The $2.5M N.C. Budget Line Item No One is Talking About

Details on a grant program that, if reinstated, could fund the state's most innovative startups.

BY LAURA BAVERMAN@laurabaverman7.8.14
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Filed Under: NEWS: Startups

If it seems like the North Carolina budget talks will never end, then it especially feels that way for the 70 or so N.C. companies that apply for and earn federal Small Business Innovation Research and Technology Transfer grants each year.

If the budget passes in its current form, they could qualify for matching grants of up to $100,000 from the One North Carolina Small Business Program, a grant program that was suspended for the last three years. That could mean more equipment, additional staff, help seeking or defending patents or other critical research and business-building needs.

The current (not-yet-passed) budget reallocates $2.5 million for the program—funds left over from the broader One North Carolina program. Both the House and Senate Budget committees have included the reallocation in their budgets and Governor Pat McCrory has recommended it.

From 2006 to 2011, 245 matching grants were awarded to private companies innovating in science and technology-related fields, says John Hardin, executive director of the N.C. Department of Commerce's Office of Science & Technology (OST). Those businesses created more than 500 jobs and generated a nine-to-one return for the state—grantees raised $85 million from private investors and collected another $73 million in follow-on funding from from the U.S. government. The average grant is $70,000, and about 50 companies qualify for one each year.

The funding can be critical for a small company with innovative technology, Hardin says. Many companies use it to defend their patents.

“There are sometimes restrictions on how the federal funds can be used,” Hardin says. “For our program, as long as it has to do with commercialization, then it's fine.”

A variety of companies can apply for federal SBIR and STTR grants—11 federal agencies fund SBIR grants and five fund STTRs. But the largest of funders are the National Science Foundation, National Institutes of Health and the Department of Defense. The main criteria are that companies are developing and planning to commercialize something new. Full details of the programs can be found here and here.

At least 15 other states offer matching grants programs, and according to OST research, many of those programs were modeled off of North Carolina's. At one time, the One North Carolina program was one of three grant programs for private companies managed by the office.

An N.C. Green Business Fund helped companies develop green technologies. That was funded by the state for a couple years and then federal recovery act dollars after the recession. An Energy R&D Cost-sharing program helped universities win federally-funded energy R&D projects by sharing in the cost. Both programs haven't been funded by the current administration.

In the last year, the OST has formed a new strategic plan to help spur along more innovation in the state. Reinstating the matching grants program is just one of four innovation and entrepreneurship initiatives for coming years.

If the program is reinstated, Hardin's staff and advisory board will turn to a second priority—converting university innovation to jobs. The challenge they'll tackle with research, and potentially a 2015 lobbying effort, is how to commercialize more university-born research and intellectual property and spin off more startup companies from those institutions.

North Carolina ranks No. 5 in the nation for funding to academic research & development projects, Hardin says, but is well below that ranking for revenue from commercialization efforts (licensing, royalties and spinoff companies). According to the December 2013 Tracking Innovation Report: North Carolina excels at academic research & development, but the total level of the state's R&D, particularly that performed by businesses, is insufficient to fuel and sustain strong economic growth.

“We're not weak weak, but weaker than you'd expect us to be based on our academic R&D,” Hardin says.

There are various potential outcomes for the OST's work—legislation or appropriations for the 2015 budget or recommendations for the individual universities.

But first, more funds for the state's most promising innovators and their companies.

In anticipation of the budget's passage, the OST expects to begin soliciting grantees in August. Stay tuned for those details here.







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