Ihor has always been at the hotspot where media touches technology. At Walmart, if a shopping cart full of electronics crashed into a shopping cart full of DVDs, Ihor would be somewhere in the middle. He’s has been part of various Canadian non-dilutive grants from government, foundation and partner sources for at least 3 decades (IRAP, OCE, NSERC). Here he speaks in relation to his startup LifeMusic Networks.
What is grant funding good for?
When you have an idea that needs development and incurs expenses but is beyond the capabilities of the team you need to seek funds somewhere. If you seek arms-length funding from Angels or Seed sources you will not have enough intellectual property accrued in the startup for a decent valuation. Because of this, you can use grants to develop this intellectual property and then go to the financial markets once you have a fleshed out product that is ready for field trials and eventual commercialization.
For example, my current startup has three major components that need to be implemented by technical people:
- an AI element that identifies the listener, builds a profile of them and then algorithmically finds music online and builds a playlist for them
- a piece of software build for a tablet device that replicates a music player
- a physical device that plays the music that fits into the consumer market and doesn’t look out of place in a kitchen for example.
There is an AI algorithmic component that could be written by a University Student, the music player by a software engineer, and the device by a consumer electronics engineer.
The challenge is to find a grant organization which can fund some or all of this work.
Where are these agencies and how do they operate?
Governments and Corporations have various granting units. Because of a prior partnership with Autodesk Foundation, we approached them and submitted an application (but we also were thinking about OCE/NSERC funding for this project).
In some cases, Foundations deal only with charities, while development and innovation Funds deal with for-profit projects. Also, you need to understand if this is a research project or something more defined like an application of existing technology. Foundations exist to give more support for research for underserved geographics or demographics, while Funds exist to give more support for applications. You need to start with one group or another and look at the requirements and adjust your application and goals based on what you see. If you can’t, grant funding is not for you.
What do you need to consider when you apply?
You will find that some granting agencies have timelines or requirements that don’t entirely suit your need, but keep in mind that these are sometimes negotiable. Autodesk for example, required a grantee to demonstrate their capabilities and to have a paper published at a conference, and collecting information from trial customers. Publication of results is common with many of these granting organizations and this may not be to a startup’s liking – so be warned. We did negotiate with them and they were flexible with their requirements based on our needs.
The difficult part is finding the college or university that can provide the people-power to build the product with the right skill set, publish the data in a required journal or do it for the allocated grant money. For example, we spoke with 5 colleges to build the AI component, finally settling on one because we felt we would have the highest degree of success with them. On the hardware and software side, we also interviewed a number of colleges, but one of the challenges we faced was a requirement for a cross-discipline skillset (industrial design and software design). Departments inside colleges did not talk to each other so we had to facilitate by building communications procedures even in the same college.
Then we filed a joint project with OCE with all these college groups included, and helped them with filing their component of the submission.
I find that OCE is good because they closely match what the colleges call their mandate of applied research. While NSERC grants fit within the university mandates of creating innovative intellectual property. If we were looking at algorithms or more academic work, then Universities would be a more appropriate group. An important part is that a lot of the instructors in colleges are involved in the industry and this gives us an advantage because of their up-to-the-minute hands-on knowledge of the industry we are in. They have a pretty good idea of the nitty-gritty issues surrounding commercialization as well and make the do-able choice rather than the academically perfect one.
Another part of a grant is a promise of in-kind commitments like time and money. So you want the be very picky on what the institution can offer for your grant money. You need to expect that it will be hands-on with several meetings and a lot of guidance. You can’t just through it over the fence and expect it to come back in three months in a perfect state. My experience is that it took weekly meetings and conference calls.
How long does it take to get the money?
Sometimes the college or university has a dedicated group to work with industry partners. But sometimes they don’t have the infrastructure and we need to help them with scheduling and estimating time. But in general, a high-level product plan and understanding your business means you can fill in the application in a couple of days. Finding a college, industry relationship and students to work on it has taken 3-6 months. Getting their portion of the submission for the grant takes about a month and a half. And the approval usually takes about 6 weeks.
So if you are well prepared you are looking at a 6-month duration from finding the grant online and receiving it.
6-months plus development and testing time seem like a lot. Are some products not suited to this lengthy timeline? When is there a lost opportunity cost?
You need to make sure that on the hardware side the product is ready for manufacturing, or on the software side, the product is ready for commercial sale. If your product is ready at the end of this stage, using the Grant process for funding is powerful. We succeeded and now we have to start looking for sources of market entry financing in a Seed round, or strategic partners who will help us commercialize.
What organizations were involved in your project and why?
- Autodesk because of my past experience,
- Guelph-University hardware student because of his hardware-programming skills,
- OCE because they are the only institution for these grants
- Sheridan College for media skills, and
- Humber College because they had the industrial design, engineering, and UI/UX
Our product idea, actually fit the possibilities of what was available in the post-secondary and funding institutions. We provided the project management, idea direction, and testing. Our patience and partner slection paid off, and now we are beginning our search for equity and commercialization partners.
TheMIN.ca note: we have a list of Foundations by Grantee requirements and category for membership. We also have non-dilutive business grants by province for startups and by requirements. Finally, we have a vendor list of grant assistants who you can reach out to who we have worked with. Email staff@themin.ca if you are a member for more information.