One of the largest challenges facing tech startup companies is finding the capital necessary to finetune their technology and ultimately launch and scale their company. Thanks to support and encouragement from the University of Notre Dame and the IDEA Center at Notre Dame, a growing number of local startups are tapping into an important funding source that has brought more than $7.5 million to South Bend-Elkhart startups over the past year and a half: the federal government’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.
The SBIR and STTR programs are called “America’s Seed Fund” because their mission is to fund a diverse portfolio of startups and small businesses across technology areas and markets to stimulate innovation, meet federal research and development needs and increase commercialization. Famous companies such as 23andMe, Symantec, iRobot, Genentech, Qualcomm, Biogen and Amgen all received seed funding from SBIR and STTR funding agreements in their early days.
Individual agencies within the federal government such as the Department of Defense, Department of Energy and National Science Foundation all participate in the congressionally mandated program. SBIR and STTR financial awards are considered non-dilutive funding and are therefore very attractive to startups.
Over the past five years, the South Bend-Elkhart region has averaged four SBIR or STTR awards with the average total of all awards being $725,000. 2020 will almost certainly show the region brought in millions more, with at least $7.5 million being awarded since the start of 2020. SBIR and STTR awards in this region began to pick up in 2019 but greatly accelerated in 2020. Most of this growth has come from startups spun out of Notre Dame. Here are five Notre Dame startups that are reaping the rewards of SBIR and STTR awards.
Vennli was founded in 2013 by Joe Urbany, a Notre Dame marketing professor, and Gary Gigot, a serial tech entrepreneur and Notre Dame alumnus. Together with a talented team, the co-founders have succeeded in building a tech-powered platform for market research and data insights used by leading national and global brands including BMW, Dunkin, Nucor Steel, 3M, Schurz Communications, Tire Rack and Notre Dame. Vennli also caters to many mid-market companies with a Midwest regional footprint like Steel Warehouse and Imagineering Technologies.
Vennli is a tech company at heart. Seeking to broaden its customer base, the company’s leadership looked at expanding in the federal government arena through the SBIR and STTR programs. Not only would they discover new customers, but their research and development effort would be funded by potential customers in the federal government.
Ethan Griffin joined Vennli in June 2020 as vice president of strategy and public sector to help the company expand its footprint in the area of government contracting. Griffin, who spent 26 years in the U.S. Air Force and as a senior executive within the Department of Defense, called the decision to enter the federal arena through the SBIR and STTR programs a “gutsy move.”
“The federal government is very complex and dense with many deeply ingrained contractors, particularly within the defense industry. It took a lot of courage for Vennli’s leadership to commit to this new market,” Griffin explains. “That said, small, nimble companies like Vennli that are enthusiastic and have great tech are exactly who the SBIR and STTR awards are designed for. The government needs this fresh perspective on problem-solving and for relatively small investments, the government is yielding good wins.”
Griffin is not a “tech” guy but was a user of tech when piloting highly sophisticated military aircraft and then developed a deep understanding of the military’s tech needs and government policy during his years at the Pentagon. He first met the Vennli team in 2019 when they were applying for their first SBIR. Griffin immediately recognized the synergy. “The military has a significant need for data analytics and capturing stakeholder needs, areas in which Vennli excels. Our original platform, re-shaped and applied to new applications within the government, was a great launchpad.”
Urbany credits Griffin’s military career and insights as an airman and leader for Vennli’s growing footprint within the Department of Defense through the SBIR and STTR programs. "Ethan has been a wonderful addition to our team, connecting us closer to the defense community and opportunities with tremendous upside potential. He personally knows the pain of not having simpler data solutions, which is helping Vennli to respond with solutions well aligned with real needs. The public sector represents a broad set of opportunities to provide value by understanding choice, process thinking and data science.”
It is important to note that STTR projects require the small business to team with a non-profit research institution, typically a university or federal laboratory. SBIRs do not have this requirement, although businesses can have university partners. In Vennli’s case, Urbany and Richard E. Billo, associate vice president for research and professor of computer science and engineering at Notre Dame, provide the university connection.
Vennli won its first SBIR Phase I award in 2019 for a scheduling solution for U.S. Marine Corps operational flight units. This was followed by a Phase II award in 2020, bringing the total project amount to $2.3 million. In late 2020, AFWERX—the innovation arm of the U.S. Air Force—awarded Vennli an STTR Phase I contract of $150,000 on a “Voice of the Airman” initiative, which the company is now progressing toward a Phase II proposal in summer 2021. Notably, Vennli’s team is working alongside Notre Dame’s Center for Research Computing on this human resources project to address quality of life issues for certain populations.
Most recently in February 2021, Vennli landed a fourth award, a $750,000 direct to Phase II SBIR award for command and control optimization for the Air National Guard in New York State. This project supports the Eastern Air Defense Sector’s mission to safeguard America’s airspace east of the Mississippi. These recent awards bring Vennli’s total SBIR/STTR program awards to $3.2 million, complementing its rising core insights commercial business.
Griffin is not surprised by Vennli’s success, calling its tailored platform, powered by the data science of Indianapolis-based Vertex Intelligence “exquisite.” He’s also proud of the talented Vennli team and excited by the regional growth these awards bring. “We’re creating jobs in South Bend and using boutique data science and design architecture talent in Indianapolis. At the same time, we’re bringing more exposure to the South Bend region’s growing technology community. Partnering with Notre Dame has helped open doors to very significant and lucrative national security and commercialization opportunities,” he says.
Among the region’s most prolific beneficiaries of the federal government’s innovation research funding programs is blockchain startup SIMBA Chain whose CEO and Co-founder Joel Neidig admits would not exist without government funding. In fact, the original U.S. Defense Advanced Research Projects Agency (DARPA) SBIR Phase I funding agreement that kickstarted the then-unnamed company is now an important part of SIMBA Chain’s lore.
“In early 2017, I learned DARPA wanted to develop a highly secure, messaging and transaction platform based on blockchain and reached out to Jarek Nabrzyski, director of Notre Dame’s Center for Research Computing and concurrent professor of computer science and engineering. He reached out to Ian Taylor, a computational scientist in the Center and research professor in computer science and engineering, and asked if he’d like to ‘take a go’ at the solicitation, which he did in a short period of time.”
Indiana Technology and Manufacturing Companies (Neidig’s company) and Notre Dame won the DARPA award. Neidig, Narbrzyski, and Taylor co-founded SIMBA Chain later that same year and continued to apply for and win a total of seven SBIR awards with a total value of $3.4 million and a basic ordering agreement for $9.5 million. Neidig says each award is based on a specific customer demand inside the government such as using blockchain to secure the military’s supply chains from cyber threats.
“Some of the blockchain solutions we’re developing for the military can also be used in business and industry. What’s great about SBIR awards is not only do they provide nondilutive capital, the government allows SIMBA Chain to retain the intellectual property of the technology we develop,” says Neidig, “That’s an awesome bonus that creates even more incentive to commercialize technology.”
While working on his Ph.D., Sanket Mishra, a co-founder of South Bend-based Grannus Therapeutics, discovered a drug compound he believes has great promise in treating breast and colon cancer as well as leukemia. Working with Brian Blagg, the Charles Huisking Professor and director of the Warren Family Research Center for Drug Discovery and Development, Mishra applied for and was awarded a $230,000 STTR Phase I grant from the National Cancer Institute in August 2020 to advance research around the compound. As icing on the cake, the Indiana Economic Development Corporation and Elevate Ventures matched the STTR with an additional $50,000.
“Blagg and I are co-principal investigators on the award, with him acting as the academic partner and myself as the company PI while also working in Notre Dame as a scientist,” explains Mishra. “With this funding, we hope to advance our compound that selectively inhibits a Hsp90beta, a variant of the Hsp90 protein, into clinical trials.”
Mishra says the STTR award came with much more than funding. “The National Cancer Institute wants us to succeed if our technology is worthy. They provide resources we can access such as help with our business plan and investor pitch, plus they introduce awardees to their investor network. If we progress, we can apply for a Phase II grant, which will further our commercialization efforts.”
Grannus Therapeutics’ current funding runs through August 2021. Successfully completing a Phase I and Phase II STTR grant will enable them to exit by licensing the technology to a pharmaceutical company that has the resources required to commercialize a breakthrough cancer drug. In the meantime, Mishra is focused on the work at hand: proving the efficacy of the compound.
“I am grateful to the NIH for the STTR award. Early-stage drug discovery is one of the riskiest investments from an investor’s point of view. It can therefore be difficult to find funding. An award from NIH reflects that the application has been peer-reviewed by experts, which builds confidence in our technology to attract further investment.”
While attending Trinity College Dublin in Ireland as an undergraduate, Rian McDonnell spent nine months studying the food waste issue, interviewing hundreds of people. He was both shocked and inspired by what he learned. By 2030, annual food waste globally is expected to swell to 2.1 billion tons, with food worth $1.5 trillion being lost or thrown away.
When McDonnell joined Notre Dame’s ESTEEM Graduate Program, the “reformed engineer” as he calls himself, developed a food analytics platform to help commercial foodservice such as cafeterias and restaurants dramatically reduce food waste and cut operating expenses in the process. The resulting company, FloWaste, was founded in August 2020, with the express purpose of making a financial and environmental impact on the costly and growing problem.
Last September FloWaste, with the Notre Dame Center for Research Computing as their university partner, applied for a National Science Foundation SBIR Phase I award. While awaiting a decision, AFWERX, the innovation funding arm of the U.S. Air Force, put out an open call for applications. “We had already done the groundwork with the National Science Foundation, so we applied for the AFWERX award, too,” McDonnell says. “In early February of this year, AFWERX awarded us an SBIR Phase I worth $50,000 which Elevate Ventures matched with another $25,000.”
The project, focused on reducing food waste in Air Force cafeterias and optimizing the nutrition of military personnel, may start as soon as March. If successful, FloWaste will be in line for a Phase II award worth $750,000.
“SBIR awards are really freeing for a startup as it allows us to focus entirely on developing and de-risking our technology so it’s market-ready. Unlike equity funding that would require us to give up board seats and control, SBIRs are a non-controlling investment so we don’t have to give up anything at this early stage,” McDonnell explains.
Meanwhile, McDonnell has high-profile pilot projects lined up for mid-2021 with major brands in the restaurant industry and another with the cafeteria of a social media company. He says his pitch is hitting home. “FloWaste can save a fast-food chain $10,000 per location annually by reducing food waste. It’s hard to argue with that.”
Since 2013, Indiana Integrated Circuits, LLC, has successfully executed three Phase I SBIRs, one Phase I STTR, and is currently under contract and performing on a Phase I STTR and a Phase II STTR. With a total contract value of $1,470,000 (nearly $900k of which came in the last year), the government programs have had a significant impact on the company whose “Quilt Packaging” technology was invented by Gary Bernstein, Frank M. Freimann Professor of Electrical Engineering; Patrick Fay, professor of electrical engineering; Wolfgang Porod, Frank M. Freimann Professor of Electrical Engineering; and Qing Liu, a former researcher at Notre Dame now working for Broadcom in California.
Indiana Integrated Circuits was founded in July 2009 by Bernstein and former student Jason Kulick. They launched the company based on then-pending patents with the help of a Pittsburgh-based law firm to finalize the technology license with Notre Dame and aid in industry engagement. Soon after, Dale O’Chap, a South Bend serial entrepreneur, invested in the company to enable full-time operation. Since 2011, with the help of additional investment including a Series A raise in 2016, Indiana Integrated Circuits has succeeded in developing their advanced microelectronics technologies and growing the company.
In addition to contracting directly with defense and commercial companies and government agencies, the company has utilized SBIR/STTR projects as an important part of technology development and demonstration. Non-dilutive SBIR/STTR funding from the Air Force Research Lab, NASA, and the Department of Energy have been leveraged to further develop and demonstrate their technology. Partners on these programs include Santa Barbara Infrared, Inc., Notre Dame, RTI International, Stanford University/SLAC National Linear Accelerator Laboratory, and Circuit Design Systems, Inc. Elevate Ventures’ SBIR/STTR match program has also provided funds to speed development. Final technology applications range from infrared sensing and test equipment to high-frequency RF/microwave systems to high-energy particle detectors.
As of today, Indiana integrated Circuits’ intellectual property portfolio has expanded from the original four applications to more than 35 issued and pending United States and international patents.
Are more SBIR and STTR funds in the South Bend region’s future?
Billo certainly hopes that is the case. While Vennli, SIMBA Chain, FloWaste, Grannus Therapeutics, Indiana Integrated Circuits and Notre Dame have taken advantage of SBIR and STTR awards, he encourages others to do the same.
"The SBIR/STTR program is an excellent vehicle to help companies jumpstart the development of new products. In addition, these federal programs provide a mechanism for a company to gain access to university faculty, laboratories, talented students, and other university services that can further the development of new products that would otherwise not be possible. Local organizations such as Notre Dame's IDEA Center, Third Coast Federal, the ESTEEM program, and the regional iNDustry Labs program are doing a superb job in linking the local companies to Notre Dame to expedite the development of a 21st Century economy for Northern Indiana."
If your company is interested in learning more about SBIRs and STTRs, please contact James Thompson, associate vice president for innovation at the IDEA Center.