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Financing with grants, not equity or debt

By: Dave Berkus


Funding round symbol. Concept words 'Funding round' on wooden blocks on a beautiful background from dollar bills. Business and funding round concept.

I was chairman of a company that, for twelve years never took a dollar of outside investment.  The company was funded entirely by grants from the National Institute of Health, amounting to millions of non-dilutive dollars in all.  The company created a product that could be delivered as a service to medical clinicians anywhere in the world, enhancing their ability to understand their patents’ problems and needs in less time, using the expertise built into an AI expert system created by the best minds in many medical specialties.  And we should not forget that non-profits of all types depend upon grants for a significant amount of their funding, often employing professional grant writers on staff or as consultants.

No dilution to shareholders or the founders

A company like this grows in value to its customers and to prospective buyers of the business, but without any dilution of control or ownership for the founders.  How refreshing!

How grants are considered

In general, grants are made to individuals, companies, businesses, organizations or institutions that are working toward serving the greater good or a greater cause.  These grants include funding to educational institutions, researchers, research centers, colleges and universities, or private companies that are researching or developing leading edge solutions in several categories including agriculture, education, energy, health, medical, space, science and technology to name a few.

The effort to write a grant request is not trivial

Grant writing takes skill and immense amounts of time.  Often, grants require that you partner with other organizations to deliver the results or measure the effectiveness of your special project.  And often, grants come with detailed accounting and reporting requirements.  If you can finance your enterprise through grants rather than equity or debt, you retain control and when it is time to sell your interest in the business, a lower sales price will create a higher return on your personal investment.

Other sources of grants

There are some grants available even for one person shops, from cities, corporations and even non-profits for just your type of business, especially if you support a social cause, can employ more people, or help turn around a geographic area in need of upgrade.

Published: February 8, 2021

Source: Reprinted with permission of Berkonomics

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Dave Berkus

Dave Berkus is a noted speaker, author and early stage private equity investor. He is acknowledged as one of the most active angel investors in the country, having made and actively participated in over 87 technology investments during the past decade. He currently manages two angel VC funds (Berkus Technology Ventures, LLC and Kodiak Ventures, L.P.) Dave is past Chairman of the Tech Coast Angels, one of the largest angel networks in the United States. Dave is author of “Basic Berkonomics,” “Berkonomics,” “Advanced Berkonomics,” “Extending the Runway,” and the Small Business Success Collection. Find out more at Berkus.com or contact Dave at dberkus@berkus.com

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