Funding Programs Underrepresented Entrepreneurs Must Explore

Published: Mar 15, 2023  |  

Assistant Professor of Engineering at the University of Indianapolis

Illustration by Sarameeya Aree

Bank of America recently released the 2022 Women & Minority Business Owner Spotlight, with a particular focus on the perspectives, aspirations, and concerns of women, Black, Hispanic-Latino, and Asian American, and Pacific Islander (AAPI) small business owners. While small business owners are confident in their business prospects for the year ahead, women and minority business owners stated that obtaining equal access to capital and securing educational resources are their top areas of need. 

Two programs that could make a difference

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are sources of non-diluted funding for women and minority business owners who are in the technology space, but they are currently underutilized. 

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide approximately $3.5 billion per year in funding to small businesses, making it the largest single source of non-dilutive, early-stage, high-risk funding. Among the programs’ key mandates in the Small Business Act is to support the participation of women, socially/economically disadvantaged individuals, and small businesses in underrepresented areas. 

Having access to the SBIR/STTR early-stage non-dilutive funds is critical to harness the technology innovations in underrepresented communities for the growth and global competitiveness of our nation. However, studies show that minority groups are not taking advantage of the SBIR/STTR funding opportunities. We must reverse this trend and tap into an underutilized population of innovators for our nation’s technological and economic leadership.

The SBIR/STTR programs were established by an act of Congress in 1982 to fund a diverse portfolio of startups and small businesses across technology areas and markets to stimulate technological innovation, meet Federal research and development (R&D) needs, and increase commercialization to transition R&D into impact. 

Brookings’ analysis of the SBIR/STTR database shows that the percentage of SBIR/STTR grants awarded to female business owners rose slightly between 2005 and 2017, from 8% to 11%, while those awarded to socially or economically disadvantaged business owners remained flat at 8%.

These shares are significantly lower than female and minority shares of the population and business ownership. According to Brookings, the percentage of women-owned and minority-owned businesses in 2019 were 35.6% and 21.3% respectively.

The SBIR/STTR funding becomes even more critical for some minority groups because even though private venture capital investments in female-founded startups have increased from 7% to 21% during the same period, according to Brookings,  investment in Black startups remains at 1%. 

Current obstacles to funding

Women and minority groups face a number of obstacles when it comes to exploring the SBIR/STTR funding opportunities. The first key challenge is a lack of awareness. Because the SBIR/STTR programs target high-risk and high-reward technological innovations, it is essentially limited to those in STEM.

While most faculty and students involved in STEM disciplines and researchers are familiar with traditional research grant applications and opportunities, many are not focused on product development for the market and are, therefore not aware of the SBIR/STTR opportunities. 

Even when STEM faculty and researchers are aware of the SBIR/STTR opportunities, they are disqualified due to lack of focus on developing a product for the market. Additionally, some faculty members fail to encourage, appreciate, and nurture the entrepreneurial spirit and interest of students. STEM faculty rarely leave their secured faculty position to pursue a startup.

A successful transition of research work into a startup that can be funded through the SBIR/STTR programs would require a willing student (undergraduate or graduate) or post-doctoral fellow who has the entrepreneurial interest who will drive the startup. Women and minority students may experience higher obstacles in securing support and approval to pursue a startup based on their research work without an entrepreneurial-minded supervisor.

Some would argue that the information for applying for the SBIR grant is readily available online. However, having the information available online is not enough when the process of creating a successful grant application is complex and daunting without a good support system. The few who are aware of the program will not submit a proposal because they are intimidated by the process. 

Aside from the technical aspects of the grant proposal, there are also commercial (market research) and budget components needed. Without a mentor who has experience in a successful SBIR/STTR proposal submission process to guide and instill confidence in a new applicant, many will not make the effort, and those who do are likely to be unsuccessful. This failed attempt may lead to discouragement.

Solutions to encourage more applicants

To reverse current trends, we need to increase women’s and under-represented groups’ awareness of funding opportunities available to them through programs like the National Science Foundation (NSF) Icorps program that target faculty and graduate students at minority institutions like HBCUs and Hispanic-serving institutions. It is critical to get these researchers into the technology innovation and commercialization pipeline.

Research Experiences for Undergraduates (REU) site coordinators should be given entrepreneurial training and be required to include an entrepreneurial component in their REU program so as to expose undergraduate researchers to the customer discovery process (Icorps) and the SBIR/STTR programs. Existing programs like the SBIR/STTR Phase 0 should be strengthened and broadened. Proper oversight should be provided to ensure that service providers are actually delivering the service to small businesses. 

To further increase awareness amongst women and underrepresented groups, minority organizations could include info sessions and seminars where they enlighten their members on the SBIR/STTR opportunities, process, and available support.

University technology transfer offices should streamline their process to make it easier for individuals and small businesses who may be interested in taking their research and turning it into a product. The support can be in different forms, such as delaying fees payment for small businesses, especially those owned by women and other minority groups. In addition, they can provide other support such as facilities, incubators, and entrepreneurial training.

These strategies will help in increasing access to the SBIR/STTR funding opportunities for women and minority populations, demystifying the application process and helping more of those who would benefit from these programs to understand how to apply.

By increasing access to such funding, we can start tapping into the technological innovation and entrepreneurial spirit of our women and minority communities. They have much to offer in terms of growing and sustaining US technological and economic leadership, if we invest in ways to support them.

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