A part of the evolution of every successful start-up is fundraising. Oftentimes, entrepreneurs start with a passionate idea as to how they can solve an existing problem in the marketplace. This leads to the development of prototypes, usually followed by some beta testing and then some actual sales. As sales start to increase and initial market validation seems apparent, the need arises to scale the business. This inevitably leads to the need for increased levels of capital.
In the early stages, there are often a number of options available to secure grant dollars. This can be an excellent way to fund the company during its infancy as these dollars are basically free money and do not cause any dilution of ownership. There are a few important considerations that need to be attended to when pursuing grant dollars, and we will review some of the basics here.
One common mistake many entrepreneurs make when pursuing grant dollars is they feel that since it is free money, it only makes sense to apply to every possible grant out there and hope for the best. This approach is basically saying, “The more grants we apply for, the greater the likelihood that we will receive money from someone.” While this sounds like a reasonable approach, it is one that will end up consuming vast amounts of time that would be better directed at attending to the many critical aspects of keeping your business headed in the right direction. It is a much wiser use of your time to research and analyze the grant dollars that are available and then take the time to identify those grants that are well aligned with your company’s goals and objectives.
Most grants are invested in a central area of interest. Some may be swayed toward the development of manufacturing capability, some may be more spent in the development of disruptive medical technologies while others may be targeted toward products within the IT space. The point here is that regardless of how good or innovative your product is, if it is not within the wheel house or “sweet spot” of the grant parameters, you are very unlikely to be given serious consideration — let alone be awarded grant dollars. By taking the time to conduct some due diligence and align your applications with those grants that are in sync with your proposed product offering, your chances of being selected will increase dramatically.
Now that we have identified some grants that are properly aligned with your offering, the next part of our due diligence process is to see what helpful information the granting organization might provide. Ask them on average how many applications they receive and how many awards are given. The lower the percentage is between awards granted and applications received will tell you a lot as to how important it is that your offering is very much in sync with the grant’s objectives. If they routinely receive 100 applications and only give out 10 grants, then 90% of the applications will fail. This is an indication that your parameters must very strongly parallel the grant objectives. If you feel you are well aligned, go for it; if however, you feel you are weak in this area, your time and effort would be better directed to a grant opportunity where better alignment exists. Granting organizations will often provide you with copies of previous award-winning applications. These can teach you a lot as to what they are looking for.
Once we have pre-qualified ourselves as to which grant opportunities will be pursued, the final task is to compile a truly impressive and first-rate application. Reviewing applications that have been successful is one way in to help achieve a top-notch application. It can also be very worthwhile to identify and work with a professional grant writer. As with any true professional, good ones do not come cheap, but spending a few thousand dollars to significantly increase your odds of getting tens or hundreds of thousands of grant dollars can be money well spent. Researching which grant writers submitted winning applications in the past to these grant opportunities is a great place to start.
There are many grant opportunities available to upstart companies in the marketplace. Doing your homework and taking the time to align yourself with those that are most appropriate to your offering can pay big dividends in securing these non-dilutive dollars.