Raising Capital in Missouri - Part II
As you read in Part I,
raising capital is a continual challenge for business owners. In last
month's issue of this newsletter, my article entitled "Seed
Capital Funding Cycle" talked about how successful capitalization
requires the ability to access capital when you need it. The key is
to know where, when and how to find that capital.
This article will describe a source of seed funding to support critical
early-stage of research and development of intellectual property from
the U.S. federal government.
First, we need to define technology. A company may choose to undergo
research as a planned effort to discover new information for
the creation of a new product, service or process. Research can be conducted
to develop a new technique or vastly improve a current one. However,
research does not include market research or market testing as these
activities are related to the selling and marketing operations of a
company. Development takes the results generated by research
and formulates a plan to create and develop the item to idea and bring
it to the market.
When a company engages in research and development (R&D), it expects
a future benefit for the company. The company may choose to exploit
the knowledge from R&D by producing the product or offering the
service or by licensing or selling the technology to others. This early-stage
R&D effort requires quite a bit of capital; therefore, many angel and
venture capitalists and lenders are not interested in providing capital
to support the R&D efforts. The risk of success is simply too low for
them to invest in the company.
One option for Missouri entrepreneurs seeking to raise capital for
an R&D effort is to check out the Small Business Innovation Research
(SBIR) program as part of the Small Business Innovative Development
Act passed by Congress in 1982. The SBIR program has helped thousands
of small businesses compete for federal R&D awards. In turn, these awards
help a small business explore its technology potential and provide the
incentive to profit from its commercialization. In doing so, these agencies
find creative ways to address their R&D efforts as well. Congress has
designated four major goals of the program:
- Stimulate technology innovation,
- Use small business to meet federal R&D needs,
- Foster and encourage participation by minorities and disadvantaged
persons in technological innovation and
- Increase private-sector commercialization innovations derived from
federal R&D.
Although the initial legislation was first passed in 1982, Congress
has reauthorized the Act three times by extending the program and its
funding through fiscal 2009. Major provisions of the reauthorization
included expanding and improving the SBIR program and emphasizing the
goal of increasing private sector commercialization. In addition, Congress
has increased the amount of the agencies' set-aside budgets and implemented
the Federal and State Technology (FAST) partnership program to increase
participation of small technology firms in states that traditionally
do not receive many awards. Missouri is one of those states. The Missouri
FAST program (MoFAST) assists small technology-based companies with
the opportunity to obtain seed capital support from the federal SBIR
program.
The federal government has more than $1.5 billion available
each year in SBIR awards from federal agencies. Traditionally, Missouri
has been very underrepresented in terms of the number of SBIR awards
granted to small business. Missouri is consistently ranked among the
lowest 12 states both in submitted and awarded grants per capital. In
an effort to change this situation in Missouri, MoFAST and the Missouri
Small Business Development Centers (MO SBDC) propose to provide assistance
to small technology-based businesses in the following ways:
- Winning more SBIR awards by offering assistance to small technology
businesses and university researchers in preparing SBIR proposals.
- Providing access to university researchers and high-growth businesses
to strengthen the applicant's SBIR proposal.
- Monitoring agencies for potential funding opportunities, posting agencies'
information on the MoFAST website and broadcasting this information
to registered website users.
To learn more about the federal SBIR program and the services MoFAST
has to offer, register online (free of charge) to access the information
at www.mofast.net.
By knowing where, when and how to receive local assistance, Missouri's
small technology-based businesses can apply for seed funding to support
the critical early-stage R&D. By offering these services, MoFAST
and MO SBDC hope to help Missouri innovators keep their technology and
commercialization within the state to enhance the state's economic development.
Send this article to a friend
Authored by: John Parfet, Business and Industry
Specialist, University of Missouri Extension
Source: Creating Quality Newsletter, Volume
12, Number 5, May 2003
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