SBIR or STTR: Choosing the Right Path for Your Business

Written By Joshua Pennington

Overview of the Programs

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, collectively known as America’s Seed Fund, provide early-stage funding to small businesses aiming to bring their innovative technologies to market. The NIH, DoD, and other federal agencies support these programs, collectively setting aside over $1.3 billion from their R&D budgets specifically for small businesses. 

Goals of the Programs 

  1. Stimulate technological innovation. 

  2. Provide support for federal research and development needs. 

  3. Increase the commercialization of private-sector innovations. 

  4. Foster and encourage participation by socially and economically disadvantaged persons and women-owned small businesses. 

Funding Phases

Phase I: The purpose of Phase I is to establish the feasibility, technical merit, and commercial potential of the proposed project. Typical funding is up to $50,000-$275,000 for 6 months (SBIR) or 12 months (STTR).

Phase II: Phase II continues R&D efforts from Phase I with a focus on technology maturation. Funding is in the range of $750,000-$1,800,000 for 2 years.

Phase III: Focuses on commercialization without additional SBIR/STTR funding. Funding for Phase III is typically obtained from the private sector or other non-SBIR federal agency sources. 

Phasing Exceptions: While the SBIR and STTR programs generally follow a three-phase process, there are a couple of exceptions. 

  • Fast-Track: Combines Phase I and II proposals to minimize funding gaps.

  • Direct to Phase II (SBIR only): This exception is applicable to projects that have already demonstrated clear feasibility, but did not receive a Phase I award. 

Key Differences Between SBIR and STTR

  1. Collaboration Requirements

    • SBIR: The small business may collaborate with research institutions but is not required to. The Principal Investigator (PI) must be primarily employed by the small business.

    • STTR: Requires collaboration with a non-profit research institution (e.g., university or federal laboratory). The PI can be employed by either the small business or the research institution.

  2. Subcontracting

    • SBIR: Allows up to 33% of the research to be subcontracted in Phase I and up to 50% in Phase II.

    • STTR: Requires that 40% of the work is done by the small business and 30% by the research institution, with the remaining 30% available for outsourcing.

  3. Program Focus

    • SBIR: Emphasizes innovation within the small business and commercialization potential.

    • STTR: Focuses on technology transfer from research institutions to small businesses, leveraging the expertise and resources of the research institutions.

  4. Eligibility and Participation

    • SBIR: 11 federal agencies participate in the SBIR program.

    • STTR: Only 5 federal agencies participate (DoD, DoE, HHS, NASA, and NSF).

Choosing Between SBIR and STTR

Choosing between SBIR and STTR programs is crucial as it determines the structure of your project’s collaboration and funding strategy. The SBIR program allows more independence and flexibility for small businesses, while the STTR program mandates a partnership with a research institution, leveraging their resources and expertise. Understanding the key differences ensures that your business can effectively align its project needs with the right funding pathway, maximizing the chances of success.

When to Choose SBIR:

  • You plan to perform most of the research within your small business.

  • You do not need to subcontract more than 33% (Phase I) or 50% (Phase II) of the research effort.

  • Potential investors prefer minimal involvement of non-profit research institutions.

  • The personnel at the research institution prefer to act as independent consultants.

When to Choose STTR:

  • Collaboration with a research institution is essential for your project.

  • A significant portion of the research effort (up to 60%) needs to be subcontracted.

  • You and the research institution view yourselves as equal partners on the project.

  • The topic of interest specifically requires an STTR response.

Conclusion

  • These programs offer different paths and requirements, but both aim to bring innovations from the research phase to a marketable product.

  • SBIR focuses more on commercialization through small businesses, while STTR emphasizes collaboration with research institutions for technology transfer.

Navigating the SBIR/STTR landscape can be complex, but the rewards are significant. By leveraging the right tools and resources, preparing a compelling proposal, and building valuable relationships, your business can unlock new opportunities for growth and innovation. At Kleos Technology, our mission is to help you succeed in securing these vital contracts. With our Xpedite tool, we simplify the process, allowing you to focus on what you do best – innovating and growing your business.

About Kleos Technology

Kleos Technology is dedicated to empowering small and medium-sized businesses to secure government contracts with ease. Our innovative tool, Xpedite, uses AI and custom algorithms to match your company with relevant opportunities, speeding up your pipeline and enhancing your chances of success. Learn more about how we can assist your business in navigating the government contracting landscape at www.kleostechnology.com.

Source

“Understanding SBIR and STTR” https://seed.nih.gov/small-business-funding/small-business-program-basics/understanding-sbir-sttr

Joshua Pennington
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