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February 18, 2024 | Tom Ballard

SBIR and STTR matching dollars are NOT in next year’s state budget

An effort is underway to get them restored before the General Assembly approves the FY25 budget.

If you follow the state budget in Tennessee, you know that a combination of factors is making the FY25 appropriations process more challenging than in recent years, particularly in the post-COVID era.

Unfortunately, one of the casualties is a program that has put the Volunteer State on par with many of its neighbors for the all-important tech-based companies that are the future of an innovation economy. Launched in 2017 after strong advocacy from Life Science Tennessee (LST), the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Matching Fund program provides much-needed, flexible funding for recipients of those federal programs.

“Without a change in the budget, there will not be a matching program next year,” says Lindsey Cox, Chief Executive Officer of Launch Tennessee (LaunchTN), the organization that administers the program for the State of Tennessee. “That would be the first time since it was approved in 2017 that the matching funds have not been in the budget other than the COVID year, and additional funds were appropriated in the next budget to catch up.”

Both LST and LaunchTN plan to make a strong push for an amendment to the appropriations bill during next week’s “Innovation Week” event when their members and entrepreneurs are in Nashville for activities including visits with state legislators. The actual amount is still in flux, but Cox also hopes to include some funding for the Tennessee Technology Advancement Consortium that was launched this year as a pilot project with three universities (see article here).

“We are making real progress, and it would be a shame not to have this funding in place going forward,” Cox said, adding that those who have benefitted from the matching program, either directly as recipients or indirectly as supporters of community innovation, are encouraged to communicate directly with their legislators.

Already for what was anticipated to be new funding in FY25, LaunchTN has received 36 interest applications for the Matching Fund accounting for $7.4 million in program demand across 17 Phase I and 19 Phase II applications. That does not take into account the fact that a significant amount of time is left in the eligibility window since a majority of awards are made between April – June.

How impactful has the matching fund been? Since it was created in 2017, federal SBIR or STTR grants received by Tennessee companies have grown from $13 million in 2016 to $35 million in 2022. Cox notes that that is close to a 3X growth rate as she cites other impressive statistics:

  • Companies participating in the program have collectively generated 939 jobs.
  • Beneficiaries of the program have secured $310 million in grants and raised an additional $301 million in capital.
  • Sixty percent of these companies have achieved post-revenue status, collectively generating more than $127 million in annual revenue.

For the second year in a row, LaunchTN received more than 60 applications for FY24 funding that collectively represented $12.5 million in demand for the program that only had funding for a little more than a third of the demand. This year’s recipients include 15 first-time applicants, 11 of which received support preparing their applications through the LaunchTN microgrant program.

The matching program has been particularly beneficial for East Tennessee start-ups. More than two-thirds of the 30 recipients announced last September (see article here) call East Tennessee home, and many of them are currently participating in the “Innovation Crossroads” program at Oak Ridge National Laboratory or are alumni of the two-year initiative. They include Addiguru LLC; American Nanotechnologies Inc.Captis Aire LLCDayLyte BatteriesEndeavor Composites Inc.FC Renew LLCHolocene; Neutroelectric LLC, parent of Becq; Perseus Materials Inc.; Sentinel Devices LLC; and SkyNano Technologies.

Another measure of just how impactful the matching program has been is an award announced in early 2021 for its longtime champion. LST’s Executive Director Abby Trotter was one of 14 individuals, seven organizations and 38 companies selected from across the country as a recipient of the U.S. Small Business Administration’s 2020 “Tibbetts Award” for her efforts.

NOTE: Tom Ballard is a member of the LaunchTN Board of Directors.

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