WASHINGTON — Space technology startups should carefully weigh the risks and rewards when bidding on Small Business Innovation Research (SBIR) government contracts, a venture investor said Feb. 6 at the SmallSat Symposium in Mountain View, California.
The SBIR program provides crucial early funding for young firms, and can be a lifeline for many space entrepreneurs when they’re just getting off the ground.
But the competitive contracts can also consume outsized time and resources, and keep many companies in a cycle of continuously chasing SBIRs and not putting enough focus on commercialization, said Timur Davis, investment director at Munich Re Ventures.
“I’d say the government is absolutely a double-edged sword, mostly on the good edge, but not always,” said Davis.
VCs that years ago were beating the “commercial is king” drum have now changed their tone as governments have taken on a major role in nurturing space technology, he said. Space startups simply can’t ignore agencies like NASA and the Space Force and miss out on important sources of funding, particularly over the last couple of years, he added.
While venture capital has retrenched, “the government has stepped up and created a tailwind for the space industry that, frankly, doesn’t exist in other venture backed categories that are suffering more so than space,” said Davis.
“Particularly in the defense world, we’ve seen government come in in a big way and support startups that otherwise may have had a tougher time raising funds.”
Be careful about ‘scope creep’
However, Davis warns startups to not become overly reliant on SBIRs, especially if the project is so demanding that a company risks missing their product window and losing out to competitors that move faster to market.
“We always advise our startups to be careful about ‘scope creep’ and what you’re signing up for,” he said.
The SBIR program awards grants and…
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