Product Startup Podcast Episode 222: Win Hardware Startup Grants

00:00:00 Kevin Mako: Hello, product innovators. Today we learn about the types of government grants available for scaling hardware startups from a funding consultancy that's raised over a quarter billion dollars for manufacturing clients. This is the Product Startup Podcast, a show to learn from top leaders in hardware product development, prototyping, manufacturing, product selling and everything in between. Hosted by Kevin Mako, the leading expert on product development for hardware startups. Welcome back, everyone. I'm very excited

00:00:26 Kevin Mako: To introduce Micki Vandeloo to the show. Micki has been in the manufacturing space for 25 years and has been helping manufacturers get government grants for almost 15 years. She and her company, Lakeview Consulting, has raised over $250 million for clients. Today, Micki will share some valuable knowledge from inventors, startups, and small manufacturers on what government grants are in the usa, what the different levels and types of grants are for hardware startups, and how to prepare for and write a great grant application to succeed. Now, onto the episode.

00:00:54 Kevin Mako: This show is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups, small manufacturers, and inventors. Take your product from idea to store shelves at MakoDesign.com. Now, onto the episode.

00:01:12 Kevin Mako: Hey, Micki, welcome to the show.

00:01:14 Micki Vandeloo: Thank you. Thank you, it's great to be with you, Kevin.

00:01:16 Kevin Mako: Well, I'm excited today to talk to you about government grant options, particularly in the U.S., that are available to hardware startups that are starting to scale their business.

00:01:26 Kevin Mako: So these are for people who have launched and are now looking to grow, which is a really good time to look at government grants because, of course, government grants can help fund some of these initiatives.

00:01:37 Kevin Mako: And obviously, everyone's always interested in how they can save money or how they can accelerate growth. Before we get into all the best practices around funding scale-up opportunities, just give us a bit of a backstory of how you became the success that you are today.

00:01:51 Micki Vandeloo: Yeah, so while I worked in manufacturing for a lot of my career and through that work, I found that manufacturers and for-profit businesses in general could access grants.

00:02:01 Micki Vandeloo: I knew there were grants out there, but I also knew that they really didn't tend to know where those grants were. So I saw a definite opportunity to educate. And that's what I do a lot now, Kevin, is I educate a lot of companies on what grants are, how to get them, what the reality is, because there is a real opportunity in any sector really to identify and access grants that can support their success.

00:02:26 Kevin Mako: That's amazing. Now you've been doing this for almost 15 years now. You've raised over a quarter billion dollars for companies, especially in the manufacturing sector to help scale, which is incredible. So let's talk about this today and what our listeners can do and start thinking about, even if it's early, even if you're still in the design phase or you're starting to launch. This is something as a hardware startup, you might as well have on your radar.

00:02:49 Kevin Mako: So as a startup, let's just talk big picture. First and foremost, what is a government grant?

00:02:55 Micki Vandeloo: Sure. And I think your point is well made because you do have to think ahead for grants. A grant is funding that is offered by a funder to achieve an outcome. And what is an outcome?

00:03:07 Micki Vandeloo: An outcome is what they want to see happen as a result of you getting money. So for example, if one of your listeners is adding people, adding jobs, the grants they'll want to look for are job creation grants that fund them to hire people to scale. Those grants are out there, but you do have to apply for the grant in many cases. And then once you get the grant,

00:03:31 Micki Vandeloo: You can then do the work. So that's why I tell people to really think ahead. So if your listeners are in that development process and they're looking to scale, now's a great time to be looking at scaling grants because they're going to have to think ahead.

00:03:44 Micki Vandeloo: They're goingto have to apply for the grant. They're gonna have to get the grant, and that can be a little bit of time, and that allows them to access the funding at the right time. So there is a timing component to this whole thing.

00:03:54 Kevin Mako: That's great. So just talk about trickling it down a bit. I know there's different types of levels of grants, whether it's a federal grant or state grant, possibly another smaller municipal-based grants.

00:04:04 Kevin Mako: Just give us an idea of what these different things are, and then we'll get actually into the weeds on the different types or formats, or let's call it, as you mentioned, outputs that certain types of grants are actually looking for that might apply to your hardware startup.

00:04:16 Micki Vandeloo: So there's two main different types of grants. One is state grants, so those are offered by state economic development agencies. They're also offered as pass-through funding from the federal government, so usda grants are something that a lot of your listeners might be familiar with. A usda is actually a national, a federal organization that offers money to states to offer to companies that are growing and expanding it, particularly in rural areas. So some of your

00:04:43 Micki Vandeloo: Listeners might be in areas that have less than 15,000 people. Those would be what's called pass-through grants. But state grants are typically like training grants and other grants that the economic development organizations of that state offer to spur job creation and economic growth.

00:04:58 Micki Vandeloo: So those fund very traditional economic outcomes. The federal government has grants that fund much bigger picture outcomes, so high technology. So some of your listeners might be familiar with programs like the sbir-sttr program that funds really the very early development of very innovative projects. But as you scale, you can get funding through the federal

00:05:23 Micki Vandeloo: Government to scale some of your facilities. So for example, if you're in like the semiconductor industry and you've developed this great new innovation and you're looking to scale it, the chips act is a great example. So that funding funds facilities and hiring people and training and a lot of the components that come along with scaling. So those are very large grants.

00:05:44 Micki Vandeloo: So the difference between federal and state grants, federal grants are very big. They're very large. They tend to be in the hundreds of thousands or millions of dollars. State grants, on the other hand, tend to be smaller. They tend to be in that maybe $5,000 to $250,000 range. It varies greatly. So those are the two different kinds of grants, the federal and the state grants. Those are all opportunities.

00:06:04 Micki Vandeloo: What we typically tell people is go for state grants first because they're a lot less work and they're at a lot lower barrier to entry.

00:06:11 Kevin Mako: That's great information. Super useful as well. And let's talk a bit about the actual timing of these grants. We've mentioned the concept of scale stage funding. A lot of hardware startups, I know when they first hear the idea about government grants, they think, oh great, I've got this idea. I can get the government to essentially fund my idea because it's going to be so great and create all these jobs and have all this economic output. But the reality is there's very, very little, almost no government

00:06:36 Kevin Mako: Funding for early stage design, especially going into prototyping, maybe a little bit flirting into launch, but more typically we're talking scale here. These are instruments that are available more for people who have validated even a small way, a new technology typically, which is your invention idea, your product, and is looking to now expand that. So just describe

00:06:59 Kevin Mako: It a bit from your perspective on what you see on why kind of thinking and planning ahead to scale stage is so important and also why it's very important not to try and be premature to apply when your product and or product business is not really ready for this type of funding?

00:07:15 Micki Vandeloo: Well, one great point to make on that and one opportunity for a lot of your listeners is to know that funders do want to see proven concepts, right? They want to say something that has a history, that has a definite revenue model, commercial possibilities.

00:07:31 Micki Vandeloo: So that is something that in the scaling stage you likely are able to show. So the types of grants that companies can go for are varied. So you can go four training grants, you can for product development grants.

00:07:45 Micki Vandeloo: So some states offer r&d type funding that funds more that scaling stage, even though it's called r&b, it's actually funding that scaling. Some offer what's called proof of concept grants.

00:07:56 Micki Vandeloo: So those are actually to prove out your concept in the scaling stage. So some will fund that area where you're really trying to commercialize. Other ones are funding job creation, capital investments.

00:08:08 Micki Vandeloo: So if you have to buy capital in order to scale, that would be a type of grant that

00:08:13 Kevin Mako: You would want to look for.

00:08:14 Micki Vandeloo: Many states now are incentivizing innovative technologies and innovative processes. And so they're called industry 4.0 grants.

00:08:23 Micki Vandeloo: Those will fund capital investments like software, like machinery that actually allows companies to be more innovative and to scale an innovation. So those are the main ones.

00:08:35 Micki Vandeloo: If there's a recycling component to what you're doing, there's also some recycling grants out there as well that will help companies process recycled materials. So if that's in the radar of any of your listeners, that might be something as well.

00:08:48 Kevin Mako: That's great. Super useful. I appreciate you breaking down what all those things mean and also clarifying that even if a grant may look on the surface to be r&d based, they're really meaning the research and development into scale, meaning you've already got a product, it's in market, you

00:09:02 Micki Vandeloo: You have customers.

00:09:03 Kevin Mako: So you've validated this new technology, even in a short way, just some social proof or some economic proof that you have a great product and people are buying it. And it's based on some proprietary technology you've developed.

00:09:15 Kevin Mako: Then they're looking to help you develop that further. And I think that's a key distinction in a lot of the mistakes that people make trying to plan a little bit too early. So that distinction is really useful. So let's assume that you are starting to scale.

00:09:27 Kevin Mako: You've got that market validation. You are now ready to start approaching some of these grants. What does it take to actually write a great grant application?

00:09:37 Micki Vandeloo: So there's a great process that I like to tell companies about, and it's fairly simple and it is an iterative process, but it all starts with a great project design. So what is a great product design?

00:09:47 Micki Vandeloo: What you talk about in a project design, it isn't simply saying we want to put a product out there and hope it works. It is what are the activities you're going to have to do to make your project work? Who is going to do those activities?

00:10:00 Micki Vandeloo: So for example, if you're scaling a project, the activity, one of the activities that may need to be done is you need to go out and recruit customers. Who's going to do that recruitment? Is it going to be somebody internally? Are you going to partner with somebody to recruit customers? Then once you've identified those two things, then how much money are you going to need to do that? You know, just a rough budget. So if you have to hire somebody, is it going to cost $5,000 or $10,000 to hire those people? And then finally, what is going to be

00:10:27 Micki Vandeloo: The result of what you're going to do? Do you hope to get 50 new customers? Do you hope to get 100 new customers, all those things and all those activities go into a project plan. And if we can know all those opportunities, then we can do really great research into funding opportunities.

00:10:42 Micki Vandeloo: So if we know the results, then we know the outcomes, right, that we talked about that before. So then we can go out and do a keyword search. So you develop keywords based on what you've said. So if one of the keywords is job creation,

00:10:53 Kevin Mako: Then you would go out

00:10:54 Micki Vandeloo: And look for job creation grants in your state.

00:10:56 Kevin Mako: And you would be able to do that and you would look for jobs

00:10:57 Micki Vandeloo: At the federal level. So that's the research component. Once you find something that's a really great fit

00:11:02 Kevin Mako: For what you want to do

00:11:03 Micki Vandeloo: And fits your project design really well, then you can apply for the grant. So applications can be very complicated. They're very intimidating to a lot of people. But I think that the key is if you can really parse out what you need to do and again, create a project around it, any application can be accomplished by anyone that's wanting to seek out a grant.

00:11:23 Micki Vandeloo: However, that is a lot of times where we step in and help because it is overwhelming. And then finally, once you get the grant and you get the money, then you typically have to do some reporting.

00:11:33 Micki Vandeloo: You commit to certain things in the grant, and the funder will want to make sure you do those things. So I always tell people, put in a grant what exactly you're going to do, and then commit to doing it. Because if you get the money, the funder is going to make you commit to doing that. So I think that's another key point and opportunity for people in this hardware space is make sure that you're, you know, be conservative and make sure that you really define your project well, that you

00:11:59 Micki Vandeloo: Really get a good definition of your project.

00:12:02 Kevin Mako: That's great. So to recap, there's really three key steps here. It's identifying the grant and really making sure that it is the correct grant for what you are trying to do. And of course, that the grant objectives match what your business objectives are. Then doing a great project plan to really highlight how your project a fits within that grant, but of course b really fits within your business model. And then c, it's not just about getting the money. Once you get the money, you have to do a great job of adhering to whatever

00:12:27 Kevin Mako: Those grant requirements are. And I'm assuming you tell me maybe what some of those things are, but I'm assuming there's a series of requirements that a lot of these grants may or may not have baked into them. So it's not just apply, get the money. It's apply, get the money. And then you have to meet xyz criteria. Maybe just give us a highlight of what some of those criteria might be or some of the requirements that the actual grant giver wants to see the company do with the money that they've given to them.

00:12:54 Micki Vandeloo: Sure. After you get a grant, some ofthe typical things they require are proof of expenditures. So if you haveto spend out money to purchase capital or to purchase anything, they'll want to see kind of like an audit trail for a tax audit or something.

00:13:07 Micki Vandeloo: You have to give proof that you actually spent out the money. So they want those invoices. A lot of times they want proof of payment. If you're training people, they'll want a list of the people that are trained and they'll want some information on the training such as what what did the training cover and what did they learn? What were the outcomes of that training?

00:13:25 Micki Vandeloo: They'll want to know, in some cases, they'll want to know the wages of the people that are being trained. So there's a little bit more on the training grants that might be required, but that really varies state by state. Some other things are they'll want proof that you actually use the people that you use. So you might have to produce a contract as proof that you engage with the company to help find customers for you. That's always key. So what I tell

00:13:50 Micki Vandeloo: People is what you're going to have to produce and sometimes it's on a quarterly basis during the project. Sometimes it's on a biannual basis. Sometimes it's just at the beginning and the end of the project, but you're going to set out objectives in your grant. You're going to say we're going to hire 50 people. We're going to purchase $100,000 worth of equipment. We are going to train so many people. When you say those things, what they are going do is they are going to take those objectives and make you prove that you actually did those things. That's really the key is whether that

00:14:16 Micki Vandeloo: Takes invoices or sign-in sheets for training, that's all going to depend on what you're applying for.

00:14:22 Kevin Mako: That's great. I guess that's why you've got to be conservative. You would be very careful. Obviously, you're going to do something, but being careful that if you are a startup and you think you're gonna hire 50 people, you gotta be sure that you're- you better be sure you hire, yeah.

00:14:35 Micki Vandeloo: And that is a good point because funders do have the right. They don't do it a lot. A lot of times they will work with you. If you work with the funders, they'll work with you. But a lot of time funders have the ability to claw back grant money if you don't do what you said you're going to do. So I always advise clients be very conservative.

00:14:51 Micki Vandeloo: If you think you're gonna hire 10, but you know, you're gonna hire five, put five in the application because otherwise, you might get into a problem with the funder. Good advice. Micki, just talk

00:15:00 Kevin Mako: A bit about what you do with Lakeview Consulting, how you actually help hardware startups navigate the grant landscape.

00:15:06 Micki Vandeloo: So what we do, we do the pre award is what we call it, we do the research into grant opportunities for clients. And that's based on whatever projects are looking to do in your client's cases that might be scaling, that might be developing the project. But we look at what they're doing. We give them a grant research questionnaire. We also help them evaluate their grant readiness because it is really important that they have all the portal registrations, that they have all the government registrations that they need in order to

00:15:33 Micki Vandeloo: Apply for those grants. So we do the grant research, we do the grant readiness, and then we do the writing of those applications. So we can either write a single application for a client that us to apply for a single grant, or we can do an ongoing arrangement where we work on an ongoing basis with the companies to help them maintain that research, know what's out there on a monthly basis. And we also have what's called a manufacturing grant database. So we have a

00:15:58 Micki Vandeloo: Database that's a subscription-based database that $25 a month that allows companies that are in any stage really to go out and look for the grants that might fund what they want to do. And you can sort it by state and you can start it by activity.

00:16:11 Micki Vandeloo: So we offer a number of different solutions to our clients to try to fit every price point.

00:16:16 Kevin Mako: Super helpful. Thanks, Micki. What's the website?

00:16:19 Micki Vandeloo: Yes, it's lakeviewconsulting.net. Lakeviewconsulting, all one word, dot net.

00:16:24 Kevin Mako: Perfect. Appreciate it. And as always, I'll put the link below in the show notes so anyone who wants to click through could do so. Micki, much appreciated for you talking about the different types of grants that are available for hardware startups that are looking to start scaling their business.

00:16:35 Kevin Mako: Ideally, you're actually looking at this well before you start scaling. So those listening here, no matter what stage of development you're at, at least start to poke around, start investigating that journey because this may be one of those things that can very much help you as one of your tools in the tool belt to help scale from there. Micki, thanks so much again for all your words of wisdom today on grants. We look forward to talking again soon.

00:16:56 Micki Vandeloo: Thank you, Kevin.

00:16:57 Kevin Mako: Thanks and take care. Thanks for tuning in to this episode of the Product Startup Podcast. If you found some value in the show, please do us a huge favor and hit the like button and subscribe. If you have any questions, guest suggestions, or anything else, feel free to reach out to us anytime at our email podcast@MakoDesign.com. This show is hosted by Kevin Mako, North America's leading

00:17:20 Kevin Mako: Expert on product development for hardware startups. And the podcast is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups, small manufacturers, and inventors.

00:17:34 Kevin Mako: Take your product from idea to store shelves at MakoDesign.com. That's M-A-K-O Design dot com. Thanks for joining and see you again soon.