How Do SBIR/STTR Programs Work and Which One Should You Choose?
Each year, federal agencies with R&D budgets over $100 million are required to direct 3.2% of that money to small businesses through the SBIR program. Federal agencies with extramural R&D budgets that exceed $1 billion are required to reserve 0.45% for the STTR program. Including the U.S. Department of Energy, 11 federal agencies participate in SBIR and five participate in STTR. Each year these agencies designate R&D topics in their solicitations and accept proposals from small businesses. Awards are made after all proposals have been competitively evaluated.
The SBIR Program
The SBIR program is structured with three gated phases. Depending on the agency, a Phase I award is typically six to nine months and around $150,000. Phase I typically involves research and possibly prototyping to prove feasibility of the initial proposal. In Phase I SBIRs, at least two-thirds of the R&D must be done by the small business itself (only one-third can be subcontracted).
At the conclusion of Phase I, the participating small business may be asked to submit a Phase II proposal. Phase II awards are typically for about two years and $1 million in total funding. In Phase II, at least half must be done by the small business. Phase III is when a small business successfully commercializes the technology. Securing Phase III status indicates that the government made a successful investment. Phase IIIs are not funded with SBIR money—funding is provided by the “programs of record” that are procuring the technology or service.
The STTR Program
The STTR program facilitates collaboration between small businesses and research institutions for federally funded research and development (R&D). It's designed to stimulate innovation and encourage technology transfer from the research realm to the commercial market. A key aspect is the requirement for a formal partnership between the small business and the research institution, with the small business leading the project and performing at least 40% of the R&D. For STTRs, the program is designed specifically for partnerships with universities and FFRDCs, where the research institution can take on up to 60% of the work.
STTR projects typically follow a three-phase structure, similar to the SBIR program. The Phase I includes concept development and feasibility assessment; Phase II: Detailed R&D and prototype development; and Phase III: Commercialization of the technology.
Choosing the Right Program for your Proposal
The best choice for your proposal depends on your company's specific needs and goals. SBIR allows flexibility in partnering with subcontractors, while STTR requires collaboration with a research institution and a specific budget allocation. Keep in mind that only five agencies participate in STTRs, which limits the funding availability.
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