Non-dilutive funding for your startup
Are you an entrepreneur, startup, or small business needing funds to support the development of your next idea? Would you like to get such funding without the need to pay it back or give up ownership? Well, there is such a program here in the US. It’s called the Small Business Innovation Research (SBIR) Program.
History of the SBIR Program
The US SBIR Program has a budget of almost US$4 billion specifically allocated to help small businesses, including startups. The program provides early stage funding to support research and development efforts with a focus on driving those efforts towards commercialization – no basic research. The program was started in 1982 after the passing of the Small Business Innovation Development Act of 1982. Ten years later, a sister program, the STTR Program, was established by the Small Business Technology Transfer Act of 1992. So, what’s the difference between SBIR and STTR?
SBIR v STTR
As the name suggests, the Small Business Technology Transfer (STTR) Program exists to drive technology transfer between research institutions and small businesses. The major difference between the STTR Program and the SBIR Program is the requirement of having a non-profit research institution as a collaborator in the STTR effort. This means that your budget request must be split between your company and the research institution for an STTR proposal. At least 30% of the budget must go to the research institution. SBIR projects have no such requirement. So, depending on your company needs, one program may be more appropriate than the other.
Who is involved in the SBIR Program?
Federal agencies that have a budget of over $100 million for extramural research are required to set aside a percentage of that budget for the SBIR Program. Here are the federal agencies that meet this criterion:
Government agencies with extramural R&D budgets of $1 billion or more are also required to set aside a portion of their budget to fund the STTR Program. Agencies involved with STTRs are the DOD, NIH, NSF, Department of Energy, and NASA.
Who is eligible?
Only United States small businesses are eligible to take part in the SBIR program. An SBIR awardee must meet the following criteria at the time of Phase I and II awards:
- Organized for profit, with a place of business in the United States
- Over 50 percent owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the United States, or by another for-profit business concern that is over 50% owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the United States; and
- No more than 500 employees, including affiliates
SBIR and STTR projects are broken down into 3 separate phases. Phase I is typically a 6-12 month effort to prove the feasibility of your approach. You can typically request between $150,000 and $275,000 for a Phase I effort, depending on the funding agency. For a Phase II effort, the goal is to move your technology towards commercialization.
A Phase II effort is typically for 2 years, with a typical budget of $1,000,000 to $2,000,000, again depending on the funding agency. Successfully completing Phase II moves the project into Phase III, which is the commercialization phase.
There are no SBIR funds available for Phase III, however, some federal agencies have funds that can be used for follow-on efforts. Each agency has its own authority of their SBIR/STTR Programs, so the budget and timelines here are just guidelines and can vary across agencies.