From Idea to Billion-Dollar Valuations: Stories of Successful SBIR-Funded Startups

While Angel Investors and Venture Capital firms continue to be a prime choice for tech companies, one that many startups overlook is federal funding opportunities. Federal money is a non-dilutive capital that provides early-stage companies with technical feasibility and commercialization.

In contrast to Venture Capital investments, federal capital is more stable and predictable. Companies can receive federal money with no strings attached. When a government awards you a grant, it does not take any ownership in your company, and you don’t have to pay interest rates or return the funds. Federal funding also can provide legitimacy and credibility to your startup, making it easier to attract other investors. In the last 10 years, the federal government has increased funding for research and development (R&D) — investing $179.5 billion in FY 2021.

Government funding sometimes offers more than just money, including access to advanced national laboratories and internal government information. Stanford

However, the process of obtaining federal funding can be lengthy and competitive. Sometimes it may take months and additional expenses to complete the application. This can be challenging for many founders you would prefer to focus on their customers and VCs rather than spending time on federal applications.

Despite skeptics, federal grants, such as Small Business Innovation Research (SBIR) programs have been playing a critical source of capital for many early and growth-stage companies to help support their growth and development. Founded in 1977, hundreds of companies have received millions of dollars through SBIR programs helping them with commercialization and R&D.

In this article, we will discuss some of the success stories when tech companies secured SBIR federal grants and used them to grow and scale their businesses.

Federal Grant Success Stories — Examples of Startups that Have Secured Funding

There are countless success stories of startups that have secured federal grant funding and used it to grow their businesses. Some of the successful alumni of the SBIR program include Qualcomm (cell phone communications) with a $135.06B market cap; Genzyme (biotech therapies) with a $ 20.10B market cap; Amgen (biopharmaceuticals) with a $134.32B market cap; Biogen (Idec, neurological, autoimmune therapies) with $3B total value; Millennium Pharma (gene databases) with $17B market value and more.

• Ginkgo Bioworks, is a startup that uses synthetic biology to produce high-value chemicals. Ginkgo Bioworks secured a $4.7 million SBIR grant from the Department of Energy, which they used to develop a platform for engineering microbes to produce biofuels.
• Apeel Sciences startup received a $3 million SBIR grant to develop a new type of plant-based coating that can extend the shelf life of fruits and vegetables. Today, Apeel Sciences has raised over $360 million in venture capital funding and is valued at over $1 billion.
• Healthy Design, a Vermont-based company, and manufactured the first prototype of the Exersides Refraint System, received funding through the NIH Small Business Technology Transfer (STTR) and Small Business Innovation Research (SBIR) programs to assist with the development, testing, and commercialization of the Exersides Refraint System. After successful Phase I and Phase II tests, Healthy Design received additional SBIR funding in 2021 to commercialize, manufacture, and market the Exersides Refraint System. Now the system is available for patients both nationally and internationally.
• OptiEnz Sensors startup received a $225,000 SBIR grant to develop a new type of enzyme sensor. Today, OptiEnz Sensors is a leading provider of enzyme sensors for the food and beverage industry.
• Alabama company Soluble Biotech improves the delivery of protein therapies received the National Institute of General Medical Sciences Small Business Technology Transfer (STTR) Phase I and II grants allowing the company to build the faster, automated machines that they use today. A second STTR grant enabled the company to incorporate membrane proteins into their workflow, which are fat-soluble and therefore often difficult to combine with liquids. The company has worked with more than 30 pharmaceutical and biotech companies. In 2020, Soluble BioTech was acquired by Predictive Oncology, a public company (NASDAQ: POAI) that offers a suite of solutions for oncology drug development from early discovery to clinical trials. Now under the POAI name, they have a Good Manufacturing Practice facility that offers manufacturing capabilities to pharmaceutical companies for phase 1 clinical trials. In addition, they sell hundreds of protein solubilization kits each year.

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• Veriflux Corp develops a traceability platform capable of tracing biogenic wastes, fats, and oils — such as tallow, brown grease, and used cooking oil — across complex supply chains, providing stakeholders with the data needed to help comply with Federal and State regulations as well as lower carbon intensity (CI) scores, has received the Environmental Protection Agency (EPA SBIR )grant to identify additional types of waste and feedstocks that can be traced with the system including food waste, plastics and other future potentially renewable materials. Veriflux has also launched a pilot with the NYC Department of Environmental Protection and Waste Management of New York, LLC to identify the source and quantify the energy value of grease trap food waste. The pilot showcases the value of a platform like Veriflux, and the ability of technology and data to empower sustainability, circularity and traceability across waste, recycling, and renewable energy supply chains.
• With the support of SBIR/STTR, Missouri-based Lickenbrock Technologies has developed Fast Expectation Maximization Ordered Subsets (FEMOS), a reconstruction algorithm that creates scans with greater resolution and contrast than commercial computed tomography (CT) scans. With this development, the inspection technicians will more easily be able to detect potential flaws and defects in equipment that could lead to failures down the line and ensure the performance of such equipment in the field. This project has allowed the company to create a commercial product that forms the foundation for a series of imaging processing tools that are currently in development. A patent application for the FEMOS algorithm has already been submitted. Lickenbrock Technologies expects a return on the project of $750,000 in the next three years, and with further development, an additional $500,000 to $1 million per year in profits in commercial industrial use.
• With support from Small Business Innovation Research (SBIR) grants, Hawaii Biotech developed and expanded its vaccine platform to develop vaccines for a variety of infectious diseases. The platform relies on insects to produce proteins that closely resemble the native structure of viruses such as tick-borne flaviviruses, filoviruses, and Chikungunya. SBIR funds also paved the way for the company to develop small-molecule drugs to treat infectious diseases, including anthrax and botulinum toxin. In August 2020, Hawaii Biotech was awarded supplemental SBIR funding to focus on developing a safe and stable vaccine for SARS-CoV-2. The COVID-19 S1 subunit vaccine developed has been shown to induce robust and durable immune responses after two doses.
• SafeLi, LLC is a women-founded, university-incubated start-up working to commercialize a new material — the first recognized carbon-based nanomaterial, named Graphene Monoxide (GmO). National Science Foundation (NSF) and Department of Energy (DOE) Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding proved critical to developing SafeLi’s understanding of how to navigate a new industry and bring the discovery to market. The SBIR and STTR funds have provided a mechanism to accelerate research and development activities and license intellectual property from UWM to the start-up, SafeLi. Access to the university facilities, including state-of-the-art scientific equipment such as the transmission electron microscope and a one-of-a-kind battery lab built by Johnson Controls, has been critical to accelerating the path to market for SafeLi’s novel material. These resources supported the efforts needed to scale up the production, demonstrate the properties of the material in prototype batteries, and develop a viable business model. Without the SBIR and STTR funding, the SafeLi material would have remained a patent with limited research and development efforts. The funding allowed for the necessary “de-risking” that it takes to get a patented product to market with traction and interest at a commercial level. The company is now in the exploratory phase with investors and 8 jobs have been created. Successful development of SafeLi’s high-tech products will produce a cost-effective material for higher performance safer energy storage applications, with profound benefits for products like EVs. Improved high-energy anode materials will generate better batteries, thus making EVs more affordable, convenient, and safer.

If you’re an early or growth-stage company looking for SBIR funding, schedule a call with an iFund Lab advisor today to learn more about available grants and eligibility criteria. Send a call request at funding@ifundlab.com