PROGRAM BASICS

What are the SBIR and STTR programs? What are the differences between the two programs, and which program is more appropriate for my project?

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are highly competitive programs that encourage domestic small businesses to engage in Federal Research/Research and Development (R/R&D) with the potential for commercialization. Through a competitive awards-based program, SBIR and STTR enable small businesses to explore their technological potential and provide the incentive to profit from its commercialization. By including qualified small businesses in the nation's R&D arena, high-tech innovation is stimulated, and the United States gains entrepreneurial spirit as it meets its specific research and development needs.

Both SBIR and STTR Programs have identical philosophies, review criteria, review processes, and award dollar amounts. The two programs also have similar success rates.

STTR's most important role is to bridge the gap between performance of basic science and commercialization of resulting innovations. Central to the STTR program is the partnership between small businesses and nonprofit research institutions. The STTR program requires the small business to formally collaborate with a research institution. As a result, an STTR proposal must include a Cooperative Research Agreement (CRA) between the small business and the research institution or a letter indicating that a CRA will be forthcoming upon notification of an award recommendation.

We recommend that potential proposers wait until invited to submit a full proposal to choose between the SBIR and STTR programs. The budget requirements of the two programs can be used to determine which is more appropriate for a given project. For an STTR submission, a minimum of 40% of the research, as measured by the budget, must be performed by the small business concern and a minimum of 30% of the research, as measured by the budget, must be performed by the not-for-profit research institution, with the balance permitted to be allocated to either of these, or to other subawards or consultants. Converting submissions between SBIR and STTR, is possible at many agencies.

What are the funding priorities for the SBIR/STTR programs?

The SBIR/STTR programs are intended to support scientific and engineering excellence and technological innovation that is moving from the lab to the market. By investing federal research and development funds into startups and small businesses, the Federal government hopes to build a strong national economy and stimulate the creation of novel products, services, and solutions in the private sector; strengthen the role of small business in meeting federal research and development needs; increase the commercial application of federally supported research results; and develop and increase the US workforce, especially by fostering and encouraging participation by socially and economically disadvantaged and women-owned small businesses.

The SBIR/ STTR program solicit proposals based on groundbreaking scientific discoveries or significant engineering breakthroughs from small businesses consistent with each agency's mission.

What is innovative research and how do I gauge whether my research is a good fit?

The NSF SBIR/STTR programs fund the research and development (R&D) of deep technologies, which are based on discoveries in fundamental science and engineering. Proposals that are a good fit for the programs generally feature most or all of the below aspects:

The SBIR/STTR programs require that projects funded contain both technical risk and technological innovation. Technical risk assumes that the possibility of technical failure exists for an envisioned product, service, or solution to be successfully developed. This risk is present even to those suitably skilled in the art of the component, subsystem, method, technique, tool, or algorithm in question. Technological innovation indicates that the new product or service is differentiated from current products or services; that is, the new technology holds the potential to result in a product or service with a substantial and durable advantage over competing solutions on the market. It also generally provides a barrier to entry for competitors. This means that if the new product, service, or solution is successfully realized and brought to the market, it should be difficult for a well-qualified, competing firm to reverse-engineer or otherwise neutralize the competitive advantage generated by leveraging fundamental science or engineering research techniques.

What activities and expenses are appropriate to be funded in a Phase I project? What activities and expenses are not permitted?

SBIR/STTR funding is for research and development (R&D) only. Generally, SBIR/STTR funding can be used for salary and wages for company employees, associated fringe benefits, materials and supplies, and a number of other direct costs needed to conduct the proposed R&D. SBIR/STTR projects may also fund consultants to the project and subawards to partner organizations. Some types of indirect costs necessary for the small business to conduct the project are also appropriate. Awardees may request indirect costs as per normal practice and as permitted by the Federal Acquisition Regulations (FAR), part 31.

In general, SBIR/STTR Phase I funds may not be used for business development, marketing and sales, production, or any activity unrelated to the underlying research and development effort (either as direct or indirect costs). There are two notable exceptions: an awardee may request a small business fee as part of the award. This fee should be consistent with the normal profit margins provided to profit-making firms for R&D work; Such funds are unrestricted. Equipment purchases and foreign travel expenses are not permitted on a Phase I award but the purchase of equipment is permitted in Phase II.

Will agencies fund work on a product that has already been developed? Will the program fund small businesses to pay sales and marketing, business development, or other related costs?

many SBIR/STTR agencies provide funding for research and development (R&D) only. Notably, the Department of Defense (DOD) will fund research to make improvements to Commercial Solutions to meet a military purpose.

Are new startup companies appropriate candidates for the program?

Yes. Agencies encourage proposals from many types of small businesses. In fact, most Phase I awards are made to companies that are newly formed and very small. Companies with no current revenues and/or a minimal history of operations are encouraged to apply. However, those small businesses must show that they have a clear plan to quickly launch the company operations and assemble a team capable of carrying out the proposed Phase I project. Conversely, companies with a significant history of operations and/or R&D funding will be evaluated based on their track record of prior technology development and commercialization and whether SBIR funding will be catalytic to their further development.

Are first-time entrepreneurs appropriate candidates to participate in the program?

Many, if not most, SBIR/STTR awardee companies are launched by first-time entrepreneurs. Agencies encourage proposals from entrepreneurs of all experience levels — new and seasoned. It is critical that the team demonstrate commitment to advancing the technology to the market. The lack of a commercialization track record does not result in a disadvantage if the proposer shows commitment to the business' mission and a path to successful commercial outcomes.

What are the expected outcomes (deliverables) of a Phase I project?

The aims of the Phase I project should include a demonstration of the technical feasibility of the proposed innovation and thereby a path to advancing the innovation toward commercialization. The R&D outcomes best demonstrating technical feasibility vary widely based on the technology field and the particulars of the project.

The required deliverable at the end of an SBIR/STTR Phase I contract or grant is a report that summarizes the project's technical accomplishments. Phase I outcomes take many forms depending on the technology area and stage of the research. Outcomes could be proof-of-concept data, a prototype, analytical/testing results of the product under development, etc.

Phase I projects should mitigate the technical risks central to future commercial success. Phase I R&D work should present high technical risk; thus, not all projects will achieve the desired technical outcomes. Successful projects will naturally be better positioned to obtain follow-on funding, including SBIR/STTR Phase II funding.