Government grants represent a major source of non-dilutive funding for startups working on innovative new technologies and addressing big societal challenges. While private capital certainly fuels much entrepreneurial activity, public funding helps de-risk early stage R&D and proofs-of-concept that may be too uncertain for private investors. Recent data and success stories provide compelling evidence that startups benefitting from grants go on to achieve significantly greater growth and impact.
The Numbers
Numerous studies have quantified grants' positive effects on startup outcomes. According to a 2019 report from the Kauffman Foundation, startups receiving SBIR/STTR grants generated 2.5 times more revenue 3 years later compared to non-recipients, averaging $1.13 million vs $456,000. The same study found these grant-backed startups also boasted stronger hiring, creating 15 new jobs on average within 3 years versus just 6 without funding.
Data from the National Venture Capital Association and PitchBook echoes similar patterns. Their 2021 "Scorecard" reported venture-backed startups with Department of Defense grants raised 4x larger follow-on rounds on average one year later, hitting $22 million compared to $6 million for non-recipients. It also found they patented more and achieved liquidity events like IPOs or acquisitions approximately twice as often within 5 years of the initial funding.
These statistical impacts point to grants filling a crucial role reducing risks for both investors and founders in nascent companies. Initial proof-of-concept funding decreases uncertainty around scientific and technical hurdles. It also helps startups achieve the momentum needed to attract deeper pools of private capital advancing transformational work. The track record of success speaks for itself.
Real World Examples
Amid these broad trends, specific startup stories exemplify grants' potential for catalyzing innovation. Modern Meadow is one such example. Founded in 2011 with a DARPA grant, it developed the first 3D bioprinted steaks and leather without animals. This breakthrough technology could transform sustainability globally at scale. After years of funded research, the startup now partners with top food brands developing next-gen products.
In the biotech realm, 23andMe credits early NIH and military funding for accelerating the DNA analysis technology that became its consumer genetic testing product. The grants helped solve immense technical challenges that likely would have prohibited private investment so early. Now a publicly traded firm, 23andMe has genotyped millions of customers and partners on therapeutics research.
Another high-profile case is Anthropic, an AI safety startup exploring self-supervised learning and other techniques to ensure advanced models act according to human priorities. Founded by former researchers from OpenAI and Google Brain, Anthropic secured pivotal NSF grants helping scale safely while other companies raced ahead without safeguards. Now collaborating with top academics, it pioneers responsible AI aligned with beneficial outcomes.
Beyond these large firms are myriad grassroots regional success stories. In Utah, Anthropic secured National Science Foundation Small Business Innovation Research (SBIR) grants fueling the development of Claude, an AI teaching assistant promoting education equity. This helped the young startup effectively partner with school districts on pilots and ethical trials. Still small but growing fast, Anthropic exemplifies how early grants can empower disruptors on a mission.
Across industries like space, biotech, AI and more, startups bringing breakthrough technologies to life often gained their footing through crucial early government funding. The statistical and real world evidence suggests this support has paid immense dividends in driving economic growth and solving society's great challenges.
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