There is a website called HackerNews that is popular among technologists and small business leaders.  They use it to post articles and ask questions.  One recent question was about the Small Business Innovative Research (SBIR) program in the United States.  It seems actual participants in this program think it's a boondoggle.  And not just in the United States.  Participants in similar programs around the world feel the same way.  Either we've discovered another global conspiracy by the Illuminati, or these programs are inherently flawed.

Why don't more people use SBIR grants?

This is the question that one user posed to the community to answer:

Some people know about SBIRs (small business innovative research grants), through which federal government gives away more than $1B of R&D funding to small businesses. There are many more opportunities open for small businesses. For example, AirForce recently opened a $100M solicitation looking for machine learning technologies. ... Why isn't gov funding a more common way of starting a startup? Is it mostly because people don't know about these and/or don't know how to navigate the process?

The responses are consistently negative

Many people responded to the question.  A large proportion of them had actually participated in the SBIR program before.  Their feedback was overwhelmingly negative, and frequently describe corruption:

  • "My $.02 as someone who has applied for multiple SBIR grants with one winning proposal.  1. Government proposal selection is painstakingly tedious and slow. 2. There are actual politics involved with final selections and winners may be pre-selected to win through information back channels that exist outside of the official process."
  • "Our company did a handful of these before we sought VC funding. I have to agree with most everything said already. You’ll starve before the contract gets funded - it can take years and you will likely be on a second generation of code by then. It’s hugely political. We partnered with larger competitors and spent a lot of cash on legal fees and patent protections. Net profit was just not worth it alone - but we had a few prestigious projects that helped us get on the GSA schedule, get FIPS and CC certified, and snag a few hard-earned customers. Honestly I wouldn’t do it again unless it had a contingent long term contract."
  • "After years of inside experience with SBIR applicants and the various agencies I can say confidently that is largely a sham to funnel money to those who make friendships and scratch the backs of the various agency heads and their underlings."
  • "We submitted our proposal, meeting all of the insanely meticulous format requirements, but as feared we never recieved a response. Instead, the award was given to an off the shelf product for an incremental upgrade. Clearly, the awardee was already identified by the PM before the SBIR solicitation was even written, so I essentially lost a month of my life by being mislead into thinking the solicitation was truly open. The SBIR was just another way to funnel R&D money to the existing product the PM manages."

These programs are "not worth it" around the globe

It turns out the United States isn't the only country where these grant programs exist.  And it sounds like they're dysfunctional elsewhere too:

  • "I don't know about the USA, but in Australia all these government programs come with so much paperwork and bullshit that it's not worth it.
  • "I worked on a software project funded from an EU grant (which essentially funded half of the company); from this + some conversations with other entrepreneurs interested in EU grants, my impression is that the reality is similar over here."
  • "Same experience here in France."

Even the supporters are opposed

Not even an small business leader who has successfully used the SBIR program thinks it's a good idea:

I feel that my team has really leveraged these findings into real products and, in turn, jobs. I see TONS of companies that just charge through grants and never do anything greater with the funding. As a small business owner and tax payer (funder of these grants) that is not what I think is an ideal use of the money.

It seems the United States government intended small businesses to benefit from the SBIR program, given the name "Small Business Innovative Research".  But if small businesses hate it, why does it still exist?  In fact, if these programs are failures around the world, why do they still exist anywhere?  

Obviously there's an intricate global conspiracy at work.  It's time to grab your torch and your pitchfork, round up all your neighbors, and march down to the nearest Illuminati dungeon.  "Stop oppressing the world with your dark magic!"

Or maybe not.  Because maybe it's not a conspiracy.  Maybe these programs simply create the same perverse incentives.  Maybe, just maybe, this is what happens when government is encouraged to do things it has no business doing.

Ridiculous photo credit: BoingBoing