Startups are often challenged with two primary issues: finding product-market fit and finding their first paying customer. The Small Business Innovation Research (SBIR) program, run by the Department of the Air Force’s AFWERX team, can help to address both of these challenges: it awards a contract to find the right fit for a product within the U.S. Government and it provides a path towards rapid funding.
The SBIR program is a competition that allows small businesses to compete for a contract to develop commercial technology for the Air Force. When developing technology for the Air Force, people often think of fighter jets and bombers; however, the Department of the Air Force is a large and varied organization, so technology can range from products in the medical field, law enforcement, construction, energy, and communications. Basically, any technology that could be used to better run or build a small city has applicability to the Air Force.
#1: No equity taken
A SBIR contract provides funding to further develop your product and, unlike a traditional investor, the U.S. Government doesn’t take any equity from your company. It is very unusual to find a customer who will invest in development; for the most part, customers only want to pay after a product is ready for them to use.
Slingshot was fortunate to leverage this during our recent Series A raise, where our work on SBIRs was seen as an asset due to the U.S. Government’s interest in our technology and the potential for rapid growth.
#2: Keep intellectual property
The U.S. Government wants to incentivize development of products or services that drive the U.S. economy and have relevance for commercial and military purposes, so the SBIR contract terms are very friendly to small businesses keeping their IP.
For Slingshot, this means that our space education tool, called Slingshot Laboratory, can be commercialized across the Government, Universities, Businesses, and even K-12. The benefit to the Government is that any development funded by venture or private investors into the software will directly provide value to Government users without the Government having to fund it.
#3: A contract that scales as we do
The SBIR process is meant to enable rapid scaling. Phase 1 of the program awards winning companies $50,000. Phase 2 awards winning companies $750,000 to build a prototype. Phase 3 is unlimited in the dollar amount and can be scaled to reach the entire federal government.
A key component to why phase 3 is so exciting for a startup is that any agency within the federal government can award a sole-source contract, avoiding the need for the requesting agency to go through a long and laborious competition. This is a huge benefit not only to the startup but also the Government Customer. Here is the description from the AFWERX website:
- Many Small Bets (Phase I) "a simple, open door for innovation" - Up to $50,000 per award | 1000-1500 awards per year | Three solicitations per year
- Some Medium Bets (Phase II) - Up to $750K per award matched funding encouraged | 300-500 awards per year
- A Few Big Bets (Strategic Financing) - Up to $15M (SBIR) Awards | 20+ Awards per year | 1:1:2 Program-SBIR-Private Matching | Annual Solicitation
#4: Working directly with a customer who is motivated and excited to try new technologies:
As many startups know, finding an early adopter for your new technology is often the hardest part. The SBIR process enables a small business to reach thousands of potential early adopters who are eager and motivated to try your new capabilities.
Slingshot has directly benefited from this user engagement, which allowed us to include operators and users in our agile sprints, providing direct feedback on features and user interfaces.
#5: Leverage Government data sources and expertise:
The Government has a huge number of data sources. Much of this data and expertise on how to best utilize this data can be negotiated with the contract under a Government Furnished Information (GFI) list.
Traditionally, the U.S. Government has not been the easiest organization for start-ups to get involved with. Long procurement timelines and regulations have meant there are significant hurdles to doing business with the Government. However, that is changing with AFWERX and organizations like it in the Army and Navy.
From Slingshot’s experience, the AFWERX SBIR program has been an amazing opportunity, allowing us to find a paying, engaged, and motivated customer and beta user. For any startup that is looking for that “keystone” customer, take a look at the AFWERX SBIR program.