• by Kaila Colbin , Featured Contributor, January 31, 2014

A startup is strapped for cash. Its founders hear about a program whereby they can get some cash. The cash dangles in front of them. It is so shiny. They walk toward it. It is right there. It is so beautiful. Some thorns brush at their sleeves, but they don’t notice. The cash seems a little farther away now, and just around a bend, but they can still see it and they keep walking. It calls to them. It is so welcoming. After many miles of walking and many twists and turns, they reach it.

They are so happy. They look around. They have no idea where they are or how they got there. They are surrounded by blackberry brambles and cannot see the original path they followed. They begin to despair. “Why?” they cry. “Why did an evil entity put the cash in such a horrible place and make it so difficult to get to?”

If you’ve ever tried to get government funding for your startup, this story may sound familiar. I’ve worked with startups that have gone through government funding rounds, seeking grants or investment from economic development agencies. While my experience is primarily in New Zealand, where I live, I’ve had a front-row seat at similar events in the U.S. and the U.K., and there are all too many similarities. The funding efforts are fraught with temptation and pitfall, and it takes an extremely steady head to navigate the government investment waters without drowning.

One of the biggest and least frequently understood issues is that the problem doesn’t exclusively reside with government. It’s not just that the government is too big or too bureaucratic; nor is it that they’re not entrepreneurial or that they “just don’t get it.”

The problem instead is that we see the shiny, pretty money, and we need it, and we WANTS it, Precious, and we forget everything around us other than getting it.

And so we contort ourselves. We contort our vision, our plan, and our business model to fit the requirements of the specific fund or to generate sensible responses to its 30-page application. We go around the corner, following the cash, and we forget where we originally started.

Here’s what that looks like in practice: You have a startup. There’s a government program that will provide 50:50 matching funds to bring in overseas experts for market research purposes, up to $50,000. You weren’t planning on spending $100,000 on market research (the total amount once you’ve added your matching funds), but getting a free $50,000 from the government seems too good to be true.  So you develop a plan TO spend $100k on market research. You also do some capital-raising to get the $50k in required matching funds. You work with the government agency for six months to get your application across the line.

By the time you get your money, you’ve neglected product development, your other fundraising needs, and the entire rest of the company. You can’t remember whether or not you actually need the market research -- but it doesn’t matter anymore, because you have to get it now. And your team is so sick of dealing with the application process they’ve lost all passion for the core business, if you can even remember what that is.

This, then, is the No. 1 rule for surviving the grant process: Do not, under any circumstances, contort yourself, your purpose, or your plan to fit the vagaries of a grant application. If you find one with which you are perfectly aligned, fantastic. Go for it. But if you’re trying to bend and twist your purpose and process so you can shove it into a 30-page box-checking document, the cost to you will go far beyond the matching funds.

No matter how shiny they are.