Published on November 16, 2009
Funding Your Dreams with Government Grants Small Business Innovation Research (SBIR)
November 14, 2009
My Entrepreneurial Hero Greg Olson, one of seven private astronauts used the proceeds from selling the company he started using an SBIR grant.
Small Business Innovation Research (SBIR) comprises a variety of grant and funding programs offered by numerous of federal government entities. As enacted by Congress, all federal entities with research budgets over $150 million must allocate a small percentage of that money for spending with small businesses. SBIR Overview
SBIR Overview Program Phases Program Types SBIR Benefits The Down Side The Bottom Line Resources Funding Your Dreams with Government Grants
SBIR programs are grants – they are not loans that have to be paid back. Competition for these funds is keen; for any given programs, the success rate in the first round averages about 15 percent. The program has expanded over the years, and depending on the granting organization, a full two phase grant can now be over $1.5 million. SBIR Overview
SBIR is an umbrella term covering various program offerings. Major participants include The departments within the Department of Defense (Navy, Army, Air Force), The Defense Advanced Research Program Administration (DARPA), The National Science Foundation, The National Institutes of Health, The Department of Homeland Security, NASA, NIST, NOAA Departments of Energy, Transportation, Education and Agriculture. SBIR Overview
SBIR funding is a three phase process. First phase grants are for a feasibility study. The SBIR program is looking for new and novel technologies and product ideas that have not been fully realized or tested. Thus the first stage is feasibility which combines a program for testing the concept’s technical feasibility with discussion and measures of eventual commercial applicability. Program Phases: Phase 1
The second phase involves development of a working prototype or other proof-of-concept. 12 month program; NIH grants for phase 2 can go over $2 million DoD and NSF – up to $700k Others vary Program Phases: Phase 2
The third phase is commercialization; in all cases the successful commercialization and realization of broader economic value from the project is the ultimate desired outcome from the program. Funding for commercialization comes from private sources; it does not come from the funding agency. Phase 3: Commercialization
Project solicitations for SBIR funding come in two forms: contract and grant. Contractagencies, such as the DoD entities and other cabinet departments as well as NASA define specific research and product outcomes they are looking to fulfill. The SBIR application for a contract solicitation must demonstrate how the proposed project or concept will fulfill the specific technical requirements laid out in the solicitation. These solicitations are released on a regular schedule and applications must pass through a rigorous process of establishing all of the bureaucratic details before applying. Program Types: Contract
Grant agencies, such as NSF and NIH solicit more broadly; they are looking for novel ideas that can be show to benefit society, and which are both technically and commercially viable. Grant agencies tend to be more concerned with the demonstration of eventual commercial viability; a strong commercialization plan and recommendations from existing players in the industry is required. Program Type: Grant
SBIR presents some obvious benefits: It is often referred to as “free money” – the grant is applied to the winning business entity directly, and while the granting agency can lay claim to the results of work, the grant winner retains all rights to the intellectual property. SBIR Benefits
In addition to being “free money”, it is often “early money” which in the venture funding world tends to be the most expensive. SBIR winners are in a highly leveraged position when seeking further rounds of venture or private equity funding. They have validation of their concept from an external source, and they are not dependent on outside entities for their first dollar, which makes them much more desirable investments. SBIR Benefits
The focus on commercialization and “social good’ forces technologists to take a broader perspective of the marketplace into which they will be delivering their developments. SBIR Benefits
SBIR grant winners keep the rights to commercialize the intellectual property developed with the grant Contract program grantors keep the right to produce the technology for their own uses But the grant recipient is most often seen as the primary commercial source for the technology SBIR Benefits
The “free money” connotation of this program is counterbalanced by the rigorous project tracking and reporting requirements imposed by granting agencies. Grant money is not delivered up front; it is released periodically, and only with documentation of the exact time and expenditures involved. In most cases the principal investigated is working at a set hourly rate; use of contractors and consultants is allowed, but cannot exceed 33 percent of expenditure in Phase I or 50 percent in Phase II. Program awardees must demonstrate progress during the program or the funding will be withheld. Free Money?
Programs are very competitive Average of 5 to 7 percent of Phase 1 proposals are funded Federal government auditing and compliance standards Can be at odds with start-up culture The Down Side
NSF CreativeIT Primarily aimed at researchers to develop innovative Has an SBIR tie-in Broad Agency Announcements (BAA) Technique may be used to acquire "scientific study and experimentation directed toward advancing the state-of-the-art or increasing knowledge or understanding.“ Mostly used in DoD/DHS sphere Can be much bigger grants ($4MM+), but has more stringent application and compliance requirements Other Options
When SBIR is discussed, it is often combined with STTR (Small business Technology Transfer) which is a comparable program defined for participants affiliated with Federal Lab programs or with Universities or other non-profit research institutions. The structure and process for applying for STTR is comparable to SBIR, but the aim is to support researchers in established lab institutions (e.g., universities) whereas SBIR is aimed at stimulating private, for-profit participation. Other Options: STTR
1) Work with a “Sherpa” with experience in supporting and winning SBIR grants Get the state to support you with their fees if possible 2) The proposal must comply with program structure to the letter Little wiggle room with Bureaucracy 3) Seek out and communicate the “cognizant program officer” Communication is open during a period prior to proposal due date The Bottom Line
4) Look like a real business Relationship with a business incubator or SBDC is a plus 5) Think like a researcher You’re developing a research plan, not a project plan. You’re providing the idea’s validity, not a plan to deliver exactly what is scoped and specified. Much more like a science experiment The Bottom Line
The official government website: http://www.sbir.gov/ www.grants.gov – master US federal grant website http://www.pnl.gov/edo/opportunities/sbir.stm -Grant and proposal Alerting service The most comprehensive independent resource site and event calendar: http://zyn.com/sbir/cal/ Resources
Kelly S. WylamProgram ManagerBen Franklin Technology Partners1010 N. 7th Street, Suite 307Harrisburg, PA email@example.comPhone: (717) 948-4318Website: http://www.innovationpartnership.net/ Randy G. Harmon Technology Commercialization ConsultantNJSBDC/Rutgers Business SchoolSBIR/STTR Training Coordinator for NJCSTCo-founder, Foundations Business Development Group, LLCPhone: firstname.lastname@example.org http://njsbdc.com/scitech/ Sherpas Jim Greenwood Greenwood Consulting Group 1150 Junonia Sanibel Island, FL 33957 email@example.com www.g-jgreenwood.com Roger S. Cohen Cohen International (845) 358-8936 firstname.lastname@example.org www.rogercohen.com
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