GOVERNMENT FUNDING.

Surprise! The government is the largest source of venture capital in the U.S. A wide range of programs provide money. Money flows directly to small businesses. Indirectly U.S. venture investments include research funding to universities that allow companies to commercialize technologies in which millions of dollars of government money has been invested. Programs include:

• SBIR Awards - Small Business Innovation Awards provide several levels of funding for research and development.
• NIH - The National Institutes of Health are a major source of funds for university research.
• DARPA - The Department of Defense provides funding for research into areas that have direct military application, but it also funds research into areas it considers vital to supporting strategic industries. You don't have to be a traditional a defense contractor to benefit from this funding.
• SBICs - The government provides loans to, and equity investments in Small Business Investment Companies, who then reinvest the capital.
• SBA Loans - The Small Business Administration guarantees bank loans to small businesses.
• Other - Both the U.S. and state governments provide many sources of funding to growth companies, especially those developing new technologies.

In deciding whether government funding is a desirable tool for your company, you should analyze three factors:

• Strings. What restrictions on use of the technology you develop will come with the funding? Will the government or others be able to use your technology without paying you?
• Process Cost. Some government funding programs involve long lead times and impose substantial administrative costs compared to the amount of money awarded. Do a cost/benefit analysis before you begin the process.
• Strategic Fit. As a young company with limited resources, you can't afford to take your eye off your goals. Will the project the government wants to fund advance your company toward your goals, or will it be a diversion? Will it take precious time from your primary researchers? If the government will pay you to do what you were intending to do anyway, then government funding can be a great benefit. If it diverts you from your business plan, however, it can harm your company.

The following websites are good starting points to look for government grants. Some of these grants can be made directly to businesses. Other grants are to universities, hospitals and other institutions where businesses may leverage off the grant through sponsoring university research and obtaining licenses.