Several area start-ups explain need for state’s SBIR/STTR matching program to be restored

By Kailyn Lamb, Marketing Content Writer and Editor, PYA

Entrepreneurial support organizations such as Launch Tennessee, Life Science Tennessee, the Tennessee Advanced Energy Business Council, and Innov865 are pushing the state to restore its Small Business Innovation (SBIR) and Small Business Technology Transfer (STTR) matching program, after the funds did not make it into the 2021 Tennessee budget.

The funds, which are administered by LaunchTN and eligible to recipients of the federal dollars pending availability, were first signed into law during the 2016 session and were renewed for funding through 2019. According to LaunchTN, 52 companies have benefited from the program so far, leveraging nearly $24 million. Half of the companies had female, minority, rural, and/or veteran representation in their executive leadership.

“We ask for the restoration of the Tennessee SBIR/STIR Fund so that the state can continue to meet the needs of grant winners,” says a statement on the LaunchTN website.

The funds were cut in 2020 due to the ongoing COVID-19 pandemic. LaunchTN and the other associations are pushing for the funds to be added back for the 2022 budget.

Here in Knoxville, a number of companies have benefitted from this matching fund, including several “Innovation Crossroads” participants.

Anna Douglas, an alum of the first “Innovation Crossroads” cohort as well as Founder and Chief Executive Officer (CEO) of SkyNano Technologies, has been vocal in her support of the matching program. She has contacted local representatives with letters talking about SkyNano’s growth since it launched. The company now has five full-time staff members and offers internships to young students. That growth is due in part, Douglas said, to funding she has received over the years from the SBIR/STTR matching program.

“One of the reasons SkyNano has chosen to continue operating in Knoxville is due to the support we have received in the past from the state, but if support like the SBIR/STTR matching program is not restored in ongoing budgets, we will be forced to look at relocating to a state with a more fertile environment for growth,” Douglas said in her letter to Tennessee legislators. “The pathway to commercialization for science-based companies like ours is long, arduous, and expensive, and we heavily rely on community support to survive our early years.”

Mitchell Ishmael, Co-Founder of Active Energy Systems, another cohort one alum, said the matching funds allowed his company to file for foundational patents, protecting its intellectual property. Traditional grant funding cannot be used to pay for that, he said. This protection in turn has allowed Active Energy to have better leverage in project negotiations with partners. More importantly, Ishmael said, the matching funds can help act as a bridge, filling gaps in funding while the company seeks other grants or forms of revenue. In other words, it helps keep them open.

“The Matching Fund helped us bridge several brief funding gaps, allowing us to maintain our full workforce and keep our momentum,” he said. “It smoothed the bumps and kept us at 100 percent capacity which has been crucial to the continuity of our development and speed of our growth.”

Trevor McQueen from the third cohort of “Innovation Crossroads,” said he also used matching funds to help cover the costs of intellectual property protection. McQueen,  Co-Founder and CEO of Neptune Fluid Flow Systems, also used matching funds to cover business expenses in customer discovery and development, helping to further its growth potential.

“The company owes this program a great deal of gratitude and hopes that it will continue to be funded by the State of Tennessee,” McQueen said.

Don DeRosa, Chief Technology Officer of Eonix LLC, received his SBIR grant after the state had already cut the matching funds. An alum of Cohort 2 of “Innovation Crossroads,” DeRosa recently opened lab space in the Spark Innovation Center at the University of Tennessee Research Park. Matching funds could have been used to expand his lab space there, he said. He also agreed with Douglas that the matching program was a large draw for locating his company here in Knoxville.

“The Matching SBIR Funds program was one of the primary reasons that led us to opening a facility and hiring in Knoxville,” he said. “These funds would have helped us considerably accelerate our battery research and development efforts which in turn would have attracted a larger pool of private investment to our company and the region.”

The disappearance of the matching funds has been restricting for young and growing companies. According to LaunchTN, Tennessee received more SBIR/STTR funding than its neighboring states. The matching funds give start-ups the ability to stretch those dollars even further, allowing them to retain or hire staff, protect intellectual property, or find other ways to expand their businesses in Tennessee. It is one of the state’s most promising ways to support the commercialization of high-value startups in Tennessee, according to LaunchTN, and another way to keep thriving businesses here.

Learn more about LaunchTN’s initiative to restore the matching funds to the budget here.

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