BOSTON -- What does Uncle Sam want?
That's what entrepreneurs have for months tried to understand while submitting applications for American Recovery and Reinvestment Act grants. On Wednesday at the Cleantech Forum Boston, Matt Rogers, the Department of Energy's Senior Advisor for Recovery Act Implementation, shed light on the government's process and priorities.
Since mid-May, an average of 250 DOE reviewers – recruited through universities and professional societies to provide a mix of both technical and business feedback – have each day sorted through award applications. Across the board, the agency received more funding requests than it had anticipated.
"In each of our programs, we're dramatically oversubscribed," Rogers said. "We're nine times oversubscribed in carbon capture and sequestration, nine times oversubscribed in transportation electrification [and] three times oversubscribed in smart grid."
Since August, the government has accelerated its pace of revealing which of the many applicants were selected during its review process. A month ago, President Barack Obama announced more than $2 billion in funding for 48 advanced battery and electric drive projects. Two weeks ago, the DOE dedicated nearly $300 million for the purchase of alternative fuel and energy efficient vehicles by 25 state and local government programs. Last week, the agency finalized a $535 million loan guarantee for Solyndra, the first DOE loan guarantee since the 1980s. In the coming months, many more winners will be named.
"It's going to be a very exciting fall. Every 10 days, we're going to have a new announcement," said Rogers.
Firms that can secure private funding to complement public sources, applied with pioneering "shovel-ready" projects, and already have the necessary teams and processes in place to execute their plans stand the best chance of being selected for DOE grants.
"We're looking for technological readiness. A number of folks have great ideas but don't have technologies that are ready to scale. We're looking for market acceptance," said Rogers. "We're looking for financial commitment... in most [cases] more than 50 percent of cost-sharing. We're looking for operational readiness and innovation."
Before finalizing its $535 million loan with Solyndra, for example, the DOE asked the firm to raise $198 million. Similarly, the government required A123Systems to secure an additional $239 million in financing to qualify for a $239 million grant.
According to several stakeholders, partnering with a larger and more established firm will in many instances improve a smaller, emerging company's chances of securing government support.
"The history of a lot of big technology grant programs is that large companies often get them," said Hank Habicht, Managing Partner of Sail Venture Partners. "Part of it is because of their size and resources, they have a higher prospect of succeeding than a company the government doesn't really know. In this last round [of DOE awards], the focus has started to turn to encouraging big companies to partner with smaller companies."
"Our companies that are involved [in DOE programs] have generally partnered with a larger company in their proposals," said Habicht. "The most visible is the Korean battery company in our portfolio, Kokam, which partnered with Dow and has received several hundred million in combination of tax benefits grants and loan guarantees. Another battery company, Xtreme [Power], is partnering with Ford."
Bob O'Connor, a Partner with Wilson Sonsini Goodrich & Rosati, agrees that smaller companies can reduce their perceived risk to the government by partnering with larger firms.
"As an emerging company, one has to think very hard about strategy with corporate partners. They have a few things you don't have – a balance sheet, they are credit worthy, they can provide credit support, and they might even be able to put to use investment tax credits to use that you could not otherwise use."
Yoni Cohen is a currently pursuing a joint degree at Wharton School of Business and Yale Law School. He formerly worked for Fox Sports, among other jobs.
