The best accelerant for any business is cheap and unregulated capital.
While most entrepreneurs and startup founders are lured to the supposedly glamorous money of venture capital, institutional investors are pulling back from a wonky economic outlook this year. Valuations are declining. The only certainty is Uncle Sam, who places stock in milestones and benchmarks over the growth at-all-costs philosophy of VCs.
It’s time to consider the road less traveled, especially for businesses based right here in Philadelphia.
In the next three years, the federal government is planning to double the available capital provided through two legacy small business technology commercialization programs — providing non-dilutive capital to grow businesses.
Through the first, dubbed “America’s Seed Fund,” the National Science Foundation offers up to $2 million in growth capital to qualifying startup businesses through Small Business Innovation Research (SBIR) and Small Business Technology Transfer Research (STTR) programs.
In the second, the Biden Administration in 2021 unlocked another $10 billion in new funding as part of the State Small Business Credit Initiative (SSBCI), with states like California and North Carolina already collecting major funds to be dispersed. The creation of the Advanced Research Projects Agency for Health (ARPA-H) department also promises a new mechanism to ensure research is getting a chance to flourish on campuses and in academic labs across the country.
Although this process can be arduous and filled with speed bumps, straightforward deadlines and requirements can allow founders to predict the timing of funding through these vehicles. One of the biggest obstacles for early stage biotechnology companies in particular is getting stuck in a lab with no long-term vision to turn a scientific innovation into an independent company. This is the kind of capital — both intellectual and financial — to help scale the wall and break free of universities.
For years, the National Institutes of Health (NIH) have fueled projects at academic research institutions across the country. At the University of Pennsylvania, in 2021 alone, projects received nearly three-quarters of a billion dollars in grant money. While this has become commonplace, most entrepreneurs lack the access or affiliations needed to tap into this wealth of resources. Innovation hubs have emerged across the country to accommodate the rise in new business applications (5.1 million in 2022), like Research Triangle Park in North Carolina.
Entrepreneurs need guides to navigate opportunities
Of course, Silicon Valley, despite all of the scrutiny, has maintained its status as the gold standard in business incubation. Sometimes, entrepreneurs need a navigational guide and a community of champions to find the right opportunities.
This has created a need for gateway organizations to steward new capital and engineer new programs that enable startup growth. One such place locally is the University City Science Center, a center for entrepreneurial activity, which matriculates research and technology development through a rigorous cycle of efficacy and commercialization. In the last 10 years, Science Center-supported companies have been awarded nearly $50 million in SBIR/STTR grants and much more in government contracts.
Two new programs — Capital Readiness and Founders Fellowship — have been specifically tailored for budding entrepreneurs and startup founders, like David Jansen, CEO of SAIL Fusion, who participated in the former. Both offer a curriculum for building the relationships necessary and following the guidelines needed to unlock the right local, state, and federal funding, including through America’s Seed Fund and SSBCI.
As with any funding, there are no guarantees that proposals will be accepted and money will flow. However, there is less subjectivity with decisions based more on hard-science bonafides to win approvals. The reward for clearing these validation hurdles is a better, more fundamentally sound product or technology. Additionally, this credibility better positions companies for private investment in the future.
With the rising trend of scarcity of capital from private market sources, the federal small business support and capital programs will be a necessary catalyst for mobility and growth well into the future for ventures across the country — not to mention you get to keep the equity in your company.