Venture capital firms continue to unveil new nine-figure funds ready to invest across the spectrum of technologies bringing innovation to healthcare. But venture dollars aren’t the only source of financial support for startups. Emerging companies can also tap into a funding source of $1.3 billion, a pot of cash that’s replenished annually. It’s funding from U.S. government.
The National Institutes of Health’s small business programs are congressionally mandated to spend this money. That funding, awarded through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, supports small businesses and R&D efforts that offer the promise of public benefit.
“We parse it out to about 1,400 different companies, and those companies come in and they are addressing health needs across the spectrum, from preconception to death,” said Chris Sasiela, director of innovator support services in the SEED (Small business Education and Entrepreneurial Development) Office at the NIH.
Sasiela spoke Tuesday in a preconference workshop ahead of the MedCity News INVEST Conference in Chicago. She’s an NIH veteran, having spent 12 years with the National Heart, Lung, and Blood Institute. Formed about five years ago, SEED is relatively new. Its mission is to connect startups with the NIH’s non-dilutive programs.
Here are five things Sasiela noted about how startups should approach tapping into NIH funding:
—SBIR and STTR are two different programs, each with different purposes. While SBIR focuses on small, independent businesses, STTR supports alliances between a small business and a research institution, such as a university or the research arm of a hospital, Sasiela explained. Startups should not look at one program being better than the other. Rather, they should choose the one that is most appropriate for them.
—Each application goes through two levels of review. The first is review by scientists and small business owners. In this review, Sasiela points to five key factors that reviewers look for: the company’s research plan, the significance of its idea, the innovation it brings to the healthcare system, the company’s research team, and the research environment. Those five factors are scored by peer reviewers, and startups receive a summary of the discussion and the score. The NIH then gets those numbers and decides which projects it wants to support. Successfully applying for funding requires a company to be able to communicate to the reviewers, Sasiela said. Startups can look at the SEED website for examples of successful applications.
—Know what NIH money can fund and what it can’t. A Phase 1 award is to establish the technical merit and feasibility of an R&D effort. These awards are capped at $350,000. But a company can continue that research with a Phase 2 award of $1 million. And when a company completes the Phase 2, it can apply for a Phase 2b award to continue its work, providing up to $2 million more. This money can be applied to big things, such as investigational new drug application-enabling studies, scaleup to manufacture. There are limitations to NIH awards. For example, they cannot be applied toward filing intellectual property. But Sasiela said her office encourages startups to leverage additional investors who can fund things that NIH money can’t.
—Startups that apply for NIH funding through SEED must be based in the U.S. Furthermore, these companies must be more than 50% owned by U.S. citizens. If a startup has received venture capital funding, those investors must also be based in the U.S. The NIH funding comes from U.S. taxpayer dollars and there’s a strong push to keep these dollars in the U.S., Sasiela explained. But there are exceptions. If a resource or expertise is only available overseas, a request can be made to spend an NIH award outside of the country.
—It’s not just about the money. SEED’s small staff is stacked with entrepreneurial expertise. Sasiela said the members of her team include former executives who have raised money and led companies. They can help startups with their experience and advice about business, regulatory matters, reimbursement, and more.
Photo: MedCity News
