The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program is the largest source of early-stage, high-risk technology financing in the United States. Eleven federal agencies participate in this program to provide over $3.7 billion for early stage research and development projects leading to commercialization of products, processes or services. The programs are designed to benefit entrepreneurs and small businesses — while increasing the competitiveness of the U.S. economy — by funding the development of innovative products and services. These are highly competitive programs that allow small businesses to play a role in the national research and development arena.
What is the purpose of the SBIR/STTR program?
The primary goals of these programs include:
- Research & Development: The participating federal government agencies each have unique needs. These programs help fund innovative solutions to meet them.
- Commercialization: Help bring to market more private-sector innovations derived from federal research and development funding.
- Innovation: Stimulate technological innovation that can benefit both the participating government agencies and the U.S. economy.
- Participation: Foster and encourage involvement in innovation and entrepreneurship by women and socially/economically disadvantaged individuals.
- Technology Transfer: Promote the proliferation and transfer of technology through cooperative R&D between small businesses and research institutions.
What businesses are a good fit for the SBIR/STTR programs?
To successfully qualify for SBIR/STTR funding, a business must meet the following criteria:
- Must be for-profit, U.S. owned and operated and employ fewer than 500 people.
- Work must be done in the U.S.
- Must focus on performing research & development — not purchasing equipment, commercializing a previously developed technology, or one that has very low risk and needs only capital.
What are the benefits of the SBIR/STTR programs?
In addition to funding for your innovative project, these programs have several unique benefits:
- No repayment or cost match: Awards come in the form of a grant or contract. You aren’t required to pay them back or provide matching funds.
- Non-Dilutive Capital: The funding agency doesn’t take an equity position in your firm.
- IP/Data Rights Protection: All IP developed remains the property of the small business. The government can’t share your reports or data with anyone outside of the federal government for five years (DoD) or four years (other agencies).
- Direct follow-on Phase III awards: No need for further competition, which benefits both the government and small businesses.
Differences between SBIR & STTR
|Purpose||R&D of technology for commercialization||Promote R&D between private and public sector|
|Partnering||Permits partnering with a nonprofit research institution||Requires nonprofit research institution partner|
|Principal Investigator||Primary employment (>50%) must be with the small business||May be employed by either the research institution or the small business|
|Work Requirement Based on Budget||May subcontract up to:|
33% (Phase I)
50% (Phase II)
40% Small business
30% Research institution partner
|Program Size||$3.28 billion||$453 million|
|Majority VC Ownership||Allowed by some agencies||Not allowed|
Participating federal agencies*
Eleven federal agencies participate in the SBIR, with five of them also participating in the STTR program. Each agency has a unique set of needs and its own list of technologies it’s looking to fund. Click on the agencies to learn more about what they fund and topics of interest.
SBIR and STTR
|Department of Defense||$1.8B|
|Department of Health and Human Services||$1.15B|
|Department of Energy||$308M|
|National Science Foundation||$212M|
|US Department of Homeland Security||$17M|
|Department of Commerce||$3.9M|
|Department of Education||$8.4M|
|Department of Transportation||$5.2M|
*Based on the FY2019 budget
The SBIR/STTR program uses a gated three phase process:
More than half of all Phase I’s are awarded to companies who have never won before.
Phase I determines project feasibility. Agencies award grants up to $256,000 for a six to twelve-month SBIR project or one-year STTR project that explores the technical merit of an idea or technology. Applicants must submit a proposal that articulates objectives, significance of the innovation, scope of work, and applicant qualifications.
Only 10-15% of Phase I applications are approved.
Phase II focuses on prototype development. Agencies award grants up to $1,250,000 for a two-year project that builds on the results of Phase I. The project features development of a minimal viable product and an evaluation of commercialization potential.
40-50% of Phase II applications are awarded because only Phase I applicants are permitted to apply.
Phase III is not funded by the SBIR/STTR program. The objective is for the small business to pursue commercialization based on results from the Phase I and Phase II R&D activities. Phase III may involve non-SBIR funding R&D or production contracts for the U.S. government.
Some agencies have special programs such as Direct to Phase II (bypassing Phase I), special announcements for targeted development, permit Venture Capital ownership, and post Phase II follow-on funding programs.
How Do I Get Federal Funding?
Below is the general process to receive funding for SBIR/STTR programs:
Find a Solicitation
Each agency has a dedicated SBIR/STTR section on their site that has their previous solicitation and either their current or upcoming solicitation with topics of interest for which they’re seeking proposals. Depending on the agency, they may release new solicitations multiple times a year. You can also sign up for the MTI newsletter, which tracks the various solicitations and their deadlines.
Submit a Proposal
Proposal length and contents vary based on which phase and the agency. MTI provides useful resources and even funding to help write and submit a competitive proposal.
Agencies will list the proposal’s open and close dates as well as the selection announcement date. In many cases, Phase II proposals are due within 30 days after the Phase I award ends.
Phase I awards are up to $256,000 for a maximum 12 month period of performance (depending on agency and SBIR or STTR). Phase II awards may be up to $1.25 million for a two-year effort.