Comment by jseliger | Hacker News Reader

Comment by jseliger | Hacker News Reader

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Every company doing hard tech should be considering federal funding for early stage R&D. The US gov't has been consistently providing more early stage capital than VC for several decades through the SBIR program.

This is generally good advice, but I'm a grant writer (see http://www.seliger.com if you're curious) and have worked on many SBIRs and STTRs. I'll add that there are downsides as well. One is simple timing: if the appropriate SBIR or STTR funding cycle just concluded for that year, you may have to wait another year to apply. Then another 1 – 3 months for a decision. Then longer for final authorization of the budget. The other day I talked to a guy whose best potential SBIR source had had a deadline the month prior.

Second, Phase 1 grants can just be too small for the amount of effort that goes into them.

Third, they don't come with the advice / community / expertise of good VCs.

Fourth, they take a lot of effort to prepare, and for first-time grant writers they can be quite hard. The alternative is to hire someone like my firm. While I'm biased towards doing that for obvious reasons, we also cost money.

While I don't want to talk anyone out of applying, I do want to note that the downsides are considerable too.

As a side note, I used to submit some SBIR and STTR RFPs to Hacker News (search for "seliger" here: https://news.ycombinator.com/from?site=nsf.gov), but I stopped after a while because no one upvotes the submissions.

These are some good warnings. The way I like to think about it is that the actual free cash available to spend from the grant is on the order of 1/3 of the sticker price when you fully account for the costs of getting the grant, administering it, and fulfilling the requirements which inevitablly do not line up exactly with your business goals.

Many companies get stuck in a kind of grant hamster wheel where they end up only producing enough from a grant to be able to get another grant, and not advance in commercializing their technology. I think there are few companies that make the transition from being primarily grant funded for a period into a high growth success.

Sometimes it's your only option for funding, but ideally, it makes up 0 to a fraction of your R&D funding so that it doesn't dilute your focus.

This advice is specific to companies that have a path to be VC-fundable, high growth, commercial success. There are many other (most) companies that can be funded by grants and build their technology incrementally over time.

> Third, they don't come with the advice / community / expertise of good VCs.

Definitely not business advice/community, but if a startup is doing significant R&D, it can be useful for the scientific and technical advice and community. Not guaranteed by any means, but I've seen it work out well, mainly in the case where a company submits an STTR jointly with a university research group. If the arrangement ends up working, the most valuable thing to the company in that case is sometimes not even the actual NSF grant money, but the connection to the research group it opens up. Having a joint STTR provides an excuse to get a company sort of attached to the research group as an external partner, with a forcing factor ensuring you end up on their schedule with regular project meetings, access to grad students, etc. Can also end up useless, of course, but when it works out well, it can provide value equivalent to something you'd have to pay a lot for if you were hiring technical consultants (especially in areas like machine learning).

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