In 2001, the federal SBIR Program will fund over $1.2 Billion in early-stage R&D projects at small high-tech firms – projects with potential for commercialization in private and government-sector markets. Small businesses (500 or fewer employees), as well as individual entrepreneurs seeking to start a small business, are eligible to apply. The purpose of the program is to help create new technologies that offer solutions to the nation's most pressing scientific and engineering problems. In essence, an SBIR award is a research contract or grant given to a small business as an enabler to conduct specific research that meets and Agency's research requirements.

SBIR funds work across a full spectrum of federal R&D. Awards are made in diverse fields including manufacturing process control, environmental monitoring, medical devices, avionics, space propulsion systems, parallel processing software, optical computing, education for the handicapped, advanced composite materials, solar energy, and anthropology to name a few. Ten federal agencies participate in the SBIR program including the Department of Defense, Health & Human Services, NASA and Department of Energy.

SBIR funds technology development at an earlier stage than the private sector generally does, by providing up to $850,000 in pre-prototype R&D funding directly to small companies. Companies apply first for a six-month, phase I award of up to $100,000 to test the scientific merit and feasibility of a particular concept. If phase I proves successful, the company may be invited to apply for a two-year, phase II award of up to $750,000 to further develop the concept, usually to the prototype stage. Proposals are judged competitively, on the basis of scientific, technical and commercial merit. The companies retain the patent rights to any invention they develop under the SBIR program.

The Small Business Innovation Research (SBIR) Program was established in 1982 under the Small Business Innovation Development Act. The objectives of the Program are to:
 

1. stimulate technological innovation;
2. use small business to meet federal R&D needs;
3. encourage the participation by disadvantaged and minority persons in technological innovation; and
4. increase private sector commercialization derived from federal R&D.

SBIR funds are not lent to the small business, i.e. the funds do not have to be repaid; SBIR funds are not given in exchange for equity, and SBIR funds do not require that the small business turn over its Intellectual Property to the U.S. Government. With IP, the small business retains ownership of the IP and the government gains a non-exclusive license for governmental purposes.

In 1992, the SBIR Program was reauthorized until September 30, 2000, and more recently congress reauthorized the SBIR legislation through 2008. Congress concluded the SBIR program has been successful in providing small business concerns with opportunities to compete for federal research and development awards, and has been effective in stimulating commercialization of the resulting technology, benefiting both private and public sectors of the nation.

Under the Small Business Innovation Development Act, each agency with an extramural R&D budget in excess of $100 million must establish an SBIR Program, dedicating 2.5% of their extramural research and development program to the SBIR program.


SBIR Program Highlights
 

• It is a Federal R&D grant/contract program
• For Profit, U.S.-Owned Companies with fewer than 500 Employeesare eligible to participate
• It provides funding for early-stage feasibility and prototype research, typically over a six-month period
• The process is competitive
• Phases:

Phase I – Up to $100,000 available-- 6-month feasibility study
Phase II – Up To $750,00 available-- 2-year research study
Phase III -- Private Sector or non-governmental funding applies-- Commercialization stage


Participating Agencies in SBIR

Five federal agencies make awards under the STTR program:
 

• U.S. Department of Agriculture
• U.S. Department of Commerce
• U.S. Department of Defense
• U.S. Department of Education
• U.S. Department of Energy
• U.S. Department of Health & Human Services
• U.S. Department of Transportation
• Environmental Protection Agency
• National Aeronautics & Space Administration
• National Science Foundation

Similarities between SBIR and STTR programs

Eligibility for each program is similar, and in either case, the proposal will be submitted by the small business concern. The proposal format is similar, as is the review process, and the agency program managers are typically the same for both programs. Additionally, both programs emphasize commercialization, and offer the Fast Track application option.

Differences between SBIR and STTR programs

Under SBIR, the principal investigator must be employed more than 50% by the small business doing the research. No more than one-third of the work can be contracted externally. SBIR however offers the larger phase II award of up to $750,000, and being a larger program more more agencies participating, significantly more funding is available through the SBIR program than the STTR program.

Under STTR, the principal investigator may be employed by either the research institution or the small business. Between 30-60% of the work must be contracted to the research institution, and the maximum phase II award is up to $500,000.