I don't know about the USA, but in Australia all these government programs come with so much paperwork and bullshit that it's not worth it.

The most successful program, Accelerating Commercialisation (or Commercialising Acceleration, or whatever this year's government is calling it) requires matching funding, only funds a specific project, and takes around 3-6 months to complete the application process. Very suitable for a existing small business trying to create a new product line, totally useless for a startup trying to iterate in a new market quickly.

The grant also comes with a case worker to follow progress, and the money is released in tranches according to achievement milestones. All sounds great on paper, but it completely ignores the fact that the original plan will definitely change in response to new information or market changes.

I've known a few people who've been through the process, and they all said that the money wasn't worth the hassle involved.

And that's the best, most successful government funding program. The others are worse, way worse.

The root cause is that the mindset needed to be a successful bureaucrat is so far away from the mindset needed to be a successful entrepreneur. There's no way any program that would actually be useful to entrepreneurs will be acceptable to the bureaucrats who administer it.

Also, the purpose of any funding program is complete the moment that a politician steps up to a TV camera to accept credit for creating it. Anything that happens after that is pointless/just a bonus. The point of all these programs is not to actually help new businesses, but to help political careers.

My advice to anyone looking to get government help for their business is to not bother, it's just a distraction from communicating with customers. And it'll be five times as time-consuming and painful as you expect, with one fifth the return you expect.

I worked on a software project funded from an EU grant (which essentially funded half of the company); from this + some conversations with other entrepreneurs interested in EU grants, my impression is that the reality is similar over here.

It's cool that you can get lots of money for essentially a wishlist on a piece of paper (though to actually get that money, your best bet is to hire someone specializing in writing EU grant proposals). However, the amount of paperwork couple years in, involved in verifying you spent the money appropriately, is so big you'll regret ever taking the grant.

(One could say that entrepreneurs are partially to blame for this one, though. I hear that initially, it was much easier to work with EU grants, but a lot of people wrote up bullshit proposals and stole the grant money.)

The last sentence is kind of the key issue. If you're a good entrepreneur skilled at doing your job well, it's very hard to compete with a good crook skilled at doing his job well; and you have to worry about your actual product while he can focus on making the paper milestones.

I've read a number of accounts of EU countries offering funds for tech start ups but in some countries folks in the same circles seem to get those funds all the time, outsiders not so much.

Don't forget incompetence in local government with regards to EU grants, too. Often there could be less paperwork than there is...

I disagree that these grants aren't worth it, but it depends on the industry you are in and if you are used to writing grants. My company (biotech) has had a few of these grants and they are an excellent way of making a dollar go twice as far. They are certainly easier than a full ARC or NH&MRC grant.

If you are a typical software startup pivioting from idea to idea then no they are not so good. Do look into the export marketing development grants as they are a much better fit and are almost like free money.

yeah, good point. I've heard that in medical & biotech startups the government funding works well.

i'd argue (without evidence) that medical and biotech startups probably require more up front capital and longer lead times to see a possible return on investment vs e.g. yet another SaaS

so maybe this is working as intended

I would argue with evidence (personal experience) that you would be right :)

QUT did a study (the CAUSEE study) that looked at the predictive factors for startups to succeed.

One of the best predictors for failure for Australian startups was if they had accessed a government service to help startups succeed. Of course, that might be selection bias.

The only exception to this (and actually was a predictor of success) was accessing the R&D tax concession.

yeah, the R&D tax concession is totally awesome.

Except, it's now getting slowly screwed up by large corporates claiming everything they possibly can on it, so the rules are getting altered and tightened up. Add in a few greased palms (sorry, "campaign contributions") and it'll be ruined, as usual.

> Also, the purpose of any funding program is complete the moment that a politician steps up to a TV camera to accept credit for creating it. Anything that happens after that is pointless/just a bonus.

This is the mechanism by which many decisions are made, be it in the government or in the Fortune 500 corporations.

I wish the theory and case studies of this mechanism were taught in high school or at least in college.

It kind of is, management theory (both in business administration/MBA and public administration programs, and IIRC also in political science and certain sociology programs) devotes quite a lot of attention and research to all these issues e.g. the agency problem, governance structures, patterns of organizational politics, incentive (mis)alignments, etc, I recall a bunch of such case studies from my college courses targeted at this, so it is taught to college students - just not to most of them.

Perhaps it should be, but it's hard to squeeze everything useful in everyone's study program, and I'm not sure if compressing all these topics in e.g. a single short elective course designed for people majoring in other disciplines can be done reasonably well, it's a complicated topic.

> Very suitable for a existing small business trying to create a new product line, totally useless for a startup trying to iterate in a new market quickly.

This is my experience as well. These programs are designed very specifically to stimulate small business R&D spending. They're not for startups, they're to encourage established businesses to spend their cash.

Great for your second product, not so helpful for your first.

Same experience here in France. One of the trick we used was to overprice our salaries so we could reinvest those salaries in the company in order to have way more runaway than initially planned. That's until a tax controller came to told us that our salaries were too big for that grant/tax reduction thing. They actually weren't that excessive so with the help of a lawyer, he fucked off. My heart missed a beat or two though.

That sounds vaguely fraudulent, but I have no idea if it actually is or not.

It was a little hack; we didn't crossed the limit of decency imo.

The problem is one of accountability. If you're taking public funds, then there should be checks and balances and make sure that it's going to good use. History has clearly shown that humans are not to be trusted otherwise, because bad actors are way too common, especially we think no one is watching.

I get that. But if you say you're going to do X and then do Y, are you a crook stealing the money, or are you a startup pivoting as a result of new information? You need an entrepreneurial mindset to tell the difference...

>You need an entrepreneurial mindset to tell the difference..

No, you don't. Why would you? You think too little of the average human. If you can communicate the chain of logic that led you to make the change. That should be sufficient.

There needs to be the freedom to make this type of change, but you still need to be held accountable for your work. It should be ok to say 'we ended up building something different than we were expecting.'

Not that Australia had a strong software industry in the first place (we well and truly missed the boat) but how the country's leadership is treating the software industry currently is going to ensure we never catch up and miss out on trillions in value for the country.

The best and brightest have so many strong reasons to leave, and many will not come back.

This is false. You only pay income tax if you are a resident of Australia. If you are a resident of another country you pay tax there - Australia is not like the USA in regards income taxes.

unless you were foolish enough to incorporate in Australia, or grant equity while still resident in Australia.

The ATO will tax any capital gains at full value if they get half the chance. And they're a law unto themselves, with no independent appeal or way of refuting a decision that they made.

There is nothing foolish about incorporating in Australia given we have franking credits so that taxes paid by the company are passed down to the individual.

While I have no great love of the ATO, it is a million times better than the IRS.

Of course you can appeal a tax ruling in Australia. If you have done something that is an open-and-shut case of tax avoidance then this might not help much.

During my MBA one of our lecturers was a tax lawyer, and the stories he told of the ATO utterly shafting people were horrendous. I might be biased because of this ;)

The IRS makes Americans abroad file taxes as well.

That's actually unusual, very few countries tax non-residents.

Only USA and Eritrea to be specific.

My $.02 as someone who has applied for multiple SBIR grants with one winning proposal.

1. Government proposal selection is painstakingly tedious and slow. 2. There are actual politics involved with final selections and winners may be pre-selected to win through information back channels that exist outside of the official process. 2. Big contracting firms (GD, Boeing, British Aerospace, Leidos, etc.) with a lot of political muscle and connections pair with connected small companies and individuals to help them win these contracts. It's not only allowed that they do this - it's actually suggested. [1] In return they get consulting fees and free R&D for future product lines.

[1] https://www.sbir.gov/tutorials/preparing-proposal/tutorial-4

Most importantly, the Government receives "Government Purpose Rights" to Data and Computer Software (including source code). The "SBIR/STTR Protection Period" gives the government a copy of the product for evaluation during which the government has limited distribution and use rights. After four years, the Government has Unlimited Rights (see the SBIR Policy Directive [1]which means they have a royalty-free license to use, authorize others to use, distribute, and disclose said data and software for Government purposes. All of this is defined in the model contract [2] for Phase I and Phase II awards. There are some restrictions, but you'll need to read the documents carefully to determine when these items apply and/or can be excluded.

With that said, I've found SBIRs to be exceptionally useful for my business (I've won $750k in Phase I funding and administered $1M in Phase II funding). The proposal forced me to hone my idea and I received feedback fairly quickly (6 months) with a week or so of invested time. The product is built with minimal risk to my business and the Government can set up meetings with potential users (something that is exceptionally difficult if you aren't on contract). Lastly, with most SBIRs you can request up to $10-15k of additional funding for Commercialization Assistance which permits you to sit down with an adviser who can guide you on bringing your product to market. SBIRs are really an ideal method for Small Businesses to grow.

[1] https://www.sbir.gov/sites/default/files/SBIR-STTR_Policy_Di...

[2] https://www.acq.osd.mil/osbp/sbir/sb/resources/model-contrac...

Edit: fixed links, added statement about my involvement with SBIRs.

The truly shocking thing about SBIR/STTR programs is realizing what they are and why they exist. Basically, a couple of decades ago the remaining big defense contractors merged to the point where they had enough market power to slash their R&D spending to the bone — in order to more efficiently focus on moving taxpayer dollars into shareholder pockets.

To offset this, Congress created a set of programs that basically shifted the cost of low-level R&D onto the taxpayer. It seems fully expected that the goal of these programs is to fund smaller businesses to do this research, but only until the point that those businesses can be acquired by the big defense contractors. There are even special partner days where STTR/SBIR recipients get matched up with the Beltway bandits, and there are official government agents there to hell make these partnerships and acquisitions happen. In many cases this is the only way a small firm can get access to the real money, so the big firms effectively get their R&D at taxpayer cost without taking any real risk at all.

You're being too kind on point #2

I think that many people forget that one can start a company without being a “start up”. Foray people, success doesn’t always mean raising a ton of VC funding and aiming for a huge valuation.

I started my company over 18 years ago. We have a lot of fun doing really interesting work for interesting customers. We’re now a “commercial” company funding ourselves through commercial sales. However before we reached that point we had a few SBIR grants as well as some other US govt grants. Total was about 4M. I’d say that was helpful and valuable especially during the recession. Ironically we’ve sold more product to non-US governments than US.

We try to only apply to grants that are 95% focused on what we want to do anyway. We’ve also found that applying to grants we find out about from public solicitations is not worth the effort. To win these grants one needs to find a sponsor interested in your technology, then get them to write a solicitation that is focused on your unique sauce. It doesn’t gaurentee you winning the grant but does increase the chances of your being considered.

I am a little jaded on this topic. I feel that my team has really leveraged these findings into real products and, in turn, jobs. However I see TONS of companies that just charge through grants and never do anything greater with the funding. As a small business owner and tax payer (funder of these grants) that is not what I think is an ideal use of the money.

Our company did a handful of these before we sought VC funding.

I have to agree with most everything said already.

You’ll starve before the contract gets funded - it can take years and you will likely be on a second generation of code by then.

It’s hugely political. We partnered with larger competitors and spent a lot of cash on legal fees and patent protections.

Net profit was just not worth it alone - but we had a few prestigious projects that helped us get on the GSA schedule, get FIPS and CC certified, and snag a few hard-earned customers.

Honestly I wouldn’t do it again unless it had a contingent long term contract.

After years of inside experience with SBIR applicants and the various agencies I can say confidently that is largely a sham to funnel money to those who make friendships and scratch the backs of the various agency heads and their underlings. Also, the things I saw regarding how the agencies and their contacts exchange private data were frightening. People talk about the "deep state" of unelected bureaucrats. It doesn't have to be some grand plan to exert great power. These programs are robbing taxpayers to enrich a small clique with self-serving goals, returning little of value. The Idaho company of "solar freaking roadways" fame is an SBIR boondoggle, that should tell you something, and I think they made it to Phase II.

I think you are exaggerating. The goal of SBIRs is to fund high risk research. Solar roadways are high risk; even if it fails completely it's not like a lot of money is wasted, and something valuable is still learned.

Qualcomm was the result of SBIRs, for example.

this has not been my experience with SBIRs

Currently VC backed companies are barred from competing on SBIRs. There is legislation currently in the works to change that. But gov funding isn’t more common currently because you legally can’t do it.

Edit: I need to amend that to say majority-VC backed companies can’t be awarded SBIRs:

Source: https://www.fedscoop.com/sbir-dod-legislation-mac-thornberry...

> In 2003, courts ruled companies with more than 50 percent venture capital ownership are ineligible for SBIR grants.

This seems like it would be a rare case, especially early in a company's lifecycle. Any company that is majority owned by VCs is either very late stage, or suffered a down round. Nobody is raising Series A or B while giving away more than 50% of their company to investors.

There's a pretty serious disconnect between the demand of those that the SBIR program is meant to serve, and the mindset of those actually receiving SBIR grants.

On the demand side - many of the intended customers of SBIR grants (government agencies who need a specific technology solution) can get what they want faster, and with lower risk, through an existing contractor. You could gamble with a two person company funded by a few hundred thousand government dollars, or you could go to a Raytheon or a United Technologies and get the same thing made by a team of experts who will build you exactly what you want. In terms of deliverables, the risk profile is much lower (and the resulting upside to your mission is much higher) if you go with the big contractor. SBIR exists to fund some of the riskier technology efforts, but also to give the government some cover in terms of perceived equality. They can point to SBIR and say "Look, the little guys had a chance to bid too! We even gave them money!"

On the receiving side, I've met more than a few researchers who have gotten SBIR grants for their work, and effectively used them to pay for research/proof of concept that they have already done. I.E. the SBIR grant (Phase I) pays for work that they've done over the past year or so. Many of the folks who take Phase I grants that I've spoken to have no interest in commercializing and productizing their work. They are interested in basic science, not product development.

I'm not sure how to get over what seems like a pretty serious disconnect here.

The purpose of the program is to help grow the economy by supporting development of innovative and risky new technology. The regular SBIR program is not about building something specific.

It's true that a lot of the technologies are risky, but many government departments (DoD, Homeland Security, NASA) put forth solicitation requests asking for companies to build proof of concepts to fill specific needs of the requesting agency.

Applying for a SBIR grant is probably orders of magnitude more work than raising VC money in this market.

After years of contemplating, I once tried going after an SBIR with a partner. It was for a robotic ship tank inspection system. We put a lot of time and effort (about a month of constant work) into designing a strong concept solution and puting the proposal together. However, we had a few basic questions and the government technical and programmatic POC on the solicitation was non-respinsive after several contact attempts.

We submitted our proposal, meeting all of the insanely meticulous format requirements, but as feared we never recieved a response. Instead, the award was given to an off the shelf product for an incremental upgrade. Clearly, the awardee was already identified by the PM before the SBIR solicitation was even written, so I essentially lost a month of my life by being mislead into thinking the solicitation was truly open. The SBIR was just another way to funnel R&D money to the existing product the PM manages.

Gov't PM's do this because government funding comes in "colors" that specify by law how the money can be used (e.g. Operation and Maintenance, Construction, R&D, etc.). However, for some programs it's hard to secure R&D dollars, so back channels, like working with your supplier to craft an SBIR solicitation you know you will be awarding to them, are needed to fund improvements.

I suspect the fear of this occurnace (wasted effort) is the primary reason startups avoid government funding, and I can tell you first hand it's a valid concern. If you think the U.S. doesn't have it's own backchannels of corruption and unfairness in the contracting community, and that such practices are limited to developing or non-ally nations, you are mistaken.

Ironically, I think one of the reasons this type of behavior has emerged is thanks to the push from our own citizens - largely due to the "fleecing of America's dollars" scare of the 1980's and 90's, which asked America why the government was buying a $100 hammer or a $200 toilet seat. The push for transparency and frugality has driven the government in many cases to a culture (or requirement) to use funding loopholes and side agreements to get work done and also award contracts to lowest bidders regardless of the quality of the offering.

There are good program managers out there, doing their civic duty and following all the rules to the best of there ability. However, to me, the chance of finding such honest brokers and opportunities isn't great. If you want to work with government, your best bet (IMO) is to go to a trade symposium in your specific area of interest and strike up conversations with PM's in attendance to discuss solutions to their problems.

This is interesting, because certainly in the UK it’s extremely common to take advantage of government and EU money, either as an individual company or in partnership with an academic institution. It’s basically free R&D, and even if you can’t be bothered with the paperwork, companies have sprung up to work as a middleman doing all the boring bits for a cut of the money.

> companies have sprung up to work as a middleman doing all the boring bits for a cut of the money

This is creating a problem just as much solving one. The billions in grants that are given away every year by the EU are basically controlled by a cabal of private consultancy firms who will cherry pick companies to write grants with; and create tailor made proposals designed to fit the call perfectly. On the one hand this is good as it creates a ‘pre-filter’ to stop you from wasting your time writing a proposal; but on the other hand it puts the EU’s R&D budget into the hands of a small group of private companies.

Either way you look at it, it means that, unless you are ‘in’ with one of these consultants, getting the funding is extremely difficult (I write from experience from both sides of the coin!)

I don't know that this is generally the case. I've never been involved directly in bigger (6+ figure) grants, but I know plenty of academic spinoffs who have had no problems writing their own grant proposals (admittedly this is a specific skill you pick up in academia so maybe not relevant to the general public).

We have had a couple of Innovate UK grants without using any external consultants to write the proposals.

I think Granttree, the company swombat (https://news.ycombinator.com/user?id=swombat) runs, does exactly that.

It's mostly because most startups are not scientific and most of the funding goes toward scientific ideas and companies. If you don't have good scientific credentials and scientific research to support your business hypothesis, you will have a hard time getting funded.

I am interested in applying to one of those programs, but I'd like to know approximate refusal rate to estimate if the effort of applying is worth it. As a technical person with a prototype, that is already useful for some business usecases (but needs lots of polishing before the final release) I find it hard to find a specific grant matching my project, and need some guidance on following the expected application procedure.

It also looks like the entire process could be streamlined. While there is a tutorial linked here: https://www.sbir.gov/tutorials/preparing-proposal/ , a simple wizard walking through the entire process would make me much more eager to go with it.

Recently discussed here:

https://news.ycombinator.com/item?id=19659853

I worked for a company doing SBIRs. The overhead for taking advantage of these is insane. You need people who understand how to get through the contract process and all the legal requirements. You have to use incredibly bad time tracking software and deal with yearly time tracking and budget audits. Your IT systems must be locked down but in a way defined by the government, not necessarily industry best practices. Finally, as others have mentioned, you have to deal with the politics of defense contracting. Ultimately you'll just be beat out by one of the many small or medium size companies that literally exist to farm these if it hasn't already been given to a large established DoD contractor.

As someone that went through the process as a startup (in the US): the biggest impediment is timing/paperwork.

In the best case scenario, you apply as part of a round (filing out a ton of paperwork), wait 3-6 months to hear that you got it, and then have to receive the money in tranches (Which sometimes includes terms like net 30days). Often, you don’t get final payment till final deliverable.

How that played out for our company was for us to take out a loan against the award, just so we can get the work done.

So it helps, but as others have said as a small startup it is not easy to do. We had the advantage of folks on the team who had done this sort of thing multiple times, and knew how to navigate the process.

This is timely. Our startup just had an article written about our use of SBIR grant funding with some tips at the end:

https://bbcetc.com/sbir-related/ann-arbor-company-is-an-engi...

TL;DR - The money available to any one company is small (hundreds of thousands) which means it could only ever be a supplement. Since they are very difficult to apply for, it could be argued you’re just better off to spend time raising money from entities that can provide more capital down the road. Also, traditional capital can be spent on all aspects of the business. However, these grants are generally very restrictive on what the money can be used for.

There is an interesting project to connect scientific community and funding organizations - Polyplexus[1]. It might be extended to support private research and development probably, you could suggest that using the contact form.

[1] https://polyplexus.com

Interesting question! I've been in government contracting off and on for over a decade. I've spent the last 5 or so helping small businesses get contracts and grants. In my opinion, having a 2 sided business - 1 for commercial and 1 for government - is a very good business strategy. But it's hard finding the right people to join the team because we get snatched up by the big shot military contractors all the time.

To answer your question, it is a very common way to start a startup in big government contracting towns. I see that all the time around here (SE US). Government contracts have been spinning up new tech since I've been in the business. But there are high barriers to entry for new players, unfortunately. Most of them have already been discussed already.

Lots of small businesses use these funds. It’s just not a good fit for a VC backed “startup”.

Also, just like SV folks know the lingo and rules around VC investors, you need to get the grant or contract lingo and process.

You need to be wary of wasting your time. One government entity that I know of will happily have you spend lots on money on upfront compliance and insurance, and then offer minimal or trivial contract opportunities. On the other hand, I know another guy who literally got free mentoring and training for his folks as part of a program, and built a 250-person company that was initially seeded by a single contract.

Is a startup going to be able to do research? Research takes years, is extremely risky, and even if it's successful may not produce anything that can be a product. Most of the time the output of successful research is a paper.

I've always wondered how many of these solicitations already have a recipient already choosen, but the law mandates you have to ask publically first.

Does anyone have any experience trying to bid on one of these contracts?

See my response above.

Yes, they technically must ask publicly as it's extremely difficult to justify sole source acquisition. However, in reality, for smaller contracts most PM's will all but ignore applicants they don't know personally. You have to engage face-to-face in some way (e.g. at a symposium, reaching them through your network, finding their phone # or email).

Some PM's are responsive and will entertain a discussion while others just want to keep their job by mimimizing risk and maintaining the status quo, and will simply blow you off. I don't have (and doubt there are) stats on this, but I suspect chances of winning a blind award (without a face-to-face meeting) are virtually zero.

Another factor might be control of IP. IP created with government funding can be pretty restrictive for the company depending on the government program and other factors.

With SBIR funding you retain your IP

They also sorta-kinda-fund research via tax credits. As far as I know, startups do take advantage of this.

It's slow.

I got laid off because the startup I was at was relying on a huge gov't grant to come in, the gov't dragged their feet then boom, the startup had to go more lean.

No clue if they've gotten it yet or just decided to abandon a possible huge payday in a few years (or decades, who knows.)

notkid...a green account 12 hours old. Who are you? Contact me from your .gov or .mil address and I'll reply. And following that, if you want a public reply, OK.

Funding momentum is shifting to private sector research financing. Apple may spend on order of $10B on research this fiscal year.

But even higher dollar outlays will not solve the problem of the "chasm". An invention made under laboratory conditions requires a lot of finesse before it becomes a mass market consumer product. And product design and go-to-market strategy are not skills found in your typical inventor's wheelhouse.

I'm curious to hear if anyone has had an experience with the "invention services" industry. The few insiders I've spoken to seem to be more interested in revenue generation via litigation, than actually ever developing a product! Seems like a service ripe for disruption...