According to the U.S. Department of Veterans Affairs, there are more than 22 million veterans living in the United States. When returning to civilian life, many veterans get bitten by the entrepreneurial bug and start their own businesses. Of the approximately 28 million businesses in the United States, about 2.4 million (8.5 percent) are owned by veterans. You can find veteran-owned businesses in every industry sector including manufacturing, consulting and service industries. Technology-related businesses are one of the fastest growing industry choices among veteran entrepreneurs.
And like many other entrepreneurs, veterans cite access to capital as a barrier to starting their own business or growing their existing technology businesses.
Banks are reluctant to fund startups and traditional bank loans to grow a technology business can be extremely difficult to obtain. It is often said that banks only loan to businesses and people that don’t need the money. For the entrepreneur who has repeatedly been turned down for funding this can appear to be the case. Other funding options for starting or growing a technology business include self-financing, loans or investments from friends and relatives, angel investors and venture capitalists and most recently, crowdfunding.
There is also another, often overlooked potential source of funding for veteran-owned technology firms—government grants. While the federal government does not provide funding for veterans to start a business it does offer some grants to which veteran-owned technology firms might be eligible to apply. In fact, each year, the federal government awards approximately $5 billion in grants to for-profit businesses. However, it must be made clear that the majority of these grants are awarded to support research and development activities that support national priorities, mostly related to technology, energy, healthcare, education, public safety and criminal justice, among others.
When looking at small business grants for veterans in technology, two programs come to mind—the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program.
About the SBIR and STTR Programs
The United States Small Business Administration (SBA) administers both the SBIR and STTR. Through these two competitive programs, the federal government ensures that the nation’s small, high-tech, innovative businesses are a significant part of the government’s research and development efforts. SBIRs and STTRs are designed to foster innovation and research while supporting small businesses. The ultimate goal of these programs is to help small businesses develop products that can be commercialized. Approximately $2 billion is awarded to United States small businesses each year through these two grant programs. The two programs were developed out of the government’s recognition that smaller firms—including those owned by veterans—are a great source of new innovation but that most of these firms often struggle for funding, especially for funds to pursue research and development projects.
Both the SBIR and STTR program share common traits. First, both programs are only available to for-profit, small businesses located in the United States and that physically perform their research and development activities in the U.S. In addition, both SBIR and STTR are applied for and funded in phases – Phase I is feasibility, Phase II allows further development and Phase III is commercialization. SBIR and STTR are set up as two unique programs, and there are some key differences between them. The main difference between the two is that the STTR program has a requirement that the project include a non-profit research institution as a research program collaborator, whereas the SBIR program does not. For both programs, Phase I funding can generally ranges from $50,000 to $150,000. Phase II grant awards can range from $500,000 to more than $1 million depending on the program.
Visit the SBIR website if you would like to learn more about both SBIR and STTR programs and to find out if there are any grants that are right for you. Other places to find small business grants for veterans in technology include www.grants.gov. You can also check with your state or local economic development office to see if they offer any grants for veteran-owned technology firms.
https://www.va.gov/osdbu/entrepreneur/ (operated by the Department of Veterans Affairs Office of Small & Disadvantaged Business Utilization, this website offers a host of business resources for veteran-owned businesses)
https://www.sba.gov/content/veteran-service-disabled-veteran-owned (information about the types of assistance available to service-disabled entrepreneurs)
https://www.usa.gov/funding-options?source=busa#wizard-step-id-1 (USA.gov financing wizard)
https://www.hiversandstrivers.com/ (an angel investment group run by graduates of the U.S. Military Academies)
https://tedco.md/program/veterans-opportunity-fund/ (the first venture capital fund formed to invest in businesses that are started, owned and/or managed by veterans. Investments can range up to $3 million)