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$2.2 Billion for Early-Stage Technology Research and Business Creation

The Small Business Innovation Research (SBIR) program is the single largest source of high-risk, early stage, leading edge R&D funding available in the USA. A common problem for small, technology-based businesses-even when the economy is good-is finding early-stage funding for the up-front, high-risk R&D needed to prove their new concepts. The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are an excellent source of exactly this type of early-stage funding. Under these programs, the federal government currently awards some $2.2 billion exclusively to small businesses each year, making it the richest source of high-tech seed funding in the nation. More than 40% of the funding goes to firms with 10 or fewer employees, and much of the money goes to companies with just 1 to 3 employees! Typically, some 40% are first-time winners each year.

    Eligibility Requirements:
    • Owned at lease 51% by US citizens and/or permanent resident aliens
    • Must be less than 500 employees including affiliates.
    • That 100% of the technical effort must be performed in the US.
    • That the PI must be at least 51% employed by the small business receiving the award at the time of award.
    • That the SBIR program is for “Innovative Research” and not just development funds.

    SBIR's and STTR's Are Three-Phase Programs

    The programs are organized into three phases. In Phase I, the small business conducts a feasibility study. Typically, the Phase I award is for up to $100,000 over 6 months (SBIR) and 12 months (STTR). [There are some exceptions on award amounts.]

    In Phase II, the small business concentrates on prototype development and validation/demonstration. The Phase II award is typically up to $750,000 over 24 months.

    Phase III is the commercialization activity. No SBIR funds are available for Phase III-rather, the small business is expected to identify external funding, which may at times include funding from federal agency programs other than the SBIR program. (Most agencies do not fund Phase III follow-on development, however.)

    The benefit to SBIR funds is that under the SBIR law, the small business not only receives funding to carry out the needed R&D, but the firm also retains the intellectual property rights to the idea. The government receives a limited license to use the technology within the federal government, but the small business may patent, trademark, or copyright any results of the effort. Unlike conventional venture or angel funding, the small firm does not give up any equity in exchange for this critical "seed money."