Why DC startups suck at getting federal SBIR funding — and what ConnecTech is doing to help

If you’ve been to a D.C. tech meetup, you may have spotted Philip Reeves. Reeves, who towers over crowds at 6-foot-7, is the program manager of ConnecTech at D.C.’s Department of Small and Local Business Development.
He’s here to help you get money.
Last year alone, Reeves spoke to more than 1,200 people around the District, espousing the wonder of a federal program that’s been around since 1982 called the Small Business Innovation Research program.
SBIR gives small businesses with less than 500 people the chance to nab up to $1 million in federal funding to commercialize their products. It began as a way to foster innovation in the United States, and the program has awarded more than $21 billion to companies in all 50 states to research and develop high-risk, high-reward products.
Along with funding, awardees receive guidance and support from federal agencies. SBIR also says something about a product: The U.S. government vouched for it.
“If you get SBIR, it will immediately attract some venture capitalists,” said Jacques Gansler, a professor at the University of Maryland’s School of Public Policy. “You get government support and there’s probably a first-buyer that way [in the government]. That would encourage me if I were a venture capitalist.”
But despite D.C.’s proximity to the 11 federal agencies that contribute money to the program, the District is in the bottom third of SBIR-winning projects.
That’s where Reeves comes in.
Almost two years ago under the direction of former Mayor Vincent Gray, DSLBD hired Reeves to raise awareness about SBIR within the small business community here. The initiative, aptly deemed ConnecTech, introduces businesses to the SBIR proposal process, offers guidance and reviews companies’ bids before they are officially submitted.
So far, Reeves has counseled approximately 130 companies.
Out of those 130, 8-10 wrote completed bids throughout ConnecTech’s inaugural year, he said. As the local government initiative closes in on its second full year, Reeves said his target is between 10 and 20 bids.
But despite these efforts, no bids associated with ConnecTech from the first year won. Technical.ly DC looks into why SBIR hasn’t seen as much success in the nation’s capital as it has elsewhere across the country.

Why SBIR doesn’t thrive in D.C.

Since SBIR targets small businesses, D.C.’s prices have made it economically difficult for young businesses to survive, let alone thrive. Companies can pay less elsewhere — including Maryland and Virginia, which together have won 16,609 SBIR bids worth more than $4 billion since 1982.
By comparison, D.C.’s win column amounts to just 330 SBIR grants worth approximately $68.4 million.

“Often an idea for an SBIR will come out of a university or an entrepreneur who wants to commercialize their idea,” Gansler, the professor, said. “Then they’ll try to set up a place where it’s inexpensive to set up a labor force and a factory, and I wouldn’t say Washington is a low-cost area.”
Gansler, who served as the Under Secretary of Defense for Acquisition, Technology and Logistics during the Clinton administration, also noted many SBIR bids come from research-focused universities. Institutions such as the University of Maryland and Johns Hopkins University might be just a metro or MARC train ride away, but any SBIR successes each one has doesn’t belong to D.C.
“A lot of the work in the Washington area is not as much products as it is think tanks,” Gansler said. “For those, SBIR doesn’t really fit. [SBIR is] looking for innovation, not services. They’re looking for new products in different agencies.”
Reeves is aware of D.C.’s underdog status, but says other larger jurisdictions have focused on SBIR for a long time and simply have more land to grow businesses. The District is small in size, and growing the tech sector hasn’t necessarily been a top priority until the past few years.
One of Mayor Gray’s incentives to starting ConnecTech was part of a push within D.C. government to make the city an East Coast tech hub. Newly-minted Mayor Muriel Bowser will most likely continue such efforts.
As the tech sector grows here, Reeves noted, the more SBIR firms will come out of D.C.

SBIR isn’t for everyone

Many firms approach ConnecTech to simply learn more about SBIR.
Doug Naegele founded a health care information technology company called Infield Health. The company sells IT services to midsize hospitals and has already developed an app called HealthySteps, which allows patients to track their pre- and post-operation to-do lists.
Naegele knew there were a lot of SBIR solicitations through the Department of Health and Human Services and liked the idea of pursuing research on surgery and cancer.
“I had my eye on SBIR for awhile, but didn’t know much about it,” Naegele explained.
At a 1776 meeting, Naegele met Reeves. Throughout a series of workshops Naegele attended, Reeves spoke to various members of 1776, listening to their project ideas and breaking down what, generally, SBIR solicitations are looking for.
“After about six months I elected not to submit for SBIR,” Naegele said. “[Reeves] helped me get fully informed and make an educated decision. Through him, I saved a lot of money and a ton of hours.”
“Our interest was getting a research project paid for,” Naegele added. “We weren’t looking to make devices and software.”

Small businesses in D.C. can use the Small Business Inclusion Center to get assistance and guidance from DSLBD. It’s also where ConnecTech’s offices are located. (Photo by Ashley Nguyen)

High barrier to success

When Sage Salvo first heard about SBIR, his interest piqued.
Salvo and his business partner Brian Moseley began Words Liive as a way to increase literacy among kids using a less conventional curriculum deemed Contemporary Language Integration. Following CLI, Salvo’s literacy lessons include lyrics from rap music, text messaging and social media. He also encourages students to learn languages used when coding or in computer programming.
After going into classrooms and working one-on-one with teachers, Salvo knew Words Liive’s model could be successful in classrooms without his physical presence. Salvo planned to develop an app using Words Liive’s program for teachers and students to use in and outside the classroom — but he needed funding to create it.
As a small business based out of Washington, he decided to respond to an SBIR solicitation from the Department of Education after learning more about the program through an agency presentation and ConnecTech.
“It was an experience,” Salvo said about writing the proposal. “I looked at the solicitation, which in itself was about 50 pages and saw the requirements. There are about 10 different checks to see if you should even respond [to the solicitation] in the first place.”
Like he does with many firms, Reeves offered condensed sections of an SBIR proposal for Salvo to write. Though the two met once at the SBIR offices in Judiciary Square, Salvo would email his responses to Reeves, who would then offer constructive criticism. When Words Liive finally finished the proposal, Reeves offered feedback.
Though Salvo is used to research — he is currently pursuing his Ph.D. at Howard University — he said writing the SBIR bid was a robust process.
He also knew the odds: The success rate of Phase I proposals for the Education Department was .080 in 2011.
“As a first-timer, I knew we weren’t going to get the actual grant,” Salvo said. A little wiser, he’s already in the process of reapplying.
Salvo chose to hire an outside firm to help Words Liive conduct research for its proposal, but Reeves said not every company does this. (Before coming to ConnecTech, Reeves personally wrote three successful SBIR proposals.)
Many companies do, however, hire consultants to test the viability of their project ideas structurally and financially.
In an effort to lower the barrier for firms short on money, DSLBD began Phase 0 this year. It will pair 10 small businesses in D.C. with a consulting agency. The firms will get 3-5 hours of face time with the consultant over the course of a few months, templates to practice writing proposals and $1,000 to offset other consulting fees the company may want to pursue.
DSLBD Director Robert Summers said Phase 0 is a way to “place D.C. tech firms on equal footing with small businesses nationwide that have had access to SBIR and other innovation resources for years.”