Opportunity Costs of SBIR & STTR Grants

There are numerous methods for funding a new start up that all have advantages and disadvantages. A popular choice for research based start ups are the small business innovative research and small business technology transfer grants. These grants are non dilutive and can provide a start up significant capital to conduct basic research. 

The benefits of SBIR and STTR grants should not be ignored however there is a cost to pursuing this source of funding. The size of the grant programs is around $2-3 billion annually to between 4,000 and 6,000 companies while venture capital invests between 20-25 times that amount each year to more than 4 times as many companies. Non dilutive funding will always have a place in a capital raise however because of its small size relative to other funding sources it should only be considered part of an overall strategy to fund a new venture.