Seeing Green Often overlooked by investors, small fund may lead to buried treasure

If at first you don't succeed, try, try again."BIZ Experiencess applying for grants from the Small BusinessInnovation Research (SBIR) and the Small Business TechnologyTransfer Research (STTR) programs should keep this adage in mind.Only one in eight applications submitted survive the rigorousapproval gauntlet, according to Daniel O. Hill, assistantadministrator for the SBA Office of Technology.

Scott Thompson knows the process well. It took 11 attempts--from1992 to 1996--and the formation of several companies before theowner of CHT Engineering Systems Inc. in Hermosa, South Dakota,obtained SBIR funding for his human target tracking system.

Why subject yourself to this kind of torture? The answer issimple, says the homebased Thompson: "It's hard to getseed money for a high-tech company. Venture capitalists don'tlike to fund ideas."

If that's not incentive enough, consider that these twoprograms have more than $1.1 billion to give businesses every year.To compete for SBIR grants, a business must be for-profit,U.S.-owned, independently operated, and have 500 or feweremployees. The principal researcher for a project must be employedby the business.

Every year, 10 federal departments and agencies are required tosolicit SBIR applications: the departments of Agriculture,Commerce, Defense, Education, Energy, Health and Human Services,and Transportation, as well as the Environmental Protection Agency,NASA and the National Science Foundation.

Initially, BIZ Experiencess compete for Phase I awards of up to$100,000 for a six-month exploration of the technical merits andfeasibility of an idea or technology. Only those awarded Phase Igrants can compete for two-year Phase II funding of up to $750,000.In Phase III, BIZ Experiencess must commercialize their products usingprivate-sector funding.

STTR pairs small businesses and nonprofit research institutions.Five federal agencies offer grants under this program: thedepartments of Defense, Energy, and Health and Human Services;NASA; and the National Science Foundation.

There are also three phases in the STTR program. Phase I offersup to $100,000 for a year of research. Phase II provides up to$500,000 for a maximum two-year project expansion, and Phase IIImirrors that of the SBIR.

Technology Of Another Kind

SBIR and STTR awards are not just for high-tech firms. Case inpoint: "We were initially working with Tuskegee University tocome up with a homemade syrup that could be made withoutpreservatives and additives and that wouldn't turn tosugar," says George Hall, co-owner of Hall's HomemadeSyrups, a 9-year-old Boligee, Alabama, company.

Tuskegee officials suggested that the BIZ Experiences approach theDepartment of Agriculture. Hall did and, on his first attempts withboth, successfully obtained a $50,000 Phase I grant and a $190,000Phase II grant in 1996. His Phase II award will fund hisdevelopment of cane-based candies, a beverage sweetener and sugarcane juice.

Michael Bergman, owner of software development firmVisualMetrics Corp. in Vermillion, South Dakota, applied for aPhase I SBIR grant not for seed money, but for the opportunity touse the software he had developed to fill a need of the NationalInstitutes of Health (NIH). Bergman liked the fact that the programgave him freedom. "SBIR placed no restrictions on my abilityto maintain what I learned as proprietary. Therefore, the fruits ofmy research didn't go into the public domain; I retainedownership."

Bergman doesn't expect an immediate payoff from his Phase Igrant. Instead, he's looking down the road and hoping toreceive a Phase II award, which he thinks could help his 3-year-oldcompany form an alliance with a drug conglomerate.

Get Going

To apply for an SBIR or STTR grant, first look at the requestfor proposals (RFPs) from participating agencies on the SBA Officeof Technology Web site (http://www.sba.gov/sbir). UnderPre-Solicitation Announcements, you'll find a master calendarof all RFPs as well as details on each agency's specificsolicitation.

When preparing your proposal, consider these suggestions:

*"Because it's being reviewed by an outside group ofscientists, your proposal has to be well-documented with citations,and each point in the proposal must be addressed," saysBergman, adding that clarity and brevity are critical.

*"It's important to be innovative," says Thompson.Demonstrating the commercial potential of your proposal is amust.

*Besides commercial viability and innovation, the agencies arealso concerned about your business's capabilities and will lookat your management team, says Hill.

Most grant recipients agree: Once you've assembled all thetechnical aspects of your proposal, obtaining the desired resultsis just a matter of perseverance.

Ready For Takeoff

Robert Severino knows life is ironic. Severino's company,Dubbs & Severino Inc., has developed a software programdesigned to eliminate what he says is the number-one reason forplane crashes: pilots getting lost. The Irvine, California,BIZ Experiences developed the program under the auspices of thegovernment's Small Business Technology Transfer Research (STTR)and Small Business Innovation Research (SBIR) programs inconjunction with the Pasadena, California, Jet PropulsionLaboratory (JPL). He connected with JPL, thanks to a small-businessdevelopment program created by former Secretary of Commerce RonBrown.

"I had a [friend die] in an airplane crash in May 1993, and[I knew] a relatively inexpensive technological tool could havesaved his life," says Severino, who went on to create such adevice.

After some investigation, Severino realized the STTR programoffered the best way to disseminate information about his product."My solution is a graphic software package that includesdigital maps, a global positioning satellite receiver and maps ofan area's natural environment. All this is not new. Ourinnovation is to provide [this as software] that can be used on aninexpensive laptop."

Severino formed the alliance with JPL to tap into its expertise."Typically a homebased business only becomes an expert in onefield. By working with several small firms and a scientificpowerhouse like JPL, my company can become world-class,"explains Severino.

Severino likes the high return on investment he gets with theSTTR program. "Any small business can submit an SBIR proposal,but only those allied with a federal research and developmentfacility or university can submit an STTR," he says. "TheSTTR program is helping us forge a brighter future than we'dhave if we just networked with other small businesses."

Where To Find Help

States

*Arizona. Pima Community College Small BusinessDevelopment and Training Center consultants help identify whichgrants BIZ Experiencess can apply for; they also review proposals.They connect small-business owners with federal labs and assistwith contractual agreements. Call (520) 206-4906 for moreinformation.

*Illinois. Staff members at the Small Business InnovationResource Center at Richard J. Daley College coach BIZ Experiencessthrough the SBIR/STTR application process. This free service isprovided to companies in--or willing to relocate to--Illinois. Call(773) 838-0300 for more information.

*Minnesota. Minnesota Project Innovation Inc. offersworkshops, one-on-one consulting and assistance finding a corporatepartner. Consultants give BIZ Experiencess insights on what thegovernment is looking for and help connect local businesses withthe appropriate federal lab. Call (612) 338-3280 for moreinformation.

*New Jersey. The Technology Help Desk & Incubator(sponsored by the New Jersey Business Development Center, the NewJersey Commission on Science and Technology, and the SBA) has atoll-free help line for BIZ Experiencess and offers free proposalwriting assistance and, in some cases, help with proposaldevelopment. Call (732) 545-3221 for more information.

*North Carolina. The North Carolina Small BusinessTechnology Development Center has a Web site (http://www.sbtdc.org)that features links to all the federal agencies participating inSBIR and STTR. Links to related sites and descriptions of how theprograms operate within each agency are provided. This month, thecenter is hosting the first of several regional SBIR/STTReducational conferences. Call (919) 962-8297 for moreinformation.

*South Dakota. The South Dakota SBIR Center holdsproposal review workshops that feature successful SBIR competitors.There is also an Internet-based SBIR proposal-writing course andday-long regional SBIR workshops introducing the entire program.Finally, an SBIR mentoring program pairs novice applicants withveterans for free counseling. Call (605) 256-5555.

National

Each SBIR and STTR agency also offers assistance toentrepreneurs. The Department of Defense, for example, has atoll-free help line that provides information on everything fromproposal preparation to intellectual property protection. Call(800) 382-4634 for more information.

To determine the agencies' assistance levels, access theirhome pages at http://www.sba.gov/sbir or call the SBA Office ofTechnology at (202) 205-6450.

Contact Sources

CHT Engineering Systems Inc., (605) 255-4401,thompsons@rapidnet.com

Dubbs & Severino Inc., (949) 854-2643,dubsev@deltanet.com

Hall's Homemade Syrup, Rte. 2, Box 163-A, Boligee, AL35443, (205) 372-4255

VisualMetrics Corp., (605) 624-6420,mkb@visualmetrics.com