The SBIR and STTR programs are congressionally mandated set-aside programs for domestic small business concerns to engage in Research and Development (R&D) that has the potential for commercialization.
The SBIR and STTR programs both seek to increase the participation of small businesses in federal R&D and to increase private sector commercialization of technology developed through federal R&D. Through the STTR program, the small business concern must formally collaborate with a non-profit research organization.
- Stimulating technological innovation
- Strengthening the role and increase participation of small businesses in meeting federal R&D needs
- Increasing private sector commercialization of innovations developed through federal R&D funding; and
- Encouraging participation in innovation and entrepreneurship by women-owned and socially and economically disadvantaged (8a) small businesses
Who Is Eligible?
Participants in the SBIR and STTR program must meet certain eligibility requirements at the time of award including:
- The small business must have fewer than 500 employees (including affiliates) and be organized as a for-profit entity that operates primarily in the U.S.
- The small business may be an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust or cooperative. In the case of a joint venture, there must be less than 50% participation by foreign business entities.
- The small business must be more than 50% directly owned and controlled by one or more individuals (U.S. citizens or permanent resident aliens), other business concerns (each of which is more than 50% owned by U.S. citizens), or tribal organization.
- If the business is a joint venture, each partner organization must meet the ownership requirements.
- For businesses applying under SBIR only, if it is more than 50% owned by multiple entities outlined above, no single venture capital, hedge fund, or private equity firm may own more than 50% of the small business, unless it qualifies as a small business itself.
How Does SBIR and STTR Funding Work?
The objective of Phase I is to establish the technical merit and feasibility of the proposed research and development efforts and to determine the quality of performance of the small business prior to providing further federal support in Phase II.
Phase I support is normally $150,000 provided over a period of six months for both SBIR and STTR programs. However, with proper justification, applicants may propose longer periods of time and greater funding amounts necessary to establish the technical merit and feasibility of the proposed project.
- SBIR: Support normally may not exceed $256,580 in total costs for six months.
- STTR: Support normally may not exceed $256,580 in total costs for one year.
The objective of Phase II is to continue the research and development efforts initiated in Phase I. Generally, only Phase I awardees are eligible for a Phase II award.
Phase II awards are normally $1 million over two years for SBIR and STTR. However, with proper justification, applicants may propose longer periods of time and greater funding amounts necessary for completion of the project. Funding is based on Phase I results and may not exceed $1.7 million in total costs for a two-year period. In addition, a commercialization plan is required.
An NIH SBIR Fast-Track incorporates a submission and review process in which both Phase I and Phase II applications are submitted and reviewed together as one application to reduce or eliminate the funding gap between phases.
Small businesses that have already demonstrated scientific and technical merit and feasibility but have not received a Phase I SBIR or STTR for that project, may want to apply for a Direct-to-Phase II award. Applicants must show proof of concept and feasibility, using work completed under other funding sources.
Phase IIB SBIR renewals are typically offered for those projects that require extraordinary time and effort, including those requiring regulatory approval or developing complex instrumentation, clinical research tools, and behavioral interventions. Applicants are encouraged to secure substantial third-party investor funds (equal or greater to the requested NIH funds) and must provide a commercialization plan that describes the long-term commercialization strategy and details on any independent third-party investor funding that has already been secured or will be provided during the Phase IIB project period. If applicable, the application should include letters of support from third-party investors.
Comparison of SBIR and STTR Programs
The SBIR and STTR programs have the same goal: to help entrepreneurial researchers launch small businesses, engage in research and development, and commercialize new products that will benefit the public. The programs have two key differences, described below.
- SBIR requires the project’s principal investigator to be employed primarily (more than half-time) by the small business during the award period, unless NIH grants a waiver of this requirement.
- STTR does not define employment criteria for the project’s principal investigator.
Nonprofit Research Institution Partners
- STTR requires the small business to have a formal collaboration agreement with a nonprofit research institution during Phases I and II. The research institution is responsible for at least 30 percent of the total effort for the project, and the small business is responsible for at least 40 percent.
- SBIR encourages but does not require nonprofit research institution partnership. A research institution can complete up to 33 percent of the total effort for a Phase I project and up to 50 percent of the total effort for a Phase II project, as applicable.