DED stops awarding funding for Business Innovation Act programs, offers no clear explanation

The Nebraska Department of Economic Development (DED) has paused funding for three cornerstone programs of Nebraska’s entrepreneurial and startup community: The prototype grant, the Small Business Innovation Research and Tech Transfer (SBIR/STTR) program and the academic research and development grants.

That’s according to a disclaimer on the website for each program that simply reads, “DED is not awarding any Business Innovation Act grant funding at this time.” No explanation is given. 

“It appears unlikely that DED will be able to make additional awards during the current fiscal year,” said an email from DED to some members of Nebraska’s startup community. Nebraska’s current fiscal year started on July 1, and runs through June 30, 2026. The email was sent on Thursday and obtained by Silicon Prairie News. 

“Please note that this suspension should not impact current awards or the existing Seed Investment contract,” the email stated. The seed investment contract is funding allocated to Invest Nebraska for venture capital.

“This news is a major disappointment for anyone who cares about the future of Nebraska’s economy,” said Adriana Cisneros Basulto, co-founder and CEO of the HR startup Maxwell. Maxwell was a recipient of a prototype grant, which has been a transformative source of pre-seed funding for many Nebraska startups.

“This funding, and in particular the prototype grant, is essential seed money that helps entrepreneurs turn a smart idea into a real, market-ready product, create high-wage jobs, and attract outside investment into our state,” Cisneros Basulto said.

“Cutting it off risks stalling the momentum in innovation and entrepreneurship we’ve worked so hard to build.”

A screenshot of the Nebraska innovation fund prototype grants website with DED’s message about stopping new BIA awards.

In an email, Silicon Prairie News asked DED why no further grants are being made; what the status and use will be for funding that has not been spent from the total $11.7 million allocation to Business Innovation Act programs; and what the legal basis is for the agency to simply stop funding appropriated by the Nebraska Legislature.

In an emailed response to SPN, DED officials said they have so far awarded $7.5 million in the 2025-26 fiscal year. “The process for awarding the remaining funding in the current year has been paused while the agency evaluates the best pathway forward for this initiative and how to prioritize programs that bring the greatest value to Nebraska,” the statement said.

Research shows that the Business Innovation Act, passed in 2011, has been an outsized success for the state. Businesses supported by BIA programs have generated almost $16 in revenue for every one dollar of state investment. 

Those businesses have also created almost 2,400 direct jobs, while making a $1.17 billion annual economic impact that supports roughly 5,000 total jobs and generates $27 million in state and local tax revenue.

That effect is in line with what Nebraska business and elected leaders say the state needs amid a brain drain, job and wage growth crisis. “It’s crazy to stop funding” to BIA programs, said Mike Cassling, chair of the Aksarben board of governors.

“We should be doing the opposite and investing in programs that work to grow jobs, wages and help all Nebraska families.”

Businesses supported by BIA programs have generated almost $16 in revenue for every one dollar of state investment. 

Said Heath Mello, the CEO of the Greater Omaha Chamber: “The Business Innovation Act has been one of Nebraska’s most effective tools for advancing a modern, technology-driven economy … Competing for talent and technology growth is a nationwide challenge, and we will continue to work with the governor to ensure our state remains competitive, resilient, and ready for what comes next.”

Business Innovation Act funding is a small part of the Nebraska state budget. For several years, annual funding hovered around $6 million, scaling up to almost $15 million during the COVID-19 pandemic. 

But the startup community has worried for months now about the future of the BIA. Roughly $3.7 million was cut from the initiative this past legislative session — less than the $5 million cut proposed by Gov. Jim Pillen.

In July, Open Range, a newly-formed backbone organization for the Nebraska startup ecosystem, submitted a brief to DED advocating for a “dramatic” increase in BIA funding. It pointed to the BIA’s support of early stage startups as a necessary factor in Nebraska, where other funders are often risk-averse to new businesses. This and other factors make the BIA a “vital strategic asset” to Nebraska’s economy, according to the brief.

But the state still has a $95 million projected budget deficit and ended the 2024-2025 budget year with $86 million less than expected in tax revenues. Over the next two years, Nebraska is also expected to lose $216 million in tax dollars due to the ‘Big Beautiful Bill’ passed by Congress on July 4.

Entrepreneurs, business and community leaders are concerned Nebraska will scale back funding and programs like the BIA to reduce the state deficit and for property tax relief, a focus of Pillen’s administration. Startup community leaders see that possibility as a short-sighted decision that will damage the state.

“The future is a policy choice,” said Scott Henderson, the managing principal for NMotion powered by gener8tor, a startup accelerator in Nebraska. “Past leaders chose to release rainy day funds and prioritize property tax cuts. That caused this budget crisis.”

“By halting … BIA awards, today’s state leaders choose to create a future that will have fewer high growth startups,” he said. “This will mean less tax revenue since startups are the biggest net creators of jobs.”

The move may also signal a pull back on other state economic development initiatives after a time of major investment moves, such as in North and South Omaha. The BIA “and other effective economic development programs need to be in place and grown, not clawed back and dismantled,” said State Sen. Ashlei Spivey, who represents legislative district 13, which covers part of North Omaha.

Lev Gringauz is a Report for America corps member who writes about corporate innovation and workforce development for Silicon Prairie News.