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Business Planning and Funding

This section introduces a number of tools that can assist technology developers, contractors, and investors in developing business plans and securing funding as well as links to specific funding sources. It includes information on the four topics listed in the box to the left.

Business Planning Concepts and Techniques

Technology developers or their teams must either acquire proficiency with, or at least be aware of, basic entrepreneurial concepts, conventions, and resources and tools necessary to ensure the successful advancement of an idea, technology or business to full commercialization. Alternatively, a developer may collaborate with other entities or individuals that complement existing capabilities. Two ingredients are fundamental to product or enterprise development: a business plan and funding. In addition, the services of entrepreneurial support organizations can be critical to the success of any venture.

Business Plan
A comprehensive business plan is fundamental to the development of a product or business, and commonly a necessary prerequisite for obtaining outside financing. It is used to guide the researcher or entrepreneur through each stage of starting, managing, and growing a product line or enterprise; to communicate the nature of the product or business and its prospects to potential investors, partners, and other stakeholders; and to establish a value for the product or business. Prospective investors, lenders, and other interested parties will generally require a business plan and examine it carefully. Business plans, which can vary in degree of detail, should always seek to present the business or technology being developed in the most appropriate manner for the targeted funding sources.

Funds to Create and Advance a Technology or Business
The types of short-term and long-term funding most suitable for a business depend upon the nature of the business, the types of products and their perceived market potential, cost structure, existing assets and debt, credit worthiness of the company, appeal of the business, and the stage of the business' development. An understanding of the general types of funding may assist a researcher or company in evaluating and selecting options that are appropriate and realistically attainable for the type of venture. The sources identified later in this section provide tools for learning about funding types and how to decide which are most appropriate and feasible for a particular situation.

Entrepreneurship Support Organizations
An efficient and effective way for technology developers to refine and advance their ideas and businesses is to participate in an incubator, accelerator, or other type of entrepreneurship support organization. Supportive entrepreneurship infrastructures, also referred to as entrepreneurial ecosystems, business and technology ecosystems, entrepreneurial communities and entrepreneurship support organizations nurture and sustain new ventures as well as growth and development of small- and medium-sized enterprises by providing services, a supportive environment and/or access to funds. These organizations can provide a wide range of support in the form of advice intellectual property experts, access to financing, exposure to potential customers, physical space, and laboratory and other facilities. This support can accelerate development of a technology or enterprise, reduce startup costs, and help align technology development with market needs.

Resources for Business Planning Concepts and Techniques

The sources below provide tools for use in developing successful business plans. Some of these include links or references to sample plans. Although some of these sources emphasize starting a new small business, the approaches and techniques are equally applicable to developing a new product line, such as a new technology in an existing company.

How to Write a Business Plan
This web site describes the function and content of a business plan. The body of the business plan can be divided into four distinct sections: 1) the description of the business, 2) the marketing plan, 3) the financial management plan and 4) the management plan. Addenda to the business plan should include the executive summary, supporting documents and financial projections. The web site provides detailed outlines and suggestions for these sections.

Services Corps of Retired Executives
The Services Corps of Retired Executives (SCORE) Association is a nonprofit organization dedicated to entrepreneur education and the formation, growth, and success of small businesses nationwide. SCORE Association volunteers, working and retired executives and business owners, dedicate their time and expertise to serve as counselors to America's small businesses. Experts in accounting, finance, law, marketing, engineering, and retail provide free counseling and mentoring to entrepreneurs. More than 12,000 volunteer members provide individual counseling and business workshops for aspiring entrepreneurs and small business owners. There are more than 750 counseling locations throughout the country. Entrepreneurs and small business owners can contact their local SBA office or SCORE office to request a meeting with a counselor.

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Small Business Resource Guide
Periodical published under contract to SBA to provide news of importance to small businesses, including information about federal programs, financing, programs for minority enterprises, inspiring success stories of small businesses addressing challenges, and general information about operating a business.

Small Business Counseling
SBA works with a number of local partners to counsel, mentor, and train small businesses. These services are offered at district and regional offices throughout the country, that are prepared to offer counseling, financial assistance, and consulting services, among other types of assistance.

Intellectual Property (SBIR)
This resource provides information to support efforts to manage and protect intellectual property (IP), such as: how to protect intellectual property in the U.S. and abroad, which government agencies and global partners aid in protecting their IP, business tools for IP enforcement, patent information and services to the public available through the U.S. Patent and Trademark Office (USPTO), IP Help for Independent Inventors and Small Business available through the Independent Inventors Section of the USPTO and locations of patent and trademark resource centers around the country, among other items.

Entrepreneurship Support Organizations
In addition to their other services, some business and technology incubators, accelerators and other forms of entrepreneurship support organizations offer financing or otherwise assist with financial advice and arranging financing, These efforts can involve initial and subsequent rounds of funding using a variety of financing methods. Factors to consider in selecting an appropriate entrepreneurship center are discussed in the Resources for Selecting an Appropriate Entrepreneurship Support Organization section below.

Funding Concepts and Techniques

Selecting Funding Types
An understanding of the general types of funding may assist a company in selecting options that are appropriate and realistically attainable for the type of venture. Funding of technology development can be grouped into three types: Equity financing, debt financing, and specific-project financing. Specific-project funding may include grants and cooperative agreements from government organizations, corporations or non-profits. Within each of the funding types, the need for funds may be short term or long term. Often, a company may combine more than one of these types to attain enough money for its activities.

The type of funding that is most suitable for a business is dependent upon a number of factors, including the nature of the business, types of products and their perceived market potential, cost structure, existing assets and debt, credit worthiness of the company, appeal of the business, and the stage of the business development. The sources below provide tools for use in selecting which funding type is most appropriate and feasible for a company.

Equity Funding
Equity funding involves raising funds in exchange for part ownership of a technology or company. Equity financing allows a company to obtain funds without being obligated to pay a specific amount on a specific payment schedule. Sources of equity funds can include the public (as a result of stock sales) or another entity, such as venture capital companies, "angels," or through business combinations. Angels are private investors who take a direct interest in the business. Business combinations include cooperative agreements, joint ventures, strategic alliances, and other arrangements that allow businesses to share costs, risk, facilities, equipment, intellectual property and expertise. If a firm is a member of a business accelerator or other type of entrepreneurship support organization it may have the option to obtain equity funds from the organization. Some organizations require companies to offer a percentage of their equity in exchange for rent or other services. Proceeds from equity sales may be applied to a specific technology or to the entire venture. Many firms use funds from their personal assets, friends and family, especially in the start-up phase of the business.

Debt Funding
Debt funding is primarily short and long-term loans that must be repaid, usually over a defined period of time with interest. This source of funds may be attractive because the principals of a business do not have to sacrifice any ownership interest in the company. Loans may be obtained from banks, other financial organizations, individuals, family and friends, suppliers, colleagues, and other sources. A technology developer or supplier may consider among several types of debt funding, including commercial business loans, equipment financing and leasing, real estate financing, and federal or state loan, loan guarantee, and insurance programs. The resources listed below describe the various types and indicate potential sources of credit.

Funding a Specific Project
Some funding may be dedicated to a particular project, such as a demonstration of a particular technology or group of technologies. Specific projects may be funded via cooperative agreements, joint ventures, strategic alliances, and other arrangements that allow businesses to share costs, risk, facilities, equipment, intellectual property and expertise. Some technology funding sources are also organizations that will be partners in testing and demonstration or may provide resources in-kind, such as laboratory facilities or analytical services. For example, a technology developer may obtain a grant from the Department of Defense (DOD) to demonstrate a technology at a DOD installation or conduct testing in a DOD laboratory.

Resources for Funding Concepts and Techniques

Small Business Majority Entrepreneurship Program
Small Business Majority is a national small business advocacy organization. Designed specifically for entrepreneurs, this site provides information on accessing capital, workplace issues, retirement planning for owners and employees, and other aspects of operating a small business.

Small Business Funding Options
This website provides an overview of funding options available to small businesses, including pros and cons of each option. Examples of options include:

  • Community development financial institutions (CDFIs)
  • Community banks and credit unions
  • SBA loan programs
  • Alternative online lenders
  • Crowdfunding
  • Angel investors
  • Venture capital
  • Business plan competitions

SBA: How to Fund Your Business Startup: 5 Fast and Popular Options
This source describes quick sources of funding for startups with little or no history or revenue. Often, many entrepreneurs and small business owners piece together their funding from separate sources and at various times.

Funding Sources

Domestic Funding Sources

Small Business Investment Company Program
Small Business Investment Companies (SBICs) are licensed and regulated by the SBA to provide venture capital and start-up financing to small businesses. SBICs are privately owned and managed investment firms that use their own capital, plus funds borrowed at favorable rates with an SBA guarantee, to make venture capital investments in small businesses. Congress created the SBIC program in 1958 to fill the gap between the availability of venture capital and the needs of small businesses in start-up and growth situations.

Virtually all SBICs are profit-motivated businesses. They provide equity capital, long-term loans, debt-equity investments and management assistance to qualifying small businesses. Their incentive is the chance to share in the success of the small business as it grows and prospers.

Small Business Administration Loan and Loan Guarantee Programs
The SBA enables its lending partners to provide financing to small businesses when funding is otherwise unavailable on reasonable terms by guaranteeing major portions of loans made to small businesses. By providing this guaranty, the SBA is able to help tens of thousands of small businesses every year get financing they would not otherwise obtain. To qualify for an SBA guaranty, a small business must meet the SBAs criteria, and the lender must certify that it could not provide funding on reasonable terms without an SBA guaranty.

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Small Business Innovation Research Program
The EPA, along with 11 other federal agencies, participates in the Small Business Innovation Research Program (SBIR) Program to help small businesses grow in the field of technical innovation. A small business is defined as an independently owned and operated for-profit firm with fewer than 500 employees. Fifty-one percent of the business must be owned by U.S. citizens, or lawfully admitted resident aliens. Joint ventures and limited partnerships are also eligible. Annually, the agencies solicit research proposals for either Phase I or Phase II grants.

Phase I awards which can be up to $100,000 and up to six months are for "proof of concept" of the technology. Phase II awards can be up to $300,000 for two years to further develop and commercialize the technology. Phase II companies that obtain qualifying third party investments are eligible for a commercialization option of $100,000.

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Americas Seed Fund powered by NSF has helped startups and small businesses transform their ideas into marketable products and services. The fund focuses on high-risk, high-impact technologies — those that show promise but whose success hasn't yet been validated — and each year, it awards $200 million in funding to entrepreneurs across the country. Phase I awards can be up to $225,000 in seed capital to conduct product Research and Development (R&D) over six to 12 months. Phase II funding can be up to $750,000 over 24 months. During the course of that award, additional awards can add up to another $500,000.

EPA and the Federal Technology Transfer Act
The Federal Technology Transfer Act (FTTA) program provides in-kind goods and services in the form of sharing of EPA laboratories, equipment and personnel. The FTTA facilitates research between the EPA and "external parties" such as companies, universities and trade associations through Cooperative Research and Development Agreements (CRADAs). Through CRADAs, non-federal partners have access to EPA's research facilities. The EPA cannot provide any funding for the project, although external parties may. The FTTA does not act as a demonstration or verification program, therefore projects under it MUST involve research and development, as well as a truly collaborative effort. The FTTA prefers to work with small companies/businesses and typically issues between 10 and 20 CRADAs per year.

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The Capital Network
The Capital Network (TCN) is a non-profit (501(c)(3)) organization that provides practical, hands-on education and personalized mentoring to help early-stage entrepreneurs master the entire funding process and successfully raise seed capital and beyond. TCN caters to entrepreneurs seeking between $50K and $4M in seed, angel or venture capital investment and provides comprehensive early-stage financing education, networking and resources. The Network offers investor-to-entrepreneur introduction services, educational programs, venture capital conferences, seminars, literature, software, and an extensive "know-how network" of experts and advisors. TCN offers a selective, confidential matching service for investors and entrepreneurs based on mutual business interests.

Angel Capital Association Member Directory
The Angel Capital Association (ACA) is not a direct funding source, but its members are. The ACA directory is organized by state or region, making it easy to locate ACA members. Visit each organizations website to learn more about its investment preferences and processes. Individual members are not listed for privacy reasons.

Entrepreneurship Support Organizations
In addition to their other services, some business and technology incubators, accelerators and other forms of entrepreneurship support organizations offer financing or otherwise assist with financial advice and arranging for financing, These efforts can involve initial and subsequent rounds of funding using a variety of financing methods. Factors to consider in selecting and using an appropriate entrepreneurship center are discussed in the Resources for Finding an Appropriate Entrepreneurship Support Organization subsection below.

Export Funding Sources

Services for U.S. Exporters
This ITA web site provides information on how and where to get financing and insurance for export activities. For example, it refers the reader to pre-export financing available from two expert Export Agencies: Small Business Administration for loan requests of $1.1 million and under, Export-Import Bank for loan requests above $1.1 million. It also addresses financing for foreign buyers, and other government and private financing sources. Insurance tools are available to help expand and develop business overseas by protecting against various potential losses, such as default of foreign buyer or other foreign debtor for political or commercial reasons, currency inconvertibility; expropriation; and, political violence.

Overseas Private Investment Corporation
The Overseas Private Investment Corporation (OPIC) is a self-sustaining U.S. government agency that supports American private investment in developing nations and emerging market economies around the world by selling financial services that are not commercially available. These services include long-term political risk insurance, and limited recourse project financing.

OPIC provides medium- to long-term funding for new ventures or the expansion or modernization of existing, successful ventures involving significant equity or management participation by U.S. businesses. Rather than relying on foreign government guaranties, OPICs limited recourse financing looks for repayment from revenues generated by the project. This allows OPIC to finance projects in countries where conventional financial institutions often are reluctant or unable to lend on such a basis.

OPIC assists American investors through four principal activities designed to promote overseas investment and reduce the associated risks:

  • Financing of businesses through loans and loan guaranties.
  • Supporting private investment funds which provide equity for U.S. companies investing in projects overseas.
  • Insuring investments against a broad range of political risks.
  • Engaging in outreach activities designed to inform the American business community of investment opportunities overseas.

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Export-Import Bank of the United States
The Export-Import Banks (EXIM) mission is to create jobs through exports. It provides guarantees of working capital loans for U.S. exporters, guarantees the repayment of loans or makes loans to foreign purchasers of U.S. goods and services. EXIM Bank also provides credit insurance that protects U.S. exporters against the risks of non-payment by foreign buyers for political or commercial reasons. EXIM Bank does not compete with commercial lenders, but assumes the risks they cannot accept. It must always conclude that there is reasonable assurance of repayment on every transaction financed.

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Resources for Selecting an Appropriate Entrepreneurship Support Organization

Technology developers must consider many factors before applying to an entrepreneurship center. Each researcher or business must meet certain criteria to qualify for membership in an incubator or other type of entrepreneurship center. Many centers carefully screen applicants for indications of commercial viability of the proposed idea or venture. Some centers have diverse interests, accepting different types of start-ups. Others focus on one or more specific areas or industry. For example, there are incubators that exclusively support communications technology, biotechnology, or water pollution control technology. Others focus on concerns of specific sponsors, such as women and minority-owned businesses, Indian tribes, chambers of commerce and others.

A prospective applicant should also consider the compatibility of the goals of the entrepreneurship support organization's sponsors with the applicant's own overall goals. For example, government and nonprofit bodies often are interested in job creation, tax base expansion, and economic diversification. Some may wish to encourage development of technologies to help address a specific local environmental issue. Universities may provide access to laboratory and equipment, supplementary labor and experts in specific areas. Some academic institutions may primarily be interested in providing faculty and related groups with research and business opportunities. Some centers are hybrids using resources from both private and public organizations.

The following resources can assist in understanding, locating, and contacting appropriate entrepreneurship support organizations.

International Business Innovation Association (InBIA)
InBIA (pronounced in-bee-eye-ay) represents a global network of entrepreneurship support professionals whose organizations support incubators, accelerators and other types of entrepreneurship support centers that provide a wide range of critical support to many businesses. The type of support varies from one entrepreneurial support organization to another and businesses and researchers should discuss their requirements directly with the support centers they are considering.

InBIA maintains a list of U.S. incubation associations and international incubation associations and organizations on its Tools & Directories page. The list provides contact information (sometimes including website addresses) for state or regional business incubation associations, each of which is a source of dozens of member business incubators. The website also contains a directory of incubators, accelerators and other entrepreneurship support organizations, that can be searched by location or name. Entrepreneurs and technology developers who seek to bring a new technology to market may use this resource to begin the search for an entrepreneurship support center able to offer the type of support needed.

Advanced Technology Development Centers
The Advanced Technology Development Center (ATDC), a program of the Georgia Institute of Technology, is the State of Georgia's technology startup incubator. Founded in 1980 by the Georgia General Assembly, which also funds it each year, ATDCs mission is to work with entrepreneurs in Georgia to help them learn, launch, scale, and succeed in the creation of viable, transformative technology companies. Since its founding, ATDC has grown to become one of the longest running and most successful university-affiliated incubators in the United States. Its graduate startup companies have raised $3 billion in investment financing and generated more than $12 billion in revenue in the State of Georgia.

The Rutgers EcoComplex
The Rutgers EcoComplex is New Jerseys clean energy and environmental research, outreach, and business incubation center. It serves as a university-based resource hub and offers industry, academia and government access to applied research capabilities, unique facilities, business and technical expertise, and incubation services. The resources at the EcoComplex facilitate the commercialization of new technologies and business concepts that address pressing energy and environmental issues facing New Jersey and the nation.

Cleantech Open
Cleantech Open (CTOs) innovation ecosystem built over the last 11 years of programming spans key Cleantech innovation hubs in the U.S. and globally. It is a non-profit organization run largely by volunteers. Since 2005 CTO has trained over 1200 early-stage clean technology startup entrepreneurs through its annual business accelerator. A majority of CTO alumni have gone on to raise $1.2 billion and create over 3,000 clean economy jobs.

New York State Pollution Prevention Institute, Green Technology Accelerator Center
Headquartered on the Rochester Institute of Technology campus outside of Rochester, NY, the Institute has invested over $25 million in innovative solutions to common environmental problems. Its technology commercialization and new product experts can help accelerate the commercialization of a company's green product or technology. Typical projects with New York State companies can involve one or more of the following: Independent, third party product testing and evaluation, competitive product benchmarking, life cycle assessments, environment and energy impact evaluation, and market viability assessments.

Regional Cluster Initiative, U.S. Small Business Administration
The U.S. Small Business Administration is investing in regional innovation clusters throughout the US that span a variety of industries, ranging from energy and manufacturing to advanced defense technologies. Clusters are geographic concentrations of interconnected companies, specialized suppliers, academic institutions, service providers and associated organizations with a specific industry focus. They provide high-value, targeted connecting of small and large businesses, including networking with potential industry partners abroad. The Regional Innovation Clusters serve a diverse group of sectors and geographies. The clusters support small businesses by fostering a synergistic network of small and large businesses, university researchers, regional economic organizations, stakeholders, and investors, while providing matchmaking, business training, counseling, mentoring, and other services to help small businesses expand and grow.

Department of Defense and Commercial Accelerators
For several years, the DOD has been exploring the use of commercial accelerators in advancing DOD technologies. Partnering with accelerators enables DOD to engage with non-traditional defense companies and entrepreneurs to enhance and expedite the DODs access to emerging technologies and ideas. If DOD can engage early enough in a technology's growth cycle, it can mitigate cost of entry, maintain a competitive advantage over foreign adversaries, and prevent foreign adversaries from obtaining equity positions in critical areas.

Several innovative groups within the Pentagon have begun to pivot towards accelerator activities. In 2016, the Air Force launched a space accelerator in partnership with the National Security Technology Accelerator (NSTXL). An office called MD5, within the Office of the Secretary of Defenses Manufacturing and Industrial Base Policy, seeks to create new communities of innovators to solve national security problems through an education, collaboration and acceleration model.

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