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.
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.
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 2nd 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.
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.