Why Black Tech Founders Aren’t Claiming Federal Funds In Silicon Valley

Written by Dana Sanchez

Silicon Valley begins at the southern end of San Mateo County, one of nine counties bordering San Francisco Bay and the No. 1 wage-earning county in the U.S. after Facebook went public in 2012.

The average salary in San Mateo County was the equivalent of $168,000 a year at the time, and the county is home to other giant tech firms including Oracle, Visa, Sony Interactive Entertainment, Electronic Arts, YouTube and Genentech, to name a few.

Yet it’s an area where black tech workers and founders are severely underrepresented.

Spencer Hamilton is paid to raise awareness of that.

Black-owned, women-owned businesses and economically and socially disadvantaged groups need to claim more of the $2.5 billion set aside each year by the federal government, Hamilton said. The money is available for small businesses engaged in research and development that have commercial potential.

Hamilton is a business advisor for the Small Business Development Center in San Mateo County, which covers most of the San Francisco Peninsula.

Black tech founders aren't claiming federal funds

He attended the Black Enterprise TechConneXt Summit 2017 in October to promote more awareness of non-dilutive funding.

“That’s funding where there are no rights to ownership of the company or the IP in most cases,” Hamilton told Moguldom. “The funding allows an organization (to move) forward and build momentum to seed further funding at a later date.”

This is a particularly critical type of gap funding for early-stage organizations that may be looking to do a pilot, or any type of testing validation of their work for further marketing purposes.

“A lot of startup companies in the Valley here or elsewhere are not aware that a lot of companies such as Qualcomm, 23 and Me, and in fact even Google got their start from non-dilutive funding from the federal government,” Hamilton said.

Hamilton spoke to Moguldom on the sidelines of the Tech ConneXt Summit in San Francisco.

Moguldom: Do people know about this money?

Spencer Hamilton: There are three goals of the Small Business Innovation Research (SBIR) program. The third one — and a big one here — is there’s an underrepresentation of women in economically and socially disadvantaged groups and that includes minority-owned businesses.

Historically speaking there’s not a large participation in this group and this is a great source of capital that many of the tech companies in Silicon Valley — that’s how they got started.

Google benefited from an NIH grant Stage 3 SBIR award — 23 and Me, Qualcomm, Symantec. It takes more sometimes for harder sciences, hardware and areas that require longer product development cycles. This gap funding is critical to get their products to commercialization stage.

Moguldom: Why are black tech founders not going for this money?

Spencer Hamilton: In terms of the overall access to the capital, 1. Awareness. 2. Knowing how to pursue it in an effective manner. (These are) key impediments. To help with that, I provide one-on-one counseling, looking at proposals, solicitation reviews, and providing workshops on how to write a persuasive proposal. (These) really are the elements that you need to have a successful team to move forward in terms of commercializing a product.
This is a paid service. The Small Business Development Center is partially funded by the SBA Small Business Administration — a federal agency. Our services here in San Mateo County are free. Taxpayers pay for it. We’re national in terms of our footprint.

You can find out more about the Small Business Innovation Research (SBIR) grants program, which is coordinated by the Small Business Administration.

Moguldom: What’s the future of this funding?

Spencer Hamilton: It has been authorized since the Reagan administration, starting with the National Science Foundation being a pilot program. From there it branched out to over 11 federal agencies. This funding has been unabated in terms of being turned on and turned off. It will continue even during this period where you find the government pulling back spending to support GDP growth. The program on average has a $2.5 billion budget to provide small businesses with opportunities to validate proof of concept, go through clinical trials if necessary and commercialization.

Moguldom: What percentage is going to black founders?

Spencer Hamilton: Overall the representation is not on par with population size or the number of minority-owned and women-owned businesses and researchers that are out there. Whether you’re looking at any of those different bases or looking at representation in terms of staff or businesses or population, participation in SBIR program is underrepresented.

I put on a  workshop series where I work with founders, inventors, scientists, and engineers to develop their proposal strategies, design their research labs, make sure they have awareness of resources to make a very persuasive application that includes understanding what their indirect and direct rates are going to be as well as their labor costs. (We look at) different ways to supplement shortfalls … keeping the team together during the period of the research project to looking at marketing, the market, the competition, potential partnerships down the road — these are types of services we provide to clients.

Moguldom: Who might be a candidate for this funding?

Spencer Hamilton: I’ve had the opportunity to see those who’ve gone through the process and are very successful versus those who are not. I saw a big need in the small business community. That includes people who are working for a Fortune 100 tech company who are tired and looking to transition to something else, or someone who just has a great idea. Helping these individuals have a good chance of winning these awards (can) make the difference between whether or not they take their business to the next level.