Developing Competitive SBIR/STTR Applications – Part 1: Get Prepared
The funding is the primary source of publicly funded research and development (R&D) and commercialization available to U.S. startups.
The National Science Foundation (NSF) first founded SBIR in 1977 to support cutting-edge technologies developed by small businesses. Since then, the program has expanded to include all government agencies, with the total grants and contracts in the billions of dollars.
Why Pursue SBIR/STTR?
SBIR/STTR funding is among the most desirable capital that an advanced technology startup can receive. SBIR/STTR programs provide non-dilutive capital (does not require shares of company stock in return) and does not have to be repaid (not a loan). Funding typically starts around $100,000 but, over multiple phases, grants and contracts can reach $1 to $2 million or more.
Depending on the agencies, about 15 percent of companies that apply for SBIR/STTR Phase I are approved on the first attempt. The conversion rate from Phase I to Phase II is about 40 percent. Even if a company’s application is not approved, the technical evaluation will provide feedback that can help the company reduce product risk before seeking other types of investment. The peer-review process helps validate (and invalidate) technology.
The purpose of SBIR/STTR is to increase private-sector commercialization of innovations derived from federal R&D funding. With more than 70,000 issued patents, about 700 publicly traded companies and $41 billion in VC investments, proof exists—SBIR/STTR definitely works.
Science is mandatory; however, the end goal is a commercial product, not more research. The approach is product development, not discovery. Project significance is changing a paradigm, not increasing knowledge. When it comes to innovation, agencies are seeking competitive advantage, not what is theoretically possible.
Eleven federal agencies* have approximately $2.5 billion in SBIR/STTR budgets set aside annually to meet federal research and development needs. Contracting agencies (DoD, NASA, DHS, DOC, EPA, DOT) have a specific problem they are trying to solve. Granting agencies (HHS/NIH, NSF, DOE, USDA, DOE) are looking for innovation in the area of more broad topics.
Companies must respond to a funding solicitation from a particular agency. SBIR/STTR programs do not accept “unsolicited” proposals.
- The gated process has three phases.
- Phase I awards up to approximately $250,000 are for concept development and validation, span about six to 18 months.
- Phase II amounts up to approximately $1.7 million or more for two years.
- Phase III is commercialization and is not funded by SBIR/STTR.
There are many links to excellent published information about SBIR/STTR. The go-to site for SBIR/STTR is www.SBIR.gov. It’s the starting point for every entrepreneur, from those who seek FAQs and a basic understanding, to those who are looking for current topic areas or solicitation listings, to those who want to learn about past awards and company stories.
- Is SBIR/STTR a viable option for your company?
Applicant must be a for-profit Small Business Concern (SBC) with 500 or fewer employees, and >50 percent U.S. owned. SBIR applicants may be owned by multiple VC operating companies, hedge funds, and/or private equity firms depending on the agency’s specific rules and guidelines. Note that not all agencies accept or participate in programs allow SBCs that are owned by multiple investors.
STTR projects require that the SBC be teamed with a non-profit research institution (RI). The STTR is focused on the transfer of technology from the RI to the SBC and ultimately to the marketplace. These and additional differences are well-explained here.
Go to the individual agency’s web site* to investigate for solicitations. Solicitations are also consolidated by agency on SBIR.gov, but be aware, solicitations are updated frequently so the agency’s site is likely to be most current. Identify the agencies and schedules with topic areas and solicitations that align with your company’s eligibility and product offering.
Each agency administers its own program. Contracting agencies have their own submission criteria and specific needs typically found on the agency’s web site. Program managers and other contacts are included in the agency solicitations.
Do your research, then contact the SBIR/STTR Program Manager on the solicitation(s) to understand as completely as possible the agency’s mission and needs. Review projects from past award winners. Attend SBIR webinars. Then send an email with a 1-page summary discussing the scope of proposed projects to schedule a call.
Make the go/no go decision. Carefully read the funding solicitation. Determine the technical expertise you will need on your time. Outline a preliminary timeline. Given your talent, capital, and 12-month priorities, can you assemble the resources and expertise to proceed competitively? If you decide to pursue an SBIR/STTR application, play to win.
Contact Rev1 to learn more.
This concludes Part 1 of the SBIR/STTR series. Part 2 here.
*Links to SBIR information for Department of Commerce (DOC), Department of Defense (DoD), Department of Energy (DOE), Department of Health and Human Services (HHS), Department of Homeland Security (DHS), Department of Transportation (DOT), Environmental Protection Agency (EPA), National Aeronautics and Space Administration (NASA), National Institutes of Health (NIH), National Institute of Standards and Technology (NIST), National Oceanic and Atmospheric Administration (NOAA), National Science Foundation (NSF), and U.S. Department of Agriculture (DOA).
Online Tutorials – An excellent resource by topic. Easy to follow and absorb.
SAM – Registering new entities. This video is a must-see for any company contemplating the registration process.
NIAID Sample SBIR/STTR Applications – Collection of winning applications and summary statements.