new succeeding at securing non-dilutive sbir/sttr funding for … · 2020. 4. 22. · succeeding at...
TRANSCRIPT
www.InteliSpark.com© 2018 InteliSpark, LLC
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
THE START: INTRODUCTIONS
www.InteliSpark.com
Non-Dilutive Funding Experience~400 proposals (90%+ SBIR/STTR) selected for award
>$190,000,000 in projects selected for award
28 start-up clients funded in 2018
43 start-up clients funded In 2019
Clients have had >$800,000,000 in successful exits
InteliSpark clients are 5% of NSF’s SBIR award cohort from 2018 Phase I proposals.
• InteliSpark clients 13/26 (50%)• Everyone else 257/2072 (12.4%)
www.InteliSpark.comLIONANO
>$190 Million in non-dilutive funding for clients in all technology sectors
www.InteliSpark.com
Many with University Roots
LIONANO
www.InteliSpark.com
SBIR BASICS: WHAT IS SBIR/STTR FUNDING AND WHY DO YOU NEED/WANT IT
www.InteliSpark.com
Why are you interested in SBIR funding?
You are hereVenture capitalists
invested $58.6 billion in 4,520 deals in 2016
U.S. Federal Government spent
$140 billion on Research in 2016
…AND YOU HAVE WARTS!• Too risky• Too early• Unproven Team• Unproven Market• Unproven Technology• Limited or no resources
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 $58.6 billion in 4,520 deals in 2016
U.S. Federal Government spent
$140 billion on Research in 2016
$2.5 Billion SBIR/STTR
www.InteliSpark.com
SBIR/STTR Program Overview
• ~$3.5 Billion in SBIR/STTR funding in FY 2020• 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 2020 3.2% 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 2020 0.45% of extramural funding
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
Despite misconceptions, there is NO Requirement to do Tech Transfer
under an STTR
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
DOING IT RIGHT: 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
Founder Dilemma
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
MATCHING: FINDING A TOPIC
Choosing the right topics will create high probability opportunities
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
www.InteliSpark.com
Narrow vs. Open TopicsNARROW TOPICS OPEN TOPICS
www.InteliSpark.com
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Solicitations
GRANTS
CONTRACTS
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
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
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)
“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
AN INEFFICIENT MARKET:UNDERSTANDING FEDERAL AGENCIES
You can exploit discontinuities in the funding probabilities
www.InteliSpark.com
View SBIR/STTR as a marketplaceInvestigator Driven Perspective
Data Driven Perspective
“Art” of Grant Writing
Data Driven Marketplace
Tends to be Focused on the Seller
Focused on matching the seller to the buyer
www.InteliSpark.com
SBIR/STTR is not monolithic
+more
www.InteliSpark.com
Go fishing where the fish are, but….Avoid the Crowded Fishing Holes
NIH Challenge Grants
$200 Million for 200 projects
DoD Operational
Medicine BAA$100 Million for
~100 projects
www.InteliSpark.com
Case Study: The Crowded Fishing Hole
NIH Challenge Grants
$200 Million for 200 projects
24,000+ applications for ~200 awards= >1% probability
~800 applications for ~100 awards
= 12.5% probability
DoD Operational
Medicine BAA$100 Million for
~100 projects
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
NSF is the Most Start-up Friendly
Company Size: ~ 92% of awardees have 10 or fewer employees
History: ~ 87% of awardees had never had a prior SBIR/STTR Phase II award from any agency
Company Age: ~ 78% of awardee companies were incorporated within the past 5 years
www.InteliSpark.com
CASE STUDIES: NIH vs. NSF
proposalproposal
proposalproposal
proposalproposal
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
Navigating NIH SBIR/STTR Budget Allocations
NCI
NIAID
NHLBI
NIGMSNIDDKNINDS
NIMH
NICHD
NIA
NIDA
NEINCATS
NIEHSNIAMS
NHGRINIAAA
NIDCD
NIDCR
NIBIB
NIMHD
ORIPNINR
NCCIH
NLM
www.InteliSpark.com
NIH Phase I SBIR/STTR 2018
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
NIH 2018 Phase I - SBIR vs. STTR success rates SBIR STTR
www.InteliSpark.com
Understanding NIH scoring• Each sub-agency has own funding policy• Some publish paylines (10-90, 10 is best score (most fall
between 15-55)• You can request assignment to a sub-agency (otherwise NIH
will choose)• Choosing the right sub agency can be the difference between
success and failure
NIH STTR Success Rates and Paylinescan fluctuate wildly
15
20
25
30
35
40
2019 2018 2017 2016 2015 2014 2013 2012 2011
NIAID+NIAMS SBIR vs STTR paylines
NIAMS SBIR NIAMS STTR NIAID SBIR NIAID STTR
www.InteliSpark.com
Success rate does not equal probability
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0% SBIR STTR
35 2532 28
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
Looking at success rates…
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
What matters is the future and how the past shapes it!
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
Looking Forward vs. Backward
www.InteliSpark.com
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Impact of solicitation schedules
15.3% vs. 12.9% = 18.1 % more likely to be funded
18.0% vs. 12.1% = 48.3 % more likely to be funded
www.InteliSpark.com
NOW WRITE: WRITING AN SBIR/STTR PROPOSAL
www.InteliSpark.com
Understanding Reviewer’s Points of Entry
GRAPHICS
TITLEABSTRACT
FIRST PAGE
www.InteliSpark.com
Research Proposal Writing
proposalsproposals
proposalsproposals
proposalsproposals
proposalsText
proposalsproposals
proposalsproposals
proposalsproposals
proposalsIdeas
proposalsproposals
Ideas
proposalsproposals
Text
Effective Research Proposal Writing
How You Are Taught to Write in School Slow build
Punch first
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
Even smart people are bad with numbers
A telling example of innumeracy levels in society involves a study of clinicians (who represent a sample with education levels representative of reviewers) who were asked to consider the release of a psychiatric patient. When told that that 20 of 100 similar patients could be expected to commit an act of violence if released, 41% refused to discharge the patient. However, when instead told that 20% of similar patients could be expected to commit an act of violence if released, only 21% refused to discharge the patient.
Slovic, P., J. Monahan, and D.G. MacGregor, Violence risk assessment and riskcommunication: the effects of using actual cases, providing instruction, andemploying probability versus frequency formats. Law Hum Behav, 2000. 24(3): p.271-96.
20/100 or 20% or 0.2 or 1/5
www.InteliSpark.com
Charts need to tell a story
0%
20%
40%
60%
80%
100%
120%
1 2 3 4 5 6 7 8 9 10 11
Functional Ability
Control Treatment
www.InteliSpark.com
Control the narrative
50% reduction in recovery time
0%
20%
40%
60%
80%
100%
120%
1 2 3 4 5 6 7 8 9 10 11
Functional Ability
Control Treatment
0%
20%
40%
60%
80%
100%
120%
1 2 3 4 5 6 7 8 9 10 11
Functional Ability
Control Treatment
20X improvement in functional
recovery
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
Importance of CommercializationMINIMAL VERY
www.InteliSpark.com
Commercialization Plans: Better Technology is not a Commercialization Plan
www.InteliSpark.com
Keys to Successful Phase II• Starts with a good Phase I• Have a Phase I designed to change the narrative and produce
interesting data (which may change the order in which you do things
• Everything you do in Phase I is about Winning Phase II!!!– Adjust plans as required– Create data that supports Phase II proposal– Understand tradeoff between submission
time and success rate
www.InteliSpark.com
Successful company common theme
www.InteliSpark.com
Raise money from position of strengthPRE
PHASE I
PHASE IAWARD
PHASE II PROPOSALREJECTED
END OF POSITIVE PHASE II
PHASE IIAWARD
END OF NEGATIVE PHASE II
www.InteliSpark.com
Understand the step functionsRARE TYPICAL
Infection points
You need to understand the inflection points that change the perspective of investors, customers, and partners…and build
your SBIR/STTR around them
www.InteliSpark.com
YIKES: 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© 2018 InteliSpark, LLC
Questions?
Kirk J. MacoliniPresident, [email protected]
(607) 277-1570