The culture of entrepreneurship in the United States of America (U.S) is an envy of the world. Entrepreneurs in the U.S identify opportunities and are often willing to take risks to bring new technologies to market. However, even though research breakthroughs in highly technical fields such as robotics, genomics, biotechnology, quantum technologies, etc., offer translational opportunities, turning these ideas into market-ready innovations remains difficult and demanding. This burden on entrepreneurs can be alleviated by public-private partnerships where the United States government steps in to provide support to entrepreneurs to study the potential of a technological breakthrough to translate into marketable innovations.
The Small Business Innovation Research (SBIR) program is one of the largest and finest examples of U.S public and private partnerships. The SBIR program was created in 1982 through the Small Business Innovation Development Act, Public Law 97-219. Its purpose was to make sure that small businesses receive a meaningful share of federal funding set aside for research and development (R&D). Prior to the Small Business Innovation Act, federal research dollars were largely distributed to universities, large corporations, and federal research laboratories. Congress wanted to encourage small businesses as a source of innovation, especially to develop cutting-edge technologies that could meet federal government’s needs and later can be leveraged into commercial products. The original goals of SBIR were to (1) simulate technological innovation, (2) use small businesses to meet federal R&D needs, and (3) increase private sector commercialization, and (4) broaden participation by socially and economically disadvantaged groups. These remain the goals of the SBIR programs today. All federal agencies such as the National Institutes of Health, National Science Foundation, Department of Energy, etc. with large R&D budgets that fund project external to the agency must reserve a part of that R&D budget for small business research awards.
The Small Business Technology Transfer (STTR) program was created in 1992 through the Small Business Technology Transfer Act of 1992, Public Law 102-564. The STTR program’s main focus is to bring to market the many promising technologies that were created in universities and other research institutions through small businesses. The goals of STTR program are the same as those of the SBIR program and they are considered sister programs. The Small Business Administration (SBA) manages the SBIR/STTR funding across 11 federal agencies to small businesses. Only six of these agencies provide STTR funding[i].
One interesting aspect of SBIR/STTR funding is that it is non-dilutive. The small business receiving an SBIR/STTR grant will not have to sell any equity shares in exchange for the funds received. A small business interested in receiving an SBIR/STTR grant should first identify which federal agency’s SBIR/STTR program is most suitable to the R&D performed at that small business. For example, the SBIR/STTR program at the Department of Agriculture (USDA) supports the following topics it will support: Forests Resources, Plant and Animal Production and Protection, Conservation of Natural Resources, Food Science and Nutrition, Rural Development, Aquaculture, Biofuels and Biobased Products, Small and Mid-Size Farms where the SBIR/STTR program at the National Science Foundation supports almost all areas of technology and market sectors (with the exception of clinical trials). The SBIR/STTR funding is made available to small businesses in three phases – Phase I funding is meant for proving the technical feasibility and building a proof-of-concept. Once a small business obtains and completes the Phase I project successfully, it can apply for Phase II funding. Phase II funding is much larger than Phase I funding and is meant for scalable prototype development and move closer to commercialization. Upon obtaining Phase II funding, a small business may be eligible more supplemental funding to prepare the technology for real-world commercialization or government use.
The SBIR/STTR funding is fairly competitive since the number of small businesses requesting funding always far exceeds the amount of available funding. The process for preparing a proposal and applying for funding can take a few months. Once the proposal is submitted, the federal agency may take up to 6 – 9 months to review the proposal, make a ‘fund/do not fund’ decision, and make the funds available to the small business. So, the process of obtaining funding can seem tedious and lengthy.
The SBIR/STTR programs are a vital part of the U.S innovation ecosystem for about 4 decades now and provided around $77B in funding to 33,000 businesses[ii]. This funding has helped develop new cancer therapies, Alzheimer’s treatments. Qualcomm is an important success story of the SBIR/STTR program which received early-stage funding from NSF and Department of Defense in early 1980 and is inducted into the SBIR Hall of Fame.
[i] https://sbir.gov
[ii] https://www.sbc.senate.gov/public/_cache/files/e/a/ead1c0f2-c75a-47ae-875c-672eead0f2f3/F56D055C92FD6B71ABDA010CBD02C398AC55F61252F71BE448427D7033AE44BF.sbir-sttr-lapse-pager.pdf
