

Y Combinator, but with 20x the red tape - ciscoriordan
http://www.nsf.gov/eng/iip/sbir/2009_ict.jsp

======
rjurney
If you're located outside of a startup hub, taking the week or two to apply
for a $100,000 Phase I SBIR grant - if there is one relevant to what you are
doing, is a smart move. If you know your subject matter, it is not that much
work, and the red tape can be well worth a six month budget. Other than the
red tape, which is not THAT bad operationally, the money is literally free.
There are often good opportunities from DoD, in some solicitations. There's a
new solicitation out from someone every few months. <http://www.dodsbir.net/>
A Phase I can lead to a Phase II - which can be $1 million or more. For
instance, there were some very interesting topics in DoD's solicitation a few
back:
[http://www.acq.osd.mil/osbp/sbir/solicitations/sbir092/osd09...](http://www.acq.osd.mil/osbp/sbir/solicitations/sbir092/osd092.htm)

BTW - DoD is pretty cool about not requiring an advanced degree, unlike some
other departments. If you have a background full of successful projects but no
degree, you can still win by stuffing some MS/PhD's in as advisers.

That being said - for some of these it can take six months to hear whether you
even won the grant, so this is not a primary funding strategy. It is a
supplementary funding strategy. Its something to do, then forget about until
you hear back. You don't want to try and setup a company with the government
as your only customer - they will bleed you dry with delays. But if you're
going to build something anyway, and are an expert in the area... why not go
for the cash?

Your state may have an office setup to assist you in applying for these. The
folks at ATDC in Atlanta were very helpful:
[http://innovate.gatech.edu/Default.aspx?alias=innovate.gatec...](http://innovate.gatech.edu/Default.aspx?alias=innovate.gatech.edu/sbir)
There are numerous companies in Atlanta that have 'bootstrapped' to the tune
of several million dollars using SBIR/STTR, and have gone on to success in the
broader market.

This doesn't really compare to Y Combinator, but it is (almost) free money.
Uncle Sam dolla dolla bill, yo.

~~~
jws
Anecdote of something that _never_ happens, where the value of "never"
includes "at least once".

A long time ago, when a Phase I SBIR was a lot of money to a tiny company, we
got one and spent 6 months on it only to find that the department which was
supposed to accept the report had been organized away. After a year of trying
to get someone to sign off on paying us we gave up. Five years after the money
was to be paid, out of the blue we got an panicked call from an accountant
that we _had_ to accept the money _right now_! Seems it was going to get
returned to congress for being unused for too long and that is bad form.

But that was the '90s. Don't make your plans based on that.

~~~
rjurney
You get paid up front, so this was your Phase II award - based on the fruits
of your Phase I? I take it this was a lot more money than the Phase I then?

~~~
jws
They may have changed the rules since the the 90s. They payment was to be
triggered by the phase I report.

------
rfreytag
My company (Freytag & Company, LLC), won a DARPA Phase I and Phase II STTR
(just like a SBIR but 30% goes to a US univesity). Phase I was for <$100K/1
year (at least 30% to a U.S. university so its $70K which has to in fact last
you 18-24 months IF you win Phase II - YC-like if you ask me) and Phase II was
competed with second-contract award a year after Phase I ended for < $750K/2
years (again 30% to university).

Topic DARPA ST061-004: ttp://tinyurl.com/yzuqxwh

This was our fourth SBIR/STTR proposal and only win. SBIR/STTR topics are very
competitive (winning teaches you how so you are more likely to win again).
This particular topic received ~30 submissions of which an unusually high
number were awarded (3) Phase I money. Winning Phase I does not mean you win
Phase II because of poor results or no Federal funds available. For this topic
we also had two competitors for Phase II funding. You cannot win Phase II
without first winning the Phase I.

The marketing, regulatory, and compliance process that comes with this money
has been VC-pitching-intense but the advantages and cautions are very, very
different. One advantage is that the Federal government pays in a recession.
The catches are important and I found surprising (e.g it is non-trivial to
negotiate a contract with a U.S. university under a deadline and to do so
while complying with the Bayh-Dole Act). Also DoD SBIR/STTRs train you to
become a government contractor (NSF might be different). Selling commercially
is unusual but laudable - just don't expect people to be very familiar with
what you need in the way a VC is "supposed" to be.

As a result of this process, my company (Freytag & Company, LLC), has
products, enough money for one other employee, and huge experience going to
the government market.

Since, our Phase II contract was "cost plus fixed fee" (most bigger government
contracts are), and most costs are labor hours, regulatory compliance means
tracking labor hours with contract codes. We passed our first Defense Contract
Audit Agency (DCAA) audit just before we won our Phase II and are about to
undergo another audit less than two years later. As a result we have probably
one of the tightest accounting systems for a company this size you will ever
see (and a damn fine accountant).

Because we took a lot of money and are doing something that might fail despite
the money, we (well, -I-) decided to give our time-tracking tool away free.
Figured it was a certain way to: 1. help the SBIR/STTR program grow our
economy by 2. helping other firms immediately solve one part of their
compliance problem - that of being able to track employee and contractor hours
in the particular way the government expects.

If you need to track your labor hours over a distributed team of developers
and would like to use a tool that has taken at least one firm through a
government audit (and soon another - joy!) email me at timesheets@freytag.us.
Please tell me who you are and what your problem is when you write.

~~~
DenisM
So... 3 winners out of 30 applicants, that's a 10% chance of winning, or $10k
expected profit six months down the road. Suppose it takes 2 weeks to
prepare...

Can you spend 2 weeks in a different way to generate > $10k in extra money 6
months down the road? If the answer is yes you should probably stick with your
other work.

~~~
gojomo
Where do you get the $10K figure? I tried to find a link to award amounts for
the exact application linked, but could not. I did find another database of
NSF awards from a superficially-similar link on that site:

[http://www.nsf.gov/awardsearch/progSearch.do?WT.si_n=Clicked...](http://www.nsf.gov/awardsearch/progSearch.do?WT.si_n=ClickedAbstractsRecentAwards&WT.si_x=1&WT.si_cs=1&WT.z_pims_id=503361&SearchType=progSearch&page=2&QueryText=&ProgOrganization=IIP&ProgOfficer=&ProgEleCode=5371&BooleanElement=true&ProgRefCode=&BooleanRef=true&ProgProgram=&ProgFoaCode=&RestrictActive=on&Search=Search#results)

Looking at a few of the awards to software companies, they appeared to reach
$150K.

~~~
DenisM
In this thread several people mentioned awards of $100k, given 10% probability
of winning the mathematical expectation
(<http://en.wikipedia.org/wiki/Expected_value>) of the award is $10k.

That is if you try 100 times you will win 10 times and get $100k each time you
win, or $1m total, or $10k per attempt.

~~~
gojomo
Trying to calculate expected value is a reasonable approach. (I understand
expected value, just hadn't seen the $100K estimate.)

This appears to be the full solicitation of which the "(IC)" area is part:

<http://www.nsf.gov/pubs/2009/nsf09609/nsf09609.htm>

Looks to be 200-300 awards of up to $150K each

It might be reasonable to assign a much higher expected value, if the
applicant knows (via communication with the program officer) that their team
and area are in a favored area, or if they expect to also seek government
funding past the first stage, or if they get some value (experience/feedback)
even from a 'loss'.

Also, the costs of applying could be far less than 2 weeks if (for whatever
reason) an applicant is good at the process or can repurpose other
presentation materials.

So perhaps the expected value is some multiple of $10K, for just a day or
two's effort,

~~~
DenisM
I expect most other applicants to do the due diligence and communicate with
program officers as well, it's even suggested on the application paperwork. In
general I expect similar situations to attract similar caliber of people, the
only exceptionality I expect is in their core competency not in other things
such as process, paperwork etc.

I agree on non-monetary rewards, those can be useful for some people depending
on their future plan. I see myself in consumer market, so it's not clear how
much benefit will I get from it. Would be nice to know more about that.

I need to look closer into the two-week thing. You might be right, and if it's
less than a week I might as well just do it.

Speaking of probabilities, they have funded 395 out of 2067 submissions in
2007, so the estimates are going up slightly:
<http://www.nsf.gov/eng/iip/sbir/phaseI_map.ppt>

~~~
rfreytag
Definitely try to speak to the PM.

------
Kliment
It's significantly more convoluted for European Commision-funded projects.
Having worked on a number of proposals, the process goes something like this:

You put together a consortium, with partners from at least three different
European countries (seven for some proposals).

If you are applying for "Future and Emerging Technologies", you write a 5 page
proposal saying what you want to do, how much it will cost, how you plan to do
it and why it should be done. Wait three months for the EC to respond. If they
like your idea, you get to the next stage.

If you are applying for a specific call or your FET-open short proposal was
accepted, you get to write a full proposal. This is 60-90 pages of detailed
justification for why your proposal is beyond the state of the art, a detailed
work plan, a justification of the concept, the specific tasks of each partner,
a timeline, a budget, and what "impact" it is meant to have on Europe as a
whole in terms of the objectives of the specific call. This is a rather
massive, hard to distribute amount of work. During the three months after the
deadline, your proposal is sent to some call-topic-specific experts as deemed
by the EC. A lot of these experts are working in the same field and indirectly
competing with you. They are almost all academic or bureaucratic, since
industry people don't have time for this sort of stuff. Three months later,
you are told how you scored, and if you scored well enough, you are put on a
list. The commission goes through the list and funds projects until the budget
runs out or the projects get too bad. All in all, the feedback cycle can be
over a year long, and that's before you even start work on the project itself.
Resubmitting an improved/modified proposal takes an incredible feat of
enthusiasm across a necessarily large number of people within several
institutions. The amounts distributed are in the millions of euros, so it can
be worth it, but the process essentially requires the working group to be so
large that a lot of efficiency is lost.

~~~
Ras_
True, and often that consortium isn't just a bunch of SME-sized companies.
Even the bigger players, like universities need to form multinational
consortia to compete successfully.

Long processing times might effectively require you to have the amount you are
seeking in your own bankroll (money comes often late, not before). Thus you
can't actually compete without stable finances.

I'm not sure that the scheme produces innovations efficiently, but at least
the investment in networking (might prove valuable) and bureaucratic efforts
is huge.

More info: <http://en.wikipedia.org/wiki/Seventh_Framework_Programme>

Luckily there are plenty of funding instruments at the national level.

~~~
Kliment
Yes, the networking is very, very effective. A lot of the people I've worked
on EC-funded projects with I've ended up working with on other, more
meaningful things as well.

------
spamizbad
Oh how deliciously ironic: sneering contempt for the NSF... on the Internet.

This is the government agency that gave us ARPANET and the Mosiac browser.
They also provided funding for Larry Page and Sergey Brin's proto-Google
project at Stanford.

~~~
mnemonicsloth
1\. the point was stronger before you added the second paragraph.

2\. So what? Yes, we need DARPA, NSF, &co to fund $10^9 research projects like
space elevators or The Internet. YC has shown that the real problem with such
projects isn't red tape _per se._ It's the decade-long release-response-
revision cycle you're forced to deal with when the stakes get so high. You
have to deal with a lot more accountability mechanisms when you beg or borrow
that much money. I'd be willing to bet YC's success rate compares favorably to
NSF's.

~~~
rjurney
DARPA birthed the Internet. YC birthed reddit. I guess the jury is still out.

~~~
mnemonicsloth
I'm not saying DARPA/NSF are bad. They deserve the respect they get. But their
job is to tackle problems that only _might_ have solutions, way out at the
edge of what's possible at a given level of technology.

But it takes a long time for the benefits of that kind of work trickle down to
the average person, and there's no feedback to indicate what the private
sector will want and what it won't. So for every Internet, there are a lot of
ITERs: <http://www.iter.org>

Total cost of ITER has been in the tens of billions, and the project is
projected to start producing energy about 40 years from now. In contrast,
General Fusion, a startup with under $25M in funding, could be ready a lot
sooner: <http://www.technologyreview.com/business/23102/>

~~~
Retric
General Fusion: "It's a long shot, they say, but well worth a try." Read that
as _It's got less than a 1% chance it might work, but compared to the
potential gain it's still worth looking at._

ITER on the other hand has an 85+% chance of working (net energy gain) and
only costs the US ~1billion. So while ITER might cost 50x as much it's more
than 50x more likely to actually work. Also should ITER work as well as
expected a working fusion reactor that could produce 1GW of base load power
could be built in 10 years. ITER's initial design was for a 500MW power plant,
but ITER was scaled back to a demonstration device to lower cost and reduce
risks.

PS: All fusion devices produce a lot a radiation and need extensive
containment and decommissioning costs. The only way you can build a 20
million$ fusion reactor is by avoiding actually producing significant amounts
of fusion. So all projects that say we can demonstrate fusion for < 50 million
are not going to produce significant amounts of electricity.

~~~
apsec112
"ITER on the other hand has an 85+% chance of working (net energy gain)"

That is "working" only under an irrelevant definition of the word. The test of
a commercial power system is not whether it can produce a net energy gain, but
whether it can produce large amounts of energy at prices which compare
favorably to coal and nuclear. Having a zillion hamsters run on wheels all day
might well qualify as "working" in the sense of producing net energy, but we
don't use it for a reason.

"and only costs the US ~1billion."

Although technically true, this is a gross misrepresentation of the actual
cost, which is enormous.

"ITER was originally expected to cost approximately €5bn, but the rising price
of raw materials and changes to the initial design may see that amount
double." - <http://en.wikipedia.org/wiki/ITER>

"All fusion devices ... need extensive containment and decommissioning costs."

Evidence? Lead is very cheap.

"The only way you can build a 20 million$ fusion reactor is by avoiding
actually producing significant amounts of fusion."

Evidence?

~~~
Retric
ITER's cost is inflated because it includes a lot of research that would not
take place in working power plant. Based on the physical cost of ITER and the
scaling factor in fusion reactors a multi GW design similar to ITER should be
close to the cost of fission. However, it has significant political advantages
both for non-proliferation reasons and Not In My Back Yard reasons.

Lead under heavy neutron bombardment becomes radioactive as does all other
materials with long term heavy neutron bombardment.

PS: If you are interested in fusion I would suggest you look at fusor.net.
It's a message board for amateurs but there are some solid posts relating to
the amount of neutrons produced per watt of net fusion energy for the better
fusion materials. As well as a look into the cost of shielding etc.

Edit: <http://en.wikipedia.org/wiki/JT-60> _JT-60 does not have the facilities
to handle Tritium; currently only the JET tokamak has such facilities. In
fusion terminology JT60 achieved conditions which in D-T would have provided
Q=1.25 where Q is the ratio of fusion power to input power._

<http://en.wikipedia.org/wiki/DEMO> _DEMO must have linear dimensions about
15% larger than ITER... Subsequent commercial fusion reactors could be built
for nearly a quarter of the cost of DEMO if things go according to
plan.[2][3]_

------
crux_
Anecdote: I've applied twice with NASA's SBIR program and been denied twice.
It has the advantage of being 'free money', besides your time required to
apply (the first time I took about two months of weekends and evenings to put
together an application; the second time I did 1/2 week full-time), and the
disadvantage of being extremely competitive. The competitors are often firms
which do little but SBIR, full time, and they have serious advantages from
knowing the system.

(Example of not knowing the system: on my first application, I put forth a
very ambitious workplan in order to entice NASA with a high bang:buck ratio;
this backfired completely as they loved my proposal except for its unrealistic
workplan. D'oh!)

However, I'd still say it was worth the time, as they forced me to do a lot of
explicit planning about where I was taking product development, and now I have
two well-written proposals that I can cut-and-paste into various new
incarnations for other audiences.

That said, my company will never be doing that again. :)

~~~
wisty
So the real advantage is it's a free and formal way to thrash out a business
plan?

------
jacoblyles
Hey, what is this for? I'm about to start on a project at the border of
research and industry, and I could use some money.

~~~
rjurney
For most agencies, it has to be something they're interested in, and it has to
constitute basic R&D, one step past the state of the art.

Check the current solicitations and see if there's a fit.

~~~
jacoblyles
It looks like they have a category for "applications", which seems to use the
same definition commonly used around here.

------
ivankirigin
Don't apply for SBIRs if you're at a startup - unless you think addiction to
crack is good. Seriously, there have been but a dismal few examples of
companies that actually stop working for the government and become product
centered.

------
sown
I wonder if some other person like PG will do a Y Combinator for another
industry.

~~~
smanek
Outside of tech, you can't really do much for $20K. Any sort of
retail/manufacture/biotech/cleantech/etc startup requires far more capital to
get off the ground.

~~~
bhousel
It could easily be transferable to the entertainment business. I'm picturing a
bootcamp for authors, or musicians, or screenwriters, etc.

Participants would get enough money to do their thing for a few months in
exchange for royalties against a future work. They'd also receive training on
the ins and outs of the business, and access to industry people.

It could work well. For all I know, it might exist already.

I think it's unfortunate that the entertainment industry seems to prefer
competitions, like "Project Runway" or "Making of the Band". It would be a
better investment to coach all those early-stage participants towards
something, rather than pit them against each other and declare a winner.

Could you imagine how much better tv/music/publishing would be, if the major
players did something like this?

~~~
forensic
There are lots of places like this, but they don't work specifically on the
venture capital model. (But they should!)

<http://www.channel101.com/> is an example where it's a kind of co-operative
incubator for comedians, directors and actors. Andy Samberg and his two
partners (who are major players on SNL now) were incubated there. Too bad you
can't invest in a comedy team the same way you can invest in a corporation -
because if you could Dan Harmon (the guy who runs C101) would be rich.

------
jmtame
goodluck with that, nsf

