Are SBIRs a Good Source of Gap Funds?

One of the hardest phases in getting a start-up off the ground is obtaining "gap funds" to get from the lab to the point where the company has met enough milestones to be venture fundable.  If you know me, you'll always hear me say that most venture capitalists are NOT very venturous.  They tend to look for measurable milestones to base their investment on, like commercialized technology, early customers, management teams, etc.  Personal savings, SBIRs/STTRs, angels and early stage venture investors are the common sources of these gap funds.  Many entrepreneurs are swooned by SBIRs because it is viewed as "free money".  They don't have to get diluted, no new people on their board, they stay in full control.  If you learned early in life that nothing is free, take that same lesson into the process of considering and SBIR as a source of gap funds.  SBIRs and other government grants are posted to get the brightest innovators to work on the toughest technical problems the government has to offer.  The military, Department of Homeland Security, National Institute of Health are common agencies that post these grants.  In return for the grant, they expect deliverables and rights to the technology developed.  So, the money really isn't free.  SBIRs are a great fit for your start-up if, and only if, the deliverables required by the grant are directly aligned with your technology development plan.  If not, producing the technology for the government will only be a distraction and not help your start-up meet the critical milestones required to get classic venture capital funding.