Article

Are You Taking Full Advantage of All Government Opportunities to Fuel Growth and Innovation?

March 6, 2018

By: Susan Moser, Partner

Many businesses large and small are missing out on “free money” from government sources – money that could fund their innovation and expansion efforts – according to a jointly sponsored Innovation Survey conducted by the Washington Business Journal and Cherry Bekaert. Released in September 2017, the survey indicates a disconnect. On one hand, businesses report that innovation is very important to them. On the other hand, many businesses are not claiming tax credits, tax deductions, grants and other incentives from federal, state and local sources for which they could be eligible.

In this same survey, when asked what their top barriers to innovation are, 26 percent of respondents said financial resources (or the lack thereof), making it the second-highest barrier in the survey.

If having the financial resources to fund innovation, development and expansion is such a huge issue for businesses, why do over 40 percent of businesses report they fund innovation initiatives themselves instead of claiming the numerous credits, deductions and grants that are available?

Two possibilities are that they are either not aware these incentives exist or they do not know they qualify for them. Take the Federal research and development (“R&D”) tax credit, for example. By some estimates, less than one-third of eligible businesses understand or know they qualify for R&D tax credits – and many of those organizations aren’t claiming the full credit they could be getting.

As a follow-up to our survey, Cherry Bekaert and Access National Bank hosted a breakfast panel event to discuss insights learned from this recent innovation survey with the Washington Business Journal and to provide education on some of the programs that companies may not be aware of. The first panel included Dr. John Main, Program Manager the Defense Advanced Research Projects Agency (“DARPA”) and Tom Gillespie, Managing Director with In-Q-Tel.

Dr. Main provided an overview on the mission of DARPA, which is to make pivotal investments in breakthrough technologies for national security. DARPA comprises approximately 220 government employees in six technical offices, including nearly 100 program managers (“PMs”), who together oversee about 250 research and development programs with an annual budget of approximately $3 billion. DARPA funds many different programs that broadly address challenges in national security, from deep science to systems to capabilities. Ultimately, the individuals at DARPA are driven by the desire to make a difference. The program managers define their programs, set milestones, meet with their performers and assiduously track progress. They are also constantly probing for the next big thing in their fields, communicating with leaders in the scientific and engineering communities to identify new challenges and potential solutions.

One of Dr. Main’s key takeaways was to look for program managers during the first six months of joining DARPA because during that time, they are exploring potential programs. With 100 PMs, there are usually new PMs every month. The website contains detailed information on all the PMs and the types of projects they work on. To explore potential opportunities to work with DARPA, please visit their website.

Tom Gillespie provided an overview of In-Q-Tel (“IQT”), whose mission is to identify, adapt and deliver innovative technology solutions from startups to support the missions of the Central Intelligence Agency and the broader U.S. Intelligence Community (“IC”). Their strategic investment model is a new R&D approach that taps into the technologies and talents already operating in the private sector. IQT is focused solely on IC mission impact, not on financial returns.

Their work complements the venture capital community, where their work is highly valued for its deep technical validation. The investment strategy is aimed at building a strong and diverse portfolio within tech areas. Focused on “ready-soon” innovation, IQT operates in the space between research and development organizations (e.g., IARPA, DARPA, etc.) and the big systems integrators. Their goal is not to recreate the wheel but to adapt commercial technology already in development to fit the needs of the intelligence community.

The advantages of dual-use, commercially-focused technologies are significant: lower initial and long-term costs, faster development and ongoing product support. Most investment dollars are directed toward a work program, which keeps IQT closely connected throughout the project and allows for adjustments during the program. IQT’s areas of focus include: data analytics; materials and electronics; cybersecurity; Internet of Things; communications; infrastructure; biotechnology; power and energy; and commercial space. To explore potential opportunities to work with IQT, please visit their website.

The final panel discussed various Federal and state tax credits and incentives that are available. Business leaders are pleasantly surprised when they learn that they qualify for credits and incentives they weren’t familiar with. To learn more, please visit the Cherry Beakert website or feel free to contact a Cherry Bekaert professional and ask for help!