The Government Gave Me $250,000 to Fail, and I Survived
By: Naser Tamimi
Tags: Fundraising, Agile, Money, Technology, Startup

STARTUP

The Government Gave Me $250,000 to Fail, and I Survived

This is the real story of my startup.

Photo by Jeswin Thomas on Unsplash

Those who know me in my real life (aka non-digital pre-COVID19 normal life) know me as an immigrant who loves programming and data science. Having my own artificial intelligence startup was one of my dreams for a long time. It was an impossible dream until I got my Green Card because you cannot set up a company in the US while you are on a non-immigrant visa. The day I received my green card, I went online and searched “How can I set up a startup company?” and I read and researched for months.

Photo by Daria Nepriakhina on Unsplash

A few months later, I registered my startup for $50 in the State of Colorado (yes! not Delaware). That was super easy that I could not believe it. But the hard part was not setting up a startup company but grow it up from the ground up. At this point, I am one of the thousands of young people who have a startup with an excellent revolutionary idea (at least in my opinion) in the industry that I know for a long time. But what’s the next? Whom can I approach to present my idea and convince them to take a chance on me and invest in my startup? To put yourself in my shoes, imagine yourself in a country with a different language, culture, and laws, and you don’t know anyone except a few other people.

In summer 2018, six months after pitching to many investors and potential clients, I got nowhere. I don’t blame those people. Investors were looking for a startup with a little bit of market traction. To get market traction, you need clients. Clients ask you for a product that you still do not have. This cycle goes forever. Some people find an angel who comes and helps them, and some people will fail and leave their dreams. I found a third way.

On a summer afternoon, I received an email from my co-founder. The email says,

Naser, Have you heard of NSF I-Corps program? I heard about it the other day, and I thought we should look at it …

Honestly, I did not even know what NSF means. I did not even know I should not pronounce “p” and “s” when I say I-Corps!!!

Long story short, my online research showed that the National Science Foundation (NSF) awards $25,000 grants to promising startups to go around the country and talk to potential customers and partners. You are supposed to know if your idea or innovation is what other people need it or not. It is an excellent idea that wants you to fail faster if there is no market out there for your product or innovation. Why should anyone gives my startup millions of dollars if just a few interviews can reveal the reality to me? I decided to attend this program. It was required sending a proposal, gathering a team, and finally, an interview. My team passed all the necessary steps, and we got accepted to the program with $25,000 credit to spend on what is called “Customer Discovery.” The program started with 3 days kick-off seminar in San Diego. You must do 100 interviews in two months, and your idea is getting criticized in all possible aspects. A team of instructors put you in a hard position to feel the pressure of having a startup and being hammered by clients and investors. They want you to fail or succeed if you deserve it. It would help if you found the answers to the questions not from your head but from what you heard in the customer interviews. If you think interviewing 100 potential customers in 2 months is an easy job, you must try to see if you can set up 12 interviews in a week. Then imagine doing that for 8 weeks in a row.

After two months and traveling to different cities, my team and I survived. We presented our findings in a 3-day seminar and got questioned from different aspects. We pivoted a few times to get our idea fit to the market. It was surprising that more than 60% of the startups decided not to pursue their idea after two months of intensive customer discovery. It is amazing that with less than 0.5 million dollar investment, 15 out of 25 startups found out their idea is not a market need. It saved millions of dollars of investment and thousands of hours of brilliant minds to pursue another idea.

But what’s next?!

I have an idea that sounds good with a proven market; what should I do next? Still, it is not easy to convince many investors to invest in a seed-stage startup. Still, many technical and commercial uncertainties discourage conservative investors from looking at your startup. The market enthusiasm cannot guarantee to overcome technical and commercial challenges.

Actually, the government has a next step opportunity for you. Now, with your knowledge from the I-Corps program, you can write a proposal for a program called SBIR Phase I. This program's main purpose is to support startups with an idea or innovation with a high risk of technical failure. It would be best if you had an idea that is not safe for a normal investor. Again, the government wants your idea to fail faster if it is not technically possible. Why should millions of dollars from private investors or government agencies go to an idea that it fails technically in less than a year? A very clever idea if you believe in agile methodology, which says, “Fail Faster.”

NSF SBIR Phase I is a program that gives you $225,000 (back in 2019) for 1 year to build your product and pass the technical hurdle and uncertainty. It helps startups pass through the most dangerous time an innovation, which is the valley of death. The valley of death is when your innovation's technical risk is high, and you don’t have the revenue. You must pass the valley of death as soon as possible, or you must die.

After 9 months of proposal preparation and due diligence, we finally awarded NSF SBIR Phase I to build our AI platform. Stories of one year of development are beyond this article, but we could make a product that works and shows value after a year. It was an exciting moment to see your product that works, and you imagined that before it exists.