three ‘Fs’ may not be enough to get it to that stage. At this point, foundersneed to become very creative in their approach. There are many other,early-stage sources that can be tapped. Here are just a few of them:
SBIR and STTR Funding:
For certain companies, government fundingis a real possibility. These programs offer money for development of prototypes and even simply proof of concept. In fact, stage one of theSBIR program is exactly that. In return for the right to use the results,almost every government agency will fund such proof of concepts inareas that they are interested and for problems that they need solved.Stage two of these programs offer follow-on funding for furtherdevelopment. The company retains the developed intellectual propertywith only the above restrictions.
This approach is a first, major test of the valueproposition that the company is promoting. The logic is, ‘if yourproduct or service is as valuable as you think it is, your potentialcustomers should have an interest in its development’. Manycompanies have been launched using this approach and never had togo the further step of raising venture capital. There are additionalbenefits of this approach. First, you get to test your ideas in the realworld. Second, your potential customers will help you refine your valueproposition. Third, they will help you expand your pool of potentialcustomers through referrals and references.
Another option is to find a well established companyto partner with. Although there are dangers involved such as keepingcontrol of the intellectual property, many companies have successfullymanaged this risk and tapped into significant financial resources. Jointventures are particularly relevant for high-technology companies thathave either cutting edge or disruptive technologies.
There are organizations and associations which are dedicatedto supporting the development of certain technologies. Many of theseprovide development grants to emerging companies. Although theamounts may be small, the restrictions on the use of proceeds aregenerally few. Some companies have accessed a fairly regular streamof these grants to support development of new innovations orfunctionality.
Sweat equity is defined as the time and effort that ateam invests in getting a business to the stage where investors will be