SBIR/STTR Contracts

SBIR and STTR are parallel programs with different partnership requirements.

SBIR (Small Business Innovation Research):

• Small business performs majority of R&D


• No mandatory research institution partnership


• Principal investigator must be primarily employed by small business


• 11 federal agencies participate with R&D budgets over $100M

STTR (Small Business Technology Transfer):

• Requires formal partnership with research institution (university, federal lab)


• Small business performs at least 40% of work


• Research institution performs at least 30% of work


• 5 federal agencies participate (DoD, DOE, NASA, NIH, NSF)


• Designed to commercialize research institution discoveries

Participating Agencies and Budgets:

• Department of Defense: ~$1.4 billion


• Department of Health and Human Services (NIH): ~$1.1 billion


• Department of Energy: ~$300 million


• NASA: ~$200 million


• National Science Foundation: ~$200 million


• Department of Agriculture, Commerce, Education, DHS, DOT, EPA

Program Goals:

Stimulate technological innovation

Meet federal R&D needs

Foster small business participation in federal R&D

Increase private sector commercialization of R&D

SBIR/STTR uses a phased approach to develop and commercialize technologies.

Phase I - Concept Development:

• Duration: 6-12 months


• Funding: $50,000 - $275,000 (varies by agency)


• Purpose: Establish technical merit and feasibility


• Deliverables: Feasibility study, proof of concept


• Success criteria: Technical feasibility demonstrated

Phase II - Prototype Development:

• Duration: 24 months typical


• Funding: $500,000 - $1.75 million (varies by agency)


• Purpose: Develop prototype, demonstrate capabilities


• Deliverables: Working prototype, test results


• Success criteria: Technology works in relevant environment


• Requirement: Usually requires successful Phase I

Phase III - Commercialization:

• Duration: Varies


• Funding: Non-SBIR federal contracts or private investment


• Purpose: Commercialize the technology


• Sources: Production contracts, other government contracts, private sector


• No set-aside: Competes on open market

Phase II Enhancement/Bridge:
Some agencies offer additional funding between phases:

• Phase II-E (Enhancement) for additional development


• Bridge funding between Phase II and III


• Direct to Phase II programs for mature technologies

Success Metrics:

• Phase I to Phase II transition: 40-50%


• Phase II to Phase III commercialization: 30-40%


• Overall commercialization success varies widely

SBIR/STTR have specific eligibility requirements for small businesses.

Business Requirements:

• Organized for profit


• Located in the United States


• More than 50% owned by U.S. citizens or permanent residents


• OR more than 50% owned by other small businesses meeting these criteria

Size Standard:

• 500 employees or fewer (including affiliates)


• Affiliation rules apply (common ownership, control)


• Size determined at time of award

Principal Investigator Requirements:

SBIR:

• Primary employment must be with the small business


• More than 50% of time during project


• Cannot be primarily employed elsewhere during project

STTR:

• May be employed by small business or research institution


• Primary employment flexibility for STTR only

Research Institution (STTR):

• Nonprofit college or university


• Domestic nonprofit research organization


• Federally funded R&D center (FFRDC)

Work Performance Requirements:

SBIR:

• Phase I: Small business performs at least 2/3 of R&D


• Phase II: Small business performs at least 1/2 of R&D

STTR:

• Small business performs at least 40% of R&D


• Research institution performs at least 30% of R&D


• Balance may be performed by either or subcontractors

SBIR/STTR proposals require demonstrating innovation, feasibility, and commercial potential.

Key Evaluation Criteria:

Technical Merit and Innovation:

• Novel approach to the problem


• Sound scientific/engineering basis


• Feasibility of proposed approach


• Awareness of state of the art

Qualifications:

• Principal investigator experience


• Team capabilities and expertise


• Facilities and resources


• Past performance (for Phase II)

Commercial Potential:

• Market opportunity and size


• Competitive advantages


• Commercialization strategy


• Company capability to commercialize

Proposal Strategy:

Before Writing:

• Research agency topics thoroughly


• Understand program manager priorities


• Review previously funded projects


• Assess competition and differentiation

Technical Section:

• Clear problem statement


• Innovative technical approach


• Realistic milestones and deliverables


• Risk identification and mitigation

Commercialization Section:

• Define target market and customers


• Quantify market opportunity


• Articulate competitive position


• Present realistic path to market

Common Mistakes:

• Too academic, not commercial enough


• Incremental improvement vs. innovation


• Weak commercialization plan


• Team lacks relevant experience


• Poor fit with agency mission

The ultimate goal of SBIR/STTR is commercialization - turning R&D into products and sales.

Commercialization Pathways:

Government Sales:

• Phase III production contracts


• Other federal contracts (non-SBIR)


• State and local government


• Defense and civilian agency procurement

Commercial Sales:

• Direct commercial sales


• Licensing to larger companies


• Joint ventures and partnerships


• Acquisition by strategic buyer

Commercialization Assistance:
Agencies provide commercialization support:

• Technology transition programs


• Commercialization assistance programs


• Mentor-protege relationships


• Industry days and matchmaking events

Phase III Rights:
SBIR/STTR data rights are valuable:

• Government has limited rights to data


• Contractor retains IP ownership


• Phase III preference for SBIR/STTR firms


• Non-SBIR funds for Phase III production

Building Toward Commercialization:
From Day 1, plan for commercialization:

• Identify potential customers


• Engage end users in development


• Build relationships during R&D


• Document market feedback


• Develop IP strategy

Commercialization Metrics:
Agencies track SBIR/STTR commercialization:

• Sales revenue generated


• Follow-on funding raised


• Phase III contracts awarded


• Jobs created


• Patents filed