Unlocking America’s Seed Fund
OpenGrants is excited to host Ben Schrag, SBIR/STTR Program Director and Policy Liaison at the National Science Foundation (NSF). We broke down everything grant seekers need to know about NSF SBIR opportunities – how the process works, how to be prepared, how to find the right fit and make your application competitive. This discussion is perfect for any grant seeker considering funding from the NSF.
In This 1-Hour Session, We Covered:
- What the NSF looks for in ideas
- The concept of technical risk
- Why startups should consider NSF over other agencies
- How to choose the right agency
About the Speakers
Sedale Turbovsky, Co-Founder & CEO, OpenGrants
Sedale Turbovsky is the CEO and co-founder of OpenGrants, a venture-backed startup focused on building modern infrastructure for funding. He has been an entrepreneur since childhood. After honing his leadership skills as an outdoor guide in his younger years, he started his professional career as an independent consultant focused on delivering data products and digital strategies to enterprise clients in South America. He is experienced in independent grant writing and public/private partnerships at the highest level, having worked directly with OpenGrants’ current strategic partner, Momentum.
Ben Schrag, SBIR/STTR Program Director and Policy Liaison, National Science Foundation
Ben Schrag is an SBIR/STTR Program Director and Policy Liaison. He joined NSF as a Program Director in the small business programs in 2009 and has worked across several portfolio areas including Advanced Materials, Instrumentation and Hardware, Nanotechnology, and Advanced Manufacturing. He became the Policy Liaison for the SBIR and STTR programs in 2016. Ben won the NSF’s Director’s Award in 2014 and 2016. Prior to NSF, he was the Director of Research and Development at Micro Magnetics, where he led a development effort to commercialize a new magnetic imaging tool for semiconductor metrology. During this time, he also served as a visiting scientist at Brown University. Ben received his Ph.D. in Physics from Brown University.
Read the Transcription
Please note, this transcription is automatically generated and may contain some spelling and contextual errors.
Sedale Turbovsky
All right, everyone. Welcome. Great to great to have you all here. My name is Sedale Turbovsky. I’m the CEO and co-founder of OpenGrants and super excited to be hosting this webinar about unlocking America’s seed fund. And we have Ben Schrag here with us. As people trickle in I just wanna cover a few housekeeping things as we get started.
You’re in the right spot if you’re here to learn about unlocking America’s seed fund. If you are not here for that stick around, it’s gonna be super cool. Gonna talk about how you can secure non-dilutive funding for your startup. In fact it doesn’t take place on your cap table. You don’t have to pay it back. It’s a super exciting program and a great way to partner with an incredible institution. We will be using the Q&A tool exclusively to ask questions today. So as you are feeling sparked to inquire about something in particular, please use the Q&A tool. Otherwise you can reach out If you have any issues support wise to our team, but yeah, really excited to have y’all here.
We’re gonna go ahead and dive right in. I’m gonna just introduce myself. My name is Sedale Turbovsky I’m founder and CEO of OpenGrants and we are the easy way to win grant funding. I’m super excited to be joined by Ben Schrag. He’s the SBIR/STTR program director and policy liaison at America’s seed fund, NSF. And Ben if you would take a moment just to introduce yourself bit of your background and what your role is.
Ben Schrag
Absolutely. Thanks. Everybody for joining, thanks to Sedale and to your team for the the invitation, the opportunity. So yeah, I am I am currently part of the national science foundation.
We’re a federal government agency that funds mostly basic research. And I work in part of the foundation that supports R and D funding to deep technology startups. So my role here, and there’s a dozen program directors who have the same role. Is to try to do outreach and bring in great deep technology companies to evaluate them based on merit and impact to support them with funding of up to 2 million each in phases, and to work with them, to help them be successful.
So I’ve been in this role for 13 years here at NSF and prior to NSF, I was actually at a startup doing a semiconductor diagnostic tool for seven years. Which was spun out of my graduate work. I got my degrees all in physics and studied physics and material science as my technical background.
Sedale Turbovsky
Awesome. That’s one of the things that always excites me about NSF in general is that everyone there is just like really solid in terms of being very smart and intelligent and subject matter experts. In a variety of spaces, I’m gonna launch a quick poll folks who are joining us would love to hear how y’all are doing today.
And what your biggest challenge might be related to fundraising. So I’m gonna go ahead and launch this poll before we dive into our full discussion. Would love to get y’all’s thoughts about just generally the vibe out there how folks are doing and, learn a little bit more about your challenges related to fundraising.
As Ben mentioned, the NSF program, super exciting there is an entire team of folks who have. Subject matter expertise across a broad array of technologies and disciplines. And I’m super excited to dive in. We’re gonna just get started with what is NSF and what are the things that you’re interested in funding there?
Feel free once again, just as a reminder, use the Q&A as, as we start talking. We will have time for some Q&A, and open discussion towards the end of the webinar today. And this will also be recorded so that you can check it out later, but seeing those questions rolling on the poll sounds like a lot of folks are excited to learn other folks looking for some midweek inspiration, which is totally warranted.
There’s a lot of interesting things going on in the world right now. Some really great. Some not so great. And the biggest challenge out there sounds like about finding the right funder. And so we are definitely gonna talk about that about whether or not NSF is a good fit for you and whether or not, this is the program that might be the one for your startup in particular.
So really thank you all for For sharing your thoughts. I’m gonna go ahead and close the poll and I will share those results with folks. So you can check that out, but yeah let’s dive into it. Ben. I’d love to hear, just get started, like to baseline it for folks.
What is NSF and what do y’all what kind of funder are you? What do y’all like to fund?
Ben Schrag
To your question about what is NSF so again, we are a part of the federal government. We’re a government agency and we’re a, we’re called a funding agency. And what that means is that the purpose of NSF, the entire existence is about allocating funding, right?
And as you mentioned today, we’re all sciences and engineers by training, most of us, but we’re not doing science and engineering while we work here, we’re actually helping to allocate resources for science projects, research, projects, engineering, things like that.
So our agency has about an eight and a half billion dollar budget. And about 93% of that funding comes to us from Congress and then goes back out of the foundation in the form of awards. So most of them are grants. Some of them are contracts, and most of them are for basic research.
NSF funding is intended for somebody who wants to learn about the universe, biologists, geologists, astronomers. They apply for funding to, to do certain research projects, to answer certain research questions. We put them all through a rigorous peer review process and we try to fund the most promising projects.
Most of that is basic research where the goal is, let me just figure out something about the universe without any specific application or use in mind. And the SBIR program, which many of you have heard about. That’s a small business innovation research that is basically a small part of NSF which is doing a slightly different kind of research.
And so our goal, and this is a congressionally mandated program is to also provide research funding. But we’re doing it for a different reason, we’re doing it to help companies, small businesses develop new products and services, specifically ones that require technical R and D to develop. So typically new engineering projects, new in engineering innovations, new scientific discoveries that might be able to translate into a product that has commercial impact.
So that’s the The basic idea of what we do here. We are the federal government. We do this at scale. So our budget is about a 230 million just in the small business programs where I work. And so that means that at any given time we’re providing funding to between 700 and 900 small businesses across the country and across the broad spectrum of technologies and industries.
And so one of the things to know about our program is. Unlike, I think every other agency that runs this program, we don’t have any topical focus. We’re not looking for any specific kind of technology. We’re not looking for any specific product. We’re looking for a specific kind of company, which is early stage.
Startups typically precede stage startups with very disruptive technology with high technical risk that have potentially seriously scalable commercial impacts, meaning, big commercial wins. That’s the type of thing we look for. I think I might have missed one of your questions Sedale.
Sedale Turbovsky
That’s a great overview. I wanna zoom in on a couple things that you mentioned, I think are really important. And that is that I love that you talked about, NSF at large is this agency that funds incredible kinds of research. You talked a lot about hard tech and I do want to answer one question I saw come in that I think is relevant.
And do, does NSF just in general, are they also interested in social sciences? Do you all fund things like social psych and like psychological studies, that kind of stuff?
Ben Schrag
Yeah, so we definitely do. We do fund any company where. The conduct of research and development, typically that is technical research and development.
Is it a critical thing that stands between them and the next stage of viability? Many times social science is usually not the core of what we pay for, of the type of activity we pay for, but we have lots of companies where the. Underlying innovation might be a new based on new innovations in social science.
For example, we have we have a comp, we have companies, a lot of companies now doing educational technology, especially in. Social and emotional learning SEL, which is a big focus right now. And that’s obviously heavily grounded in social sciences and in those companies, we tend to fund them to try to figure out ways to build algorithms, for example, around that, or other ways to to create scalable products based on innovative approaches, where there is research development required.
So it’s not the biggest part of our portfolio, but there’s definitely some of that we. Awesome.
Sedale Turbovsky
Very cool. So I wanted to mention that and then zoom in a little bit and note that, and you could correct me if I’m wrong, but I did wanna make the distinction that NSF is an agency. They do a lot of research development, funding of research and development.
And then there is America’s seed fund, which is the brand. That is built around the NSF S B I R program. Yeah. Federally mandated program that we’re talking about today which is focused on the early stage startup. So I wanted to draw that distinction for folks.
And so SBIR we talked a little bit you mentioned like primarily looking at programs with technical risk, and this is kinda one of the things I wanted to break down for folks, because it’s a conversation that we have a lot where people say, Hey, we submitted this SBIR proposal.
And, it got rejected because of X or Y. Or we just want to know if this program is a good fit. And so there’s, there is language about an interest in technical risk and I’d love if you could just describe or talk a bit, speak a bit to that. What is technical risk?
Yeah. What does that mean? And like how much risk are you actually looking to fund?
Ben Schrag
Yeah, that’s a great question because this idea of having enough technical risk and technical innovation is the flip side of that. So I’ll talk about both of them together, but that aspect of a company is the single biggest reason why a particular startup is not a good fit for us.
That’s that is the thing that makes most companies actually not a good fit for our funding because there’s a lot of great small businesses that don’t actually need. To rely on a risky product, which is great. If you have a, if you all have a company and you have a path to commercial viability that doesn’t require technical risk, you should take it because technical risk is not something you ask for.
It’s something you have to deal with if you happen to be cursed or blessed with that kind of product. And so the way we think about this is technical risk for us is basically when you have an idea for product or service, That even given a really qualified team to build that out, to develop it, there is still a good chance that something about the laws of nature or of the universe makes it possible that product or service can never be built the way it needs to be built to your customer.
So there is a, there is an existential risk. Not in terms of your company failing, which there always is, but there’s an existential risk just to being able to make the product work at all. That’s the type of technical risk that’s the way we would boil it down. And again, that’s a, it’s very important to distinguish that from a market risk, it’s not a risk that nobody’s gonna buy your product.
It’s not a risk that, you, can’t build a margin in that you need to, it’s literally a risk that like, I can’t even give you the product cuz I can’t make it work. And so our pro program, not only tolerates, that kind of risk, we require it. It’s a requirement. And the reason we do that is because we’re trying to fit in and make an impact as, as big as possible.
And one of the places that the private sector historically has not been perfect at supporting. First of all, anything that has a technical innovation involved at all, cuz if there’s long timelines and large capital requirements, but also that technical risk is something that investors in the private sector typically don’t wanna pay for.
They don’t wanna, they don’t wanna take that risk. They don’t wanna wait as long as it takes and they don’t, they’re not comfortable with these kind of very technical products. So that’s the, that’s the place where we think we can have the biggest. The way to think about technical risk.
And again, technical innovation is the flip side of that. It’s hard to define it, but the best way I think for people to understand it is that there’s a few characteristics of the kinds of companies that are good fits that you don’t have to have all of them, but if you’re a good fit, you probably have many of them.
And so what that, what those things are is again, number one, as I mentioned, you have a product where you’re not sure how to make it work yet. And you’re not sure. And nobody’s done anything like it so that you don’t have a roadmap to making it work. You have to figure that out. Number two, if it works, it provides some kind of pretty disruptive, competitive advantage or feature that is not possible with other products in the market.
So some compelling value proposition to your customer. Number three. It if it works, if you can build it, it’s something that you can stop. Other people from replicating. It’s something where you can build a barrier to entry for competitors. Sometimes that’s a patent, sometimes it’s straight secrets, but basically you can make an argument that the next qualified team in your space, can’t just knock off what you’re doing.
And so those three things are typically the hallmarks of the type of companies we look for. You don’t have to have all three of them, but if you don’t have any of them, It’s likely that you’re not what you’re working on is not a good fit. So the thing that makes your company special, it might be other things, but for companies that we fund, the thing that makes your company special has to be a new way of doing things that is still, at least when you apply for funding from us, that is still TBD uncertain and unproven.
Sedale Turbovsky
Awesome. No, that was a great description and very clear. I really appreciate it. And I am seeing all the questions come in. We will get into those. I promise folks but I want to touch on. So we’ve discussed is this a good fit? And like I, is it fair to say that kind of technical risk and those those metrics you just mentioned, those are a really good barometer by which to judge, if your company is a good fit for this program is that fair?
Ben Schrag
That’s one side that’s probably the most. That’s probably the rare risk characteristic that we look for and what’s a good fit for us. There is though also another category that I think is much less mysterious and much more common, which is that we all look for companies that have the same, characteristics, commercially and team wise as any investor, we’re looking for committed, passionate, grit, gritty teams who, see that this is what they need to do. This is what they’re gonna focus, all their efforts on for the. It could be 10 or 12 years in our case. We’re looking for some sense of customer traction, customer discovery, possibly, it’s a sense that, you can actually solve a problem and you’ve started to talk to the people whose problem you’re solving.
And then all the other aspects that any early stage investor looks for. Structure of the company, advisors, things like that. So I think our kind of rubric for a good fit is that technical piece that we talked about, plus the commercial and team vision and approach that I think many private sector investors look for.
Sedale Turbovsky
Awesome. So through the TLDR on that might be to say that like you’re looking for the same things that a lot of investors are, but also you’re willing to take on a risk profile that just, a lot of other VCs won’t.
Ben Schrag
Yeah. I think that’s right. And again, we’re willing to take on risk in lots of areas, but that technical risk we have to have we’re not willing to take on, we’re not willing to not take on risk on the technical side.
So the idea is if your company can. Tell me for sure. If we have enough money in time, we can make this product work. If you know that, for sure. You’re probably not risky enough for.
Sedale Turbovsky
Awesome. Very cool. That’s great. I wanted to touch on those aspects just in terms of finding fit. And then before we dive into all the Q&A, cause there’s a lot of questions stacking up.
I wanted to mention or get your like overview. On kind of the logistics of the, this this program, because there’s a phase one, there’s a phase two, there’s other there’s other contracts and grants in the P R space. Can you just describe logistically what the approach like typical pathway is for a company that all they’re a fit.
They, pass through peer review and they have what’s the timeframe look like? What’s that process look like for, once you’ve, you’ve said go NSF and the company they’re like ready to roll. What happens next?
Ben Schrag
Yeah, sure. So let me talk, I’m only gonna talk about NSF. Every agency, there’s a lot of SBIR programs and there’s some.
Commonalities between them, but the practicalities can be very different. I will say that for NSF I would really focus folks on the phase one. That’s you have to do that first. And there is a phase two funding. And so the phase one is a $275,000 grant. And the phase two is a million dollar award.
Phase two is something you probably don’t have to worry too much. Now it would happen typically a year or two after your phase one starts. But for NSF, the phase one has two steps and one of them is called the project pitch. That’s the first one you have to do. It’s it’s very lightweight.
It’s submitted to our website anytime as a portal. It’s a two pager on, again, all the kind of key DNA about your company. And then specifically, what are these kind of big technical risks that you need our funding to address? And so that would. that submission is about a thousand words.
And again, you would send it to our website and that is intended for you to figure out this question of whether you might be a good fit. So we’ll take a look at it. We’ll typically respond within a week or two, and you’ll get feedback from the program director who would actually be the person who would fund you if you move forward.
So that project pitches, something that I think is for those who are not sure that they’re a good fit, that we’ve created that to answer that question in a slightly more formal fashion. So that step would be the first step.
Sedale Turbovsky
I just wanna say this is an incredible feature.
One of the reasons I’m a big fan of NSFs, seed fund approach. And I know someone asked a question about this. This is easily the easiest way for you to figure out if you’re a good fit. Amongst the spectrum of programs that are out there in the SBIR space. So definitely take advantage of it.
If you have a question of Hey, is there a place to go where people can tell us if we’re a good fit? It’s this, it’s a thousand words. It’s the easiest like feedback you’re gonna get. And it’s pretty turnkey.
Ben Schrag
Thank you. Thanks for the words of support. Yeah. The other thing about the project pitch that I think is helpful is oftentimes we get people saying, okay I’m not sure I’m a good fit.
And also I don’t even know who to talk to or where I. The project pitch is intended for you to not only get a feedback, but if you are invited based on the fact that we think you might be a good fit we tell you exactly, this is the topic. This is the area of NSF, and this is the program director who you need to ask if you have questions.
And so that way you get both of those real common, early questions answered. So that project pitch, if you’re invited will be an invitation to submit a full proposal for phase one. The full proposal is not slight weight. It is a pretty traditional government document. It’s takes a fair amount of time to fill out.
It is. I think it is, I think com customized in language that many of you guys under entrepreneurs will understand. I think, I don’t think there’s anything there. In terms of the content that is extremely unexpected, but it’s got a lot of extra forms and things to fill out. And that would be something where you can submit at any time, but there are windows every few months that you can target that kind of give you the fastest turnaround.
And you’re welcome to start reading about that full proposal now. But if I would recommend if you haven’t gone through the project pitch, not spend too much time on it. The website that we have seat fund.nsf.gov is the best place to learn about all these steps. But that’s so that those are the two steps.
The full proposal has the disadvantage of taking a long time. It takes after you apply four, five or six months to get a final decision. So it’s not a fast process. I don’t recommend your company sit around waiting. We can usually work with you if you’ve kept moving. During that process if the process results in an award, then you basically have access to the funding as soon as we decide.
So that, that gap is very small, but the decision time is fairly long. And the reason that is, is because we bring in external experts, both on the technology and science side and from the startup and the venture side to to. To give you feedback on what, we like, and don’t like about what you’re doing and to give the program directors, guidance and advice.
And we also do our own diligence for a lot of companies that are competitive, engaging with them directly, which is why this process takes a while. But yeah, so if that. If that goes well and you get an award, then you would have access to basically almost all that $275,000 on day one of the award and a fairly flexible grant that you can use to do R and D to move your product forward.
Sedale Turbovsky
Awesome. And to be clear because there’s a lot of grants there’s a lot of different ways. Grant money is deliver. With the NSF SBIR program, this is delivered as a kind of like upfront lump sum or is, does it work on like a reimbursement schedule?
It’s upfront it’s in advance is the best way to think about it.
It’s not delivered. It’s made available to you in a, an account at NSF. The entire amount is locked down and held aside for your company, but you don’t have to draw it down at any given time. So it’s like a one way ATM through our. Systems that you can draw down as much as you need before you need it usually.
And you can draw down whenever you need more. You come back and draw down more. I think the funding and the conduct of the projects under our pro under our program is actually a much more pleasant experience than the application for the project. I would say.
Hundred percent and I just wanna speak… I brought that up just because there are just so many different programs out there as entrepreneurs. I know. There’s some folks who’ve worked with different areas of the government where it’s on a reimbursement basis, yet funding to float the capital out front can be complex. And so I just wanted to make clear for all the folks on the call that, one of the reasons we love NSF.
Seed fund program and, highly recommend if you’re a good fit that you consider engaging with them is the fact that, you get the funding it’s available to you. And you can really leverage it to your advantage instead of having to think three or four steps around alright, how do I actually utilize this capital?
Yeah. It’s very it’s a, there’s a high level of utility with the NSF grants that I think doesn’t always exist in, in other programs Yeah, because the there’s been a good amount of streamlining of this process.
Ben Schrag
We actually had to rebuild our award because we are funding startups and the traditional awards.
NSFs just didn’t work for those companies. They didn’t have cash flow to support it. They didn’t have the systems to support it. So we’ve designed a lot of parts of our program to reflect where all of us come from, which is from the startup environment. We have for our phase two, we have the only it’s.
Technical term, we have the only fixed amount cooperative agreement that exists in the federal government. We created that with other people from the government helping us so that we could serve our community, cuz nobody else in the government has ever built an award in the federal government has built an award specifically for startups.
So yeah, there’s a lot of parts of our program that we’re, we’ve tried to customize toward that specific audience and sometimes we’re successful and sometimes we still have work to do.
Sedale Turbovsky
A hundred percent and that’s just the nature of the beast in terms of government. For sure. Yeah.
Really do appreciate the utility and just the purpose built kind of design of this program. One last question I wanted to throw out there and then we’ll get into all of the questions. NSF is notoriously competitive. It’s, it is very popular for all of the reasons we’ve described here.
I wonder if you could speak to a bit of just. How competitive like what what sets companies apart a bit from the pack and maybe any thoughts you have on how to deal with rejection?
Ben Schrag
Sure. We are, I think the most competitive of the big SBIR agencies the phase one success rate.
The project pitches, actually, we’re pretty loose on that. We try to invite anyone who might be close. So we invite more well more than half of the project pitches that are submitted. The phase one proposal, which is, the second step is something where we fund between 10 and 15% typically.
So it’s it’s one in eight, one and seven, something like that. So it’s it’s definitely competitive. And the reason that is I. I don’t think we’re looking for anything. The technical piece is hard, right? If your company doesn’t have that, it’s very difficult to create it, if either you’ve got it or you don’t, depending on how, what your company was built to do that part is the, is really what mostly what kind of separates that one in seven from the other six who don’t get funded.
But the best thing for people to do beside that is under your control is to basically build your company in a way that is com customer focused and aggressive about commercialization. There are a lot of government grant programs and funding programs where they not only will allow you, but they actually encourage companies to continue to get funding from the government year after year.
And that’s, and that makes sense in a lot of cases, that makes sense, depending. What the government is looking for. If they’re looking for a stable, long term supplier, they’re gonna, they’re gonna provide awards to a given company. Lots of times. We don’t do that. We rarely fund a company more than once or twice.
And the reason that is, is cuz we’re looking to help support you on your, as a temporary partner on your on your path to having a commercially focused business. And you could be selling to the government eventually, but you’re not selling to us. We’re not buying anything from you. So we need to basical.
there’s no reason for us to support you after a few years typically. And so the best thing, I think to your point, Sedale, about what they can do to differentiate themselves is make it very clear to us that they are viewing the program in that way. And they’re viewing the government as an investor of a sort, and that their focus is on solving a, an identified, validated problem in the market that they’re targeting and that they’re doing all the right things commercially to build that commercial case.
Sedale Turbovsky
Awesome. That is an incredible answer. And I. Everyone on the line who’s considering applying or do very well to, to consider that cause this, it gets at the heart of, we, we work across a lot of spectrums and support a lot of different programs through the OpenGrants platform.
And it is just so critical that you as applicants and people are applying, understand. The motivations behind the agency who is yeah. On, I just wanna bring up there’s another very popular S B R program through the DOD that I’m sure a lot of folks are familiar with. And the do OD pipeline is very much about selling to the D OD.
It’s not a, it’s not about. This kind of like investor almost relationship that NSF has. It’s really important to like key in, on these things and understand like the motivation behind the agencies and what they’re trying to accomplish with their capital. So yeah. I last question then we’re gonna get into all of the Q the great questions that y’all are submitting.
Thank you all for using the Q&A feel free to drop other questions in there at this point as well. But last question is there’s a when you submit information to NSF there’s you either get accepted or you get rejected. There’s some feedback there. Does it make sense to reapply if you’ve gotten rejected, does it make sense to.
Give up and go another direction. How do you deal with that? Or what thoughts do you have about how startups should deal with that feedback and rejection?
Ben Schrag
If you’re a startup, you should get used to feedback and rejection. I think that’s kind of part of the that’s part of the contract when you sign up to be an entrepreneur.
To be less flipped, I think to your question, one, one thing I would say is that you do get feedback at every stage in this process. If you don’t get funded, especially if you submit a full proposal, which is a significant investment of. If you don’t get funded, there will be written comments from our external reviewers anonymous.
But I would also encourage folks to reach out to the program director and who actually brought those people in, who talked to them in most cases and ask them questions and get that take, cuz you might get a more comprehensive kind of holistic sense of the reasons for the DEC, the declination there and the program directors we have.
Again, we’ve all been startup founders and investors typically. And so we understand and are. Eager to work with entrepreneurs. That’s why most of us took this job. And so I think I would give folks that advice as a first step in trying to approach this question about whether they come back.
I think as far as whether people should reapply, you always, you’re always allowed to reapply. That’s always allowed. You have to go through both of these steps again. Typically I think the the reason for. Getting to the real reason that you weren’t funded is really important making this decision, because there are some things that you can absolutely work on and figure out and address.
And there are some things that you can’t right. So the issue of technical risk, if your product is already working is really no way to go back to technical risk. And you can try to find a new product, but again we’re big fans of people and companies focusing. And so if your product is past the point where you know how to make it.
You probably don’t wanna be doing R and D. That’s, our funding is just maybe not the best fit for you. And so there is a time and a place for this funding. And so if that’s your concern, if that’s the reason you weren’t funded, there may not be a path forward to being successful the second time, if the issue is like, look, we don’t think you understand who needs this and who your customers are and what their, what they care about then customer discovery could absolutely get you into a place where you’d be successful the second time.
So I think really understanding Almost always when you don’t get funded by us, it’s not just cuz you wrote the thing, the wrong things in the wrong way. It really is that there’s some part of your company you need to work on to get to a place where you’re competitive. And so if you feel like that’s a worthwhile use of your time and you can really address whatever that issue is then then we do have a lot of companies that we do have a lot of companies that get funded on their second or third try.
I will say as one final point here I think this is very different from most agencies. Most of the companies we fund are submitting their first ever proposal to NSF. So the, a the majority of companies we fund have never submitted a proposal before. The one we pay, we paid them for, and I don’t, I’ve never seen a stat like that in other agencies.
I don’t think that’s true for any, anywhere else. So we’re not looking for one of my colleagues, Anna. She says, this is not a proposal beauty contest. And so we’re obviously looking for you to communicate well, we’re looking for you to, Be able to tell a story, but we’re not looking for people who are experts in government funding.
And so I think for people to understand that, we’re not looking for perfect we’re looking for entrepreneurs who inspire us, that’s the play. Hopefully that gives some context about how we think about these proposals.
Sedale Turbovsky
Yeah, no, that, that was great. And I think, the one thing I wanna highlight for everyone on the call too, Ben mentioned like reaching out to the program officers.
Those folks, not only are they like here to work with you. The NSFs program is different in a lot of sense. And I think one of those things is just like the motivation behind these folks. We’ve found the program officers through SPR to be incredibly helpful on a variety of projects, everything from oh fast lane broke, or there was a natural disaster, or there’s all kinds of things that come up in life.
And I just wanted to throw that out there that like the program officers can be incredible resources for you and your company. So develop a good relationship there. Definitely reach out and get feedback about why something happened. And they can also be a great resource in just like helping you, putting in a note that like, oh, fast lane broke, so we’re okay with you submitting this or like doing this resubmission because the platform blew up or whatever.
Great great stuff. Thank you. We’re gonna dive into. Some of the questions here. There’s a lot of great ones. I know we’ve answered a lot of different things. There’s a few that are gonna just kinda combine together, but the first one here there’s a question. Hey, we submitted our one page proposal.
Are there examples? The whole question is we’re developing software to solve business problems. See it working for many industries. How can we communicate this clearly in a way to demonstrate that it’s researchable? But I think like the core of the question the ask is, are there examples of proposals that we can review?
Ben Schrag
Yeah. We don’t provide sample successful proposals either for either of these two steps for project pitch. We don’t provide an example of that and we don’t provide a full proposal. Example we do that because we really don’t want to tempt you to follow a cookie cutter that maybe is not the true intent of your business.
Like we really wanna understand what you, we’re trying to align ourselves with your vision as a company. You’re not vice versa. And if we give you any kind of template that worry is that you’re gonna try to foot yourself into that container. And it may not be a good fit for your company. We’re trying to.
Open and inclusive to light as many different companies in as possible. So we don’t have that, but I understand why people would want that document. And I will say that, you, your dealings with NSF will be private up until the potentially you get an award from us. And then if you do get an award from us there will be some basic information about the project we funded in the public domain, everything the government pays for, there has to be public record.
And so you can go to our website and you can look up 3000 companies that have gotten funded by us over the last decade. And we list contact information for all of our awardee. That’s again, part of the government rules. And so if you really need to see a full proposal maybe you can get one of those people to give you their proposal.
I did that when I was funded by this program and we were applying when we were starting our company and I got a colleague from grad school to give me their proposal. And I shared my proposal with others after we were successfully funded. There’s a lot of people out there who’ve been funded by us and it’s entrepreneurs typically like to help each other.
And so maybe you can get a proposal that way. That’s the best I can do for that question.
Sedale Turbovsky
it’s a great response. And I’ll just say that the links to the NSF site are on the in the chat there. It’s I think you just I think you can find pasties by simple, just scrolling down on the homepage and it’s right there and you can get right into it.
Ben Schrag
Find someone, oh yeah. Kate posted the actual direct link to the portfolio. Thank you. Perfect. That’s great.
Sedale Turbovsky
There’s a question here about application deadlines. I’ll just say, refer you to the website. Check that out. It’s rolling. But there are windows. This is a great question. Would love to know if anyone with, without who doesn’t have a university partner can work on an S B R NSF grant.
And I’d love to hear your feedback on this. And I think I know how to answer this, but I would love to hear your thoughts on SBIR and S TTR. And if those distinctions are active within the NSF seed fund?
Ben Schrag
Let me work backwards there. So STTR, you just mentioned Sedale, that stands for small business technology transfer.
Don’t ask me why that’s, what it stands for. I didn’t decide the acronym. And that is a program that basically you don’t need to worry too much. It’s a program that basically is mirrors, almost everything I’ve said today applies to that as well. It’s a second program that we work for. It’s smaller.
And there are some differences about the. Practicalities, but fundamentally all the philosophy is the same. You don’t need to worry about the difference at NSF. Other agencies will have more differences between these programs and you’ll have to worry about which is a good fit. You never actually need to even worry about which of these is a good fit until later, because they’re actually part of the same process.
And the big thing with the TTR program is that it does require that university is part of the project and the SBIR program you can work with the university, but you’re not required to. The question about whether you can work. I think I’m not sure if this question is an eligibility question about whether you’re allowed to work on a project without university partner or whether there’s some, criteria that we want to see university partner, but I would say the answer is that there’s no, not necessarily any reason you have to be working with university to have having a university connection for our program.
A lot of new technology that has high risk does spin out of universities in some form. So a lot of our projects do have connections. People are, technologies from university or people have just graduated from university and, that’s fine, but there’s lots of other great innovations out there that are technical, where there is no necessarily in university connection.
I had a. I had a phase two company I worked with once, which where the there’s no university and the PI the guy who was a technical expert didn’t even have a bachelor’s degree. And he just happened to be extremely good at building high temperature furnaces. And so he got funding to develop a furnace that could process certain metals that are difficult to process better than could be done before.
And so I think, we try to be open to innovation that comes from anywhere. Sometimes the technical risk and the innovation you’re working on is in a field where, certain university training is very common to make you if you wanna do genetic engineering, you probably learned at that at university, right?
There’s not a lot of other places where you can do that. So sometimes there are a lot of our portfolio companies that have university connections, but I wouldn’t worry if you don’t. I would, again, focus back on the risk and the innovation that we talked about.
Sedale Turbovsky
That was a great answer. Another great one. What is the benefit of working with a consultant versus applying on your own? Does NSF approve or disapprove of doing that?
Ben Schrag
So yeah, so this is an interesting question, given the I’m here here on with an opportunity with an invitation from from a service provider, I would say I don’t blame anybody for working with a service provider cuz of how opaque this process is.
I think we’re a little better, but I think we’re, we still have challenges and I think other agencies are very difficult to navigate. So I there’s absolutely a need for people to help you with the process. And so I have, I think we have no problem with getting help. I will say At NSF, because we are so different.
And because we have the same name as other agencies that have a very different focus, there is a risk that people misunderstand us, even service providers. Occasionally we see that where we’re people are given advice that actually is not really as relevant for us as it would be for somebody else.
And because we’re a little bit of a, of an outlier We are a little bit worried about that, but I would say, I think it’s fine either way. I would say the one piece of advice I would give is if you do work with somebody to help you with the proposal make sure your story is still there.
What we really want to hear is from the people who are gonna push this company uphill for the eight years or whatever it is, we wanna understand what they’re trying to do, what their vision is and what their mission is. And so if you have someone working on massaging the document, make sure that your own personal voice as the entrepreneur.
Or the team of entrepreneurs doesn’t get lost in that in that massaging.
Sedale Turbovsky
Awesome. Thank you so much. There’s quite a few questions. If you could just speak briefly to what in terms of eligibility if you’re a foreign company, can you participate in this program and what are the restrictions?
Ben Schrag
So let me cover a couple of things about eligibility.
Number one is that, to apply to get funded. You have to be a us based small business. So to be the applicant, to be the company leading the project, you have to be us based which means number one, you have to have at least a place of business in the us. Number two, you have to be us owned and operated and us owned and operated means 51% of your stock or control.
And your control and your equity. Those things all have to be controlled or owned by us based individuals, which means citizens are permanent residents. So it’s really about your cap table and who actually makes company decisions and not, and the people who do that. And for a foreign company typically a foreign company could not apply, but a foreign company could theoretically work with a, an American, small business and receive funding.
The other eligibility thing I’ll talk about here is that typically all the funding that we provide has to be spent inside the United States. So if a foreign company was part of this, their work would have to be done by their employees wall in the us typically. There’s rare exceptions to that, but Congress is pretty strict with that requirement that’s imposed on the program.
So typically again, us individuals have to own a majority of the company control majority of the company and the work has to be done here in the us.
Sedale Turbovsky
Awesome. Thank you. There’s also quite a few questions just around the judging process. Like how are program directors selected? How do they pull in experts?
Ben Schrag
How are program directors selected? Is that, was that the question? How do they select like the outside?
Sedale Turbovsky
Yeah. How does that, what does that process?
Ben Schrag
Look like in terms of the, yeah. Sure. There’s a section on our website about reviewers, about the review process that I recommend for more information, but basically when a full proposal comes in, we have three, three kind of criteria.
We, we judge you on. One of them is called intellectual merit, but that’s actually a term that I would. I would just think about this technical innovation and risk piece basically. Is the innovation real? Does it have disruptive potential? Do you have a team that kind of can carry out the work and this is the right people in the right technical field.
So that kind of thing about the research that’s gonna be done. That’s what intellectual merit is. That’s the first piece. The second piece is what we call broader impact, which is basically if this technology gets to market, if this product. Exist. What benefits does it have? And there’s a third criteria called commercial impact.
So this is really about the beyond the commercial and the economic impact. What are the broader impacts are is this helping is this product gonna help clean up the environment, educate the next generation, things like that? Is it, is the company gonna be a net positive force for America?
There’s some products that are actually probably harmful to the general taxpayer. . And then the third thing is commercial impact, which is what an investor would look at a startup and think about. And so when you, when we’re putting together these reviewers, we’re really looking at getting people who mirror, who have expertise in understanding those three things, right?
So the technical risk and innovation. The commercial impact and the kind of broader impact on the domain. So the types of people that we bring in, they’re all from outside of NSF again for the technical side of things, it’s typically scientists and engineers, technical people who understand the research.
Next thing is the broader impact. And that typically has people who understand that the market you’re going into, which is maybe different from the scientific personnel people who understand what the impact will be and what the dynamics of the market are and how it’s gonna change the facts of the, that industry.
And then the commercial side of things we bring to, we bring in typically people who know startups and that’s usually entrepreneurs or investors. So those are the types of people we bring in. And we have a lot of freedom to bring in. Whoever we think is gonna. Versed to to comment on a given proposal.
And in many cases I’ll bring in reviewers just for one proposal. That’s actually pretty common for my portfolio. I just need one person. Who’s an expert in, I have a company right now developing a new kind of elevator. So I had to figure out okay who designs skyscrapers like? And so I had to figure out, okay, who can I talk to about that?
So that’s a big part of our job. And we’re really trying to just get people who know more. One part of your business model that you’re touching one part of your stakeholders than we do.
Sedale Turbovsky
Awesome. Very cool. Thank you for that. Another great question. And I think there’s some related ones about this.
Can you speak a bit about like the reporting process for once you have your award? What does that look like? Is it a lot of time? What goes into that?
Ben Schrag
The formal reporting is pretty lightweight. It’s pretty, it’s fairly easy. And so the formal requirement for phase one is really only happens at the end of the project.
There’s no other formal require. So you have to basically send in a, kind of a summary of what you did at the end, and you have to send in a one page summary for the public about, why the taxpayer investment was a good thing to, to have. And so that is, I think that can take a little while, but that’s the only formal reporting requirement for that phase one.
Informally a lot of the program directors to be in fairly constant contact. Y all of you in a fair, in a fairly lightweight way, in a fair, in a fairly non burdensome way. And so typically like a 15 minute phone call, or maybe you send them a one slide every month or two, something like that.
That’s not a formal requirement, but a lot of us find that it’s really much more helpful for us to. To have those conversations every so often. And if you need help, obviously we’re always there to help out if you need, if needed, but even if not, we’re we wanna understand how you’re thinking about things and the best way to get that is to talk to you about it every so often.
And so that’s not a requirement, but obviously if your program director wants that, usually it’s something you want do. And sometimes you’ll have that, but I think that is, I think that is typically, a kind of half hour per month type. Type of time commitment. So it’s not too bad.
Sedale Turbovsky
Yeah. A couple rapid fire ones. That, I’m pretty sure I know the answer to as well, but I’ll throw ’em your way. Do you only fund companies? What about nonprofits? Yeah. What needs to be like, is it a Delaware, C Corp?
Ben Schrag
We can’t change it. It could be anything that is a for profit small business. And so we fund a lot of C Corps. We fund LLCs, we fund some S Corps, we can fund sole proprietorships. We fund, B CORs now, some of them so anything that has a profit. Motive. That is a small business, which by the government definition is fewer than 500 employees.
Although the average company we funded phase one is two employees. That’s the median size of company.
Sedale Turbovsky
Awesome. Thank you. Can awarded funds be used on compliance studies, for example, EPA required scientific testing.
Ben Schrag
Maybe that’s something you’d wanna talk to the program director about typically the phase one has to have some aspect.
Work, that’s actually moving your product forward, where the product is changing and improving and being proven out over time. But some of the funding could be used for testing and evaluation and some of that could actually be things that also feed into regulatory or compliance studies in some cases.
Sedale Turbovsky
Awesome. Great. There’s some questions here about just generally speaking like where your company should be in its life cycle. Should you have a patent? All these different things. Can you talk a bit about like where the team and company and tech should be? Like, do you need revenue?
Ben Schrag
Yeah. So usually it’s hard to be too early for us. Almost all the companies we fund this represents the first institutional funding in of any form. As I mentioned, the median company we fund in phase one is two years old, two employees and has had no prior government funding. That’s a very common profile.
None of those companies have revenue recurring revenue, some of our companies are going through incubators and accelerators and that’s all good. But product revenue is typically pretty rare because. Again, unless you have a different product. The one that, that has the high risk that we’re looking for, it’s probably too risky for anyone to pay for yet.
So usually the, to the extent that our companies have funding, it’s usually sweat equity, founders shares, maybe some angel funding or, other kinds of, incubator, precede type funding.
Sedale Turbovsky
Awesome. Thank you for that. Another great question here. If there’s a good fit between NSFs SBIR program and NIH, and we’ll just expand this to DOD and everyone else in the SPI.
Is it advisable to apply to and receive funding from multiple agencies? Is that legal? I know obvious. I know these answers as well, but if you could speak a bit to how you might navigate that as a company.
Ben Schrag
Sure. So the legal and eligibility and kind of formal requirements about applying for multiple projects is that it’s never illegal to apply to multiple agencies.
As long as you disclose to each of them about everybody else. You can’t accept funding for the same project or for overlapping projects from more than one agency, but you could theoretically ex accept two different projects that are different projects from the same agency or from different agencies.
As far as navigating that. It’s true that a lot of our cuz we have a topical focus that is basically in infinite, right? There’s no technical topic. We don’t support. We overlap with, I think every agency and our portfolio companies have probably been funded by every other agency. We are the only agency that I know of.
That’s really startup focused. And so usually. We go before the other agency, maybe at the same time, but it’s pretty rare for you to go to any other agency, get funded and then come to us three years later. Because number one, if that agency, if you’re three years done, you’re probably not as much of a startup anymore.
And especially if the other agency funded you, cuz a lot of other agencies don’t fund startups as much. Also because again, we’re looking for that high level of technical risk. And if you are, if you’re working on this product for five years and you’ve still got technical risk, There’s a few things that could mean, and none of them are good typically and it could be a company that’s been around for a while.
Maybe you change what you’re doing. And so now you’ve got a new thing that you just started working on and it’s still risky and that’s fine. But usually because we’re looking for companies to focus on doing one thing well, and because we’re looking for high technical risk, you’re doing one thing.
And it’s still risky. It usually means you’re just getting started. So that’s typically. Typically means NSF will typically be the earliest agency to approach, but not always. And and there is a lot of overlap, right? So with NIH, for example we have out of our 12 program directors for 13. Now the five of them are focused on the life sciences and the entire portfolio of all five of those colleagues could probably fit somewhere at NIH.
So there is a fair amount of overlap and it’s usually not a problem to go to. Usually our window closes first, I would say, as far as your company’s ready availability. And so I would encourage you if you’re approaching any other agency to approach us at least as early, if not earlier than them.
Sedale Turbovsky
Awesome. Question here, will the NSF participate with other investors? Yeah. Thoughts on like outside capital and other folks? Joining in. Sure.
Ben Schrag
Yeah, so we don’t we’re not an investor per se. We Don. Take equity share. We don’t take board seats. So we’re down dilutive and you guys should be appreciate that.
Hopefully that’s a good thing. And so we don’t participate in the sense of, actually being part of a transaction that another investor might have. I will say that for our phase two companies, if you get phase two, which is a million dollar award. We have a program called phase two B, which actually gives you the opportunity to match outside funding, especially investment or product sales up to another half million dollars.
So if you get a phase two, you get a million dollars. Say you raise a million dollars of venture investment or seed angel funding or, convertible maybe even a convertible equity or safe note. We will then match 50, 50 cents on the dollar up to another half million dollars. So now your $1 million phase two award will become a million 0.5.
And so we do encourage people through that mechanism to raise funding. So usually if you’ve raised some. That’s a good thing. It validates a lot of the things that we’re looking for. It gives you more support, so you’re more likely to be successful. There is an amount of money you could have raised before you came to us that we start to be a negative and we want our funding to be catalytic.
We want our funding to be transformative for your company’s trajectory and. If you’ve raised a million bucks, that’s fine. Usually if you’ve raised 200,000, that’s fine. If you’ve raised 5 million, it’s starting to be the case where we’re gonna ask ourself, like why is my $275,000 phase one gonna make a difference here?
And there is a double-edged sword to external funding, but the way I think about external funding is this, when people say, we wanna know how much external funding work we need to raise before we start being a, before that starts to be a negative. And I say, look if the amount of money you can raise is gonna be negative for NSF, you should just go raise it anyway because it’s much more important than, right?
So if you need to ask the question, you can’t afford it anyway, basically. So I would say we’re hoping that the companies we’re working with are not gonna dramatically change their fundraising or other plans for us. We’re hoping to again, be a part of your story, but we’re hoping that you’re not building your company around our funding.
Cause our funding is only ever gonna be. Part of your funding landscape because we only pay for one thing. We only pay for R and D. So we hope that you, us as one piece of a puzzle to support your company.
Awesome. Love it. So I just wanna throw out there, this will be available as a recording afterwards. Definitely reach out. We’re happy to be a resource and let’s go. So is there an advantage to having a university a partner, does that make you more competitive?
Ben Schrag
If the work you need to do is gonna be better done with the university partner then yes. But per se, there’s no advantage of having a university partner, right? But sometimes with a startup, you don’t have all the equipment and expertise you need. As I mentioned, most of our companies are around two employees.
That’s common. That usually means you, you can’t do everything you propose to do technically within your own facility with your own people. So having a university can be helpful there, but it’s not a check box. We look for it. it’s the right. If it’s the right tool for the job, then it’s great.
Otherwise that’s fine. Not to work with one.
Sedale Turbovsky
Awesome. Can you receive funding from more than one?
Ben Schrag
Yeah certainly we look at the unit of inter the unit of organization we look at as a, is a company, right? So each company has its separate. We look at them separately.
If there’s people who are overlapping with multiple companies, then multiple, those different companies can all apply. We would start to ask questions about if people are all have three different jobs, we start to ask questions about the team, right? Any investor would say, look if my CEO has a day to day job, how much am I gonna get enough time to make the company successful?
So there are those questions that would be asked, but yeah, somebody could theoretically be part of two companies that both received parallel words. Awesome.
Sedale Turbovsky
And another question here any opportunities for funding post quantum CRI cryptography project.
Ben Schrag
Sure. Yeah. We have a full quantum information technology portfolio.
Peter agen, he’s actually funded some of the leading companies in quantum, including the current longest coherence time for quantum computing is a company called Adam computing, I think. And they’re a portfolio company of ours. So yeah I can’t remember the name of the, we do, we have done some post quantum photography.
I just can’t remember the names of those companies, but if you talk to Peter he’ll be able to give you more.
Sedale Turbovsky
Awesome. And I just mentioned in, in chat reaching out to anyone within this program go to the NSF site, contact information is all there. The links are there in the chat.
One last one here. Does NSF refer program projects and applications that they don’t fund to other agencies?
Ben Schrag
We would theoretically talk to people in that when there’s that debrief call, if you don’t get funded and you wanna talk about why a lot of times that’s a common question that comes up and we’re happy to try to give you ideas.
We don’t ever release any information that you sent us to anybody outside of NSF for any reason. It’s all kept private. So we could tell you about another agency, but we couldn’t tell them about you. Unless we had a, unless we somehow you had your permission to do that in a way that didn’t re reveal proprietary information.
But yeah, all of us here have worked with other agencies. And so sometimes if you wanna just think about, we don’t know the whole government, it’s a big government, but if you wanna understand the opportunities, we know a lot of the people in the research space for companies.
Sedale Turbovsky
Awesome. Ben, thank you so much. This has been incredibly enlightening. I hope this was useful for everyone on the on the call. We will be following up with emails, with links, to all these resources. If we didn’t get to your question feel free to reach out with any specific questions to myself or Ben.
And you can go to the NSF site, all of the contact information, like I said, is there highly encourage you to reach out to these folks? Incredibly approach approachable. Very responsive. Just a great agency to work with in general. So we’re big fans and OpenGrants of what y’all are bringing to the table and really appreciate your time today.
Ben Schrag
Thank you. Thanks for having me.
Sedale Turbovsky
All right, everyone. Thanks for being here. Thanks for sticking with us. You can visit OpenGrants.io, the links to NSF right there in the chat. And we’ll see. Y’all next time. Thank you.
