How to get up to $1M in startup funding and keep your equity

Customers or capital? Founders need both, but need to prioritize one over the other — or figure out which one leads to the other.

Founders with innovative products pursue capital because it takes cash to create something out of nothing: to do the research, to buy materials, to hire people who bring the big idea to life. 

Unfortunately, traditional sources of capital like investors and lenders can be even harder to come by than customers in the early stages. 

But there’s a lesser-known alternate route to fund that critical research and development work: the SBIR grant. Yes. Grant. As in, capital that doesn’t dilute your ownership and you don’t have to pay back.

Even better — on July 20, representatives who facilitate this grant are coming to Lincoln, Neb., for an event where they’ll meet directly with business owners and innovators who are interested in taking advantage of this funding. More on that in a bit.

What is an SBIR grant? 

The SBIR (Small Business Innovation Research) grant falls under a federal government program called America’s Seed Fund. America’s Seed Fund is administered by the U.S. Small Business Administration and exists to encourage and support the creation and commercialization of innovative American ideas, processes and products.

These grants fund projects that are early stage or high risk with the goal of proving feasibility, developing a concept and ultimately moving the product into the marketplace. They are designed specifically to support startups and small businesses. 

Under America’s Seed Fund federal agencies review and fund proposals that align with their respective missions. For example, the U.S. Department of Agriculture funded a proposal for a Nebraska company developing an app that connects farmers to ag lenders. 

How much money comes with an SBIR grant?

Funding can come in two waves:  

Phase I lasts six months and tests the technical merit, feasibility and commercial potential of the innovation, and awards $50,000-$250,000. Phase II further develops R&D efforts and leads to a “market-ready” prototype over the course of two years. Phase II awards are generally $750,000.

The Nebraska Department of Economic Development (DED) also offers grants in concert with the SBIR. First, the DED offers a Phase 0 grant of up to $5,000 that reimburses the cost of preparing a Phase I proposal. Most recipients utilize this funding to hire a grant writer.

The state of Nebraska will match federal SBIR awards. 

Josh Nichol-Caddy is the director of the Innovation and Technology program at the Nebraska Business Development Center (NBDC). “My counterparts in other states envy the support the state of Nebraska offers applicants to this federal program,” he said. 

Emily Huffman, manager at Chadron-based AgCredit Consulting, was a funding awardee. “The SBIR funding, in addition to matching grants from the Nebraska Innovation Act, provided us the resources to hire a full-time software engineer and gave us nearly three years of runway to research, test and develop our application and business model,” she said. “In addition to the funding, the SBIR process really helped us to plan out and develop a strong commercialization plan. It would have been much more difficult to accomplish this without SBIR resources.”  

How do I obtain an SBIR grant? 

Any business that is American-owned and organized as a for-profit entity with fewer than 500 employees can apply. And while there’s no catch to the funding, the process isn’t for someone looking for easy money. It can take months to pull together the required details. And while it’s true that the process isn’t easy, the return is great. 

The Nebraska Business Development Center’s (NBDC) Innovation and Technology program exists to help companies applying for funding. A confidential service, NBDC’s consultants will help project manage your proposal over the course of several months, advise you on which federal agencies to apply to and help you network with federal program managers whose job it is to review proposals. Ultimately, they help you put your best foot forward to increase your chances of getting funded. In 2022, the NBDC team directly helped Nebraska businesses earn more than $3.2 million in SBIR funding – at no cost to the business.  

“When we had the idea to create an agricultural digital lending app back in 2018, the first place we went to for help was the NBDC office at Chadron State College,” Huffman said. “They connected us with NBDC’s Innovation and Technology Commercialization team for further assistance with an SBIR application. And to the Nebraska Department of Economic Development in pursuit of a DED Phase 0 grant, which provided us the resources to hire a great grant writer. The NBDC is a great resource and starting point for any small business wanting to apply for an SBIR grant.”

America’s Seed Fund Road Show

Interested in learning more? The U.S. Small Business Administration announced the America’s Seed Fund Midwest Road Show. On July 20, the tour will stop in Lincoln for a free morning event. It’s an opportunity to learn more, meet directly with federal program managers from 12 participating federal government agencies and network with other technology entrepreneurs and state innovation ecosystem members. 

For a full day of Nebraska innovation activity, attendees are also invited to sign up for Invest Nebraska’s Ag Tech Connect, a parallel conference supporting innovation in the agricultural space. 

For more information on America’s Seed Fund Road Show or to get more information about the SBIR grant program, contact Josh Nichol-Caddy at jnicholcaddy@unomaha.edu. 

About the NBDC

The Nebraska Business Development Center (NBDC) helps Nebraska businesses start, grow, and develop, by strengthening Nebraska businesses for a healthy economy and prosperous communities. NBDC is a University of Nebraska at Omaha center that provides confidential consulting business development services across Nebraska to entrepreneurs and business owners for the life cycle of their business. NBDC partners with the University of Nebraska-Lincoln, University of Nebraska at Kearney, University of Nebraska Medical Center, Wayne State College, and Chadron State College to deliver its services statewide. The U.S. Small Business Administration (SBA), the U.S. Department of Commerce (EDA), and other federal, state, and private organizations support NBDC. The APEX Accelerator is funded in part through a cooperative agreement with the Department of Defense.

Visit nbdc.unomaha.edu for more information.