In this week's Latino Founders Accelerator – Finances session, attendees were guided through vital financial strategies and resources to elevate their entrepreneurial journeys.
With a focus on federal funding and legal safeguards for startups, the session equipped participants with the knowledge to navigate financial complexities and protect their businesses.
Read: Week 7 Accelerator Class Recap: Navigating Finances for Latino Entrepreneurs
Federal Funding Opportunities
The session opened with Mary Phillips from VertueLab, offering an in-depth look at SBIR/STTR funding.
These federal programs provide non-dilutive funding (which doesn’t require giving up equity) for s amall businesses, focusing on breakthrough innovations that address critical challenges.
Eleven federal agencies, including the Department of Defense, Health & Human Services, and the Department of Energy, collectively award $4.2 billion annually.
SBIR/STTR Funding
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are federal initiatives designed to support small businesses and foster innovation in the United States.
These programs provide funding to early-stage companies and research institutions to advance technological advancements and commercialization efforts. Here’s a comprehensive look at what SBIR and STTR are, how they work, and how they can benefit your business.
Small Business Innovation Research (SBIR)
The SBIR program is divided into three phases:
Phase I: Feasibility Study - Provides up to $200,000 (varies by agency) for 6-12 months to establish the technical merit and feasibility of the proposed research or development
Phase II: Development - Offers up to $1.5 million (varies by agency) for 2 years to expand upon the results of Phase I and conduct further R&D. Funding is typically based on the successful completion of Phase I
Phase III: Commercialization - Focuses on the commercialization of the technology developed in Phases I and II. Funding for Phase III does not come from SBIR but rather through private sector investments or additional government contracts
Eligibility: To be eligible, businesses must be for-profit, based in the U.S., and meet certain size standards (typically fewer than 500 employees). They must also be at least 51% owned and controlled by U.S. citizens or permanent residents.
Agencies: The SBIR program involves 11 federal agencies, including the Department of Defense (DoD), National Institutes of Health (NIH), and NASA. Each agency has its own specific topics and research interests.
Registering with Sam.gov is a must for any business applying for federal funding.
Small Business Technology Transfer (STTR)
STTR is a related program that complements SBIR by fostering collaboration between small businesses and research institutions. The STTR program focuses on transferring technology from research institutions to the private sector, with an emphasis on partnerships.
Key Features of STTR:
The STTR program also operates in three phases:
Phase I: Feasibility Study - Provides up to $200,000 (varies by agency) for 6-12 months to evaluate the feasibility of the proposed technology
Phase II: Development - Offers up to $1.5 million (varies by agency) for 2 years to develop the technology further and demonstrate its commercial potential
Phase III: Commercialization - Similar to SBIR, this phase focuses on bringing the technology to market through private sector funding or additional contracts
Eligibility: To qualify, businesses must be for-profit and based in the U.S. They must also collaborate with a research institution. The research institution must be a U.S.-based organization such as a university, federally funded research and development center (FFRDC), or other non-profit research entity.
Agencies: Like SBIR, the STTR program is managed by several federal agencies, including the Department of Defense (DoD), National Institutes of Health (NIH), and NASA. Each agency may have different research priorities and funding opportunities.
Legal Considerations for Startups
Julie Preciado, Associate Attorney at Dunn Carney LLP, took the stage to discuss essential legal considerations for startups. Her emphasis was on the importance of business formation, insurance, and contracts.
Julie explained how forming a separate business entity helps shield personal assets and provided a breakdown of insurance options such as general liability and cyber insurance.
She also highlighted the importance of contracts—from NDAs (non-disclosure agreement) to service agreements—and the need to memorialize key business agreements to allocate risk and increase trust between parties.
Contract Specifics and Risk Mitigation
Diving deeper into contracts, Julie provided an overview of various contract types and critical clauses to include, such as liability limitations and indemnity. She stressed the importance of proper contract execution and maintaining corporate formalities to avoid legal pitfalls, like piercing the corporate veil.
Engaging Q&A and Action Items
Participants had the chance to engage in a Q&A session, discussing the significance of business roles and how titles affect company dynamics. The conversation also turned to upcoming events, including the October 9th Showcase and the much-anticipated Pitch Latino - Portland on October 10th.
This session provided a wealth of knowledge, guiding entrepreneurs toward financial empowerment and legal security. With federal funding insights and solid legal frameworks, participants are now better equipped to grow and sustain their businesses.
Stay tuned for more updates as the Latino Founders Accelerator continues!
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