89. Non-Dilutive Startup Fundraising 💰 SBIR Grants for Innovation

In this interview, Caroline Arzoo, Director of Partnerships at OmniSync, and I discuss the different options for funding a startup. She emphasizes that federal grants and contracts can be a great alternative to conventional angel and VC investment. However, she notes that the application process can be difficult, with over 80% of people who apply for federal funding on their own getting rejected for non-compliance. To help founders access non-dilutive funding, OmniSync has created an AI-powered platform that simplifies the process of finding and applying for federal funding.

In addition to federal grants and contracts, Caroline also suggests considering crowdfunding and pitch competitions as creative funding avenues.

She highlights the importance of community, transparency, and being open to change to navigate the complexities of growing a startup.

We also also touch on the emotional toll of the founder journey and the importance of building a support system.

Caroline Arzoo Bio:

Caroline Arzoo is a passionate advocate of innovation, supporting early-stage founders through her community-building work at OmniSync Inc and as a mentor for Founder Institute. A graduate of UC Santa Barbara’s Technology Management program, Caroline has supported hundreds of early-stage startups in accessing non-dilutive capital from the federal Small Business Innovation Research (SBIR) program.


In addition to her work supporting founders, Caroline also works to empower and build innovation ecosystems, partnering with universities, small business development centers, accelerators, and more to support their entrepreneurial initiatives.

Find her on LinkedIn at https://www.linkedin.com/in/carolinearzoo/

Check out OmniSync’s grant application tools at https://www.turbosbir.com/

Transcript

Lance

Hey, there. On this channel, we talk a lot about fundraising. It's one of the main preoccupations of many founders. And my personal focus has usually been on angel and venture capital investment, because that's the world in which I live. But I think it's really critical not to limit yourself to that kind of funding source. In fact, one of the biggest available sources of money is grants. The great thing about grants funding is it's not dilutive. It doesn't land on your cap table, it doesn't dilute your or anyone else's ownership. And in many cases, it's available much earlier than angel investment. So it can be a way to solve the founders paradox, where you need money to make your MVP, but no one will invest in you in any way, shape, or form until you have an MVP and some traction.

However, as I said, this is not my specialty. So I was really excited to have a chance to talk with Caroline Arzoo, and she is a director of partnerships at Omnisync, and they make a product called Turbo-SBIR, which is a tool for creating applications to government grants, SBIR grants. So she's extremely familiar with this entire ecosystem.

However, I met her as a mentor through the Founder Institute, and she's amazing. She works with huge numbers of founders. She's a font of wisdom. And so in this episode, we start off by talking quite a bit about the alternatives to conventional angel and VC investment, how SBIR grants work, we diverge a little bit to talk about the whole startup experience, the entrepreneurial ecology, and then eventually circle back to get into some real nuts and bolts about the details of the SBIR contract. I think you'll find it really useful.

Carolyn. Welcome to feel the boot.

Caroline

Thanks so much for having me. I'm really excited to be here.

Lance

I'm so glad you could join us today. Feel the Boot talks a lot about fundraising, and when I'm working with founders, they're often extremely focused around that issue. You need money to get the company going, but generally they've got a very narrow vision of how they're going about that. They're looking at angel investment and VC and those kind of classic approaches. But I thought today it would be great to have you on to talk about nondilutive funding and other kinds of funding mechanisms. Maybe you could start by talking just a little bit about what are some of those alternatives.

Caroline

Absolutely. So I have, since I joined this ecosystem, been in a startup support capacity, from a venture fund, to an accelerator, to a startup studio. I absolutely love working with founders, and from day one, the main dialogue in the space really is what we just talked about when it comes to venture and debt. And part of my biggest passion, what I've grown into, especially with OmniSync and my current work at Turbo-SBIR, is just shaking founders and saying, hey, there's alternate sources of funding out there. Consider it, look into it, see what works for you.

So a few things that I have really seen pan out for a lot of my founder friends and my ecosystem and the people I've supported. There's some creative things when it comes to pitch competitions and specific accelerator programs, et cetera, et cetera. But two of the biggest things I think that have been coming across a little bit more recently are the crowdfunding space as well as federal grants and contracts. So that's where my bread and butter is. Now, what I've become so passionate about is helping founders find and apply for nondilutive funding from the federal government.

But either way, there are creative ways to get funding that aren't in the traditional pitch, pitch, pitch. Let me get a VC to invest in me. And it's really important for founders to be aware of that and look into it to see if those are good for them.

Lance

Now, do you see certain types of startups, certain kind of categories of companies that have an easier time or more appropriate kind of overlaps with getting that kind of funding than others?

Caroline

Yeah, and again, it depends on what vertical you're going after and what type of funding. When it comes to crowdfunding, I'll often see a consumer brand, a startup that is more focused on the consumer model going much farther because their message really resonates. And there's a lot that goes into marketing in terms of bringing in this entire crowd for crowdfunding. We'll also see some great medical devices if they have a really heartwarming story, especially if they resonate with a health issue that many people face. So I see those going far with crowdfunding.

But frankly, I fell in love with the grant world because I didn't expect how open it was, how applicable it was to so many founders. So obviously there are restrictions for the US. Government. They have 700 billion in federal grants and contracts. About 4 billion is for the Small Business Innovation Research Program. So SBIR, if you're from the defense space, you'll say "sibr", and that's how most people say it, but this funding is actually pretty wide open. You have to be less than 500 employees, majority owned and operated in the United States, and doing something innovative and R and D focused because the money is intended to fund R and D.

But if you are doing that, and you're the one who brings the rationale, if you're innovative or not, you bring that argument in. There's funding across every single industry, from education to space, to health, to ocean, to agriculture to even measurements. I would never have thought about revolutions in measurements, even though that must be such a staple of life and foundational to life. But really, it's really all about, though.

Lance

That research aspect is that they're not funding you to do marketing, they're funding you to do new kind of development.

Caroline

Yeah, absolutely. And I think that's what a lot of people struggle with. We at OmniSync, so we help hundreds of founders find and apply for federal funding. And we'll often get inquiries from all over the web of, hey, can you give me funding to fix my bathroom? Or founders who are making a dating app and things like this. And those are amazing. I want his bathroom to be fixed. And I love dating apps, and I love founders who have their own unique journeys and what they're in love with.

But the point of federal funding, at least from the government, is this dual use application. So, on one hand, they want to stimulate the economy. They want to create jobs and create local businesses, of course, but they also do want to stay on the forefront of innovation, especially when you think about the United States in the global economy and in the global landscape. So they want to make sure that they are staying as innovative as possible. And the government, you think of it as one gigantic customer, frankly, they have verticals in every single space. They do everything, the government will buy everything.

And so they need to have great technology and great options and great products for their own needs. And so that's what a dual use application really is. It's taking the research and development and the technology that the commercial section is creating and saying, hey, the government has five different use cases for this. Let's give you the money. So you can create as innovative a technology as possible, and we can apply it to our own needs, so the government can function better, survive and grow and thrive in this economy.

Lance

And so, since we've talked a little bit about OmniSync already, why don't we dive into that a little bit more? And what exactly is this platform and how does it work? 

Caroline

Yeah, and I'm so nerdy about my team, frankly, I wasn't in the grand space beforehand. I mentioned I was at a fund Startup Studio. And I kind of grew up with founders in the same mainstream wave of okay, venture and debt, with no kind of understanding of the alternatives that were out there. And I joined the team because I loved the people. They were so impact focused. I think we talked about music for my first few times of meeting them, but in essence, I really fell in love with the mission.

And it's less so grants as much as nondilutive funding, empowering founders and democratization in order to have being a founder, and innovation, be something that we can all do. And so, OmniSync, we're a startup ourselves. We're about three years old. We use artificial intelligence to empower innovation. So the first and most well known product that we've built out, which has been really phenomenal, is Turbo-SBIR. So that's like TurboTax for finding and applying for SBIR funding. We were pretty straightforward about the day, but it hurt us to see how wonderful this resource was of the nondilutive funding, the federal grants, but realize how difficult it was to access.

So really, if you go ahead and go after this federal funding, over 80% of people who do it themselves actually get rejected for non-compliance. It is incredibly difficult to not only go through the application, but even at the beginning points of identifying what's out there for you. The government websites are decentralized, they're a little outdated, they're relying on keyword searches. And most people have very limited expertise, which is completely fair. So I will have a company come to me, an education company, for instance, an ed-tech company, and only ever look at Department of Education, but not realize that science would fund them, or health or something of the sort. Like if a med-tech company comes to me and doesn't realize that space would fund them or defense would fund them. And so currently the ways to identify these opportunities are really difficult to find, quality opportunities.

Lance

I remember back when I was doing this sort of thing, starting to look out there and there are so many things and it is so opaquely described that you don't even know where to start, where to start digging, how to find it. And then the forms are well, they're government forms.

Caroline

Right, exactly. Well, and honestly, I think that's why we built what we built. It's either do it yourself and suffer or pay an extraordinary amount of money. And we saw a lot of people getting exploited. And for us, we wanted to create that middle ground in order to help real people innovate and make it so that it wasn't just about the people who knew how to play the game. So we used AI to create TurboTax for finding and applying for federal funding. It's AI to search, show you best trends, software to help you with the application, as well as courses and grant writing at no upfront cost if necessary.

Lance

You've clearly been on the leading edge of this wave because the whole AI driven thing has just obviously been exploding in the last year and completely altering how a lot of these kinds of work get done. And I think it's going to end up sweeping away just all kinds of friction in the systems that have existed just because of the existing infrastructures that we've got. So did you come to them because they were working with you? The fund that you were in was funding them or how did you connect? 

Caroline

Yeah, no, I was searching for a space down in the geography where I'm at. So I'm in San Diego now and I was just looking for a good team. I was really in love with my venture fund and they were so wonderful. But the focus was future of work. And even though I love that I got into innovation for Climate and so I wanted to work with founders who I felt were working on those issues where it comes to my personal passions with climate and education and things like that. And so it felt like a perfect match, right? Because again, as I mentioned, we have so many founders because there's so many agencies funding such a variety of research and development. And so it felt like a perfect fit to just come here and work with so many different founders from all backgrounds.

Lance

So how did you start getting into this sort of entrepreneurial ecosystem in the first place? What is it that led you down this strange path? 

Caroline

It is such a strange path and sometimes I feel so lonely because I really randomly fell into this, frankly, I come from a Middle Eastern immigrant family. It was very much kind of a survivalist mindset. They immigrated here with their shoes and that was pretty much it. And working to go from nothing to the point of being able to sustain and support a family and support and grow and live, survive. I grew up with such a rigid viewpoint in terms of how the world should work and part of that is safety. But I was only ever taught, oh, doctor, lawyer, like the traditional pathways and nothing really resonated for me.

I loved people and I ended up finding and falling into a group of people who were just so inspirational in the sense of they focused on real problems, they were gritty, they wanted to make impact, they didn't shy away from the emotional aspect of facing fear and failing and growing. And so coming together in a community like that of people who genuinely wanted to build, that's where I started and it just led me down the path of continuously working with founders and joining startups and startup support groups because it's amazing people.

Lance

Yeah, and in fact, we met when we were mentoring together at Founder Institute, which it's amazing how many people get involved in that and I think just really enjoy that process of giving back. Again, I think mentors are a resource that a lot of founders don't quite understand. How many people are out there that are excited about helping out this community and working with these interesting people.

Caroline

And I'm sure this is something you see, Lance, because I feel that people totally underestimate it, especially in the founder space and in the startup space in this ecosystem, it really is a community. We are supportive. And so I think founders oftentimes feel that fear about reaching out or being honest with their investors or things like this that really inhibit them from making the most out of that community. So, community for sure.

Lance

Yeah, I think there is that hustle culture where everyone wants to be showing, oh, we're doing great and we're killing it and we're working so hard. And when you actually get past that shell and you're working with a founder and they get honest with you, yeah, they're living in a world of problems and because everyone else is putting up this front often feel like they're the only ones, so they're trying to hide it. And if you can get a community, that's a safe place that can come out.

Caroline

Absolutely. And I can't tell you how much I adore it and how proud and grateful I am when I have founders that I mentor. And founders reach out to me and they sit down and they start with an honest conversation. I'm really struggling here. Okay, this is where we thought we were going, and it does not seem like that's where we're going to end up. And those, I think, are the best people in this ecosystem.

Lance

It's funny, I've had people who are like, is it okay that I'm pivoting? Just want to shake them gently and say, have you looked at the number of hugely successful companies that ended up doing what they started doing? Yeah, right. Most companies end up just in radically new directions. But are you open to that and are you keeping your eyes up and aware of what's going on? 

Caroline

And I think that's the mark of a real founder in the sense that they're not so in love with the solution that they've created or that they've thought of, that they won't divorce themselves from that idea in order to actually create what the market needs and what the people need. 

Lance

Yeah, I've come up with a phrase, I like to call it strong convictions held loosely. 

Caroline

I like that. 

Lance

Because you got to be going 100% in a direction and then be willing to go "that's not working" and be 100% committed in the new direction. 

Caroline

What do you feel gets people there? In the sense that... 

Lance

It's a tricky thing and sometimes it does help to have advisors, to have a community around you, because I think we can all get so focused on what we're doing and into a tunnel vision and having someone around you who can sort of say, hey, look up, look over here. Start thinking in a more broad way can be useful. Because when you're executing, you're executing running down that path. 

Caroline

Yeah, no, most definitely. And I think that's something that I've learned as well is really taking the time to step back. And I've built basically a day every week where I am not touched by any of the fires that I have to constantly put out. But I get to sit down and really reflect on overall, the strategic things that I need and the overall vision. Because you really do put your head down and you get so focused on putting out the fires that sometimes you look up and you realize that you needed to pivot a while ago or you needed to do this, or you're working towards an end that you don't want.

Lance

I love the fact that you've sort of calendared that, so it's a structured time because and I certainly got reminded of this a lot by my community when I was doing a startup that the working in the business versus on the business. And as an employee, you're pretty much spending all your time in the business. As the founder, as part of the C-suite team, you have to be also working on the business, doing that meta level kind of activity around what should we be doing? What kind of business? What kind of structures do we need? What kind of people do we need in the team? And that is a fundamentally different kind of thinking. 

Caroline

And it also really speaks to the fact that you need to learn how to trust your team, and you need to learn how. And I think founders become such operators and so in love and over in charge of everything going on, that learning to delegate, learning to trust the team that you bring on, learning to be okay with success and be okay with moving to different spaces, it's really hard. 

Lance

What do you see in terms of founders ability to migrate across that? Because when you're starting, it's you and maybe your friend in a room just bashing out stuff. And then as you're bringing in grants and raising money and doing things, suddenly you've got a team and you've got vendors, and you're working in this much more complicated environment. How do you see people navigate that and what's your advice to them? 

Caroline

Yeah, my advice would be starting off know that it's going to be complicated. Nothing in this journey is perfect, and you can't really expect it to be. It really is. If you have faith in yourself that you'll be able to grow from an experience, and that you'll be able to survive an experience and you'll be able to figure it out, that's the biggest thing. For me, I think, even for us, we went from five to 20 in a year, and it was a big explosion. 

Lance

And that's a huge cultural difference between five and 20. 

Caroline

That's so much, so different, so much. I really do think that it tends to be a lot to navigate, and you just have to be open to the fact that it's going to suck and there's going to be a lot of challenges and a lot of pinches and all of that, and you're just figuring it out together. One thing I think really helped us at Omnisync was with this extreme growth and the culture changes, we started instituting a monthly All Hands where every single member of the entire team, from development to business development, to marketing and sales, et cetera, everyone has to meet. And we have an hour long debrief, kind of about where we were in the past month and what our KPIs are and our goals as a company overall. How do we get there? And I think especially as we're growing, forcing that interdepartmental communication, and also having such transparency about where we're at, bringing this together as a team, trying to brainstorm really helped a lot. 

Lance

If everyone knows what's going on, they're all pulling in the same direction. It's funny, we're talking about sort of the fact that things are messy and there's an emotional component to the founder journey that I don't think it's picked up in the media and a lot of people aren't expecting. And so what are your thoughts about sort of how founders can handle that and what sort of things they should be expecting and preparing for? Because it's an under discussed topic. 

Caroline

Absolutely. And I think this is one of the most important topics for me at least. And I think for many of the people in the community, especially founders, who are just starting or part of a younger generation who is a little bit more open about mental health and working mental health in their life and making sure that that is a balanced thing for them, it's an important value. And in general, for all founders. So frankly, I really would warn anyone going into the space that this is not easy. It is far from easy. This is going to challenge you from every single level of your life. Your relationships, your view of yourself, your view of your capabilities, your perspectives on the world. It's going to challenge you in so many different ways, and that's not a bad thing. But you have to be open for the roller coaster. Because if you fight to hold on to your previous conceptions and the way that you were living life as opposed to adjusting and realizing and growing and creating new habits and new perspectives to serve you in the way, that the life is changing, then you are really going to get depressed in a lot of ways and you're going to struggle a lot. 

This is a very personal journey, and that can really have so much impact on you. For me, I got into this because failure scares me. And this was the best way to have to face it constantly. And I thought I would hate it. I thought I hated pain, and you're always going to hide from it, but frankly, I love it now. Not pain necessarily, but the growth that comes from it. And so when I talk to founders, I want them to know that you're okay, this shouldn't be so personal. It's just part of the journey. One of the biggest things that have helped me no, go ahead. You were about to know. 

Lance

I was just going to sort of echo that discomfort, that being out of your comfort zone, I think is a critical element. I remember back when I was studying kung fu, the instructor would say, when you're sparring, if you're not losing regularly, you're not pushing your boundaries, you should always be trying some new thing rather than always doing the safe things, because that's where the growth happens. 

Caroline

Absolutely. And one thing I have on my fridge is a phrase. It literally says, success is an option and I don't think I would have expected to have such fear of change and success and different pathways, but I did. And that's why the founder journey has been so integral to me and my growth and my life and the relationships I build. A few things that I would say really in terms of what would be a great way to help you through that journey, besides knowing it's not personal. I really do think community is so important for me. 

One of the reasons I felt lonely going into this is that I fell into it. And I didn't have anyone in my family or in my close group of friends who was in this ecosystem. But when I began mentoring and I continued to work with founders and I made that a bigger part of my life and I built communities, it changed so much because these are people who understand in a lot of different ways things that no one else could really understand. So building communities, advisors, just like you mentioned, Lance, I think reading a ton of books and asking advisors and just being okay with being vulnerable, it made me realize that a lot of the things that I was nervous about was something that we all share in this community. 

Lance

Yeah, it's funny when you're in a room with other founders, other people who've been in that startup thing, the kind of conversations you can have this sort of an instant camaraderie because you all have this shared experience. I mean, I imagine it's something like people who are combat veterans have shared this incredibly intense, not often good experience, but it shapes you in really critical ways. And it's interesting to see how people of different ages react to this challenge as well. Why people who are right out of college versus people who are maybe mid to late career and doing an entrepreneurial journey for the first time. 

Caroline

Yeah, agreed. Would you say that what kind of impressions would you say that you've had? I know that I've come into this and I started right out of college and the people that I interact with at the youth stage who are just getting into this have this deep passion and deep faith, which I absolutely love. I think that's so important. But I also love when I meet founders who've been through the grinder a couple of times and the wisdom and the experience that they bring to it as well. I think there's so much in terms of there's so much I love about founders and everyone's perspectives at different ages. What would you say are the impressions that you've gotten? 

Lance

I think I'd agree very much that the people who are coming out of college and getting into entrepreneurship are usually extremely passionate about some particular issue. They have the energy of youth. They're going for it. When you're getting a more mature founder, they have sort of more life experience to pad the situations that happen, to contextualize what they're going through. They've had other losses, they've had lots of other kinds of experiences which I think often helps ground them. I also find they tend to be solving a problem that they've experienced through work. Most of them have been in some space and so they have an intimate understanding of the customer and the problem and the solution that they're trying to propose. Whereas often I find that the younger founders are coming in with more of a blue sky vision and it's often bolder and sort of more moonshot kind of thing, but it's also often less built in context of the actual real world problems that the customers they think they're going to help are actually experiencing. 

Caroline

Yeah, and I think that was why I was so grateful when I joined entrepreneurship to be more of a support capacity rather than a founder originally because it helped me with easing in and being able to support and learn the lessons of entrepreneurship instead of just throwing myself into something immediately. Personally, I really feel that to commit my whole life to something in the way that a startup is your baby, it had to be something that I was so incredibly passionate about and educated on and experienced in. So that I would be able to really not only bring my own knowledge, but be open to the market as it was and the relationships that I had built, hearing what the problems were, So I don't know if I could have started a company right out of college. 

Lance

Interesting, I think that experience does help. I certainly know I didn't know what the hell I was doing when I started, in a very profound way. 

Caroline

But one thing I would say is that I think a lot of people hesitate to be founders or join be in the startup ecosystem because they think, oh, I don't have an idea, I can't be a founder, I can't start a startup, you can join a team, you can be a startup support organization. There's so many different ways to go about it and I don't want people to hesitate because they think, oh, I just don't have that burning topic that I really want to solve that burning problem. That doesn't mean you wouldn't be part of the ecosystem and you wouldn't be part of the family here. 

Lance

Yeah, there're huge opportunities to be a co founder. And frankly, the people with the ideas often don't have the skills that they need to execute on the idea. That can be a fantastic synergy and I see that fairly often where you've sort of got teams where there's kind of a visionary member of the team and someone who's bringing some particular execution capability. They're a coder, they're a market or whatever that may be. 

Caroline

Absolutely. 

Lance

And the sum is so much larger than the parts. 

Caroline

And I think that's one of the reasons I shared how much I love when founders are. Open and how much I was scared of failure. Because I think part of this is my background, and part of this, I think, is just what we're taught as human beings. I felt I needed to be perfect and be able to take care of everything, and I need to succeed in all realms. But one of the beautiful things that I've learned in this ecosystem is that play to your strengths and find team members who can have strengths, where your weaknesses are. I think that's a big thing. That is such a great lesson for founders to find the right team members and be okay with not being good at certain things. You can't be perfect at everything. 

Lance

That's so true. Individuals don't scale. You need to have other people. There are going to be people who you're not the best person at every single thing. And it's challenging, right? Especially when it is your baby. It's hard to let someone else take it and put their own mark on it, but it's not maybe what you would have done, maybe not the path you would have gone.  

Caroline

Absolutely. 

Lance

And I realized I've let this conversation get really philosophical. I wanted to circle back to sort of where we started a little bit around some of the grants, and just sort of to help the audience have a sense of what is the scale of what we're looking. So when someone's looking for grants, kind of how much money is available, kind of what's the time frame? What constraints are there, under what circumstances is it not something that someone should be pursuing? 

Caroline

Yeah, that's a great question. And Lance, I love getting philosophical with you, and I'm so glad we brought it to grants too, because I love talking about this as well. So for the purpose of this conversation, I'm going to focus on the federal grants and contracts, the SBIR focus. So, SBIR funding, as I mentioned, is a $4 billion grant and contract program from the US government. It is spread across multiple agencies. I believe there's about eleven participating agencies. That's everything from science to health, to agriculture, to space, to education, to measurement, transportation. So there's such a wide range.

The funding really is intended to be this funding for research and development. The idea is that when you're at that early stage and you have this risky idea, an investor might not be willing to risk their dollars with you, but at the end of the day, you still might be able to make incredible impact and bring about this really revolutionary technology. But just because you didn't have the funding, is that idea going to die where it was? And are we all going to miss out because that idea didn't survive? And there's many companies that have been incredibly successful that have started out with SBIR funding, Qualcomm here in San Diego is one.

So we tell founders to come into this at that early stage. The program is broken up into three components. So the first component is a phase one SBIR that is testing the feasibility, right. The concept development of what you're doing. And so you're coming in and you're getting about up to $275,000 to test the feasibility of your innovation. 

Lance

So at this point, you could really just be idea stage and get this right. 

Caroline

We've had everyone from mom and pops who've written their idea on a napkin come to us, to unicorn on the platform who are just doing continuous R and D for their technology. Of course, you still have to have a viable thought process and plan. And it's important to have partners and understand what the agencies themselves want, because every agency has a different approach and a different need and a different expectation, and we help with all of that. But I love working with early stage founders and letting them know that idea stage, this is the whole point of the program. We're here testing your feasibility and letting you bring that idea. 

Lance

And so what's the typical time frame for that initial funding? 

Caroline

Yeah. Off of our system, if you're not working with us. We've seen founders take months and months and months. I think we've heard an average of like 160 hours sometimes, which can be really difficult. And then again, over 80% get rejected for non compliance because they missed their font size. Or there was a form on page 270 of the 300 page solicitation that you didn't really realize you needed to address, and you didn't address it correctly. And that's just the logistical and admin stuff, as opposed to, did I even position this correctly for the agency I'm submitting to. So it does take a few months. But if you're on the system with us, I know that we've been able to help people turn around applications in a couple of weeks, even. The only thing that we can't control for is the government. And they do tend to take a few months to get back to you. I believe it's about three months, two to three months for Notification of Review award going to six months, and then max would be like eight months for delivery of funding. And so for founders who come to me who are so gung ho on raising right now, this is not something that I would recommend for them.

And frankly, I love SBIR funding, but it shouldn't exist in a vacuum. We ourselves have multiple SBIRS, but we also have VC funding. I view this funding as a resource to de-risk you and help you get to that point of initial trajectory traction, concept, prototype development. But if you're already past that stage, or if you're already seeing so much traction and you are comfortable going with the VC only route and you want to move fast, then this wouldn't necessarily be the funding for you. So that's a couple of the recommendations that I give. I know that the government is trending towards simplifying that time frame. They're trying to shorten it as much as possible. They've heard our concerns. But for right now there is still some time from finding your opportunity to going through that application to getting the funding from the government. 

Lance

Yeah, but it does seem to address that paradox of many startups where you need money to create the MVP, but no one will give you money until you have the MVP working and have some traction. And this is a source that will sort of help pay you to get that first thing out there. So when you get the phase one, what's the time frame that you're expected to execute on that? 

Caroline

So it depends on each agency. I can't speak because it's dependent on each agency's contract and the relationship that they're going to build with you and your own specific idea. But the hope is that once you test out the concept, you'll be able to go to MVP in a phase two contract right after. So that would be nine to twelve months down the line. And so the phase two contract actually will award you up to 1.75 million in funding and non-dilutive grants to get to that point of MVP. 

Lance

And that's for many startups, a pretty substantial chunk of change. 

Caroline

Absolutely. 

Lance

What sort of commitments does the startup have to make for this? Or is it to what extent are there strings attached to this? 

Caroline

So SBIR and STTR, which is its sister program, that is the program where you're working with a research institution to go ahead and deliver on this opportunity. Both of those come in different forms, so it could be either grants or contracts. Most people say grants, and that's just an easy term to use. But some opportunities from a few agencies, including defense and the sub agencies underneath that are actually contracts. So even though this money doesn't have to be paid back in either grant or contract form, depending on where you end up, and if it's a contract, there are going to be these certain expectations for what you deliver and what the steps are and the milestones that you have to hit.

And the government does have supervision after the award period, not only to make sure that you're using the money for its intended purpose and that you're respecting that process, but you'll also be meeting with your program officer and the person on your grant in order to make sure that you're hitting the deadlines that they expect. The thing is, every project is different, so you'll have different needs per project and what they expect.

But I tell people not to view this as a free money. In fact, we'll have so many people who come to us and they'll be like, oh yeah, I'm just going to put in this grant application, get so much money. It's not that easy. You really do have to roll up your sleeves, put some effort into this commitment not only into the application, but realize that you're building this relationship with the government and they have expectations. You're not going to have to pay the money back or anything like that, but you are going to have to try to deliver on what you said you were going to do and the plan that you proposed for the research and the development.

And, in fact, the phase one and the phase two actually de-risk you and lead you to this path of getting the government as a customer itself. So, right now, for a phase one and a phase two, they're giving you money to do your research and development. But once you've already done that, and they see that you've created a product that is viable, is useful, and, in fact, is applying itself to a government use case, which is why they funded you in the first place.

You actually can begin to have the government as a customer where they give you multimillion dollar contracts in order to purchase your technology or whatever you're creating for their own needs. And so you really want to maintain a quality relationship through your phase ones and your phase twos, because by going through this pathway, you're actually opening yourself up to having the government as an overall customer in the end. 

Lance

Yeah, I think a lot of people forget that that these things largely exist because the government wants some things to exist that don't exist now. 

Caroline

Absolutely. 

Lance

And they want to work with you to create it so they can buy it. 

Caroline

Absolutely. And that's it at the end of the day. Right. I mean, they have their own needs. They want to be a fully functioning government. They want to be able to deliver quality programs and have a quality nation. And they're going to need to innovate to do that. Innovation is where we all need to be in order to have success, growth, and keep getting to that point of being our best. So, absolutely. At the end, the government kind of is a customer. And I know you and I had spoken a little bit about this, but would you like me to share anything about OmniSync journey with working with the government? 

Lance

Absolutely, yeah, please do. I think it's appropriate right here. 

Caroline

Yeah, and this was interesting to me. I didn't expect to necessarily work with the government, and it's so fun for me to be at the center Section of Innovation and Government and working with people across the nation and in the federal space to empower innovation. So not only do I work with small business development centers and the SBA and different entities across the nation to support their startups just as Director of Partnerships here at OmniSync, but I've really seen the ins and outs of the process, not only because we've helped so many founders do it, but because we've gone through the journey ourselves.

So Omnisync has two phase ones two phase twos from the Air Force and recently received a phase three contract SBIR from the Department of Energy. And so similar to what I shared with you guys, where phase one is this concept development, phase two is this point of prototype development, additional investment. And then phase three is the government realizes that they need your technology and they've already invested in you. And so you have a sole source justification for being able to be a contractor with them. That's when they become a customer of yours.

And so Omnisync, in actually such a short time, which is somewhat unprecedented, has experienced both the R and D funding and the contractual relationship as well. 

Lance

That's great. And you used a phrase that I think a lot of people don't quite appreciate the value of, which is "sole source." This is a root password to government contracting. Everything else has to be bid. It's competitive. You're fighting against the big gorillas that are out there, although they usually have set asides that they have to put for small business. But sole source means they've already admitted that you're the only person who can do it and so they can just contract with you. My company did a lot of sole source work and it was fantastic. 

Caroline

And honestly, you can see the light glow in the eyes of the government employees who would be the ones giving the sole source. Because in their mind, it's like, oh, I don't have to go through the pain of sending out a solicitation and then doing this and this and this and months. We just have someone, and they already do. Risk. I can just in a couple of months do a purchase order. Fantastic. 

Lance

And they know who they're going to be working with, whereas if they put it out to bid, they're going to get maybe some lowest bidder who's not who they wanted to work with and was not the right. 

Caroline

Yeah. Our phase three, I think it came and closed in a matter of like three months, which you wouldn't expect with government entities. 

Lance

When there's a good mesh, they can occasionally move fast when they want to. Are there any final last thoughts that you wanted to share? Anything I didn't hit on in these questions? 

Caroline

No, you're perfect. I know that we went on a few tangents and that's because entrepreneurship for me is so philosophical and so intertwined with kind of the human experience.

I think the biggest things I would say in summary is that entrepreneurship and this experience is all about facing your ego and learning to grow. In that experience, it's important to realize that it's not personal. None of it is. It's about growing and that you're such a fantastic, wonderful person for caring and trying. There's a community behind you and there really is, frankly, a lot of resources out there, not only from the people, but from the programs and the opportunities.

Some people don't know about small business development centers. And those are centers from the government across every state that are there to help small businesses from high tech or not. And so, point being is really, there is a lot of resources out there. There's a lot of people who care. I'm so proud of each and every one of you guys if your founders going after this journey and please look into the smart ways to support your work.

Personally, Turbo-SBIR. I really love my team and we've built this to be as founder friendly as possible. Most of our models are no upfront cost. So really, if we can help you identify funding opportunities across the entire federal space or apply, or if I can ever just be of support, it's all about community, please reach out. 

Lance

Yeah, because of course, in addition to the work with Omnisync, you're with Founder Institute and you're donating volunteering your time to work with these startups, as are so many other mentors, and really appreciate your doing that.

Well, thanks so much. I think this has been great information. It'll be really appreciated and useful to the Feel The Boot community. And thanks so much for coming on. It's been a real pleasure. 

Caroline

Yeah, thanks so much for having me. I always appreciate talking to you, Lance, and Feel the Boot community excited to be here. Thanks for having me. 

Lance

Thanks for watching this interview. I hope you found it useful and interesting and there's something there that you'll be able to apply to your startup. If there was, please do the usual: like, subscribe, and ring that bell. It makes a huge difference to the channel and it makes sure you find new content like this.

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And till next time, ciao.