Overview of The SBIR & STTR Programs

October, 2014

The purpose of the SBIR program as established by law is to:

• Stimulate technological innovation in the private sector

• Strengthen the role of small businesses in meeting federal research and development needs

• Increase the commercial application of these research results

• Encourage participation of socially and economically disadvantaged persons and women owned small businesses

SBIR OBJECTIVES

Phase I. Evaluate scientific technical merit & feasibility of an idea. • Up to $150K• 6-9 months

Phase II. Expand the results of, and further pursue the development of Phase I work. • Main R&D activity• May involve prototype creation & testing, clinical trials, etc. • Up to $1 million for 24 month period (varies by agency)

Phase III. “Commercialize” results of Phase II. • No SBIR funds available for this phase• May use private money, or non-SBIR federal funding

THREE PHASES OF THE SBIR PROGRAM

Note 1: Must enter program thru Phase I: Can’t go directly to Phase II (except possible pilot programs @ NIH, DOD, DoED)

Note 2: Sole source procurement OK in Phase III

Notes:

1. Contract Agencies• Have a specific problem or need• You must grasp & respond to that needo “Only proposals submitted in response to topics in this solicitation will be considered” –DoD

FY08.2o “Focus on what we asked for, not what you think we need” –Susan Nichols, DARPA SBIR

Prog Mgr, 11/11

2. Grant Agencies• Want to support “good ideas”• You must determine what they think “good” is

TWO TYPES OF SBIR AGENCIES

• ≤500 employees, including affiliateso Must be “for profit”o ≥51% owned & controlled by US citizens or permanent resident aliens

• SBA ruling: SBIR/STTR applicant firm can be owned/ controlled by one or more other small businesses, of parent company(ies):o ≤500 employeeso 51+% owned by US citizenso Awards can go to firms majority owned by multiple Venture o Capitalists/Hedge Funds/Private Equity Funds if agency elects to do so

• Relationship between small business ownership and university/faculty members must be carefully managedo Caution: no consistent, firm rules here o Caution: what is allowed in Phase I may not be acceptable in Phase II

SMALL COMPANY ELIGIBILITY FOR SBIR PARTICIPATION:

May want to include consultants, subcontractors to round-out your team

• Can subcontract ≤33% of Phase I• Can subcontract ≤50% of Phase II• For profit or non profit• Large or small• Individual consultant or company

However, all work must be done in the U.S.

SUBCONTRATOR ELIGIBILITY FOR SBIR

• Agency FY08 FY09 FY10 (WAGS)• FY11 (WAGS)• FY12 (WAGS)• FY13 (WAGS)• Dept of Agriculture 77 70 85 90 85 65• Dept of Commerce 40 40 45 35 25 19• Dept of Defense 1826 2018 1800 1800 1700 1300• Dept of Education 33 18 40 25 24 22• Dept of Energy 280 373 300 280 223 279• Dept of Health & Human Services 806 739 900 699 808• Dept of Homeland Security/HSARPA 28 52 60 50 50 29• Dept of Transportation 11 16 19 15 21 9• Environmental Protection Agency 25 23 35 28 25 26• NASA 276 348 300 450 258 259• National Science Foundation 224 311 300 272 223 177

APPROXIMATE NUMBER OF PHASE I AWARDS BY AGENCY

PHASE I SOLICITAION SCHEDULE

SBIR Principal Investigator Involvement• Must be primarily employed by the companyo Cannot work full time for another employero Some agencies say <75%, others <50%

• Other agency-specific requirementso DOE: 111 hours on the Phase 1 project (3+ hrs/wk minimum)o NSF: PI must devote >1 FTE month to Phase 1 SBIR

Liberal Patent Rights• Recipient can apply for worldwide patent rights• Federal government gets royalty free license

Funding Gap Problem• Gap #1: 6-10 months between Ph I proposal submittal & awardo Agencies must award within 90 days of proposal deadline (1 year at NIH & NSF)

• Gap #2: 4-18 months between Ph II proposal submittal & awardo Ditto comment above: 90 day at all but NIH & NSFo Some agencies have options, early decision programs

NSF: PhIB: match 1:2 of 3rd party $$ up to $50k NSF $$s

OTHER

Phase I• Historically: 1 out of 10 proposals funded• FY12 estimate: ~15%

In comparison, VCs fund 2.4% • VCs don’t fund start ups• VCs are geographically concentratedo Entrepreneur.com, 3/06

Phase II• Between 1:2 and 1:3• FY 12 estimate: 45%• But competition is tougher

SBIR SUCCESS RATIOS

Modeled after SBIR • Small company must team with Federal Lab, University or other non-profit R&D

entity• Only 5 Federal agencies participatingo DOD

• Not all componentso DHHS/NIHo DOEo NSFo NASA

• “Small” compared to SBIR

SMALL BUSINESS TECH TRANSFER PROGRAM (STTR)

SBIR STTR

Number of participating agencies 11 5

FY14 budget as % of outside R&D budget

2.8% 0.4%

Min. Phase I small business participation

67.0% 40.0%

Max. Phase I subcontractor participation

33.0% 60.0%

Min. Phase I subcontractor participation

0.0% 30.0%

Principal Investigator employer Small Bsns SB or RI*

SBIR vs STTR

* STTR: PI can be at Research Institution (except at NSF).

SMALL COMPANY ELIGIBILITY FOR STTR

Located in U.S. and meets one of the following:• Non-profit research institution per Stevenson-Wydler Technology Innovation Act of

1980o Owned/operated exclusively for scientific or educational purposeso No profits benefiting private shareholders or an individual

• Non-profit college or universityo Public or private

• Non-profit medical or surgical hospital• Federally Funded Research and Development Center (FFRDC)o GOGOs do not qualifyo www.federallabs.org

NOTE: a single research entity must qualify as the partner on an STTR (& receive ≥30% but ≤60% of funds)

RESEARCH ENTITY ELIGIBILITY FOR STTR PARTICIPATION

• Mandatory participation by nonprofit R&D Institution in STTR• Participation by nonprofit R&D institution is allowed but optional in SBIR• Secondary difference: STTR is an R&D “collaboration” between the

small business & the nonprofit 2011 CHANGESFraction of agency’s SBIR budget can go to previously ineligible firms• Firms majority owned by multiple Venture Capitalist/Hedge Funds/Private Equity

Funds• ≤25% of NIH, NSF, DoE SBIR budgets• ≤15% of all other agencies• Agencies have to elect to do this or not

PRIMARY DIFFERENCE BETWEEN SBIR vs STTR

Step 1.• Formulate your proposal strategy• Draft the proposal• Get a review of the draft before submitting it• Get a debriefing after winners are announced

Step 2.• Formulate your proposal strategy• Draft the proposal• Get a review of the draft before submitting it• Get a debriefing after winners are announced

Step 3.• Formulate your proposal strategy• Draft the proposal• Get a review of the draft before submitting it• Get a debriefing after winners are announced

Step 4.• Formulate your proposal strategy• Draft the proposal• Get a review of the draft before submitting it• Get a debriefing after winners are announced

4-STEP PROCESS FOR DEVELOPING A PHASE 1 SABIR/STTR PROPOSAL

• Lack of technical detailo especially problematic: vague research/work plans

• No evidence of innovation or uniqueness• No statement of the feasibility question, risk, or solution measure• Much too much background stuff: the technology trap discussed earlier• Failure to present a credible commercialization story• Lack of credible PI &/or team• Lack of credible/defensible/sensible cost proposal

COMMON WEAKNESSES

1. Poorly written & presented2. PI lacks necessary expertise3. Insufficient literature review4. Insufficient technical information5. Cannot be done in 8 months6. Inadequate bibliographical information7. Lacks letters from consultants8. Research already done by others9. Too vague, unfocused10. Failure to state where project would go in Phase II11. Doesn’t address an important problem12. Doubtful commercialization potential13. Insufficient detail in experimental plan14. Too much of the research will be done at a university15. Should add consultant w/expertise where PI is deficient

Common Errors