Granting success

by Bradley Hardiman

Quethera, a Cambridge Enterprise portfolio company, was recently awarded a Pathfinder grant from the Wellcome Trust. For an early-stage company like Quethera, grants can be invaluable. In fact, grants can be invaluable to any company. But you have to consider the consequences. Time and effort are at stake with no guarantee of success.

The advantages:

It’s non-dilutive funding. Grants bring in money to further the company’s research without the need to offer company equity to investors.

It gives validation to the technology. Grants are invariably peer-reviewed, so being awarded one validates the technological basis of the company.

It can give credence to the commercial direction of the company. Some grants, especially those for translational funding, consider the commercial strategy of the company. A successful grant application lends credibility to the commercial plan.

My advice to companies raising finance is to raise all of the money you need through equity investment. Then, during the investment period, by all means apply for grants.

Valuable yes, but grants are not without their flaws:

They are fiercely competitive. Given the advantages, competition is tight. Applicants can spend an inordinate amount of effort applying for grants with limited chances of success.

Reporting can be onerous. Invariably, grant awarding bodies want to know what you have done with the money. Sometimes this reporting is no mean feat, especially for grants that come from our friends in the EU.

The tail can wag the dog. Applying for grants that are outside the company’s core area of interest can be tempting. However these grants may not add any real value to the company in the long run.

They are rarely fully-funding. Many grants require matched funding. This will come from the company’s own coffers. If the programme of research is not mission-critical, then this could divert resources from programmes that are.

So what does it all mean?

When I see a company pitching for funding that has already received grants, this ticks a number of positive boxes for me. However, if they state that they will fund their mission-critical research through grant funding, alarm bells go off. If a company’s success depends on grants, then the company really isn’t viable as an investment proposition.

My advice to companies raising finance is to raise all of the money you need through equity investment. Then, during the investment period, by all means apply for grants. If you are successful, this will make the equity fundraising go further, or allow you to explore new things. If you are unsuccessful, at least you have the funding you need to drive the company forward.

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