Andi Littlejohn is chief of the EPIcenter Energy Incubator and Accelerator (EEIA). EPIcenter is a nonprofit organization propelling energy innovation and thought for our global future with a think tank, incubator and accelerator, strategic partnerships, and critical conversations about energy, with the aim to support startups in all phases of development to incite the energy evolution.
Startups and small businesses will always fight an uphill battle when innovating and commercializing technologies, regardless of the external economic conditions. More established enterprises have advantages that startups do not – more financial resources, larger teams with more diverse areas of expertise, and more robust legal teams to protect innovations, to name a few.
In an economic downturn such as the economy might be entering now, the differences between startups and established enterprises become even more apparent. But startups have advantages that many larger companies lack.
Startups tend to have a lean mindset, the ability to act fast and unleash their employees’ creativity, and a “hustle” mentality. These attributes are what startups should leverage during turbulent economic times.
Here are four ways startups can leverage their inherent entrepreneurial traits to withstand challenging times and fund their work.
Brainstorm early-revenue strategies for funding R&D and commercialization for your innovation.
First, audit your existing team’s strengths, skill sets, and areas of expertise. Do not just focus on technical skills. Think about how your team excels. Is it good at organizing? Problem Solving? Storytelling? Add that to the list!
Next, consider your innovation and the ecosystem. Who are the players in that ecosystem? What challenges do they face? Do not limit your focus on what your particular innovation solves — think broadly. Spend time with your team whiteboarding and documenting these challenges.
Finally, put the two together and see what emerges. Are there any revenue-generating opportunities you can leverage that may not directly tie to your innovation but can help bring in some money?
As an example, one startup that spun out of a well-known research institute we work with still has deep ties to the organization. Its team is primarily researchers, scientists, and analysts from this organization. The startup needed money for its technology development, but seeking outside investment was not part of its strategy.
After completing the whiteboarding exercises, the startup discovered a way to earn early revenue by charging for its data collection, analysis, and modeling of complex climate change data. Their ties to the research institute gave them credibility and access to specific industry players.
As they explored the ecosystem and its existing challenges, the company determined that climate change increases the risk levels for companies with physical assets in high-risk areas (for example, a company with property in a region of California with a high risk of wildfires). As companies look to expand their physical assets, they could use help analyzing and determining risk profiles for these assets.
The startup began doing this consulting work to fund its technology development. In the process, this early-stage company made strong connections with large companies that could become early adopters of their innovation. It also gave the team some early successes, reinforcing passion for their work.
Apply to grants, prizes, and other non-dilutive funding sources to fund your R&D.
In times of economic downturn, dilutive investment funding can dry up as investors hold on to their money or direct it to companies already in their portfolios. Consider applying for federal, state, and local funding sources through grants, federal funding, and low- or no-interest small business loans.
Read: Check Out These Four Business Grants To Fund Your Startup
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants offer non-dilutive federal funding for small businesses. Non-dilutive means that the government does not own a percentage of your small business after you receive the grant.
Read: What You Should Know about Non-Diluting Federal SBIR, STTR Funding
The SBIR and STTR programs encourage small businesses to pursue federal research and development opportunities with the potential for commercialization. The startup retains intellectual property ownership and has the potential for government sole-source contracts during the commercialization phase.
Read: 7 Tips on How to Win Non-Diluting Federal SBIR, STTR Grants
These highly competitive programs will likely not fund the entire product development and commercialization process, but they can still help, particularly if you couple it with early revenue-generating opportunities. Start by checking the Small Business Administration website in your state first. The SBIR website will include information on the STTR program. Also, check your local Small Business Development Center, as they understand what funding is available and can help you through the application process.
Cut unnecessary expenses.
This can be a hard one, especially as many startups are already lean as it is.
Have a subscription to Photoshop that you only occasionally use? Consider cutting it out for now. Paying for office space? Give up dedicated office space and join a coworking space, or switch to remote work.
Do not be afraid to ask for help!
Understanding how to ask for help is a critical leadership skill all startup founders must master. It is surprising how many people are genuinely willing to help if asked. So many resources can help you make an explicit, specific request for help in a way that is effective.
You can effectively ask for help in an email once you’ve thought through who to reach out to and have framed a specific request that matches well with the person you’ve asked.
For example, instead of asking: “We are looking for funding opportunities to support the development of our innovation; do you know of any?”
Ask instead: “We are looking for non-dilutive funding opportunities to fund $150,000+ for R&D for an innovative energy storage solution; do you have any recommendations of resources or people we should be talking to?”
Do not be the founder who asks an expert “to pick your brains” over coffee. Instead, ask for specific help with an issue that shows you’ve researched the person’s background and discovered they might have the resources you need.
Remember to focus on what you can control.
The only way businesses survive an economic downturn is to focus on what your startup does best. Founders implementing one or more of these tactics when facing challenging economic headwinds will have a better chance of weathering tough economic times to emerge more vital than ever.
The featured image shows Andi Littlejohn at a whiteboard leading an EPIcenter Incubator and Accelerator session, courtesy photo.