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Grants: A Non-diluting Source of Start-up Money
by Cammie Edwards, PhD, DNA Gateway International

In the rush and intensity of raising money, many companies overlook or dismiss the non-diluting funding opportunity that grants provide. There is a tendency to view grant money as too far away. Yet with a solid grant strategy up-front and a commitment to submitting high-quality applications, companies can find themselves receiving significant grant monies on or before the angel or VC funding comes through.

There are 3 main sources for grant monies: Federal programs, Foundations and Individuals. While money from any of these sources would be great; in general, companies obtain the best return by focusing on federal funds. For life science companies, the 3 best sources of federal funds are:

1. SBIR/STTR grants
2. NIH grants
3. DARPA (Department of Defense) grants

SBIR/STTR: The life science portion of the SBIR/STTR grants is administered through the National Institutes of Health (NIH). The web page www.sbirworld.com covers all the details of these programs, as well as links to the current listing. The SBIR program awards grants directly to small business; whereas the STTR program awards grants to academic/business collaborations. Small businesses applying for SBIR/STTRs must consist of fewer than 500 individuals and must be 51 percent owned and controlled by one or more individuals who are U.S. citizens or permanent resident aliens. Hence, any companies with greater than 49% venture capital interest are ineligible for SBIR/STTR funding.

The funding of the SBIR/STTR programs comes in 2 phases. Phase I awards, used to establish the merit and feasibility of a project, are typically $100,000 and last for 6-12 months. The follow-up phase II awards are typically $750,000 and last 2 years. However, there are special SBIR/STTR programs which offer higher funding and longer times. Additionally, granting agencies have granted longer project times and larger funding amounts when the projects merited them.

NIH: It is no longer the case that the NIH only funds academic science. There are numerous opportunities for companies. The publicly-traded vaccine company, Dynport, received a large NIAID grant to generate a botulinum vaccine. Conversely, the small privately owned Integral Molecular received NIH funds to identify influenza therapeutics. The NCI has funded companies to develop a range of products including listeria-based ovarian cancer vaccines, novel protein markers for disease detection, as well as an antibody purification matrix.

The NIH granting opportunities can be for as little as $250,000 or up to millions of dollars. Each listing will describe its own requirements and funding levels. Additionally, many of the opportunities are also open to non-U.S. companies. Check the NIH listings weekly, since new opportunities are released every week and these opportunities can have deadlines that are only 6-8 weeks away. The following web page, http://grants1.nih.gov/grants/index.cfm, will give your more information about the NIH opportunities. You can also sign up for weekly updates at NIHTOCL@LIST.NIH.gov.

DARPA: The Defense Advanced Research Projects Agency (DARPA) is the central R&D organization for the Department of Defense. It pursues high risk, high pay-off R&D projects that support military goals. These tend to be high budget projects and DARPA is very familiar in working with companies. Some of the programs that DARPA has funded include pathogen countermeasures, bio-molecular nano-devices and accelerated manufacturing of pharmaceuticals. The web page, www.darpa.mil, provides more info on these programs, the current listing and links to key DARPA personnel.

There are a number of things that you can do maximize your chance of submitting a successful grant.

1. Ensure that all the appropriate stakeholders are committed to the grant submission.
    – Grants are a lot of work
2. Check the grant listings on a weekly basis
3. CALL THE PROGRAM DIRECTORS! (This is a must for DARPA applications.)
    – They can provide key insights into the agency goals or recommend other opportunities.
4. Line up key collaborators, if necessary.
5. Take the time to submit a well-written grant with clearly defined goals and deliverables.
    – Expect to spend 4-8 weeks writing and assembling a good application.

In addition to helping you raise money, a well written grant is your product development plan.

For more information: http://www.dnagateway.com/workshop/default.htm.