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Thursday, July 24, 2008

Show me the money

A quick flick through the sheer multiplicity of grants on offer is enough to make any entrepreneur’s mouth water. And unlike VC money, grants don’t have to be repaid and they don’t – big sigh – dilute your shareholding. So it’s worth spending a bit of time considering this funding option, whatever your viewpoint on “free” money.

But grants come with a couple of downsides. The first is that the terms and conditions can be excruciatingly restrictive. While it’s not a common occurrence, it’s certainly not unheard of that a start-up will go through all the hassle of finding what they think is the right award scheme, filling in the application forms and going through due diligence, only to find at the last minute that something in the small print – like the fact that part of their R&D is conducted overseas - disqualifies them.

Secondly, as we’ve pointed out before, many awards schemes are actually run as competitions – including one of the most lucrative in the UK, the Technology Strategy Board, which includes the wonderful Knowledge Transfer Partnerships. Want to get your research done by some whiz kid PhD students at a University department specialising in your particular field? Then a KTP is the thing for you. The only snag is you’ve got to prove you’re more deserving than your competitors (which could be many or few, depending on when you apply) and there’s a strict timeline you have to adhere to.

So if you haven’t got the time to find the right award scheme and jump through hoops to meet the application criteria, take the advice of one entrepreneur we recently spoke to. He used an outside adviser to secure an award from the DTI, working on a no-win-no-fee basis. “It worked well for us because it can be difficult when you’re already working an 18-hour day to find the time to identify which awards are right for you,” he points out. Of course, you can’t shift responsibility for funding entirely to a third party, but if you can devolve much of the grunt work to them – and incentivise them in a way that means you don’t lose money if they fail – then you should be onto a winner. And better still, you might get to meet Stelios in the process.

For South African Business Invetment Opportunities and Capital check out SA Investors Network