Small Business Innovation Research Program (SBIR)

SBIR targets the entrepreneurial sector because that is where most innovation and innovators thrive. However, the risk and expense of conducting serious R&D efforts are often beyond the means of many Small Business Concerns (SBCs). By reserving a specific percentage of federal R&D funds for small business, SBIR protects the small business and enables it to compete on the same level as larger businesses. SBIR funds the critical startup and development stages and it encourages the commercialization of the technology, product, or service, which, in turn, stimulates the U.S. economy.

SBIR qualifications

Small businesses must meet certain eligibility criteria to participate in the SBIR program:

• American-owned and independently operated
• For-profit
• Principal researcher employed by business
• Company size limited to 500 employees

SBIR system

Each year, Federal agencies with extramural research and development (R&D) budgets that exceed $100 million are required to allocate 2.8 percent of their R&D budget to these programs. Currently, the 12 following agencies and/or departments offer SBIR programs. These agencies designate R&D topics and accept proposals.

• NSF
• NAVY
• NIH
• Air Force
• ARMY
• MDA
• DOC-NOAA
• DOC-NIST
• DOE-OSD
• DOE
• EPA
• NASA

Small Business Technology Transfer Program (STTR)

STTR is an important new small business program that expands funding opportunities in the federal innovation research and development arena. Central to the program is expansion of the public/private sector partnership to include the joint venture opportunities for small business and the nation's premier nonprofit research institutions. STTR's most important role is to foster the innovation necessary to meet the nation's scientific and technological challenges in the 21st century.

Competitive opportunity for small business

STTR is a highly competitive program that reserves a specific percentage of federal R&D funding for award to small business and nonprofit research institution partners. Small business has long been where innovation and innovators thrive. But the risk and expense of conducting serious R&D efforts can be beyond the means of many small businesses.

Conversely, nonprofit research laboratories are instrumental in developing high-tech innovations. But frequently, innovation is confined to the theoretical, not the practical. STTR combines the strengths of both entities by introducing entrepreneurial skills to high-tech research efforts. The technologies and products are transferred from the laboratory to the marketplace. The small business profits from the commercialization, which, in turn, stimulates the U.S. economy.

STTR program eligibility

Only United States small businesses are eligible to participate in the STTR program. The small business must meet all of the following criteria at time of award:

• Organized for profit, with a place of business located in the United States;
• At least 51 percent owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the United States, and;
• No more than 500 employees, including affiliates.

The nonprofit research institution must also meet certain eligibility criteria:

• Located in the US
• Meet one of three definitions:
  • Nonprofit college or university
  • Domestic nonprofit research organization
  • Federally funded R&D center (FFRDC)

STTR differs from SBIR in three important aspects:

1. The SBC and its partnering institution are required to establish an intellectual property agreement detailing the allocation of intellectual property rights and rights to carry out follow-on research, development or commercialization activities.
2. STTR requires that the SBC perform at least 40% of the R&D and the single partnering research institution to perform at least 30% of the R&D.
3. Unlike the SBIR program, STTR does not require the Principal Investigator to be primarily employed by the SBC.

STTR system

Each year, Federal agencies with extramural research and development (R&D) budgets that exceed $1 billion are required to reserve 0.3% of the extramural research budget for STTR awards to small businesses. These agencies designate R&D topics and accept proposals. Currently, five agencies participate in the STTR program:

• Department of Defense
• Department of Energy
• Department of Health and Human Services
• National Aeronautics and Space Administration
• National Science Foundation

Each agency administers its own individual program within guidelines established by Congress.  These agencies designate R&D topics in their solicitations and accept proposals from small businesses. Awards are made on a competitive basis after proposal evaluation.

Three-Phase Program

The SBIR/STTR program is structured in three phases.

Phase I

The objective of Phase I is to establish the technical merit, feasibility, and commercial potential of the proposed R&D efforts and to determine the quality of performance of the small businesses prior to providing further Federal support in Phase II. Phase I awards normally do not exceed $300,000 total costs for one year, depending on agency.

Phase II

The objective of Phase II is to continue the R/R&D efforts initiated in Phase I. Funding is based on the results achieved in Phase I and the scientific and technical merit and commercial potential of the Phase II project proposed. Typically, only Phase I award winners are considered for Phase II, although some agencies allow for a direct-to-Phase II or combined “Fast Track” application. Phase II awards normally do not exceed $3,000,000 total costs for 2 years, depending on agency.

Phase III

The objective of Phase III, where appropriate, is for the small business to pursue commercialization objectives resulting from the Phase I/II R&D activities. The SBIR/STTR program does not fund Phase III. In some Federal agencies, Phase III may involve follow-on non-STTR funded R&D or production contracts for products, processes or services intended for use by the U.S. Government.

For more information, visit https://www.sbir.gov.