Government Funding for Small Businesses: Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
Cody M. Andrushko
Funding is integral to small business growth. Common funding avenues include personal financing, loans, private investment, and government funding. Government funding, such as grants or awards, can be particularly advantageous, as it has the potential to provide millions in funding and open up the U.S. government, U.S. Military, etc. as an end user/customer (which can be both lucrative and profitable).
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) are specific vehicles established to solve government issues (or part of an issue) through small business innovation. [1] Based on progress in technology development, the government offers opportunities aligned with proportionate funding increments to support the technology level of innovation. [2] Government agencies source through open topic or targeted solicitations. Solutions are sourced from an array of innovative fields, from healthcare to defense.
The following list of federal agencies provide funding through the SBIR process (11 agencies plus SBA): [3]
Department of Agriculture,
Department of Commerce
Department of Defense,
Department of Education,
Department of Energy,
Department of Health and Human Services,
Department of Homeland Security,
Department of Transportation,
Environmental Protection Agency,
National Aeronautics and Space Administration, and
National Science Foundation
Small Business Administration
The following list of federal agencies provide funding through the STTR process: [3]
Department of Defense,
Department of Energy,
Department of Health and Human Services,
National Aeronautics and Space Administration, and
National Science Foundation
Many of the aforementioned agencies are further divided amongst themselves when soliciting for solutions. For example, the Department of Defense (DOD) further sub-divides to solicit solutions specific to the Air Force, Navy, etc. Depending on the federal agency, solicitations may be once or multiple times a year; as follows is a tentative schedule for 2022: [4]
One of the core requirements specific to DoD SBIR/STTR programs here aligns a dual-purpose use case. Dual-purpose is defined according to a company’s innovation having both government application and civilian market commercialization. Companies are most successful in reaching Phase III when they have strong private market positioning, accompanied by revenue. In the prior two years, the least successful companies moving from Phase II to Phase IIII rely solely on a government customer. The customer and end-users in government (e.g. DoD) acquisition drive the requirements. Specific to the Department of the Air Force (DAF), and their AFWERX program, a requirement exists for the small business to find the appropriate government partner, customer, and/or end user. The Department of the Army, for example, provides the customer and specific use case. More to come next month on this position.
The SouthEast Innovation Institute (SEII) is comprised of skilled professionals experienced with assisting companies and individuals in navigating this government programs. Further, as a non-profit research institute, SEII is uniquely positioned to support companies through the STTR program as their collaborative research institution (See Footnote 1). To better understand these government programs or to inquire about support, contact us here. With unique capabilities and expertise in intellectual property monetization, valuation, and technology commercialization in both government and private markets, SEII offers capabilities unlike other SBIR/STTR advisors.
[1] The key difference between a SBIR and STTR is that the STTR program requires a small business to be partnered with a non-profit research institution (RI). The SouthEast Innovation Institute, is an example of a RI. More subtle distinctions exist between the two programs; for greater understanding contact SEII or learn more at the provided links.
[2] The SBIR/STTR program is structured in three phases. “The objective of Phase I is to establish the technical merit, feasibility, and commercial potential of proposed Federal Research/R&D efforts and to determine the quality of performance of the small business prior to providing further Federal Support in Phase II.” Step 1, make a strong case for application, use, and feasibility. Phase II, “continue the Federal Research/R&D efforts initiated in Phase I.” Step 2, expand on step 1 and further develop innovation from concept to prototype/product. Phase III awards are typically not funded and are either established to further commercialization efforts or to successfully sell your innovation/product to a government end user/customer. Funding here is not through SBIR/STTR funding, but through the government customer. This may be simultaneous with Step 3 to sell your product to the government. https://www.sbir.gov/faqs.
[3] “Each year, Federal agencies with extramural research and development (R&D) budgets that exceed $100 million are required to allocate 3.2% (since FY2017) of this extramural R&D budget to fund small businesses through the SBIR program. Federal agencies with extramural R&D budgets that exceed $1 billion are required to reserve 0.45% (since FY2016) of this extramural R&D budget for the STTR program.” https://www.sbir.gov/about. Through FY2018, the most recent year with published annual report data, federal agencies had made 171,680 awards totaling $51.0 billion under the SBIR and STTR program. https://crsreports.congress.gov/product/pdf/R/R43695
[4] See https://www.sbir.gov/solicitations. [Schedule subject to change].
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