The Small Business Administration (SBA) oversees two programs that pay small businesses to conduct research and development, develop prototypes of designed products, and bring those products and/or services to the marketplace.
The first program is called the Small Business Innovations and Research (SBIR) Program. Over $2 billion was spent on this program in 2012 for more than 5,600 awards.
The program’s stated goals are to:
- Stimulate technological innovation.
- Meet Federal research and development needs.
- Foster and encourage participation in innovation and entrepreneurship by socially and economically disadvantaged persons.
- Increase private sector commercialization of innovations derived from Federal research and development funding.
Each year, eleven participating agencies select qualified projects to fund. Only small business as defined by the SBIR Program can participate. Awards are made on a competitive basis after proposals are submitted.
Each award is broken down into three phases:
- Phase 1: Establish the technical merit, feasibility, and commercial potential of the proposed project. Phase 1 awards are typically limited to $150,000 and 6 months.
- Phase 2: Continue the Phase 1 efforts and potentially develop a prototype of the end result and test the results against the stated criteria. Phase 2 awards are typically limited to $1 million and 2 years.
- Phase 3: Commercialize the R&D project. The SBIR Program does not fund Phase 3; however, the sponsoring agency may fund Phase 3 if the products, processes, or services are intended for use by the U.S. Government.
The second program is called the Small Business Technology Transfer (STTR) Program. The goal of this program is to expand the public/private sector partnership to include joint venture opportunities for small businesses and nonprofit research institutions. The STTR Program requires the business to formally collaborate with a research institution in Phase 1 and Phase 2.
The programs’ stated goals are to:
- Stimulate technological innovation.
- Foster technology transfer through cooperative R&D between small businesses and research institutions.
- Increase private sector commercialization of innovations derived from federal R&D.
Five agencies participate in the program and awards are offered on a competitive basis. The phases are similar to the SBIR Program; however, Phase 1 is typically limited to $100,000 for one year and Phase 2 is limited to $750,000 for two years. Program eligibility is listed on the website. Note that effective January 28, 2013, venture capital backed firms are now eligible to participate in the STTR.
David E. Shaffer is a director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email.
Has your business taken advantage of either of these programs? Any insight you can offer? Share in the comments.
