Small Business Grants: A Guide for Startup Founders
Small Business Grants: A Guide for Startup Founders
Words Founders Factory
August 23rd 2022 / 10 min read
Running out of cash, and failing to raise capital, is the number one reason startups fail. For that reason, exploring the many different avenues for funding your business is one of the most important tasks founders face. This ranges from early stage investment from friends and family, equity finance from crowdfunding platforms, angel investors and VCs, or debt financing - including traditional bank loans and revenue-based funding options.
Often overlooked are small business grants. Grants are offered by a wide range of organisations with the aim of supporting small businesses across a range of industries. Most grants are very specialist, created to service specific verticals or building a business that will support a local community. Grants aren’t a quick win—they can take up to 50 hours of a founder’s time—but the benefits can be huge, not just the money but the credibility it lends you, the sway it has with investors, as well as the personal clarity it may give you on the commercial and technical direction of the business.
Here’s our essential guide to small business grants, including the pros and cons of applying, a list of grant organisations, useful resources for your application, as well as practical advice from founders.
The main benefits of grant funding, as well as some of the potential negatives
Top tips for writing your grant application
A list of organisations that offer grant funding
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Small business grants: An overview
Applying for grants is an increasingly popular way to fund businesses at an early stage or raise additional capital. It can be a particularly useful way to get initial funding for a business idea that is taking formation but isn’t quite ready for dilutive investment.
Grant funding tends to be awarded to businesses who meet some or all of the following criteria:
Truly innovative (what they are doing hasn’t been done before)
Commercially viable (business model to back up technology)
Based in a sector ripe for research and development
Grants range hugely in value. Smaller, sector specific grants tend to start at around £10k-25k, while established grants from governmental organisations like Innovate UK can reach up to £2m. See the graph below for details.
Benefits of applying for grant funding
Beyond the obvious funding opportunity, there are several clear benefits to applying for grant funding.
Primarily, it can help you think through your value proposition and define what it is that distinguishes your business. The rigour and discipline of the process will force you to examine the current state of the industry or technological landscape, and where your product fits into that.
Cat Jones, founder of slow travel startup Byway, benefited greatly from the process of applying for grant funding from Innovate UK. At the time, she had a vision for the AI-powered trip planning technology that she wanted to build through Byway, but hadn’t deeply defined this vision and what it would take to build this. After receiving funding, this process also helped in hiring a CTO, who would be a critical partner in building the technology.
As well as defining your USP, it can also help provide clarity to your direction: including planning exactly what areas you’re going to focus on, as well as which markets you’re looking to target. Applying for grant funding helped define this for Jeffrey Ng, co-founder of BuiltAI, a digital twin of the world’s real estate market. Initial responses to their business plan and the outline of their technology showed them that they needed to broaden the scope of their technology to create greater value.
This plays into another significant benefit. Successfully applying for grants can help move the needle on fundraising. Jeff reveals how receiving grant funding added a real seal of approval (particularly as it was from a highly competitive Innovate UK SMART grant) from technical experts which not only verified their technological proposition, but also showed that what they were doing was truly innovative.
"Successfully applying for grants can really help move the needle on fundraising."
As well as strengthening your impression with investors, it can also boost your confidence with regards to applying for other grants. It underlines what you’ve got right in the application, as well as demonstrating that you are a grant-fundable business (in that what you are doing is truly innovative and worthy of funding).
Negatives & challenges of grant funding
Applying for small business grants is not without some considerable challenges though.
For one, it's an incredibly time consuming process. Each grant will vary but don’t underestimate the amount of time it takes to apply—often up to 50 hours of work. Grants often have a specific timeline for expenditure (for instance, 12 months) in which case you may have to detail the step-by-step of a 12-month project in your application.
Balancing that with the full-time (and more) job of running a startup can be difficult, so it’s worth blocking out specific time in your schedule to ensure that you give it the attention it needs in order to be successful.
Grant applications are extremely rigorous. Grants will usually have tight sets of criteria coupled to questions on the application form: if you fall below the threshold on any of these, your application will probably be rejected.
There’s also a precise process to getting grant applications right. You’ll need to perfectly balance technical and commercial: technical to demonstrate what distinguishes your business and how your technology works, and commercial, to demonstrate why this is something that can generate economic value.
Even if you are successful, you need to be quite aware of the conditions that come attached to your grant. Many geographic-specific grants will stipulate that all expenditure must take place within that geography (Innovate UK has this). It may also be that funding has to be ring-fenced (applied to a specific project, rather than to generally fund the business). There are certain project specific grants too which stipulate that the company must be able to pay a certain percentage of overall project cost.
Tips for writing your grant application
1. Allow plenty of time
As outlined earlier, startup grants can take a long time to write—in the ballpark of 50 hours—so make sure you aren’t leaving it to the last minute. The best way to approach it is to carve out a number of hours each week to dedicate to the grant, to ensure you aren’t falling behind.
2. Do your research
Each grant/grant organisation is different, so make sure you do appropriate research into the grant organisation. This of course includes eligibility criteria: you don’t want to waste your time writing a grant that you are ineligible for. More importantly, though, you should look for grants that are a good fit for you, that align with your goals and mission.
3. Know who you are writing to
Consider who is going to read your application—a mixture of independent experts, as well as board members for the organisation. That means you have to be technical enough to appeal to the experts, while also speaking in layman’s terms so it’s understood by a broad audience.
4. Tell a compelling story
As with many of your other jobs as a founder, you’re in sales mode here. So make sure you hook them with your story. This will include giving a strong overview of the market and competitive landscape, as well as a clear hook around what differentiates your product.
5. Prove your potential impact
Grant organisations are interested in the wider impact your business will have. You should be very clear about how your target audience will benefit from your product, as well as your ability to scale it to a much wider audience. If your product is a specific innovation, you should show your ability to turn that into a business. You can do this by showing your traction so far, as this will be a strong indicator of future success.
6. Demonstrate clearly why you need their funding
You should be as specific as possible—show exactly why you need their money, and where you’ll spend it. This is particularly important for grants that are geared towards a specific ring fenced project. For each allocation, make sure you justify why you are spending it there, and why that will have the biggest impact.
P.S. Should I use a grant writer?
Given the time required and competitiveness of applications, many founders will opt to use a grant writer. This is someone who can bring their expertise and grant application experience to the process, or who can proof-read your application. Grant writers, most founders will agree, are definitely worth it—but they can be costly.
Founders should work alongside their grant writers. This will help you to communicate the USP of your business or technology in a way that is easy to understand. Cat describes grant writers as “translators”, who can speak the language of grant organisations and know what they are looking for in applications.
There are a number of places to find grant writers: on grant-specific websites like GrantUp, or on freelancer marketplaces like Fiverr and Upwork. There are also a number of websites that offer support with applications, including eligibility questionnaires and writing support technology. These include:
Grant organisations: A directory
Here is our extensive (if not definitive) list of grant organisations for startups to apply to in the UK, Europe, and beyond. If we’re missing something, please email email@example.com to let us know.
Description: Innovate UK is the UK’s innovation agency which provides money and support to organisations to make new products and services, and is part of UK Research and Innovation (UKRI)
SMART Grants (up to £2m) - For disruptive, innovation projects with high chance of commercial success
Women in Innovation Grant (£50k) - Leadership program for female founders - must commit to bootcamp and mentoring
European Innovation Council
Description: Introduced by the European Commission to support the commercialization of high-risk, high-impact technologies in the European Union. Launched under Horizon Europe.
EIC Pathfinder (up to €4m) - Support for researching or developing breakthrough technologies
EIC Transition (up to €2.5m) - Maturing a novel technology and developing a business case
EIC Accelerator (up to €2.5m) - Developing and scaling-up innovative technologies
Women TechEU (€70k) - Must be female, must be a deeptech company
Description: Public network for international cooperation in R&D and innovation
Eureka Eurostars Open Call (up to €360k) - funding international collaborative R&D and innovation projects that result in new products, processes and services
Description: Business insurance platform
Business Boost (£25k) - for entrepreneurs to start, grow or revive their small business.
Sector: General (university-based businesses)
Description: Initiative from Santander to support higher education around the world
Santander X Entrepreneurship Awards (up to £75k) - Virtual business acceleration programme that's dedicated to helping innovative student and graduate businesses to scale
Cartier Women’s Initiative
Sector: General (women led businesses)
Description: Organisation driving change by empowering women impact entrepreneurs
Cartier Women’s Initiative Regional Awards (up to $100k) - for early stage businesses
Cartier Women’s Initiative Science & Technology Pioneer Award (up to $100k) - new technology or product at an early stage with a significant business opportunity
Sector: Internet, data security
Description: To empower top internet innovators to develop human-centric technology solutions addressing the challenge of personal data portability
DAPSI Open Call (up to €150k) - Startups addressing challenges around data, portability, security & privacy
Department for Transport
Description: UK government department responsible for UK transport infrastructure
Transport-technology Research Innovation Grants (£30k) - For startups addressing specific transport-related technology issues
Sector: Healthcare, healthtech
Description: Investing in technologies and innovations to support the NHS tackle health challenges
SBRI Healthcare Open Competitions (up to £1.6m) - targeted competitions for specific health challenges
National Institute for Health Research
Description: Organisation that funds, enables and delivers world-leading health and social care research
Invention for Innovation (up to 100% funding) - Aimed at de-risking early-to-late stage medtech innovations
Description: Market leading producer responsibility compliance scheme investing in quality recycling
Ecosurety Exploration Fund (up to £1m) - For startups that aim to reduce the environmental impact of packaging, batteries or EEE
Sector: Social impact
Description: Organisation aimed to reduce (and where necessary, support) use of animals in scientific research
CRACK IT Challenges (up to £1.6m) - For SMEs solving business or social challenges are their '3 Rs' (replacement, refinement, reduction of animals in research)
Sector: Social impact
Description: Organisation to provide funding and support for social entrepreneurs
Grow It Awards (up to £15k) - for business addressing clear social challenges
Description: A new blockchain protocol
Unlock Grants (vary in amount) - For projects and products to encourage adoption of the Unlock protocol
Description: Platform for creators and their communities to build their own independent digital economies
Rally Grants (vary in amount) - For third-party developers to expand the functionality of social tokens and NFTs
Sector: Crypto, blockchain
Description: Initiative by the cryptocurrency platform to foster innovation in the blockchain ecosystem at large
Binance X Fellowship (vary in amount) - to support developers and researchers in creating free and open-source software that would enable new innovations and businesses in the crypto economy
Binance Smart Chain Accelerator Fund (average $100k) - to accelerate the development of blockchain technology and empower emerging projects
Ethereum Ecosystem Support Program
Sector: Crypto, blockchain
Description: Inititive by the Ethereum blockchain aiming to support projects across the ecosystem
Ethereum ESP (varies in amount)
To discover more Web3, crypto, blockchain grants: https://web3grants.org/
Description: A scaleup programme for fintech startups
Fintech Circle & SFC SEIS Fund (£150k) - a fund aimed at growing the next best UK fintech companies
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