Some of the most innovative work funded by the federal government happens at small businesses. Two programs, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR), are designed specifically to support that work. They provide funding to small firms for research and development that meets federal needs and has commercial potential.
Congress authorizes these programs for set periods and reauthorizes them periodically, and program rules can change. Check sbir.gov for current status, solicitations and eligibility rules.
The origins of the programs
The SBIR program was created by the Small Business Innovation Development Act of 1982. Its goals include stimulating technological innovation, meeting federal research and development needs, and increasing private sector commercialization of innovations derived from federal funding. The STTR program was established in the 1990s to encourage cooperative research between small businesses and nonprofit research institutions, such as universities and federally funded research centers.
Federal agencies with extramural research and development budgets above certain levels are required to reserve a portion for these programs. The SBA coordinates the programs government-wide, while participating agencies run their own solicitations and select awards.
The phased structure
Both programs use a three-phase structure:
- Phase I generally supports exploring the technical merit and feasibility of an idea over a relatively short period.
- Phase II generally supports further research and development based on Phase I results, typically larger and longer.
- Phase III involves commercialization or further work funded by sources other than the SBIR/STTR set-aside, such as private investment or government contracts. Phase III work can be awarded without additional competition under certain conditions, which is a significant feature of the programs.
Award amounts and durations vary by agency and change over time, so consult each agency’s solicitation.
SBIR vs STTR in general terms
Both programs require the small business to meet SBA eligibility standards, including ownership and size requirements. A key difference is that STTR requires a formal partnership with a research institution, with minimum shares of work performed by both the small business and the institution. SBIR allows, but does not require, such partnerships. There are also rules about where the principal investigator must be employed.
Is it a fit for your firm?
SBIR and STTR are research programs, not general business funding. They fit firms that are developing new technology that addresses an agency’s stated research topics. Consider:
- Does your technology align with topics in current agency solicitations?
- Do you have the technical staff and, for STTR, a research partner?
- Do you have a credible path to commercialization?
- Can you meet the accounting and reporting requirements of a federal award?
Agencies differ in how they structure solicitations. Some issue contracts with very specific topics, while others use grants with broader topics. Reading several solicitations and talking with agency program managers during allowed periods can help you find the right fit. State and local innovation organizations often offer free help preparing proposals.