What Funding Sources Are Available?

The funding sources that you choose to apply for will be determined primarily by the stage that your idea/technology is at and realistically how far the product is from being on the market. Many sources of funding, especially foundations funding epilepsy therapy development can be found on the epilepsy.com site by following this link.

• Epilepsy Therapy Project
  The Epilepsy Therapy Project supports innovative research in both academic and industry settings through direct grants and investments. Learn about our programs and how the Epilepsy Therapy Project is supporting research and helping to advance new therapies.
• National Institutes of Health
  NIH or NIMH tend to fund very early stage research with R01 grants and renewals, but will often not fund more applied projects. Sometimes researchers are able to make a good deal of progress on these funds and might be ready to seek out angel or venture capital funding. Often, however, a step in between is required to further develop the idea and do the proof of concept. A number of options are available at this stage including the following.
• National Science Foundation
• Department of Defense / DARPA
  Mainly due to their large healthcare expenses for current troops and veterans, the Department of Defense can also be a source of funding for medically related startups and for epilepsy research. The Congressionally Directed Medical Research Programs fund a wide range of research. A separate division, the Defense Advanced Research Projects Agency also provides funding for projects which may have medical as well as defense applications.
• SBIR
  The Small Business Innovation Research (SBIR) program - a program for funding domestic small businesses that have the potential for commercialization. The NIH website has a good section on the SBIR program and deadlines.
• Business Plan Competitions - Often run by students at universities and business schools, business plan competitions can be a great way to make progress on formulating the business model and getting exposure to entrepreneurs and investors. Most competitions carry cash prizes of $10,000-50,000 for winners and the runner-up as well as the publicity that comes with winning.
• Foundations
  Charitable and non-profit foundations or patient groups such as the Epilepsy Foundation or the Bill and Melinda Gates Foundation can sometimes be a good source of funding for further development of an idea. The Howard Hughes Medical Institute also has funding programs such as the HHMI Early Career Scientist Program.
• Corporate Partnerships
  Many large pharmaceutical companies have corporate venture capital (CVC) arms that will provide funding as well as testing and complementary assets for early or later stage technologies. Even if a pharmaceutical or medical device company does not have a CVC group, they will often provide funds or partner with researchers with ideas in markets they serve. However, one should be careful as there are certain drawbacks to using CVC. It is usually better used as a later stage funding option.
• Regional Development Funds
  Many states in the U.S. and around the world have non-profits or funding organizations set up to promote new business development. Sometimes these target a particular industry, but often they require that a firm be located within the state. They can be a good option, but be aware that they can impose conditions which may scare off venture capital investors.
• University Funds
  Many universities have set up various types of funding sources for early-stage technologies. Deshpande Center at MIT, the University of Utah Venture Fund, and U. Mass. among others are good examples. Check with your university Technology Licensing Office.
• Angel Investors
  Angels are high net worth individuals who provide early-stage funding for start-up ventures. In recent years a large number of angel groups have formed, making it far easier for entrepreneurs to pitch to multiple angels at one time. Angels are more likely to provide early-stage funding than most venture capital firms. Ask a lawyer or university entrepreneurship center and they can often direct you to local angel groups.
• Venture Capital (VCs)
  Venture capital firms provide funding for start-up companies typically once the entrepreneurs and founding team as well as the plan is fairly complete. Some VC firms fund only later stage start-ups while others will fund companies before they have revenues. It is best to approach VCs through an experienced entrepreneur or trusted friend of the VC partner as they are extremely busy and see many entrepreneurs asking for funding each week. See the material below for more background on VCs.
  
  • Ask the VC
  • What is a term sheet?
    VC term sheet series
  • What do VCs Look For? http://www.mit100k.org/entrant/vcpitch.php
  • How do I approach a VC? http://www.mit100k.org/docs/kivel_041702.pdf (PDF)
  • What do investors expect of me?
• There is a nice article on "Funding a Medical Device Start-up." It mentions a couple of sources like customers, borrowing, and investment banks which are more rare than other funding sources. Nonetheless, it is a good introduction.

References

• Privitera, M. Large clinical trials in epilepsy: Funding by the NIH versus pharmaceutical industry. Epilepsy Research, Volume 68, Issue 1, Pages 52-56, 2006.
• The Venture Capital Cycle (with Paul Gompers). Cambridge: MIT Press, 1999. Paperback edition, 2001.
• Hsu, David. What Do Entrepreneurs Pay for Venture Capital Affiliation?, Journal of Finance, 59: 1805-1844, August 2004.
• Rich or Royal: What Do Founders Want?