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Part One
Navigating the Grant and Funding Landscape
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Chapter One
Why Grants Now ?
You've never considered using grants and didn't even know they were open to businesses. You've always heard they were a lot of red tape. Why bother with grant funding now ?
“So, how much grant money is really out there?”
“Is the grant industry even worth my time?”
“What do grant agencies really fund, anyway? I thought every grant went to academics and ‘save the blah, blah, blah ’ whatever foundation…”
“Do you really think we ought to use grants? Whose money is it, anyway?”
“I'm not sure how to describe what I want to do, but I know I'll need money—is there a grant for that?”
A great many of my initial conversations with anyone I meet begin with the inevitable opener, “So, what do you do?” Actually, I love answering this question. Questions about grant funding are the reason my business exists. The process of working though questions and answers like those above is what got me started consulting about grants (I'll explain more in a few chapters), and now I employ a certain set of questions to help people find money, as you'll see in my self-assessment tools found later in the book. Because grant seeking is a highly subjective business, it's also a very relational business where I need to learn as much as I can about the project and goals. When a new client retains me, the process often goes the same with the questions and answers. I ask a lot of questions before we ever talk about building a grant application.
The longer I worked in the industry, the more questions I had about the reasons behind interest in grant funding. I began to wonder: Why grants, why now? What makes this topic interesting? While not a new phenomenon, grant funding as a means of the overall financial strategy is gaining in popularity and acceptance in the private sector. Where it was once believed that the pool of funds was solely reserved for academia and nonprofit work, businesses, small and large, established and emerging, are looking into both creating grant programs to support their causes and using grant money to complete work. What is going on to make an old standby—grant writing—suddenly like a new trend? Why grants now?
Why Grant Funding is Hot
That's an easy question to begin with, though it's a matter of opinion. Every time I give a speech about grant funding in the private sector, I like to lead with three questions:
1. How many audience members have ever wanted to start their own business or work for themselves as a freelancer?
2. How many have ever considered using some alternative kind of funding besides a bank loan?
3. How many who said yes to number one have ever considered using grant dollars?
The results are always similar in my little qualitative market research poll. Everyone in the room, be it a group of 6 or 600, will say yes to #1. This group includes quite a few people who will later admit that they will never actually become an entrepreneur, just that they love the notion of it. As for #2, about half of the room says yes to considering funding besides the traditional financing industry—and this number is growing rapidly. For #3, rarely do I have audience members tell me they've used or considered grants, even if they wanted other ideas for finding funds.
People of all backgrounds are right now exceptionally curious, hungry, and largely seeking to do more on their own. People today are rather willing to go it alone; many are starting businesses or are thinking about it as a someday goal. According to the Ewing Marion Kaufmann Foundation, a foundation that is devoted to entrepreneurship, approximately 540,000 new businesses are created each month of every year, even (especially) during the recent recession.1 What are the reasons for this boom? Economists using labor and wage statistics could mount a case that this movement toward DIY (do-it-yourself) is economic. Some would suggest we've reached our capacity for doing jobs of rote and desire deeply to express our pent-up creativity. No matter—DIY approaches are hugely popular in everything from making your own wedding decorations to funding a business. Investment in the DIY movement, particularly in social media, is strong. Consider the exploding popularity of social sharing site, www.pinterest.com. Its members create pages and share them just as a means to adorn a public place with their personalized pins, that is, images of anything that interests them. This site encourages not just crafting, creating, and collecting, but sharing and conversing about how to make or build those items that interest the person who pins it and fellow members who see it or even re-pin the item, thereby expressing their interest. At present, all this pinning isn't amounting to exceptional profits—at least not as of this writing. “Pinterest is part of a group of startups that offer twists on Internet networking among various groups. They typically have little discernible profit or revenue, but have landed some outsized investments from venture capitalists,” reports Sarah McBride in an article in the February 20, 2013 issue of Reuters. The article also reports that the valuation of the market is presently worth $2.5 billion with more dollars flowing toward the Internet startups of the do-it-yourself set, such as Pinterest.2
If the market isn't yet large, why does it matter? I believe it shows a trend in the way small businesses are emerging. Sure, some new entrepreneurs start a business almost as a last resort when the corporate world fails them—that's the hungry part of my earlier comment.
Others are curious to see how easy it might be to begin a company today given that operating online has both a low initial investment and theoretically an instant marketplace. I'm not sure what is in store for the DIY world of business, but it appears that the ability to leap from idea to launch is happening much quicker today.
Like anything too casual, though, are new entrepreneurs serious enough? Are they leaping out just as easily as hopping in? That's a possibility, too. The Small Business Administration (SBA) reports that an estimated 552,600 new employer firms opened for business in 2009, and 660,900 firms closed.3 Businesses without employees, called non-employer firms by SBA and often referred to as solopreneurs on the street, are opening and closing much more often. SBA says they turn over nearly three times as often as those companies with a payroll.
It is a positive thing to see small businesses opening, but why are so many closing and, worse yet, filing for bankruptcy? Take a look at SBA's open, close, and bankruptcy chart in Table 1.1 as an illustration of the trend. Items with an ‘e’ behind them represent best estimates as of the date the data was published.
Table 1.1 Starts and Closures of Employer Firms, 2005–2009
Source: U.S. Small Business Administration (www.sba.gov), April 17, 2013.
Startup owners know there is potential to fail or just fade away. Facts reported by the U.S. Department of Commerce, Census Bureau, Business Dynamics Statistics, U.S. Dept. of Labor, and Bureau of Labor Statistics seem to endorse the notion of exploring unique financing alternatives. According to the SBA's website: “Seven out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years, and a quarter stay in business 15 years or more.”4
What's happening to entrepreneurs early in the businesses? Do they run out of motivation, or money? If it's money, and it's always about money at some point, here's the quandary: Financing availability from traditional sources can be tough. Not everyone qualifies for a traditional bank loan, and frankly, not everyone wants one. Part of the culture of distrust breeding the growth in general of DIY includes concerns of uncertainty about the financial services industry. Regularly, startup owners come to me for grant funding and yet have no desire to take out a bank loan. Reasons to avoid the lending marketplace are varied, but some I've heard include fears of being tied down to a repayment schedule if the business experiences rough patches, a general feeling of skepticism that their lender will be there for them or remain stable, and even an internal philosophy toward avoidance of debt. Younger people often say their interest in grants comes from the age-old story of not wanting to end up like their parents. I'm not talking about “staying cool” and not becoming fuddy-duddies or wearing black knee-socks with white walking shoes, either.
Generations X and Y want freedom to self-direct their lives; they don't want to be on the hamster-wheel of debt that they've watched generations before tie themselves to, working in something they hate because they need the money.
Attitudes about employment are shifting, too. Generations X and especially Y resist the 8-to-5 grind and demand flexible schedules far more than any previous generation ever deemed conceivable. Many of them believe entrepreneurship is the answer. But does it work out?
The SBA does appear to claim the trend toward business failures is improving and optimism is the new tone. In a recent article entitled “Small Business Trends, Sm...
