Every week, I meet with medical device entrepreneurs who tell me their funding strategy: “We’re applying for SBIR grants.” When I ask about their timeline, they inevitably say something like, “We should have the money in 6-8 months.”
I hate to be the bearer of bad news, but if your company’s survival depends on grant funding, you’re probably in trouble.
Don’t get me wrong—grants can be valuable fuel for medical device development. But they’re not the magic bullet that most entrepreneurs think they are. The application process is longer, more competitive, and more restrictive than you expect. Most importantly, by the time you actually receive grant money, your startup may already be dead.
Let me give you the brutal reality of grant funding so you can make informed decisions about whether to pursue this path.
The SBIR/STTR Landscape: What’s Actually Available
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are the primary federal grant opportunities for medical device companies. Understanding what’s available is the first step in developing a realistic grant strategy.
Here’s the detailed breakdown of what actually happens:
Months 1-3: Preparation
- Research
appropriate programs and deadlines - Develop
technical approach and budget - Write
and refine application (this alone takes 2-4 weeks) - Submit
before deadline (which you’ll probably miss the first time)
Months 4-9: Review Process
- Initial
administrative review (4-6 weeks) - Scientific
peer review (8-12 weeks) - Program
officer evaluation (4-8 weeks) - Award
negotiations if selected (4-8 weeks)
Months 10-18: Administrative Processing
- Contract/grant
agreement finalization - Institutional
approvals and compliance - Budget
modifications and clarifications - Legal
and administrative reviews
Months 19-24: First Funding
- Award
notification and acceptance - Initial
funding disbursement - Reporting
requirements setup - Project
launch
The brutal reality: Most companies that start the grant
process needing money in 6 months are out of business before they see a dime.
Success Rates: The Odds Are Against You
Grant funding isn’t just slow—it’s incredibly competitive.
The success rates for SBIR/STTR applications are much lower than most
entrepreneurs realize.
Translation: For every 100 applications submitted, only 8-15 receive funding.
These aren’t lottery odds, but they’re not far off. The competition includes:
- Established companies with grant-writing experience
- Academic institutions with dedicated grant offices
- Companies that have already received Phase I funding applying for Phase II
- Teams with deep relationships at funding agencies
As a first-time applicant, your odds are even lower than these averages suggest.
The Hidden Costs of Grant Applications
Most entrepreneurs think of grants as “free money,” but there are significant costs associated with the application process that add up quickly.
Breakdown of Grant Application Costs:
Founder/Team Time (35%): At $200/hour for technical founders, the 3-4 weeks required for a quality application costs $24,000-$32,000 in opportunity cost.
Professional Grant Writers (25%): Experienced medical device grant writers charge $15,000-$25,000 for a comprehensive SBIR application.
Technical Consultants (15%): Regulatory experts, clinical advisors, and market research for competitive applications: $5,000-$10,000.
Administrative Costs (10%): Legal review, institutional overhead, compliance documentation: $2,000-$5,000.
Opportunity Cost (15%): What else could you accomplish with those resources? Customer development, prototype refinement, fundraising from private investors?
The math is sobering: if you have an 11% chance of success and spend $25,000 per application, your expected cost per successful grant is $227,000.
When Grants Make Sense (And When They Don’t)
Despite these challenges, grants can be valuable in specific circumstances. The key is understanding when they align with your company’s needs and timeline.
Green Zone – Pursue Grants:
- High innovation, research-intensive projects
- University spinouts with academic partnerships
- Novel technologies requiring extensive R&D
- Long development timelines (3+ years)
- Strong intellectual property positions
Yellow Zone – Consider Carefully:
- Moderate innovation with some research components
- Established markets with incremental improvements
- Timeline pressure for commercial launch
- Limited grant-writing experience
Red Zone – Skip Grants:
- Commercially ready or near-ready products
- Incremental improvements to existing devices
- Service-based business models
- Urgent funding needs (< 18 months)
Alternative Funding Strategies
If grants don’t make sense for your situation, there are other funding paths that might be more appropriate:
Angel Investors (4 months average): Faster decision-making, industry expertise, valuable connections. Best for devices with clear commercial potential.
Venture Capital (6 months average): Larger funding amounts, professional management support, extensive networks. Suitable for scalable, high-growth potential devices.
Strategic Partnerships (8 months average): Industry validation, distribution channels, regulatory expertise. Ideal when you have technology that complements larger companies’ portfolios.
Revenue-Based Financing (2 months average): Fast deployment, no equity dilution, aligned incentives. Works when you have predictable revenue streams or contracts in place.
The MTEC Alternative
One program worth special mention is the Medical Technology Enterprise Consortium (MTEC). While technically not SBIR/STTR, it offers some advantages over traditional grant programs:
- Faster timelines: 6-12 months vs. 18-24 months
- Higher success rates: 15-25% vs. 8-11%
- Industry partnerships: Built-in collaboration with defense contractors
- Flexible terms: Less restrictive than traditional grants
However, MTEC focuses primarily on military medical applications, which may limit commercial applicability.
Making the Grant Decision
Before you invest time and money in grant applications, honestly answer these questions:
Timing Questions:
- Can your company survive 24 months without this funding?
- Do you have alternative funding sources during the grant process?
- Are you applying because grants seem “easier” than investor pitches?
Strategic Questions:
- Does the grant agency’s mission align with your technology?
- Do you have prior relationships with program officers?
- Can you demonstrate preliminary data or proof of concept?
Resource Questions:
- Do you have dedicated grant-writing expertise?
- Can you afford the opportunity cost of the application process?
- Are you prepared for the administrative burden of grant management?
The Bottom Line
Grants can be valuable fuel for medical device development, but they’re not the funding panacea that most entrepreneurs believe. The process is slow, competitive, and expensive. Most importantly, grants work best as supplementary funding for companies that already have other revenue sources or funding, not as the primary lifeline for cash-strapped startups.
If you’re counting on a grant to save your company, you’re probably making a strategic mistake. Use the time you’d spend writing grant applications to validate your market, develop customer relationships, and build a compelling investment case for private funding.
In our next article, we’ll explore the equity trap—why hiring people who are “available to work for equity” often costs more than paying market rates for experienced professionals.
Remember: Grant money isn’t free money. It’s expensive, slow money that comes with significant strings attached. Make sure it aligns with your company’s strategy and timeline before you invest precious resources in the pursuit.
