflow Issues (most awards work on
reimbursement basis)• SBIR/STTR funding is sloooooooooow!!!• Relying Solely on Government Grants is a Bad
Strategy
Phase Prep (3
months)
Awaiting Award
(6 months)
Phase I Award
(6 Months)
Phase II Prep
(3 Month
s)
Awaiting Award (6 Months) Phase II Award (24 Months)
3.5-4 Year Process
www.InteliSpark.com
WHY ALL THIS THIS MATTERSYOU
www.InteliSpark.com
Labor Participation Rate
“Startups aren’t everything when it comes to job growth. They’re the only thing” - Kaufman Foundation
Workforce in 2000: 155,731,652 Now 152,139,676
Not in Workforce in 2000: 79,416,868 Now 94,620,883
www.InteliSpark.com
What are our scientists working on?“We wanted flying cars, instead we got 140 characters”
– Peter Thiel (Paypal co-founder, first Facebook Investor)
20th CenturyAutomobile
PlasticsRadio
TelevisionTransistorAntibioticsVaccines
Personal ComputerSpaceflight
AirplaneRefrigeration
Atomic EnergyXerography
InternetPharmaceuticals
www.InteliSpark.com
Keep doing what we’ve been doing and we will keep getting what we’ve been getting…
Cornell University currently has 1056
inventions available for licensing
Amp’d Mobile: $360 million raised, ended in bankruptcy.Procket: $272 million, sold for $89 million.Webvan: Ate through $800 million in venture capital, ended with $830 million in losses.Caspian Networks: >$300 million in funding, closed doors.Pets.com: Raised $50 million did sock-puppet ads, then crashed.Optiva: $41.5 million, crashed.Kozmo.com: $250 million, liquidated.CueCat: $185 million from investors like The Coca-Cola Co. and General Electric Co., bombed.DeNovis Inc.: $125 million, closed.AllAdvantage: $135 million in venture capital down the drain.FastForward: $54 million into the company, bankrupt.Flooz.com: $50 million, went broke.Boo.com: $120 million, went bust.
U.S. Federal Government
spent $133.5 billion on
research in 2013
Venture capitalists invested $29.4 billion in 3,995 deals in 2013
Physical Optics Corporation Radiation Monitoring Devices
Intelligent AutomationPhysical Sciences
Creare
