Grant Engine EssentialsWhy is Non-Dilutive Funding So Exciting?
It’s Your Company
You took a big idea and turned it into a reality, in the form of a company – so don’t you want to keep control of it? Scaling can be difficult, especially when you’re running out of funds, but don’t consider selling off stock for cash just yet.
Maybe you’ve got a good idea or product, or perhaps you’re already further into building your business; whatever the stage, you should know about non-dilutive funding. These are grants by which you can grow your business without relinquishing significant or controlling interest.
What is Non-Dilutive Funding?
Before you begin writing your application, you should know exactly what you’re getting into. As opposed to dilutive funding, which operates precisely how it sounds, non-dilutive funding does not reduce your ownership in the process of selling your product and company.
All life science companies need funding to realize success in their business model. Yet, the dilution, dynamics between Investors and Company, and overhead cash drain all make external funding challenging. While these dynamics are acute at all stages, they are especially crucial early in your business development. Non-dilutive funding has none of these complications.
Government grants, also known as Small Business Innovation Research (SBIR) grants, focus on this type of funding and are equipped to evaluate and support companies in an array of highly specialized fields. Non-Dilutive funding is a great complement to loans and selling equity because it acts as a force multiplier to equity funding.
The non-dilutive funding route affords you the ability to raise money for your company before selling shares to entities outside of co-founders, essential personnel, and critical investors. This means that you can dedicate time and money to research and development, increasing the value of your business. When it comes time to raise funds for additional cash-flow, you might even be able to sell fewer shares because they now have a higher valuation and ultimately retain a higher percentage of your company’s stake. But how do you get there?
Applying for Grant Funding
You should research grants offered by your state’s economic development agency and the SBIR program. They are dedicated to financing small businesses that show potential for technological commercialization and economic stimulation in the areas of agriculture, defense, transportation, and health. SBIR program comprises three phases. In Phase I, an entrepreneur must establish their merit and an outline of R&D projections, plus an overall account of their business performance, to qualify for $225,000 or more over six to twelve months. Phase I awardees then move on to Phase II, where funding is determined by the results of R&D and the potential commercial earnings. Awards can exceed $1.5 million over two years. As well, there is a FastTrack option that delivers at least $1.725 million, by combining Phase 1 and II together.
These grants can be highly competitive, so you need to make sure you have a clearly defined business model, a differentiated product, and a winning team.
Taking the Next Step
Non-dilutive funding is especially attractive because you don’t have to resort to selling equity for funds. You’ll be able to afford fundamental aspects of building value like developing products and services. You earn this award based on your company’s unique ability to strengthen the national economy, and the best part is that it doesn’t come with hooks – you’ll never have to pay it back.
Ready to get started by working with a team of experts? Contact us today for your free consultation!