Exploring the Build to Scale Program: Funding Opportunities for Entrepreneurs and Tech-Driven Startups

June 21, 2023

On June 1st, the Economic Development Administration’s Office of Innovation and Entrepreneurship (OIE) within the U.S. Department of Commerce launched the application process for the Build to Scale (B2S) Program. This program provides a funding opportunity aimed at empowering entrepreneurs and tech-driven startups to fuel regional economic growth. The program is part of a series of funding opportunities announced by the EDA for this summer, including the Tech Hubs Phase 1 Notice of Funding Opportunity published on May 12th. This article covers these specific OIE opportunities at the federal level and serves as the first in a series of KJK articles on regional innovation incentives available to Northeast Ohio venture capital and startups.

Build to Scale Program

OIE’s Build to Scale Program is authorized under Section 27 of the Stevenson-Wydler Technology Innovation Act of 1980 and funded through annual Congressional appropriations. The program, which received $50 million in the FY 2023 Consolidated Appropriations Act, makes targeted investments to increase regional capacity to specifically support early-stage tech startups.

The OIE has prioritized two competitive initiatives the B2S program this year: the Venture Challenge and the Capital Challenge.

The Venture Challenge

The Venture Challenge seeks to advance regional innovation ecosystems by awarding grants to intermediary venture organizations, including accelerators, universities, municipal governments, and non-profits supporting new business ventures. Organizations can apply for funding at one of three levels:

  • Ignite (up to $300,000 available over the period of performance)
  • Build (up to $750,000 available)
  • Scale (up to $2,000,000 available)

OIE’s Notice of Funding Opportunity notes that Ignite applicants may be focused on establishing partnerships across industries and sectors, while Build applicants may be focused on “piloting a solution to a demonstrated [regional innovation] need or implementing a proven solution” in a new region. For instance, focusing on a promising technological sector that could create significant new jobs and attract significant capital to a region would likely be a competitive basis for application. The expected period of performance for grant awards is approximately 18-24 months. Applicants must provide evidence that they will both increase venture programming in the region over the period of performance and generate sustainable added value for the region’s entrepreneurial ecosystem.

Past Venture Challenge award winners in Ohio have included Rev1 Ventures (a VC fund based in Columbus), the Ohio Aerospace Institute, Cleveland State University, and the Cincinnati USA Regional Chamber of Commerce. The Ohio tech-based economic development community has developed a nationally-distinctive track record for building new industrial potential with small amounts of pre-seed and seed investment, with a robust ecosystem to help early stage companies move to the next level.  These funded, tech-forward programs connect directly to the private investment community, as well as the many state-funded programs with an aligned mission (e.g., the Ohio Third Frontier).

The Capital Challenge

The Capital Challenge seeks to increase venture capital funding for new and growing investment funds, particularly those deploying capital within a community, region, or regional industry. The program supports equity-based investing, and investments that “foster the growth of a regional technology cluster.” Applications of funds making loans to startups rather than equity investments will not be considered.

Organizations can apply for Capital Challenge funding at two levels: Form (up to $400,000 over the performance period) and Deploy (up to $750,000 over the performance period). The Notice of Funding Opportunity states that Form applicants for the Capital challenge should identify and connect investors with other sources of equity-based capital, build capacity to conduct due diligence and close venture investment deals, and demonstrate an ability and commitment to achieve, measure, and share data that support agreed-upon effects. In contrast, Deploy applicants should “raise or deploy equity-based capital…within a regional technology cluster,” and “deploy investment capital into technology startups based on an investment thesis that clearly supports and fosters the growth of a regional technology cluster and its entrepreneurship.”

Past Capital Challenge awardees include the Cleveland Water Alliance, which created the resulting Freshwater Economy Seed Fund in 2023.

A 1:1 match with the organization is required for all Build to Scale grant programs described above.  Given that most existing state-funded programs in Ohio already require a 1:1 match, the ecosystem has developed both an understanding and an appetite for bringing additional capital alongside that coming from the public sector.  For instance, Small Business Innovation Research (SBIR) grants are a great source of matching capital for state-funded programs (so long as the timing and amount of funding align).  Similarly, other regional funders (e.g., Innovation Fund America) have developed strategies to attract direct private funding to match public sector funding, sometimes tranching out the funding of awards to match capital as it is raised or generated by the recipient.

Applications Due July 28th

Applications for both the Venture and Capital Challenges are due July 28th. KJK is prepared to assist on these detailed applications, which include staffing plans, detailed budget information, and various disclosures regarding operations of the organization. We have a strong track record of developing technology-based economic development strategies in and outside of Ohio, bringing entrepreneurial perspectives to the development of large-scale, long-term economic and industry opportunities.

For more information or to discuss capitalization questions, please contact KJK Corporate & Securities attorney Ted Theofrastous (TCT@kjk.com; 216.736.7290)) or Transaction Analyst Charlie Bolton (CHB@kjk.com; 216.736.7249).