Grants and Government Programs
A lucrative and underutilized source of start-up funding for biotechnology, medical device technologies, and health care service concepts is grant financing. The advantage of grant financing is that it is non-dilutive to current investors, meaning there is no expectation of a return of capital to the granting source.
For a current list of grant funding opportunities, click here.
There are numerous examples of medical companies in Cleveland that have been awarded >$1 million in grant funding to advance their technologies and meet milestones that were critical to attracting next-stage growth capital. In fact, some companies have even attracted $5-10 million or more in total grant funding for their successful ventures. Entrepreneurs should explore all grant funding possibilities that fit, but do not distract from, their business and technology development plans.
The Small Business Innovation Research (SBIR) and State Technology Transfer Research (STTR) programs are federally mandated programs in which numerous government agencies reserve a portion of their R&D funding to award to small businesses. Under a competitive process, small business can receive awards to engage in R&D projects with commercial potential. The awards are:
* Phase I (feasibility studies) awards of up to $100,000
* Phase II (research) awards of up to $750,000
* Phase II continuation awards of up to $1 million a year for 3 years
To qualify for SBIR funding, the company must be incorporated and located in the U.S. , have fewer than 500 employees, and be at least 51% owned by individuals. In addition, the Principal Investigator's primary employment during the project must be with the company.
The STTR program facilitates collaboration between businesses and research institutions on projects with commercial potential. Initial awards range from $100,000 to >$1 million for projects.
The Small Business Administration, Office of Technology and the National Science Foundation web sites provide general information on the programs and links to specific agency solicitations.
Other Federal Funds
In addition to the well-known SBIR and STTR programs, entrepreneurs should explore accessing government contracts and appropriations (non-competitive allocations) to develop their concepts. Numerous agencies are interested in advancing medical technologies and health care. For example, the Defense agencies are very interested in the health care of military personnel, while the Agriculture Department has a strong interest in rural health. Companies can access these funds directly or in partnership with a research organization. The range of these awards varies from $50,000 to >$1 million in total size. To learn more, companies should consult with government relations firms that are expert in supporting small companies in accessing funds.
Health Care Foundations
Companies should also explore funding possibilities from foundations that are interested in the specific diseases or health system conditions that the company is seeking to address. These foundations award significant dollars both to companies directly as well as companies working with research organizations for advancing medical technologies that advance the understanding, treat the symptoms, or ultimately cure these diseases. Well-know and large foundations exist for funding research and technologies that can address most types of cancer, genetic conditions, and other chronic diseases. In addition, foundations exist for funding improvements to the health care system that address inefficiencies, safety, and accessibility of health care. The awards can be very significant for companies and their technologies, easily topping >$1 million over time. To learn more, start your search at the Foundation Center database.
Third Frontier Action Fund Grants
The State of Ohio 's Third Frontier programs (>$1 billion) are an extraordinary commitment of capital to expanding Ohio 's high-tech research capabilities, promoting innovation, and growing companies. Ohio has identified biotechnology, medical technologies, and health care related IT and services as among the critical areas for public investment. For companies, there are numerous opportunities to access funds directly through Third Frontier Action Grants ($100,000-$5 million) and Innovation Ohio loans ($100,000-$5 million), and through partnerships with institutions in the pursuit of BRTT and Wright Center grants. Each program has its specific requirements and application cycles. Learn more about the programs at the Ohio Third Frontier website.
Ohio 's Technology Investment Tax Credit
This program may be of particular interest to entrepreneurs starting a new business. This program offers benefits to Ohio taxpayers who invest in small, research and development, and technology-oriented firms. Through the TITC program, Ohio investors may reduce their state taxes by up to 25 percent of the amount they invest in qualified, technology-based Ohio companies. Specific types of investments (purchase of common stock, preferred stock, membership interest, partnership or other equity position) are eligible and the investment must not exceed $250,000 in any single company. The program's credit may be applied to personal income tax, corporation franchise tax, public utility excise tax or the tax on dealers in intangibles. Find out more on the Ohio Department of Development web.
Other Government Incentive Programs
In addition to the major granting sources, companies that have positive income, tangible assets, or significant projected near-term job growth should also explore a range of incentive programs available through the State of Ohio and their local counties and municipalities. These programs range from low-interest loans to refundable tax credits. For a complete list of Local, State, and Federal incentives, visit the Team NEO website. For more information, read about the State programs at the Ohio Department of Development website. For municipal and county incentives, contact the respective government's economic development officer.