The program, launched in 2015, helps St. Louis entrepreneurs through the application process of Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants. It has helped local startups snag millions in coveted, federal non-dilutive grants.
That funding could become even more desired amid the Covid-19 pandemic, as venture capital firms in St. Louis and nationwide shift their focus to protecting existing investments over making new ones. If those VC funds stay on the sidelines, federal agencies such as the National Institutes of Health, which doles out millions in SBIR and STTR grants per year, will likely be viewed by more startups as reliable — and far more attractive — sources of capital.
“At least half a dozen companies that we’ve been trying to persuade that they should go after grants are suddenly much more avidly interested,” said Harry Arader, director of the Grants to Business program.
BioGenerator, the investment arm of local bioscience booster BioSTL, is hesitant to say federal grants are a recession-proof funding strategy. But it notes their importance could heighten in a downturn.
“We put this in place not anticipating that turn in the market, but just to try to get better and better at what we do. But the timing is certainly great to have this in place now that the market may be turning,” said BioGenerator Senior Vice President Charlie Bolten.
BioGenerator’s Grants to Business program came together after it noticed that several portfolio startups were successfully leveraging federal funding. But even with those firms’ success, BioGenerator noticed a problem: It wasn’t able to scale and replicate that success across its entire portfolio.
“Our companies were just striking out,” said Bolten. “We had a very hard time. It was a mysterious thing. We didn’t understand the grants universe.”
In 2015, BioGenerator sought to change its luck, launching Grants to Business. The program aims to institutionalize an approach to winning federal grants, seeing the non-dilutive funds as an important tool to help startups advance their technology and lure follow-on capital. It includes hands-on assistance for entrepreneurs such as one-on-one mentorship, consulting and mock panels that review applications. The program also includes significant capital investment from BioGenerator.
“We will spend over $200,000 this year supporting companies with paying for things on their behalf that increase their chances of getting grants,” Bolten said.
The strategy has worked.
Since 2015, BioGenerator has helped local startups snag more than $50 million in equity-free, federal grants. The St. Louis startups have found themselves in the winner’s circle more than the average applicant. The program has seen a success rate of 52% for Phase I NIH SBIR/STTR grants, while the national average is just 19%. The win rate for phase II grants is 66%, nearly double the 38% national average.
VaxNewMo has accrued $4 million in NIH grants since it launched four years ago, funding that’s become even more important to the St. Louis biotech startup during the Covid-19 pandemic.
“We’re very fortunate and blessed because we do have these grant monies. We can continue to maintain payroll,” said CEO Christian Harding.
VaxNewMo, which is developing a portfolio of affordable vaccines, has relied almost exclusively on NIH funding since its founding. And it’s targeting even more grants.
Harding is optimistic that Covid-19 could lead to more non-dilutive funding for all types of medical ventures, not just those aimed at mitigating the pandemic.
“Cancer has been the king in terms of dollars — pure dollars,” he said. “I think it’s going to change now and I think infectious disease will take the top crown.”
Could more federal grants counter an economic slowdown in venture investment?
“I don’t want to say (it is) recession-proof, but it is not going to be encountering any headwind from this. Quite the opposite, there’s going to be a strong tailwind for anything having to do not only with Covid-19 itself, but also all the comorbidities associated with Covid-19,” said Arader. “We’ve been prudent as a community to get our act together in terms of winning these grants, because they are going to be an important hedge against the upcoming recession.”
The optimism around federal grants comes as BioGenerator targets more avenues of funding. Arader said G2B plans to put greater focus in the next several years on securing grants from the U.S. Department of Defense and U.S. Department of Health and Human Services’ Biomedical Advanced Research and Development Authority (Barda), in addition to the NIH.
“One of the silver linings of the Covid crisis is that Barda has lowered its technology readiness level standards, which has enabled many of our local labs and companies to now have technology readiness levels that are of interest to Barda,” Arader said.
DILIP VISHWANAT | SLBJ