Grants – Don’t Take the Process for Granted

For technology and bio-tech companies, the availability of government grant programs through various government agencies – National Institutes of Health, National Science Foundation, Depart of Defense, and others – provides an opportunity to obtain funds that neither dilutes founder and early-stage investor ownership, nor requires that they be repaid as loans do.  However, grant funding isn’t without cost or requirements.  It is important to understand the implications of the grants on all aspects of the business, particularly accounting, project management, human resources, and intellectual property ownership.

For companies deciding whether or not to pursue grant opportunities, it is important to understand both the proposal and compliance processes.  The proposal process involves identification of funding agencies that will be interested in your technology.  This step includes reviewing the existing requests for proposals, timing for submission of proposals, and understanding what needs to be included in your proposal.

NOTE:  If you are in the process of developing a new technology in your lab at a university or on your own in your garage or basement, be aware that you do not have to have an established company when you begin the proposal process or even at the time of submission.  You will be expected to form a company within a specified period of time should you be notified of a grant award.

The elements of your grant proposal combine to become a “sales” tool for your proposal and concept.  The content of these elements explain the WHY this should be done, WHO is affected, HOW you plan to do it, WHO will be doing the work, and HOW MUCH it is going to cost.

Example Table of Contents – Phase I Grant Proposal:

I.    Identification and Significance – Problem
II.    Technical Objectives
III.    Work Plan
IV.    Related Research
V.    Related Phase II and/or other Future Research
VI.    Anticipated Results of Research
VII.    Commercialization Implications (Long-term)
VIII.    Key Personnel
IX.    Consultants and Subcontractors
X.    Facilities and Equipment
XI.    Cost Proposal

Each of these elements requires that you carefully develop the “story” and the perspective that communicates that your idea is

•    New,
•    Innovative, and
•    Not currently in the public domain
It is also important to convey the potential for COMMERCIAL application and development.  These agencies make grants available to develop solutions to unsolved problems that may lead to marketable products.

Grants are not for the sake of research.  They fund feasibility and development of concepts into solutions for commercial applications.  They are a means for businesses to obtain a portion of the funding needed to assess viability and commercialization potential.  Grants are not intended to be the sole source of funding for any technology or for a business.  Businesses and researchers need to be aware that grants are not intended to cover 100% of the feasibility, development, or commercialization cost of any technology or product.  Instead, they are intended as a mechanism for defraying some of the costs during early-stage innovation.

Another point that businesses and researchers need to be aware of this: grants do not have to repaid, IF the organization receiving the grant complies with regulations, reporting, and accounting practices related to receipt of government funds.  Organizations receiving grant funding are expected to comply with regulations related to
•    Recordkeeping
o    Projects
o    Timekeeping
o    Funding
•    Accounting
o    Cost
o    Controls
o    Projects
o    Commercialization
•    Human Resources
•    Intellectual Property Ownership
o    Funding sources
o    Licensing
o    Other issues

The items above do not fully encompass all of the business, process, and systems requirements that accompany government grant compliance requirements.  They do, however, provide a starting point for discussion within your business on possible implications on how you do business and the cost of compliance.  Having an awareness of potential issues and changes to your business model enables you to evaluate objectively the benefits versus the costs of using grant funds.

The impact on your business is, in part, a function of the number, type, size, and source of the grants.  Each business should take the time to understand the specific issues that relate to its particular situation and parameters.  The areas to focus most intensely on are intellectual property ownership and project controls – including accounting and recordkeeping processes.  With upfront planning and analysis, businesses can avoid many pitfalls and reduce the overall investment in systems and processes to support grant projects, proposals, and accounting.

Copyright © 2004 F.O.C.U.S. Resource, Inc.

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