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Though not traditional bootstrapping, Warren Katz, founder and CEO of MAK Technologies found an unlikely candidate to fund development of his software to...

...link, simulate, and visualize the virtual world.

The government!

The company found funding through the U.S. Department of Defense Small Business Innovation Research program which Katz describes as...

...mandated in 1982 under the Small Business Innovation Development Act to encourage businesses of 500 or fewer employees to develop technology and to provide incentives for these small businesses to profit from its commercialization. Each year, eleven federal departments and agencies are required by SBIR to reserve a portion of their R&D funds to award to small businesses.

Katz says...

Under the program, companies can apply for a Phase I award of up to $100,000 to test the scientific, technical, and commercial merit and feasibility of a concept. DoD issues three SBIR solicitations a year for Phase I proposals on various research topics. If Phase I proves successful, the company may be invited to apply for a two-year Phase II award of up to $750,000 to further develop the concept, usually to the prototype stage. More than 40 percent of Phase I projects subsequently are awarded Phase II contracts.

With the funding from the program, sale of the company's first product developed a revenue stream that could be reinvested into the company.

For more on Katz observations and the SBIR see these links, and for more from the Kauffman Foundation bootstrapping series see the next post...

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