How Founders Can Tap Into Public Funding Opportunities
Our new event series called “Friends & Family” focuses on capital at the earliest stages. We know that relying on friends and family to fund your startup isn’t always realistic for all founders, especially those from diverse backgrounds. During this series, we explore different paths to funding, the pros and cons and how to best pursue them.
This series is co-hosted by our friends at AWSM, who share our commitment to leveling the playing field and providing more founders with the support, information and connections they need to excel in their startup journey.
We welcomed three guests to our latest virtual Friends and Family event: Chante Harris, Vice President of Business Strategy at Capalino & Company, David Scatterday, Managing Partner at Scatterday & Associates, and McKeever (Mac) E. Conwell, II, Seed Portfolio Development at TEDCO. Each has experience in public funding, from helping founders secure public funds, to helping them incorporate it into their capital stack, to distributing public funds to founders. Read on for key takeaways from this informative conversation, watch the replay here and get access to content shared here.
Public funding opportunities vary widely
Public funding can come in the form of a pilot program where you help to launch a new program or service. It can also look like a design challenge where you help reimagine the way something is currently being done, such as redesigning waste bins throughout the City of New York. It can even look like a more traditional debt instrument such as a subsidized loan. The opportunities vary by state and by sector, but there is sure to be one that’s right for you. When researching public funding opportunities, Chante suggests that founders leverage government databases for information, paying careful attention to the amount of funding for the opportunity, who has been awarded the funding in the past, who your buyer persona is to award those funds, and to sign up for newsletters to keep up to date with all of this information. While the amount of opportunities is exciting, it can also be overwhelming. Mac points out that there are agencies out there dedicated to helping founders navigate this process. Lean on them so you don’t let potential cash flow pass you by!
Understand the impact of public funding
Your capital structure is affected by every new type of funding you take on. It’s important to examine how public funding may impact your critical metrics and to plan for all variables. David suggests using what he calls “a framework for thoughtful sensitivity analysis”. He suggests that founders understand what their investors and other stakeholders care about, such as payback period, break-even point, or IRR. Then use a tool like SensIt, an Excel plugin, to create alternative scenarios exploring both the upside and downside of how the public funding being considered could affect these critical metrics. And don’t forget that depending on where the public funding comes from, you could be impacted in other ways as well. Mac says that every public fund is different, but when the agency he works for, Maryland Technology Development Corporation (TEDCO), is lending funds, they are focused primarily on job ratios in the state of Maryland. As such, anyone who receives public funding from TEDCO must have a physical location in the state and 51% of their full-time employees must live or work in Maryland. Violate that and there may be a callback revision in the contract to ensure you pay back the funds. Entrepreneurs always need to stay a few steps ahead, and scenario planning when it comes to public funding is no different.
Secure public funds
Public funding initiatives are being formed specifically to support underrepresented founders, a heartening trend amid the social unrest we’re seeing across our country today. Entrepreneurs who are female and/or people of color can help their chances to secure public funding by getting all the minority designations they can, Mac says. If you’ve never been through the process before, Chante suggests that you can also improve your odds of winning public funding by subcontracting for a vendor that has experience working with, or bidding for, government initiatives. And Mac agrees, adding that there is an appetite to find subcontractors who are women and minority founders. Be sure to tap your local tech ecosystem for meetings and virtual events. Every major metropolitan area has one and you may discover a great way to break into public funding through a local connection.
Connecting with other founders is crucial for making it in this ecosystem long term. Mac’s parting words for this virtual event were ones of encouragement. He said:
“You’re all awesome…Being an entrepreneur is hard… Make sure you build yourself a community with the people like the folks who are in this video chat so you have people to talk to and commiserate with… I always like to push to make sure you have people to help you deal with the hard times because no one likes to talk about that stuff”.
We couldn’t agree more. A big thanks to Chante, David and Mac for their time and insight. Public funding is often overlooked, even by founders who could really benefit from it. We hope you took away some helpful tips and tricks for how you may be able to leverage public funding to accelerate your next great idea.
