Funding Sources
Government Funding
Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants are available to businesses performing research and development that is directly related to a federal agency’s mission. The grants are funded by US taxpayers, and do not have to be repaid. The SBIR or STTR federal grants are awarded in two phases: Phase One grants are designed to assess feasibility and award up to $100K. Phase Two grants are structured to support in-depth research and development and award up to $750K.
Business Plan Competition
Business plan competitions are often held by universities and only open to their students, although there are also a number of community-based or privately-funded competitions. Applicants must create business plans based on contest criteria and the plans are then judged with a limited number of teams winning cash prizes. Top prizes typically range from $10K to $25K, which the winners may use to start their businesses, conduct bench testing, etc. In addition, competition judges may decide to mentor or invest in a team.
University Seed
University seed grants are awarded to help the development of research programs proposed by faculty members. Ideal seed grant projects have a high probability of continuing research beyond the seed grant period, with the hope that the programs grow and receive external funding. Awards range widely, from < $1K to $100K.
Angel Investors
Angel investors provide early stage capital for promising technology startups. As many Angel investors are retired entrepreneurs or executives, they can provide valuable experience and networking. Historically, Angel investing has been 20% < $25K, 40% $25 - $99K, 25% $100 - $250K and 15% > $250K, with 85% of investments no more than 1 hour from the home of the investors.
Philanthropic
There are a number of privately-funded non-profit foundations for the development of technology and pharmaceuticals to treat medical causes, often those without alternate sources of funding available for major diseases. Money from Foundations ranges in focus from commercialization of products (as in the Alfred E. Mann Foundation for Biomedical Engineering) to basic research, and from funding any type of medical research to funding research on specific diseases.
Venture Capital
Unprecedented levels of cash have built up in venture capital funds, with the average fund size growing from $100M in 1975, to over $500M in 2008. Traditionally, venture capital funds have made smaller investments (< $3M) to “bridge” the early stage funding gap between university research and commercialization, but today venture capital is directed to later stage investment ($5M–20M).