Demonstration Fund
The Demonstration Fund provides financial and technical assistance to encourage high technology prototype and concept development activities that have a clear potential to lead to commercially viable products or services within a reasonable period of time. The Demonstration Fund supports commercialization activities by small and medium-sized Iowa companies in the advanced manufacturing, biosciences, and information technology industries. The primary purpose of the fund is to help businesses with a high-growth potential reach a position where they are able to attract later stage private sector funding.
Eligibility
An eligible business must be an Iowa-based company developing a unique and competitive product, technology, or process that can be protected in the marketplace. Applicants must have a NAICS code that falls within the industries of advanced manufacturing, bioscience, or information technology. Applicants must be able to demonstrate that the product is ready for commercialization and market entry. Applicants must also show their ability to develop and commercialize products and manage successful ventures.
Program Guidelines
The Demonstration Fund is a competitive application-based program. Prospective applicants should carefully review the application and the following program guidelines to assist in determining if this program will fit your economic development project.
Intellectual Property
In reviewing applications for financial assistance, the committee and board will consider how the ownership of the IP is structured. More points are awarded for greater IP control by the business, with the greatest number of points being awarded for exclusive IP ownership by the business.
Match Requirement
Companies must match the award with at least one dollar of non-state funding for every two dollars of state funding. Funds spent prior to receiving the award cannot be used as matching funds. Extra consideration will be given to projects that provide more than the minimum match effectively leveraging more State funds.
Ineligible Use of Funds
- University overhead expenses or any work that was conducted prior to the term of the contract by the applicant or any third-party consultant.
- Paying down debt, restructuring or repaying founders, paying bonuses, or paying to help advance the company operationally.
- Intellectual Property development and evaluation
Award Amounts
- There is no limit on the number awards a company can receive but there is a limit on the amount of funding available for a single project. Awards are made on a per-project basis and the maximum award shall not exceed $150,000 for a single project.
- Financial assistance awarded to companies applying for the maximum $150,000 will most likely be a loan or royalty arrangement.
- If a company receives an award for a project as a grant that is less than the $150,000 maximum, any future award for the same project most likely will be in the form of a loan or royalty agreement.
- Companies requesting funding for projects less than $50,000 will receive more consideration for an award in the form of a grant. The company can submit a second application for the same project and the award will most likely be in the form of a loan or royalty arrangement.
- The company must consider their ability to secure a loan which may be a contract condition.
- The Technology Commercialization Committee can take one of the following actions on each application it considers: approve full funding for the proposal; approve partial funding for the proposal; deny funding for the proposal.
- If a company receives a partial award, the use of funds presented in the project budget will not change. The reduced award does not result in a pro-rated budget based on the partial award. The IEDA’s expectation is that the project applied for is still the project that needs to go forward regardless of whether or not the full funding was awarded.
Forms of Financial Assistance
Grant: Consists of money provided to the business from the Authority for a specific activity or activities with no expectation of repayment, except and unless there is a material misrepresentation, fraud, misuse of funds or repayment event. Grant funds are typically released up front, so the business can use the cash infusion immediately.
Grants do not require collateral.
- Contract in effect for ten years.
- Repayment Triggers: full repayment is required if:
- The business issues an Initial Public Offering (IPO).
- The business moves the company out-of-state.
- The business sells 51% or more of the company assets and/or the company.
Royalty: Consists of money provided to the business from the Authority for a specific activity or activities where there is a contractual obligation to repay an amount larger than what was awarded. The amount of the payments are determined by a percentage of some measure (sales, profit, etc.) taken from the business’s year end income statement. Funds are released up front, so the business can use the cash infusion immediately and payments typically begin one year after the funds have been released. The percentage to determine payment amounts, the frequency of payments and total amount to be repaid are negotiated as part of the award.
Royalties do not require collateral.
- Standard terms would require a 1.5 times payback with payments based on 1/0% - 2.0% of annual gross revenues.
- Total payback, payback rate (percentage) and annual payment caps can all be considered.
Loan: Consists of money provided to the business from the Authority for a specific activity or activities where there is a contractual obligation to repay. Funds are typically released up front, so the business can use the cash infusion immediately.
- Repayment amounts are generally spread over 3 to 5 years, but may be structured as balloon payments.
- It would be expected that the loan would be fully secured. Security may include: ILOC, dedicated CD, UCC-1, Personal Guaranty, Corporate Guaranty, etc.
Loans do require collateral, are 0% and carry a 6% penalty upon default calculated from the time the funds were released.
I6 Green Challenge Grant Component
Iowa State University (ISU) and the Iowa Economic Development Authority (IEDA) have been awarded an i6 Green Challenge Grant of $1 million from the Department of Commerce’s (DOC) Economic Development Administration (EDA). The IEDA provided a $575,000 match from the Demonstration Fund monies to support projects in the following categories:
- Renewable Energy
- Renewable Chemicals
- Renewable Feed Stocks
- Manufacturing Innovations Utilizing Green Technologies: Green Products/Processes Technology and Manufacturing projects that facilitate technological advances, processes, and materials that minimize environmental and public health impacts over their lifecycles.
The Demonstration Fund program guidelines apply to this component. Awards are made in the form of a grant with a $150,000 maximum.
How to Apply
An eligible business must submit a Demonstration Fund application to the Iowa Economic Development, Authority, 200 East Grand Avenue, Des Moines, Iowa 50309. Applications are reviewed for funding decisions on a bi-monthly basis.
It is recommended you contact an Iowa business accelerator to determine if the demonstration fund is a good match for your company and assist you with the application process. A list of business accelerators is available at iowaeconomicdevelopment.com/business/business_growth.aspx
The IEDA has engaged the services of VentureNet Iowa to manage the application review process. VentureNet Iowa will contact you to discuss the application, Expert Panel Review process and the presentation to the IEDA Technology and Commercialization Committee (TCC).
Demonstration Fund
To Learn More:
Phone: 515.471.1965 or 515.471.1300
E-mail: innovation@iowa.gov