Anyone working with startups in the federal space has probably applied to at least one Small Business Innovative Research or Small Business Technology Transfer program. These programs get praise and criticism in equal measure, and both for good reason. At the end of the day, they are a tool that may be useful in your journey.  

We are approaching TACFI/STRATFI season for the Air Force SBIR program, which is near and dear to my own heart and history. In light of that, I’d like to launch a series discussing this program in an attempt to enhance the understanding of the program and its goals. Colloquialisms surrounding this program have served to propagate some false truths about what it is and how it works. To start, I’d like to clear the slate and lay the foundation with some history and regulatory basics.

Overview of SBIR and STTR Programs

The SBIR and STTR programs were designed to grow the industrial base following a trend of consolidation that started in the 1950s. It was also designed to drive innovation by providing funding to small businesses for research and development (R&D). In the 1980’s, when the program was born, there was a clear uptick in development investment from commercial industry partners. The desire to capture that was two fold: (1) to leverage those dollars for the benefit of federal needs, and (2) to continue to flow IP into the public arena.  SBIR and STTR aim to stimulate technological innovation, meet federal R&D needs, and increase private-sector commercialization of innovations derived from federal research.

Governance and Administration

The SBIR program was established by the Small Business Innovation Development Act of 1982, while the STTR program was created by the Small Business Technology Transfer Act of 1992. Both programs are governed by the Small Business Administration (SBA), which sets the policy directives and ensures that the programs are implemented in accordance with federal guidelines.

Budget Allocation

Federal agencies with extramural R&D budgets exceeding $100 million are required to allocate a portion of their funds to the SBIR program. Specifically, these agencies must set aside 3.2% of their extramural R&D budgets for SBIR awards. For the STTR program, agencies with R&D budgets over $1 billion must allocate 0.45% of their funds. These allocations are mandated to ensure that a significant portion of federal R&D funding supports small business innovation.

Participating Agencies

Several federal agencies participate in the SBIR and STTR programs, each with its own set of research priorities and funding opportunities. Key agencies include:

• Department of Defense (DoD)
• National Institutes of Health (NIH)
• National Aeronautics and Space Administration (NASA)
• Department of Energy (DoE)
• National Science Foundation (NSF)

These agencies administer their own SBIR and STTR programs, issuing solicitations and awarding grants or contracts to small businesses.

Grants vs. Contract Awards

The SBIR and STTR programs operate through both grants and contract mechanisms, depending on the participating agency:

• Grants: Agencies like the NIH and NSF typically use grants to fund projects, providing recipients with significant flexibility in conducting their research.
• Contracts: Agencies such as the DoD and NASA often use contracts, which are more prescriptive and closely aligned with the agency’s specific needs and requirements.

Eligibility Criteria

To be eligible for SBIR and STTR funding, companies must meet several criteria:

• Small Business Status: The company must be a for-profit business with no more than 500 employees.
• U.S. Ownership: The business must be at least 51% owned and controlled by U.S. citizens or permanent resident aliens.
• Principal Investigator Employment: For SBIR, the principal investigator (PI) must be primarily employed by the small business at the time of award and during the project. For STTR, the PI can be primarily employed by either the small business or the collaborating research institution.

The SBIR and STTR programs are essential tools for small businesses seeking to innovate and bring new technologies to market. By understanding the nuances of these programs, including governance, budget allocations, participating agencies, funding mechanisms, and eligibility criteria, companies can better navigate the application process and leverage these opportunities to drive their research and development efforts.

As anyone who’s engaged with this program knows, the reality of execution is highly nuanced, and varies across agencies. I’ll be diving deep into different iterations of this program in the coming weeks, with a goal to provide some insights to help small businesses find and win the opportunities best aligned with their goals. 

If you have any specific questions or topics you’d like covered, reach out! 

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