Funding Your Idea Niches to Riches

1
Funding Your IdeaNiches to Riches
Session sponsor
2
Niche Experts John P Waszczak, Raytheon -
SBIR/STTR Sandra DiCosola-Summit Contract
Management Government Grants and
Contracts Harry George, Solstice Capital -
Venture Capital Jill Malick, Wells Fargo Bank -
Commercial Bank Loans Emre Toker, Surgical Tools
Niches to Riches Success Story
3
Small Business Development Center Pima Community
College October 30, 2008
4
Most Likely Sources of Capital by Business Type
and Stage of Development
Small Business Development Center Pima Community
College October 2008
5
SBIR Program Funding
DOD History
2006 SBIR Budget
1.134B
M (FY06)
2.07B
1.134B
SBIR Program Phases
Distribution within DoD
Ph I, 6mo, 75K
Ph II, 18mo, 750K
Ph 0
Ph III, non-SBIR s
1.134B
Support the War Fighter
6
SBIR Program Evolution

• 1982 Lab Technology Development Focus
• 2000 Transition Assistance Program
• 2002 Program Manager Pull
• 2004 Primes Initiative
• 2005 Presidential SBIR/ ManTech EO
• 2006 Commercialization Pilot Program (CPP)
• 2007 Integrated Tech Roadmaps Phase 0s

Major Changes in Past 8 Years!
7
Integrated Funding Plans

• IRD Investment
• SBIR/ STTR
• ManTech
• Plus-ups
• CRAD/ ACTD/ BAA/ DACP/
• VECPs/ IDIQs/ CRADA
• TTI/ RTT/ RTI/ QRF/
• Title III
• SDD/ Qual/
  Production

Spanning the Valley of Death!
8
Keys to SBIR/ OPM Funding Success

• PM 2 Pull
• Work w/ Prime
• Strategic Need ltgt Core Capability
• Effective Match Making
• Relationship, Trust, IP
• Transition/ Cut-in Plan
• Minimize Risk, P3I
• TRL, MRL, BRL CRL
• Business plan
• Communicate!

• Related opportunities
• Possible Mentor Protégé
• Supplier Development R6S

9
Working Together!
Win! Win! Win! Win!
10
Preparing for a Government Award

• Government RD funding fits your business
  proposition
• Technical and Business Management Team
• Protection of your privately developed
  Intellectual Property well documented
  chronology, lab notebooks, IRD project in
  accounting records
• Job cost accounting system time sheets!
• Financial capability to perform, viable business

11
AZFAST Grants

• 5K grants offered by Arizona Department of
  Commerce for eligible SBIR/STTR expenses
• Small AZ technology companies with lt100 employees
  or lt 4M revenue
• Use for grant writing/coaching, attend
  conferences or seminars (Pima SBDC SBIR Seminar
  12/9/08)
• Next round opens 11/20/08 closes 12/18/08

12
Broad Agency Announcements(FAR 6.102 and FAR
35.016)

• A competitive solicitation procedure
• Agencies obtain proposals for basic and applied
  research
• Topics are not related to the development of a
  specific system or hardware procurement
• Can introduce innovation with a white paper
• Open to all size businesses
• Generally higher funding amounts

13
General Services Administration (GSA)

• One of largest agencies in the federal government
• Mission to simplify buying and to reduce costs
• Negotiate multi-user contracts
• Leverage the volume of the federal market to
  drive down prices
• Multiple award schedules and single award
  schedules

14
Venture Capital

• Venture Capitalist look for businesses with
• Rapid revenue growth
• Potential for significant returns on investment
• Market dominance
• Barriers to entry into industry
• Professional, highly qualified management team

15
Venture and Angel Capital
16
SBA Loans

• The Benefits
• Access a full package of financial services to
  finance up to 90 of a business purchase,
  including the land/building, furniture, fixtures,
  and obtain working capital
• Start, buy or expand a franchised business, make
  leasehold improvements or pay franchise fees
• Purchase equipment, pay installation costs, or
  finance up to 100 of equipment costs
• Fund accounts receivable fluctuations, hire
  employees, expand a business, finance a new
  project or take advantage of vendor discounts.
  Lines of credit are available up to 350,000.
• Longer maturities and more flexible terms than
  most bank loans.

17
SBA 7(a)

• Summary Information
• Uses to purchase owner-user real estate,
  refinance balloons of owner-user real estate,
  equipment purchase, working capital, purchase
  existing business
• Advance rates of up to 90 for real estate, 85
  for business acquisitions, 70 for start-up
  businesses
• 7-10 year terms for non-real estate loans
• Floating interest rate fixed rate is available
  for real estate loans with 3 year adjustment
• Must have two years of industry management
  experience

18
504 Loans

• Summary Information
• Purchase owner-occupied commercial property
  tenant improvements
• Advance rate is typically 90
• Up to 30 year amortization (20 years on Community
  Development Corporations piece)
• Terms of 10, 15 or 20 years
• Fixed interest rate
• Must have two years of industry management
  experience
• Typical structure 10 owners equity, 50 bank
  financing, 40 Community Development Corporation

19
Find a niche in your market landscape
consistent with your resources
Consumer market
Niche market
CAPITAL EQUIPMENT PRODUCTS
MARKET
DISPOSABLE PRODUCTS (and/or SERVICES)
20
Study in detail your niche in the market
landscape
Screening mammo 50M women/year
Screening mammo systems
Biolucent MammoPad
Diagnostic mammo 5M women/yr
Breast biopsy devices
Diagnostic mammo systems
Therapeutic breast surgery 200K women/yr
Specimen radiography systems
Breast specimen container
CAPITAL EQUIPMENT PRODUCTS
MARKET
DISPOSABLE PRODUCTS (SERVICES)
21
Standard VC model



Think big!
22
Niches-to-Riches strategy
Tackle in increasing complexity technical,
regulatory, competitive, distribution,
23
Understand and utilize the SBIR process
SBIRs typically fund high-risk (futuristic) RD
projects. Always include in your high-risk SBIR
application a low-risk component that can be
readily commercialized.
EXAMPLE SBIR application proposed the
development of a very complex three dimensional
x-ray imaging system for breast surgery. One
component of the proposed system was a very
simple disposable plastic breast specimen
container (required for the 3-D imaging system to
work properly), for which there is an instant
market.
24
Niches to Riches Strategies

• Overwhelming amount of work for the founder
• Few to delegate to so use your time efficiently
• Study your market niche
• Understand and utilize the SBIR program
• Define and plan for your exit point
• Strive to build a company infrastructure that is
  not reliant on you (documentation)

25
Q A