Life Sciences Articles
Wishes Granted: Funding Your Biotech Start-Up through NIH sponsored Grant Programs
By James A. DeLeo, CPA, MST
Gray, Gray & Gray, LLP
During the start-up phase of any life science company, there is seldom a lack of ideas or enthusiasm. What is in short supply is the money necessary to transform those ideas and channel that enthusiasm into a marketable product. In recent years, the search for start-up funding has been a difficult and lengthy process.
But one source of start-up funding that has been steady and reliable is through the National Institutes of Health (NIH). There are no less than eleven agencies including the NIH offering funding through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer Research (STTR) programs for those businesses partnering with research institutions.
Obtaining funding through the SBIR/STTR programs is not a simple procedure. The application process is strict and cumbersome, with boatloads of paperwork and absolute deadlines. There is a 295-page grant policy statement that outlines recipient compliance requirements. Your business must already have documented policies, procedures and controls in place.
Still, for many start-ups the journey is worth the destination.
The first step is to investigate funding opportunities from all eleven sponsoring agencies in the SBIR/STTR programs. While each agency has its own main focus, there is overlap among the agencies which is the reason one should not limit their search for funding to solely one agency. Information on available funding is communicated to the public through SBIR/STTR Omnibus Grant Solicitations which are published annually in January, SBIR Contract Solicitations which are published in August and typically expire in three months, and the NIH Guide for Grants and Contracts which is published weekly.
It is critical that you maintain open and continuous communication with the funding agency throughout the application process, and after funding has been awarded. Noncompliance with NIH rules could lead to civil or criminal penalties.
Funds are awarded in three primary ways: grants, contracts and cooperative agreements. The NIH mission of advancing human health is embedded in each phase of its funding criteria.
Awards are made for Phase I and Phase II of development only - rarely Phase III. The time frame for funding is generally from 9 to 18 months, and the release of funds is staggered over the development phase.
Phase I funding is generally awarded for feasibility studies lasting no more than six months. Phase II funding for research and development can be awarded for up to two years. Phase III clinical trials will require you to seek private equity funding outside the NIH sponsored programs.
There are those who fear the heavy hand of "big brother" meddling in the start-up of a company. Indeed, the application process involves receipt of feedback on your application from a peer review committee of experts. However, this is generally not for purposes of "oversight," but an effort to offer helpful advice with a genuine concern for assisting your company advance your technology.
The path to a successful product launch is not going to get any easier. However, with a little diligence and patience, the NIH SBIR/STTR programs can be excellent sources of the financial support necessary to get your company off the ground.
James DeLeo, CPA, MST is a partner with Gray, Gray & Gray, LLP, Certified Public Accountants, Westwood, MA. Gray, Gray & Gray serves the tax and accounting needs of businesses in the life science industry. Mr. DeLeo can be reached at (781) 407-0300, or via e-mail to: jdeleo@gggcpas.com.