FrankFCraig
New Member
Entrepreneurs can be defined as “businessmen who utilise resources beyond their direct control”. In the early phases of research or product development, some technology entrepreneurs tend to take advantage of grants from various sources to progress their scientific ambitions. I have learnt that many Finance Directors (FDs) disapprove of this source of finance as they prefer the company’s science teams or entrepreneurs to focus on generating “commercial” sources of cash via sales and/or the raising of Private Equity.
Grants are very useful as they minimise spend on core R&D (enabling saved funds to be invested in other functions such as sales). Also, contrary to loans, grants have no penalising interest and capital repayments required and, unlike Private Equity, there is no share ownership dilution! So, in this “cold financial winter”, the FDss may at last start warming to this source of money? I have observed in the media and blogosphere that, since Private Equity is now becoming rare, start-ups in the US and Europe are now hunting down relevant Research Foundation or Government Grants to fund their science programs. There are also specialist conferences emerging across Europe dedicated to explaining to SMEs and academics the availability of various grants. So, in the words of Bob Dylan, “The times they are a changin…”.
Over the last several years, as part of my business development activities, I have gathered together a novel database collection which contains information on almost 200,000 funding sources. The sources of funds includes: Charities, Foundations, Loans, Lease Finance Firms, Government Grants, Regional Development Agencies, Government R&D Tax Credits, Corporate Donors and Sponsors, Philanthropists, High Net Worth Individuals, Angel Syndicates and Venture Capital (VC). The vast majority of the database entries are grants from various institutions. Currently, our financing database is mainly UK-based with a proportion from the US and large European Union funding sources (e.g. Framework 7) now being integrated. This set of information is unique and can be exploited by SMEs ranging from pre-start-up firms with intellectual property (IP),which need a balanced, corporate financing strategy, through to an established firm wishing to identify all sources of funding for its planned growth (or even survival in this harsh, economic climate?).
However, even with grants there are some hurdles to overcome: forms to complete, presentations to give and a decision-making process that can take 3-12 months. Also, one must carefully read the details of the conditions of the associated contract as certain awarding bodies may claim some or all of the emerging IP. Saying that, a shrewd SME can still use these funds to progress its plans and is usually in a prime position to be the first firm considered as a licensor of any shared IP. Noticeably with grants, funding success is not always guaranteed: most individuals or companies will win 1 in 4 applications (recent figures from Nature). In my view, this can be significantly improved with a better understanding of the grants available, specific grant selection and targeting, professional drafting of the application and involvement of the correct individuals and/or team to win favour from the review panel.
To compare this approach, only up to 5% of those companies wishing to obtain Private Equity investment are successful. Plus a VC investment process involves lengthy due diligence. This takes significantly longer and is more expensive than a grant submission - as the former involves preparation and review of multiple technical, business, financial and legal documents. Currently, global VC investment in new firms has significantly decreased as the VCs preserve their funds to provide lifelines for their current portfolio of companies.
In conclusion, talented entrepreneurs should consider all sources of finance to generate fuel for their business. To date, a major barrier to doing this successfully has been the lack of a codified set of information. However, Life Sciences Consultancy now has this and we plan to commercialise our database to external individuals or companies to enable their subsequent growth. Other challenges have included available management ability, energy and experience to juggle these funding options, prepare applications and process them successfully. We also plan to help here with the provision of professional, business support services. In my view, the future of financing businesses is via improvements in strategy, exploitation of a portfolio of funding sources and adoption of more entrepreneurial processes. The future starts here……..
This article was written by Dr Frank F Craig MBA. Frank and a few of his colleagues have recently won yet another research grant of £1.6 million for a new biomedical software venture.
Grants are very useful as they minimise spend on core R&D (enabling saved funds to be invested in other functions such as sales). Also, contrary to loans, grants have no penalising interest and capital repayments required and, unlike Private Equity, there is no share ownership dilution! So, in this “cold financial winter”, the FDss may at last start warming to this source of money? I have observed in the media and blogosphere that, since Private Equity is now becoming rare, start-ups in the US and Europe are now hunting down relevant Research Foundation or Government Grants to fund their science programs. There are also specialist conferences emerging across Europe dedicated to explaining to SMEs and academics the availability of various grants. So, in the words of Bob Dylan, “The times they are a changin…”.
Over the last several years, as part of my business development activities, I have gathered together a novel database collection which contains information on almost 200,000 funding sources. The sources of funds includes: Charities, Foundations, Loans, Lease Finance Firms, Government Grants, Regional Development Agencies, Government R&D Tax Credits, Corporate Donors and Sponsors, Philanthropists, High Net Worth Individuals, Angel Syndicates and Venture Capital (VC). The vast majority of the database entries are grants from various institutions. Currently, our financing database is mainly UK-based with a proportion from the US and large European Union funding sources (e.g. Framework 7) now being integrated. This set of information is unique and can be exploited by SMEs ranging from pre-start-up firms with intellectual property (IP),which need a balanced, corporate financing strategy, through to an established firm wishing to identify all sources of funding for its planned growth (or even survival in this harsh, economic climate?).
However, even with grants there are some hurdles to overcome: forms to complete, presentations to give and a decision-making process that can take 3-12 months. Also, one must carefully read the details of the conditions of the associated contract as certain awarding bodies may claim some or all of the emerging IP. Saying that, a shrewd SME can still use these funds to progress its plans and is usually in a prime position to be the first firm considered as a licensor of any shared IP. Noticeably with grants, funding success is not always guaranteed: most individuals or companies will win 1 in 4 applications (recent figures from Nature). In my view, this can be significantly improved with a better understanding of the grants available, specific grant selection and targeting, professional drafting of the application and involvement of the correct individuals and/or team to win favour from the review panel.
To compare this approach, only up to 5% of those companies wishing to obtain Private Equity investment are successful. Plus a VC investment process involves lengthy due diligence. This takes significantly longer and is more expensive than a grant submission - as the former involves preparation and review of multiple technical, business, financial and legal documents. Currently, global VC investment in new firms has significantly decreased as the VCs preserve their funds to provide lifelines for their current portfolio of companies.
In conclusion, talented entrepreneurs should consider all sources of finance to generate fuel for their business. To date, a major barrier to doing this successfully has been the lack of a codified set of information. However, Life Sciences Consultancy now has this and we plan to commercialise our database to external individuals or companies to enable their subsequent growth. Other challenges have included available management ability, energy and experience to juggle these funding options, prepare applications and process them successfully. We also plan to help here with the provision of professional, business support services. In my view, the future of financing businesses is via improvements in strategy, exploitation of a portfolio of funding sources and adoption of more entrepreneurial processes. The future starts here……..
This article was written by Dr Frank F Craig MBA. Frank and a few of his colleagues have recently won yet another research grant of £1.6 million for a new biomedical software venture.
