Eight Recommendations for Improving Government Funding of Innovation
As I’ve written in a previous post, the US government provides more funding for very early stage innovation than venture capital. The main vehicle for government funding is the SBIR, an umbrella program of the US Government.
The US government recognizes that the amount of funding going to companies with women or people of color is disproportionately low when compared with their representation as degree holders. They are actively seeking ways to improve these numbers. As an early stage investor who understands entrepreneurs and as someone who invests in diverse teams, I observed the government grant process and have recommendations.
The biggest change that needs to happen is to make the process not just user friendly, but user-focused.
1) Get rid of the jargon. Acronyms are pervasive and act like “insider” language. Different programs and department names don’t help us navigate the decision to apply. Yes, each program is different as are the applications, but we don’t need to face that right up front. Entrepreneurs may have solutions that work for many branches, and right now they have to navigate down into the weeds of each department to see if they might be a fit.
2) Target outreach into the three major categories of entrepreneurs (1) those who have never applied (2) those who have applied but have been rejected and (3) those who have received funding and want to apply for more. Each of these applicants ("users") has distinct needs.
3) Stop focusing your message on compliance. We get it, companies need to have good accounting, and grants have some restrictions on how they can be spent. If you think your message isn’t all about compliance, then you aren’t listening to yourselves talk. Same with your website. Save the compliance for later in the process. Paradoxically, by being more transparent about how it works, the process has become more opaque because the emphasis is on the myriad steps in the process and not on attracting applicants. Applicants are more confused about whether to apply.
4) Have more options to access program managers or their staff. Entrepreneurs are advised to “cold call” program managers directly, but is that truly scalable? Can you really handle an influx of all of the entrepreneurs seeking funding? Also, if entrepreneurs do not have the connections to the programs, they have no idea whom to call and it seems daunting.
5) Grant recipients are your best ambassadors. Speakers (I might argue all of your speakers) at your events should be entrepreneurs and seed stage investors. They speak the same language as your applicants. Make sure they all get pitch coaching before they speak. Pitch coaching always pays off. This will enhance the network effect by connecting them to applicants. Entrepreneurs and scientists want to hear from their colleagues.
6) Draw distinctions between grants and government contracting. That distinction is completely lost on your audience and would be incredibly useful. A government contract might even be more suitable than a grant.
7) Have a pathway for truly innovative companies that recognizes their futurist vision. Many applicants are concerned that the people reviewing their application are mired in traditional methods and not as open minded as needed. True or not, this is a perception often expressed to me. Peer review is key to vetting these applications, and it should be robust and diversified to meet the needs of applicants.
8) On the compliance front, change the government accounting practice for small businesses to be more in line with General Audit and Accounting Practices (GAAP). If small businesses can’t use Quickbooks or the like, then that’s an absurd burden to place on them. Modify this requirement for companies under a certain grant size or revenue size.
Much of the process is off-putting to entrepreneurs, but it is not intentional. Making a shift to user-focused will increase the applications from truly innovative companies.