Scherer Communications Landing site -- Fred Patterson

The following is an interview done by Adolfo Pesqueria for the May 7 Central Texas Funding Forum.   Rather than make my regular blogging readers read the entire interview in my blog, I have posted it here for those who wish to read the entire document.  It has some great stuff, but not everyone wants to read something over 500 words.    The online interview was done with Fred Patterson, the SBIR coach.  He'll speak on Thursday as part of the Funding Forum at the Norris Conference Center.

) What is Small Business Innovation Research (SBIR)?

Each year, the U.S. Small Business Administration oversees federal law related to a segment of Research and Development funding. Federal agencies spending above $100 million externally on R&D in the prior year must set aside 2.5 percent of that budget in the current year for small business technology development. This annual set-aside represents about $2.5 billion.

For Fiscal Year 2009, there are 11 participating SBIR agencies - The Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Transportation, the Environmental Protection Agency, NASA, and the National Science Foundation.

 

The agencies select technical topics - problems for which they seek solutions. Published topics on agency Websites include guidelines for proposal content and submission. Opening and closing dates for solicitations are staggered throughout the year. Small businesses search topics for those matching their capabilities. They prepare problem-solving proposals with innovative applications based on their areas of expertise.

After submission to the originating agency, that agency reviews proposals, ranking them according to the degree of originality and innovation, technical merit, credibility of the proposing team, and market potential. On average, 10 to 15 percent of the proposals submitted get funded. Awards are issued as grants or contracts.

Small businesses face four requisites: (1) Be U.S.-based, majority American-owned, and independently operated, (2) Have less than 501 employees, (3) Be a for-profit firm, and (4) Have the Principal Researcher as an employee.

Awards are issued in Phases:

Phase I – Feasibility & Design: Awards averaging $100,000 for six to 12 months of effort. This supports a feasibility study and design of a solution to the problem posed.

 

Phase II – Prototype Development: Awards averaging $750,000 for up to two years. This expands meritorious Phase I designs to Proof of Concept. A prototype is developed and staging begins for commercialization. Only Phase I award winners have a shot at Phase II.

 

Phase III – Commercialization: The developer moves the concept from the laboratory to the marketplace. No SBIR funds support this, but some agencies do budget for it. The business must get funding from private sector or non-SBIR government sources. Phase III is a brand new game with different rules and incredible opportunity. Getting you to Phase III is our goal!

The best part of SBIR funding is that, unlike most government-funded programs, the small business retains intellectual property rights to all inventions and proprietary data for up to five years after completion of the final Phase.

2) How did you get started in the SBIR coaching business?

I was co-founder of two Austin firms that from 1986 to 2001 won over 100 SBIR awards. I was chief financial officer and drove the process of producing proposals and managing the administration of our grants. When the 2^nd company collapsed in 2001 - after its Telecom marketplace evaporated - I decided that I’d had enough fun running companies. I turned my talents to helping others. As the Commercialization Funding Coach, I’ve helped companies find funding ever since, mostly from SBIR. I also coach preparation of Texas Emerging Technology Fund applications, as well as preparing companies seeking Angel and Venture Capital funding.

 

3)  What should a person do to prepare for SBIR funding?

 

The key is preparing a well-articulated response to an agency's Request For Proposal. The agency provides the topic area and sometimes detailed project specifications. It is up to you to propose an approach and methodology for solving the problem, verifying feasibility in Phase I and providing proof of a promising concept in Phase II.

Preparation involves gathering the facts necessary for showing in the proposal that you (1) Know the current state of the art, (2) Understand the agency's perspective, (3) Have assembled the right team in place, and (4) Have a business model that can profit from your R&D.

 

4)  With the Stimulus Funding increasing federal budgets, has there been an increase in funding via SBIR?

Not yet, but we’re hopeful. Agency allocations are based on the prior year’s R&D budget. Stimulus funding affects next year’s SBIR budget. However, some agencies are voluntarily increasing this year’s project opportunities. Others are actually trying to exclude SBIR from their Stimulus Funding. We’re watching the situation closely to ensure small business gets its fair share.

 

 5)  What else should people know about the SBIR program?

SBIR awards are truly no-strings-attached funding. There’s no interest to pay and no equity to give up! And if the research doesn’t pan out, you needn't return the money.

The SBIR-awarded firm is automatically sole-source qualified for any federal government work that logically follows from the firm's SBIR-funded work. The Stimulus bill requires quick contracting. This can put SBIR-funded companies in an advantageous position for landing Stimulus-related contracts.

The SBIR program is extremely competitive; 85 to 90 percent of applicants do not get a Phase I grant. Was it because their ideas were without merit? It is more likely that many of those applicants simply did not address the agency’s specified problem directly enough or articulate their proposed solutions clearly enough to compete successfully.

In addition to the government SBIR site, there’s an excellent non-government Web site - The SBIR Gateway. Besides being a portal for SBIR information, it has a search engine for finding SBIR proposals.

One last thing: SBIR is up for reauthorization in Congress this summer. You can find out about that at www.SBIRreauthorization.com.