Grant Funding (eg SBIR) Business Model

by a searcher from Duke University - The Fuqua School of Business

1 month ago

Has anyone purchased (or run) a company that has SBIR grants as part of its revenue and business model? I am trying to understand how that is taken into consideration during valuation. In particular, a company that has won several past SBIR grants and actively applies for them as part of their model.  My approach is a "sum of parts" valuation. I plan to value the grant revenue separately from the product/research commercialization revenue using different multiples. Other suggestions or comments?

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searcher from IESE Business School

As a searcher looking to purchase a business, we look towards long term sustainability of the income coming in. From that standpoint, I would completely remove the grants from the accounting, and see if the company is still running (at the very least). If that is a no, its a no-go for me. If its a yes, then I would think of how the grants can be replaced by actual revenue.

Overall, I would consider grants as bonuses, and treat them the same a one-time income to calculate adjusted EBITDA

3 weeks ago | like reply | 0 likes

searcher from Columbia University - Columbia Business School

The trouble w SBIR funding is that it is not market driven. You are responding to the govt request, so SBIR focused firms tend to be not commercially successful. I have invested in one company that failed after 5 yrs of SBIR funding

1 month ago | like reply | 1 like

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