What are SBIR & STTR grants?
Companies have a number of resources to draw from to support their research and product development. While private investment, like venture capital or business loans, is the most obvious resource for budding startups, government agencies at all levels frequently offer additional assistance to businesses with the potential of creating economic growth.
The federal government is one of the biggest government players in offering help to innovative small businesses. The Small Business Administration (SBA) heads up the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grant programs. These grant programs offer hundreds of millions of dollars in assistance to New York firms innovating in areas of interest to federal agencies and departments. Since 2005, firms in New York State alone have received just over one billion dollars in SBIR/STTR grant funding. Since 2005, 779 New York small businesses were able to attain funding, with an average firm funding of about $1.2 million (many firms received repeat funding, as described below).
So, what are the differences between the SBIR and STTR grants?
Small Business Innovation Research (SBIR)
With SBIR grant money, small businesses can conduct federal research and develop projects that have a potential for commercialization. Nationwide, SBIR is the largest of the two programs, with a 2015 award amount of $2 and $2.5 billion.
Small Business Technology Transfer (STTR)
STTR grants are closely related to SBIR grants. They are used to facilitate R&D partnerships between small businesses and U.S. research institutions related to projects that have commercialization potential. In 2015, STTR grants amounted to more than $250 million.
What Are the Details?
SBIR/STTR funds are granted individually through federal departments and agencies, such as the Departments of Energy, Defense, Commerce, and Agriculture to name a few. Each individual department and agency administers their own funds and accepts applications for SBIR funding. SBIR grants have helped fuel innovation in the particular areas of interest to these government organizations, such as in environmental protection, national defense, and health. The application process is very competitive.
SBIR/STTR grant funding is structured in three phases:
- Phase 1 awards generally do not exceed $150,000, and are meant to establish feasibility and commercial potential.
- Phase 2 grants continue research and development efforts of those Phase 1 projects that are deemed feasible and commercializable. Grants at this stage do not exceed $1,000,000 for two years.
- Phase 3 exists for STTR because there can be a third phase of grants related to commercializing projects. SBIR funding doesn’t fund this third stage, although some federal agencies may provide funding on their own to commercializable Phase 2 projects.
While the idea of receiving $1.2 million may get any innovator’s heart rate going, there is a challenge to interested parties: the application is very competitive. The exact rate varies depending on the agency or department; grants through the Department of Defense have the highest acceptance rate at 19%, while grants from the EPA have the lowest acceptance rate at 7%. But there are other funding options available on a state-level, such as NYSERDA’s 76West, a $20 million clean energy competition for the Southern Tier.
Regardless, SBIR/STTR presents a great opportunity to contribute to the public good by pursuing research of interest to the federal government and establishing your idea’s feasibility, all with the help of federal funds. Importantly, there is no additional risk taken on when accepting SBIR funding: if the idea doesn’t seem feasible after Phase 1 funding, the idea likely won’t be supported in Phase 2. And as a grant, the company doesn’t need to pay back funds, as would be the case when taking out a loan. Additionally, no equity is taken out, as would be the case with most venture capital funds.
Who Is Eligible to Apply?
Companies eligible to apply SBIR/STTR must:
- Be majority-owned by U.S. citizens or U.S. citizen-owned entitites
- U.S. people/entities must make up the majority of company control as well.
- Have more than 500 employees.
- Have the ability to conduct federal research and develop projects that have a potential for commercialization, if given SBIR grant money or create a research and development partnership between the company and U.S. research institutions related to projects that have commercialization potential (STTR)
There are additional details regulating how control/ownership and employees are defined. If you think your company may have ownership that isn’t so neat, or affiliated people that may or may not be considered employees, check out the SBA’s detailed guidelines here.
Alright, How Can I Search for SBIR/STTR Funding Opportunities?
Interested companies can search through current proposal topics at the SBIR website to find projects that align with their potential research. These listings include the grantor (such as the Department of Health & Human Services), and the project of interest they are looking to fund (such as new processes to commercialize cancer-fighting treatments). These listings also link to official postings and their instructions for the funding application.
National SBIR/STTR conferences are typically the largest and most important conferences specializing in helping small businesses learn about participating in SBIR/STTR programs. At this year’s conference, held May 23-25 in Washington D.C., representatives from all 11 federal agencies with SBIR programs will attend, in addition to other SBIR/STTR experts and trainers. It’s a great opportunity for young companies and incubators to come meet with these agencies 1-on-1 and to learn how to apply for funding. More details at: www.nationsbirconference.
As a Supporting Partner, the Southern Tier Startup Alliance is pleased to offer a 10% off discounted rate to attend the SBIR/STTR Conference May 23-25. When registering, please use code: 16STSA10