Funding Your Company with Grants: Innovation Pays

In addition to the traditional sources of funding for a company (venture capital, loans and bootstrapping), there is one source of money that many forget to look to – SBIR and STTR grants. The SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) programs are designed to stimulate technological innovation and provide opportunities for small businesses. Grant solicitations for many agencies are open now and will close in January, so this is an ideal time to investigate these often-forgotten funding sources.

Five federal agencies reserve a portion of their R&D funds to be awarded via the STTR program to small business/nonprofit research institution partnerships. For more information about the STTR program, visit http://www.sba.gov/sbir/indexsbir-sttr.html. But for purposes of this article, and timing of solicitation requests (open now), I will focus on the SBIR program.

SBIR grants offer significant benefits to small businesses

The SBIR program was established in 1982 to provide increased opportunities for small businesses to meet federal research and development needs, increase employment, foster and encourage participation in technological innovation by socially and economically disadvantaged persons, and increase private-sector commercialization of innovations derived from federal research and development.

The SBIR program provides over $1 billion annually to small businesses to research high-risk innovations and solicits research in a variety of subject areas. Benefits of involvement are:

• Most patent and proprietary rights remain with the business
• SBIR is not a loan program – funds do not have to be repaid
• The business owner does not sacrifice equity in the company

SBIRs are three-phase programs

Phase I is traditionally a six-month feasibility study in which the business must demonstrate the technical feasibility of the proposed innovation. Funding available for Phase I research ranges from $50,000 to $100,000, depending on the individual agency guidelines.

Phase II is a major two-year research and development effort. A company must successfully complete a Phase I project to be eligible to apply for a Phase II SBIR project. Phase II generally involves development and testing of prototypes. Funding for Phase II ranges from $200,000 to $750,000, depending on the individual agency guidelines.

Phase III focuses on commercialization. Federal funding is not provided for Phase III, but often the government agency becomes the company’s first client.

Applying for an SBIR grant
During the year, eleven different federal agencies release at least one SBIR solicitation requesting proposals from small businesses. The agencies that administer SBIR programs provide support for a wide range of research activities. These agencies issue more than 1,000 general and specific SBIR research topics each year. SBIR projects range from new radar systems for the Department of Defense to new uses of agricultural products. Some of the general research areas commonly funded include the following:

• communications
• computers
• electronics
• energy
• environmental technologies
• life sciences
• materials
• mechanics
• health sciences

The SBIR program solicitations are issued by: the Department of Agriculture, the Department of Commerce, the Department of Defense, the Department of Education, the Department of Energy, the Department of Health and Human Services, the Department of Homeland Security, the Department of Transportation, the Environmental Protection Agency, the National Aeronautics and Space Administration and the National Science Foundation.

Each agency uses different guidelines and procedures to administer its individual SBIR program. Each agency has different research topics, uses a different proposal review process, and may impose different dollar limitations on awards and other requirements. The following is a list of web pages for the federal agencies’ department-specific SBIR and STTR programs. Many of them have their solicitations open now and will close in January. Take a look at their sites for possible grant solicitations for your company.

Eligibility for SBIR grants
For a business to be eligible for the SBIR program, it must meet the following criteria:

• American-owned (at least 51%) small business
• For-profit entity
• Fewer than 500 employees
• Able to perform two-thirds of the Phase I and one-half of the Phase II work within the company itself

If you meet the criteria and apply, I cannot stress enough to FOLLOW THE DIRECTIONS for application. Many grants are thrown out because of errors in the application.

Not quite ready this year?
If your company is not ready, but interested, there is always the possibility of a second solicitation cycle in 2006, 2007 and beyond. To stay on top of these solicitation announcements, I recommend subscribing to one of two listservs: the State Science and Technology Institute Weekly Digest (www.ssti.org/Digest/digform.htm) or the SBIR-ALERT. To subscribe to the SBIR-Alert mailing list, send an email to lyris@lyris.pnl.gov with the following in the subject line or body of your message (your name is optional): subscribe sbir-alert first_name last_name.

There are a number of websites that give you step-by-step instructions on the application process, and tell you about upcoming conferences, such as www.zyn.com/sbir/ and www.sbirworld.com. At the moment there isn’t a conference scheduled in Oregon, but on December 8th, the Washington Tech Center is hosting a Defense and Security Grants Conference in Seattle. (For more information, go to www.watechcenter.org.)

Good luck!

About the author

Barbara Anderman is the special events and programs manager for the Software Association of Oregon. In her past life, she co-ran the Northwest Innovative Business and Technology Center, a non-profit dedicated to helping companies find federal funding for R&D. In 1998, NIBTEC received the Tibbets Award for its work with the SBIR program and outreach efforts.