Small Business Innovation Research program provides grants to further R&D at budding companies

by Dan Dickson, Business Lexington

Lexington, KY (Aug. 30, 2011) - Good ideas have always propelled America forward, even during economic uncertainty. But sometimes a start-up company's dreams need a little financial boost in order to stabilize, grow and create new jobs.

The federal government's Small Business Innovation Research (SBIR) program supports small businesses that carry out research and development with the potential for commercialization. SBIR helps small businesses explore what technological breakthroughs may be possible by providing incentives in the form of grant money.

"Many of those small businesses have great ideas — cutting-edge, innovative ideas — but some of them don't have the resources to do the research to develop their products or to protect their intellectual property," explained Michael Ashcraft, business development specialist for the U.S. Small Business Administration (SBA). Ashcraft works in the SBA's Louisville office.

One goal of the SBIR program is to encourage and stimulate the entrepreneurial spirit of emerging U.S. businesses so they can meet the nation's needs for research and development.

SBIR has three phases, and the grants are based on merit. Phase I helps determine whether the small business has ideas that "have technical merit, feasibility and commercial potential," according to the SBA's guidelines. These grants normally do not exceed $150,000 total cost for 6 months.

Phase II helps the business continue the research and development efforts carried out in Phase I. Funding is based solely on the results of the first phase. SBIR Phase II awards normally do not exceed $1 million in total costs for two years.

"Someone who is awarded a Phase I is not automatically awarded a Phase II," said Ashcraft, "but their odds are pretty darn good if they did a nice job upfront with Phase I."

The objective of Phase III is for the small business to pursue commercialization based on the result of their activities in Phases I and II.

"The idea is to help a business 'graduate' from the program," said Ashcraft.

Most of the SBIR money goes through either the U.S. Departments of Defense or Health and Human Services. Just those two agencies alone have awarded well over half of the grant money, according to the SBA.

"It is a grant program with a significant amount of money. In fiscal year 2009 (the latest year for which statistics are available), between $2.4 billion and $2.6 billion was set aside for small businesses," Ashcraft said.

In Kentucky, many of the grants are awarded to medically related companies, a significant number through the University of Kentucky, where former president Lee Todd strongly encouraged faculty to commercialize their research and to launch their own companies.

Since the program took off in the early 1980s, Kentucky small businesses have received 330 awards worth about $85 million. California leads the nation with the most SBIR grants — 27,000 awards in the last three decades, worth $6.4 billion. Massachusetts and Virginia are also major players in the SBIR grants game.

A Versailles company established in 2000 has been quite active in the SBIR grants program. The business, called customKYnetics, is a research and development company that develops rehabilitation engineering products. The products of customKYnetics usually employ neuromuscular electrical stimulation, according to the company's website.

"It is a medical device company that is developing products for physical therapy, primarily in three markets — exercise, neuro-rehabilitation and sports medicine," explained Eric Hartman, president of customKYnetics.

"All of our products utilize electrical stimulation as a means to activate muscles for either exercise or rehabilitation," Hartman said.

Hartman's company has received 11 SBIR Phase I awards worth a total of just over $1.2 million and four more Phase II grants valued at just under $4 million. The money was used for studies and to develop the systems needed for customKYnetics' product line.

In addition, customKYnetics was awarded another four grants from Kentucky's state matching grants program, administered by the Kentucky Science and Technology Corporation (KSTC). SBIR awardees from Kentucky, and out-of-state companies that win SBIR grants and are willing to re-locate to Kentucky, may be eligible for additional grant money beyond what the federal government awards.

"This is designed for businesses with great ideas and smart people but (without) all of the necessary financial resources," said Ashcraft.

Hartman encouraged small Kentucky businesses to look into the program.

"It can be a valuable tool to move an early-stage concept through to engineering work or clinical work as far as developing prototypes and demonstrating what can be used safely and effectively," he said.

Hartman also urged small companies to work with Kentucky's Innovation and Commercialization Centers, part of the state Cabinet for Economic Development. The Centers promote technology-driven and research-intensive industries, while attempting to create clusters of innovation throughout the state. The Centers represent a statewide network of regional, urban and rural offices and are focused on helping Kentucky entrepreneurs, scientists and engineers perfect their business strategies, according to the Cabinet's website.

"They can help connect you to various people in the area who have the resources and advice you need to be successful," said Hartman.

About customKYnetics

Eric Hartman co-founded customKYnetics as a University of Kentucky graduate student in 2000 with Jimmy Abbas, then an associate professor in the Center for Biomedical Engineering.

About the Kentucky SBIR-STTR Matching Funds Program

The Kentucky SBIR-STTR Matching Funds Program is funded by the Cabinet for Economic Development, Office of Commercialization and Innovation. The program provides matching funding up to $150,000 for Phase I and up to $500,000 for Phase II federal awards. Companies from outside of Kentucky can apply and receive conditional pre-approval for a matching funds award (see guidelines). Click here to apply for a Kentucky SBIR-STTR Matching Funds grant. For a list of awards, click here.

About the Lexington Innovation & Commercialization Center

The Lexington ICC is part of the state ICC network and the Von Allmen Center for Entrepreneurship in the UK Office for Commercialization & Economic Development. Lexington ICC director, Warren Nash, also partners with economic development specialists in Lexington city government and Commerce Lexington as part of the Bluegrass Business Development Partnership, and hosts the bimonthly Lexington Venture Club meetings with Commerce Lexington.