MOBILE, Alabama – In an attempt to bridge a glaring funding gap common to early-stage technology companies, Alabama Launchpad will unveil an initiative in early 2014 to help entrepreneurs statewide pursue federal research grants.
“We need to help struggling new tech companies find the funding to get them to the commercialization stage to grow jobs and wages of Alabama companies,” said Mark Weaver, director of the Melton Center for Entrepreneurship and Innovation at the University of South Alabama.
Weaver, who also serves as director for the recently launched Coastal Innovation Hub in Mobile, is one of eight business and research leaders across the state tapped to comprise the advisory committee for the 2014 program. Other advisers include:
- Bill Waite, co-founder and chief technical officer of AEgis Technologies Inc. in Huntsville
- Troy Brady, licensing officer for Auburn University
- Steve Ceulemans, vice president of innovation and technology for the Birmingham Business Alliance
- Rick Swatloski, director of the Office of Technology Transfer for the University of Alabama
- Dave Winwood, executive director of the University of Alabama at Birmingham Institute for Innovation & Entrepreneurship and chief executive officer of the UAB Research Foundation
- Kannan Grant, director of the University of Alabama in Huntsville’s Office of Technology Transfer
- Michael Brooks, associate director for program operations with the Alabama Small Business Development Center Network
Alabama Launchpad is a program of the Economic Development Partnership of Alabama Foundation, and the pilot program is intended to help tech-centered startups make the leap from proof-of-concept to the funding needed to jumpstart actual activity.
‘We can do more’
EDPA Vice President Angela Wier said a recent analysis revealed Alabama businesses submit about 500 proposals for the competitive Small Business Innovation Research and Small Business Technology Transfer grants – both administered by the U.S. Small Business Administration – yet only about 14 percent of those applicants receive are successful. The national average is typically 15.7 percent, she said.
The research also revealed Alabama-based companies have won more than 2,600 grants since 1983, securing more than $660 million through the SBIR/SBTT program.
“We are consistently among the top 20 states in the country in our success rate, and that is a phenomenal achievement considering our population base, but we know we can do more,” Wier said.
In turn, the new program will funnel resources through Alabama Launchpad to help better identify the companies and technologies most likely to win SBIR funding while assisting all who pursue it through the often tedious and overwhelming process.
“There are very few sources of funding for transitioning from basic research to prototypes, field testing and preparation pre-revenue companies need to be ready for investment. This federal money works in that space where there’s a gap,” she said.
More importantly, she said, the pilot program’s launch stems directly from business and research leaders reaching out to EDPA, concerned by the number of investigators and aspiring entrepreneurs they witness on a daily basis struggling to navigate the unwieldy funding process.
“They came to us and said, ‘We think there’s a way to help them increase success rates,’ and that’s what this is all about,” Wier said. “We see a demand and an opportunity to really improve our chances of being successful, but it will probably take about three years to measure that success.”
Leading by example
As an adviser, Weaver said he and his collaborators across the state will provide aspiring tech-centered entrepreneurs with commercialization assessments, host SBIR funding workshops, compile market analyses and even offer assistance with SBIR grant writing.
“We are working with EDPA to bring funding of up to $1 million to new technology companies in Alabama,” he said, calling the consortium a “major leap forward.”
For the unacquainted, a Phase I SBIR grant typically provides a startup with $100,000 to be used for planning and marketing, but second-phase grants after a company or technology’s viability has been established provide a base $1 million award to develop the business plan. Wier said depending on the source of the funds, the amount can total as much as $1.5 million
“With Launchpad, we’ve been making a lot of progress working with these early-stage companies at this proof-of-concept phase. We put them through rigorous deadlines and help them make those connection that can be vital to their success, but our funding is so small, we’re really just basically a big funnel. It’s a valid form of validation, and this is a natural next step,” she said.
But how exactly will an advisory committee accomplish that goal?
“We’re trying to develop connectivity, so we don’t just work (with the companies) in one slice. Ultimately, it’s about helping them jumpstart the revenue process and being able to attract the investment dollars they need to be able to grow their companies,” Wier said, adding, “We’re trying to widen the spectrum and help these companies for a longer period of time, and that’s what makes the local partners so important because they know these companies inside and out. They see the strides being made and are in a better position than anyone else to tell them where they should or should not be focusing their time and energy.”
Bridging the gap
According to the SBIR website, the program “enables small businesses to explore their technological potential and provides the incentive to profit from its commercialization. By including qualified small businesses in the nation’s R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs.”
Closer to home, Wier said the funding can be critical because it allows companies to retain full ownership of their technology and intellectual property, and the money does not have to be paid back by the companies.
“The SBIR program funds innovative, high-risk early-stage projects during a time when it is much too early for angel investment. It also bridges a gap between traditional grant funding for research and equity investment from a business or investment fund,” she said.
Any companies interested in learning more about the SBIR program can visit the Alabama Launchpad website and participate in a brief survey.
(Updated at 9:32 a.m. Nov. 14 to expand Bill Waite’s title with AEgis Technologies; boost the national average for successful SBIR applications from 15 to 15.7 based on revised figures from EDPA; and to include a link to the survey.)