These federal programs can help small businesses fund the development of new technologies.
As a small business owner, you already know that big corporations don’t have a monopoly on innovative ideas. Well, the federal government agrees with you.
Back in 1982, Congress created the Small Business Innovation Research (SBIR) program, which provides funding to small companies that are developing new, innovative technologies. Federal agencies with large budgets for external R&D are required to set aside a small portion of those funds for competitive SBIR awards.
A sister program—the Small Business Technology Transfer (STTR) initiative—debuted in 1992. It’s very similar to SBIR, but with one twist: STTR awards are given to small businesses that are developing a technology in partnership with a nonprofit research institution, such as a university.
How Much Money Is Available?
In 2013, federal agencies made more than 5,000 SBIR and STTR awards, worth a total of $1.98 billion.
Small businesses can qualify for an initial Phase I grant worth about $150,000 over the span of around six months. The money is used for testing a concept’s commercial feasibility, merit and potential. The awarding agency also looks at how well the business itself performs.
Companies that win Phase I grants are eligible for larger Phase II grants, worth approximately $1 million over two years.
Are Phase III awards available? Not exactly. In certain cases, some agencies will offer previous SBIR and STTR winners contracts or some other funding as they continue the commercialization process, but the money won’t come from the official SBIR and STTR programs.
Who Can Compete for SBIR and STTR Awards?
SBIR- and STTR-winning companies must be based in the United States, cannot have more than 500 employees and, generally speaking, must be at least 51 percent owned and controlled by a U.S. citizen or a permanent resident alien. In some cases, SBIR awards can be made to companies owned by a venture capital firm, a private equity firm or a hedge fund.
And it’s not enough to have a great idea for a product. SBIR and STTR projects must meet a specific need that a federal agency has. The official SBIR website publishes an updated list of solicitations (www.sbir.gov/solicitations) from agencies seeking help with everything from mental health to zebrafish.
So, while unsolicited ideas aren’t welcome, an agency might be looking for a solution like yours.
How Do I Get Started?
The 11 federal agencies that make SBIR and STTR awards all operate their own programs, but the official SBIR website, www.sbir.gov, serves as a clearinghouse for information.
For first-timers, it can be helpful to get one-on-one coaching. Luckily, the Small Business and Technology Development Center at the University of Missouri-Kansas City has experience helping companies win SBIR and STTR awards. The center also hosts workshops on these programs. The next one is scheduled for 11 a.m. to 2 p.m. on April 15; admission costs $35. Call (816) 235-6063 or visit info.umkc.edu/sbtdc for more information.
And if you’re up for a road trip, the U.S. Small Business Administration is bringing the SBIR Road Tour, a national promotional tour, to Wichita on April 30 and Columbia on May 1. Get details and register at www.sbirroadtour.com.