Three key things to consider in discussing revenue or a clear path to revenue in SBIR proposals

  • March 30, 2023

One frequent parameter for applicants to the SBIR/STTR and other federal research grant programs is an expectation of having “revenue or a clear path to revenue within 12-18 months”. The “revenue” part is easy to understand. But what exactly does “a clear path to revenue within 12-18 months” mean? What makes the path clear? Who determines if the plan represents a clear path?

#1. A Clear Path to Revenue and what makes it clear

This part of the ask refers to specifics within an applicant’s plan to commercialize. This means that funders need to see how the applicant plans to sell the product, where, and to whom. The applicant must demonstrate that this plan is realistic using market research and proven examples where similar revenue paths have been successful by other companies or market competitors. The goal is to be realistic in your assumptions and back up your processes with validated market research, interviews with potential customers, and similar market success stories.

#2. Who determines if the plan represents a clear path?

Reviewers associated with the funding opportunity to which you are applying will be the deciding factor in if your plan represents a clear path to revenue. This is fortunate because the merit review criteria are listed for nearly every published solicitation. This means that while there is an element of subjectivity within different reviewers’ opinions, there is a rubric to mock-score sections of your proposal before you send it off. Following the stipulations in the merit review criteria can help you draft a more competitive proposal in terms of revenue path and all other sections.

#3. The 12-18 month window

This is a very common timeframe for revenue generation in the funding world, both within the federal grant space and equity investments. It makes sense if you look at the stages of startup growth. There is a 12-18 month window anticipated in getting from the seed stage (where large-scale investments are sought for the first time) to Series A (the next stage up). In SBIR/STTR scenarios, Phase II (the last R&D stage before commercialization) is 12-24 months. Starting to see the pattern? This 12-18 month window is a common expectation for revenue generation once investments have been made, or the timeframe with which investors are comfortable waiting before they start seeing ROI. Thus, it is wise to keep this window in mind when making revenue plans and assumptions for a new product or service.

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