Why Startups Should Consider Grant Writing to Improve What They’re Making
Prior to this year, we had never considered grants to be a viable funding opportunity for software startups like ours. In the past, when we’ve thought of grants, we’ve always thought of nonprofits and foundations, not software companies.
We were wrong.
Not only do grants provide valuable (undiluted) capital to cash-strapped startups like ours, but the grant writing process has also been essential to improving the foundation of our business moving forward.
Brendan and I feel very lucky to have complementary skills. While I design and sell, he builds. While we aren’t averse to fundraising (and we’ve both done it in the past for projects), we’re privileged to be making our current project without having raised dilutive capital. We’ve focused on learning without the constraint of delivering immediate results to potentially impatient investors. In effect, we’ve traded the constraint of time for the constraint of capital (or not having very much capital, in our case).
While we’ve avoided raising a seed round, we’ve actively pursued a number of grant opportunities. This week, we learned that we’re recipients of our first grant award from the Maine Technology Institute (MTI). With the MTI funding opportunity, we plan to continue working with our diverse software design and development specialists (contracted from Houston, Madrid, Missouri, and San Francisco) and testing our software with hundreds of listeners before beginning selling our software publicly later this year.
Before you continue reading, we’d like to introduce a caveat. We’re not grant writing experts. We received a tremendous amount of help and feedback from a sleuth of different advisors and mentors, and we only can speak about the grants we’ve applied to ourselves.
Grants Are Outcome-Based
Grants are outcome-based. A writer must very clearly define a desired result, likely transforming complex ideas into straightforward writing. Focusing on one very clear set of results ensured that we developed a coherent and clear strategy of how to get there with a very specific budget. Writing forced us to focus on the essence of our business and strip anything unnecessary.
The application questions could be distilled into three questions:
Should you be awarded this grant, what is the intended outcome?
In order to achieve the intended outcome, what will you need to do?
In order to do the things you need to do in order to achieve the intended outcome, wow much will it cost to get there?
Ideally, these are the questions a startup would be thinking about if it were raising a round of capital.
For us, our answers to the above questions read something like:
After nearly a year of testing, we want to begin selling our software publicly.
In order to sell our software publicly, we need to keep working with talented folks with the specialized talents that we don’t have ourselves.
In order to adequately pay folks for the projects we can’t build ourselves (or think others can make significantly better), we think we need about $10,000.
While our winning application was rather lengthy, explaining specifics and backstory, it can effectively be condensed to the points above.
Grants Officers Want to See You Succeed
Like all good things, grants take time to materialize. Despite the potential time investment (for undiluted capital - a worthwhile investment, we’d argue), grant officers genuinely want to see your application succeed.
How do we know this to be true?
Our grant officer read and edited revision after revision, relentlessly sharpening our focus and thoughtfully posing the sorts of questions we should know the answers to (and didn’t quite yet).
We initially wrote our first set of applications in February, but decided to delay formally applying as we realized our initial business model might be impossible to scale. The sheer number of questions that our grant officer posed was the spark that led us to rethinking our initial business model. We had mapped a path forward. But, daily, it seemed less and less likely to materialize.
After exploring a multitude of different models, we landed on the simplest (and the one that makes the most sense for our individual business). When we returned with a freshly written application in June, explaining that we sell subscriptions of our software to individuals, our grant officer was equal parts delighted and relieved.
But, that was just the start. Before formally applying, we submitted an initial application and our grant officer was delighted to edit, revise, and improve what we had to say. Through a countless number of emails (and a few in-person meetings), we worked closely to turn a draft into an application.
Grants Highlight Weaknesses
Grant writing highlighted the weakest parts of our business.
For a living, we work with others to design outcomes based on needs. We then develop software to meet those needs. In this domain, we’re able. When it comes to long-term financial modeling and planning, we struggle. While I started my career at an investment bank as a research trader, I hadn’t modeled anything for five years. My partner hadn’t ever modeled.
Because grant writing is outcome-based, the process forced us to examine what we weren’t very good at and confront them directly. So, we searched for experts to help us understand how to turn our logic and strategy into numbers in an Excel document.
Prior to submitting our formal application, we discovered SCORE. SCORE is a nonprofit organization dedicated to the formation, growth and success of small businesses. I’ll admit that we were highly skeptical of the program. It sounded too good to be true, and that the “mentor” we’d be matched with wouldn’t be much help.
Again, we were very wrong. (We’re wrong a lot.)
When we initially asked for a mentor, we highlighted that we needed the biggest help with financial modeling. We weren’t matched with someone knowledgeable. Instead, we were matched with an expert.
Our mentor was not only an adept modeler, but a patient teacher. And when our drafts would take us into the late hours, his responses would come what seemed nearly immediately. Like the best teachers we’ve had, he’s kind, empathetic, understanding that it’s impossible for teams to exist without flaws.
Your startup probably has some weaknesses. We’d be delighted if you signed up to be matched with a SCORE mentor.
How MTI’s Application Helped Us
We work with a group of college students from around central Maine to help them start their software projects and products. Because most are first time makers, providing an outline of what’s necessary (and what’s yet to be understood) is vital. We have found MTI’s grant application to serve as a model for ironing out the fundamentals of students’ burgeoning businesses. In effect, their application is an investment readiness tool that provides a baseline understanding of what must be improved.
“The tool evaluates 8 different areas along the VIRAL pathway – – team, problem and vision, value proposition, product, market, business model, scale, and exit,” explains Brian Whitney, the President of MTI, “and provides a baseline and follow-on assessment to measure the progress being achieved by the entrepreneurs, businesses and organizations that receive MTI funding.”
“Grant writing is ideal because it exposes the weakest aspects of your business plan and forces investigations that can lead to incredibly important insights,” Tyler Hansen, Founder of PieFolio, a startup that creates portfolios for students without technical or design skills in under an hour, “While completing MTI’s funding application, I realized that I didn’t know enough about my customers. This led to an intensive market research campaign that brought to light several of their shared behaviors that are going to make it much easier for me when I start to sell my software.”
Grant Money Is Undiluted Money
While we have intensive reporting to complete, and fully intend to meet the expectations outlined in our application, our first winning grant is not dilutive. It means that we can continue focusing on learning how to design the best possible experience for our listeners. Simply, we aren’t subject to answering to investors who might not necessarily have the same vision or expectations.
It Might Not Be for Everyone. But, We’d Love to Help.
Bootstrapping isn’t for everyone. Admittedly, it can be exhausting.
For teams doing it (or cash-strapped startups, generally), grants can provide the breathing room necessary to focus on designing and developing (and less about saving to pay the bills of operating a business). We didn’t think it was a viable option because we didn’t know any other startups that had garnered grants themselves. And while we’re not expert grant writers, we’re certainly grant writing advocates.
If you’d like for us to poke holes in an application you’re writing, we’d be happy to. (A lot of different people helped us, and we’d love to pay it forward.) Just drop us a line.