How to Find Funding for Innovative Business Ideas

The world is full of simple ideas. Sell hamburgers. Start a website. Build cars. Those kinds of businesses will have few problems attracting lenders and investors, from banks to venture capital. But really innovative ideas, from advanced communication technologies to cures for cancer, often get a cold shoulder from traditional funding sources.

If you are pursuing a radically new or complex idea, don’t waste your time asking a local bank for a loan. You need to find financing sources that understand the particular risks and challenges of research-stage concepts.

Instead, start with this list of likely funding sources:

• SBIR and STTR grants: Small Business Innovative Research grants and Small Business Technology Transfer grants are made by 11 different agencies within the federal government, from the Department of Defense to NASA to the Environmental Protection Agency. The application process is centrally coordinated by the U.S. Small Business Administration. Whether you are developing satellite technologies or sewer-cleaning robots, you’re likely to find an SBIR program that fits. Through a simple application process, you can qualify for grants from $100,000 (in Phase 1) to $750,000 (in Phase II). The only downside is timing. Grants are awarded on an arbitrary schedule and the application itself can take several days (or weeks) to complete. Give yourself plenty of lead time.
• University incubators: Universities have a lot of reasons to encourage the development of new technologies, and a lot of practice commercializing them. Many leading institutions have technology transfer departments that sponsor or collaborate with business incubators, either on campus or close by. If these departments can’t connect you to funding sources, they might still provide non-cash financing such as free office space, lab time, and consultation from leading professors.
• Angel and “seed-stage” funds: Before tramping off to the well-known VC firms, take a baby step and visit your local or regional angel groups and seed-stage funds. Often these are one and the same, such as the southeast’s regional Inception Micro Angel Fund. Angels and seed-stage funds are open to “crazy” new technologies and often invest specifically in ideas that need further research and development.
• Mission-driven organizations: There are a growing number of foundations and organizations that provide grants, loans, and equity capital to entrepreneurs who can help them achieve their social mission. The Gates Foundation and the Skoll Foundation are two great examples. If your leading-edge technology can be applied to further education or health goals (Gates’ mission) or social and environmental justice (Skoll’s mission), be sure to investigate these great resources. There are hundreds, and each has its own unique mission and investment style.
• Friends and family: It’s a bit cliché, but don’t forget to look for funding closer to home. When the technology risks are too much for conventional VC, success lies within you; and those who know you best are the most likely to trust you with their money.

The world is counting on entrepreneurs to solve big problems with great new innovation. So if you’ve got a vision for something revolutionary, something leading-edge, maybe even something dangerously different, look to the financial community that supports such things. Traditional funders may shake their heads quizzically, but these resources will be there for you.