Thursday, October 9, 2008

SBIR and other technology funding in the current crisis.

The current economic crisis certainly caught most of us by surprise. Crooks manipulating the credit markets suddenly found themselves without the reserves to cover their subprime loan losses, and their house of cards began to collapse. We trusted the watchdogs to keep us safe, but the crooks were tossing them goodies, and they didn't bark the alarm. The result is a plummeting of the stock market and a virtual freezing of the credit market. The losses are staggering.

Will this crisis affect our ability to get money for our businesses? Sure, at least for a while. Family and friends funding will be harder to tie down as people, even those who love you, feel the need to be more cautious with their financial reserves. Bootstrapping will be more difficult as your customers stretch their accounts payable timelines out to well beyond 30 days. Lines of credit may be withdrawn, and surely difficult to get expanded, as banks find their money sources restricted. Equity investors will tighten up on their governance and look for risk reduction wherever they can find it. New Angel or VC investment will be even harder to secure, and valuations are certain to be even further reduced. It will be tougher to find sources of debt or equity money for a while. Tighten your belts, it's going to get rough.

So what about Grant funding? Will SBIR be affected? Probably not in the availability of funds, but it will most certainly get more competitive. The SBIR budget is a fixed percentage (2.5%) of the largest Agency R&D budgets, and if those budgets are reduced, the SBIR pot will be proportionately smaller. My sense says that we'll see even more applications and it will become even harder to win funding. That's what happened following 9-11 when the economy dipped. As belts get tightened, smart people get "downsized". Many of them have entrepreneurial spirits and small businesses get born. SBIR is a way many of them actually get started.

Entrepreneurial spirit is innovative in nature. Unfortunately, Wall Street's penchant for "financial innovation" is taking the hit with a big share of the blame for this crisis, and whenever innovation is attacked, SBIR ducks for cover. SBIR is up for reauthorization, now with a deadline in March, 2009, for Congressional action to improve and expand it, or at least, continue it. There's always the danger that it could be eliminated, and that would be a crushing blow to American innovation and entrepreneurship.

We'll need to be involved as a small business community to educate and inform our legislators in the new Congress of the value of SBIR, to ensure that the program continues to foster the creation of innovative technology.

The SBIR Coach will be involved. Hopefully you will too. Stay tuned....

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