August 16, 2020

Small Business Innovation Research (SBIR) program

Americas
Policy/Program
Description of the core change(s) brought by this policy instrument

SBIR offers eligible participants grants to develop and commercialize a new technology or intellectual property, when it isn’t yet at the stage where they can attract traditional investment, and the risk or cost is too high for an ordinary loan.

The SBIR program is structured into three phases:

  • Phase I is for applicants demonstrating proof of concept — anywhere on the line from whiteboard to prototype. Awards range $50,000 - $250,000 for six months (SBIR), depending on what is warranted for the specific development costs. SBIR/STTR Phase I awards are generally $50,000 - $250,000 for 6 months (SBIR) 
  • Phase II is for those doing deeper R&D on a proven concept and $750,000 over a two-year period. Funding is based on the results achieved in Phase I and the scientific and technical merit and commercial potential of the project proposed in Phase II. Typically, only Phase I awardees are eligible for a Phase II award. 
  • Phase III is where a project may transition to actual paid contracts and purchases. While the SBIR program does not fund Phase III, an eligible company may skip some government procurement processes that would otherwise require competitive offers. 
Please list the implementing agencies

SBIR is a large network of programs, spread across several federal agencies and the military.

Each agency administers its own individual program within guidelines established by Congress. These agencies designate R&D topics in their solicitations and accept proposals from small businesses. As such, not every technology or business is a fit for every agency.

  1. Dept. of Defense (DoD): SBIR — Solicitations
  2. Dept. of Health and Human Services/National Institutes of Health (HHS/NIH): SBIR — Solicitations
  3. Dept. of Energy (DoE): SBIR — Solicitations
  4. National Science Foundation (NSF): SBIR — Solicitations
  5. National Air and Space Administration (NASA): SBIR — Solicitations
  6. Dept. of Homeland Security (DHS): SBIR — Solicitations
  7. Dept. of Education: SBIR — Solicitations
  8. Dept .of Transportation (DoT): SBIR — Solicitations
  9. Dept. of Agriculture (USDA): SBIR — Solicitations
  10. Environmental Protection Agency (EPA): SBIR — Solicitations
  11. National Oceanic and Atmospheric Administration (NOAA): SBIR — Solicitations
  12. National Institute of Standards and Technology (NIST): SBIR — Solicitations

Each has its own SBIR budget and application process.

The U.S. Small Business Administration (SBA) serves as the coordinating agency for the SBIR program. It directs the agencies' implementation of SBIR, reviews their progress, and reports annually to Congress on its operation. 

Lifecycle of target firms for this policy instrument
Start-up firms
If you marked "start-up" and/or "scale-up" firms, please provide the specific definitions used

A small business must meet the eligibility requirements set forth in 13 CFR 121.702 "What size and eligibility standards are applicable to the SBIR and STTR programs?" at the time of Phase I and II awards, which specify the following criteria:

  1. Organized for profit, with a place of business located in the United States
  2. More than 50% owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States, or by other small business concerns that are each more than 50% owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States; and
  3. No more than 500 employees, including affiliates.

 

Support offered
Direct Financial Support
Level of intervention
Firm-level
Barrier(s) addressed with this policy tool
Access to Capital
Policy timeline

1982: The SBIR program was established under the Small Business Innovation Development Act of 1982 (P.L. 97-219) with the purpose of strengthening the role of innovative small business concerns in federally-funded research and development (R&D). 

2000: In December 2000, Congress passed the Small Business Research and Development Enhancement Act (P.L. 102-564) and reauthorized the SBIR program until September 30, 2008 by the Small Business Reauthorization Act of 2000 (P.L. 106-554). Subsequently, Congress passed numerous extensions.

2019: Proportion of award has grown into a total award budget of nearly $3.3 billion. SBIR is currently considered the largest, broadest and arguably the most accessible tech-related government grant program available to small business entrepreneurs.

Stated goal/metrics of the policy instrument

The stated mission of the SBIR program is to support scientific excellence and technological innovation through the investment of federal research funds in critical priorities to build a strong national economy.

The program's goals are to:

  • Stimulate technological innovation.
  • Meet federal research and development needs.
  • Foster and encourage participation in innovation and entrepreneurship by women and socially or economically disadvantaged persons.
  • Increase private-sector commercialization of innovations derived from Federal research and development funding.
Evidence of results

Annual reports provide detailed coverage of several important metrics including: total aggregate funding across all agencies and by individual States; as well as additional metrics for outreach activities, award selection rates, and how long it takes for companies to receive funding. Over time this report has expanded and now includes additional information such as funding by key demographics including Women-Owned Businesses, Socially and Economically Disadvantaged Businesses, and small businesses located in HUBZones.

In addition, economic impact reports are available, here.

Challenges, criticisms and lessons
  • Guidance was necessary for clarity across states: Since each agency administers its own individual SBIR program (within guidelines established by Congress), the SBA funds organizations to help applicants navigate the complexities of this and other government grant programs (e.g. Procurement Technical Assistance Centers and  Small Business Development Center, which exist in every state, as well as D.C., Guam and Puerto Rico).

 

  • Abuse control: SBA efforts to reign in abuse of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs continue, yet companies that seem to use SBIR awards as a primary revenue stream rather than a means to creating future revenue paths through new product and process innovations persist. Known as “SBIR mills” many of these companies appear to be clustered geographically in specific metropolitan areas, many of which house major federal labs or research centers, the analysis of SBIR data revealed in September 2020.  This suggests, from a policy perspective, that the federal agencies could be doing much more to curtail the mills and redirect awards into companies more consistently focused on turning innovation into products, profits and jobs. The data reveals the extent of abuse by the small number of SBIR mills among all awardees is not insignificant: awards made to potential mills account for more than 21 percent of all awards made during the period from 2009 to 2019.
Geographic scope
National-level