SBIR Program Overview

The DoD SBIR program, funded at approximately $1 billion in FY 2004, is made up of 10 participating components: (see Figure 1): Army, Navy, Air Force, Missile Defense Agency (MDA), Defense Advanced Research Projects Agency (DARPA), Chemical Biological Defense (CBD), Special Operations Command (SOCOM), Defense Threat Reduction Agency (DTRA), National Geospatial-Intelligence Agency (NGA), and the Office of Secretary of Defense (OSD).

The Small Business Innovation Research program funds early-stage R&D at small technology companies and is designed to:

• stimulate technological innovation

• increase private sector commercialization of federal R&D

• increase small business participation in federally funded R&D

• foster participation by minority and disadvantaged firms in technological  innovation
  
  To participate in the SBIR program:
   

• a firm must be a U.S. for-profit small business of 500 or fewer employees

• work must be performed in the United States

• during Phase I, a minimum of 2/3 of the effort must be performed by the  proposing firm; a minimum of 1/2 of the effort in Phase II

• the Principal Investigator must spend more than 1/2 of the time employed by the proposing firm

For Further information regarding program eligibility, limitations, and definitions, review the SBIR solicitations.

STTR Program Overview

The DoD STTR program, funded at approximately $111 million in FY 2004, is made up of 5 participating components: (see Figure 2): Army, Navy, Air Force, Missile Defense Agency (MDA), and Defense Advanced Research Projects Agency (DARPA).

In 1992, Congress established the STTR pilot program. STTR is similar in structure to SBIR but funds cooperative R&D projects involving a small business and a research institution (i.e., university, federally-funded R&D center, or nonprofit research institution). The purpose of STTR is to create, for the first time, an effective vehicle for moving ideas from our nation's research institutions to the market, where they can benefit both private sector and military customers.

To participate in the STTR program:

• a firm must be a U.S. for-profit small business of 500 or fewer employees; there is no size limit on the research institution

• research institution must be a U.S. college or university, FFRDC or non-profit research institution

• work must be performed in the United States

• the small business must perform a minimum of 40% of the work and the research institution a minimum of 30% of the work in both Phase I and Phase II

• the small business must manage and control the STTR funding agreement

• the principal investigator may be employed at the small business or research institution

For Further information regarding program eligibility, limitations, and definitions, review the STTR solicitations.

Three Phased Program

Companies apply first for a phase I award of up to $100,000 to test the scientific, technical, and commercial merit and feasibility of a particular concept. If phase I proves successful, the company may be invited to apply for a two-year phase II award of up to $750,000 to further develop the concept, usually to the prototype stage. Proposals are judged competitively on the basis of scientific, technical, and commercial merit. Following completion of phase II, small companies are expected to obtain funding from the private sector and/or non-SBIR government sources (in "phase III") to develop the concept into a product for sale in private sector and/or military markets (see Figure 3 for program specifics).

SBIR is the largest source of early-stage technology financing in the U.S. Total Federal SBIR/STTR funding in FY 2003 was $1.6 billion. The DoD accounts for nearly half of the total SBIR/STTR program (see Figure 4).

Why participate in SBIR/STTR? You can receive up to $850,000 of seed capital, develop a working relationship and credibility with government R&D programs, and all data rights remain with your firm.

Who participates in SBIR/STTR? Small hi-tech firms from across the country. There have been proposals and awards in all 50 states. Firms are typically small and are new to the program (see Figure 5).

34% of Phase I awardees are first-time DoD winners. Even non-"first-times" are relatively new to the program (see Figure 6). Historically, about 15 percent of SBIR and STTR proposals are awarded a phase I contract; approximately 40 percent of phase I projects subsequently are awarded a phase II contract.

(However, in recent solicitations, a much higher percentage of STTR phase I proposals was awarded a phase I contract.) See our statistical profile/history of the DoD SBIR and STTR programs.

SBIR is a small percentage of the total extramural R&D program (see Figure 7), but it's where small businesses are able to demonstrate their capability to meet federal R&D needs

The SBIR/STTR program reaches out to socially and economically disadvantaged firms. There is significant minority/women-owned firm participation in the SBIR/STTR program (see Figure 8).

For information on the ten-agency federal SBIR program and five-agency STTR program, see our links to other SBIR/STTR web sites, or call the Small Business Administration at (202) 205-6450.

Getting Started in SBIR and STTR

First, review the current solicitation --

The SBIR and STTR solicitations list all the research topics under which DoD is seeking phase I proposals, and also contain detailed information on the parameters of the SBIR and STTR programs and how to submit a proposal. DoD issues two SBIR solicitations and one STTR solicitation each year, according to the following schedule:

All solicitations are available electronically. If you want to be notified when a solicitation becomes available, please sign up for our listserv.

Second, to resolve any questions you may have --

If you have a general question about the SBIR or STTR programs, please contact the DoD SBIR/STTR Help Desk by telephone 866-SBIRHLP (866-724-7457) or by Email. We have also prepared a set of answers to commonly-asked questions about proposal preparation, contracting with the government, and getting paid in a timely manner.

If you have a technical question about a specific research topic listed in the solicitation, you may ask it in two ways:

• Talk by telephone with the Topic Author, whose name and phone number will be listed in the solicitation topic. Important: The Topic Authors will only be listed, and telephone questions will only be accepted, during the two months following public release of the solicitation on the Web Site and before DoD begins accepting proposals.
   

• Submit a written question through the SBIR/STTR Interactive Topic Information System (SITIS), in which the questioner and respondent remain anonymous and all questions and answers are posted electronically for general viewing until the solicitation closes.

DoD SBIR/STTR "Fast Track"

Since October 1995, the Department's SBIR and STTR programs have featured a "Fast Track" process for SBIR/STTR projects that attract outside investors who will match phase II funding, in cash, contingent on the project's selection for phase II award. The matching rates are described in How To Participate. Projects that obtain such outside investments and thereby qualify for the Fast Track will (subject to qualifications described in the solicitation):

• Receive interim funding of $30,000 to $50,000 between phases I and II;
   

• Be evaluated for phase II award under a separate, expedited process; and
   

• Be selected for phase II award provided they meet or exceed a threshold of "technically sufficient" and have substantially met their phase I technical goals.                

Consistent with DoD policy, this process should prevent any significant gaps in funding between phases I and II for Fast Track projects.

Many small companies have found the Fast Track policy to be an effective tool for leveraging their SBIR (or STTR) funds to obtain additional funds from outside investors. This is because, under the Fast Track, a small company can offer an investor the opportunity to obtain a match of between $1 and $4 in DoD SBIR (or STTR) funds for every $1 the investor puts in (see matching rates). See our List of Fast Track Awards.

Please send any comments on, or suggestions for improving, the Fast Track policy to the DoD SBIR/STTR Program Manager at jeff.bond@osd.mil.

How to Participate in the SBIR/STTR "Fast Track"

To Qualify for the Fast Track --

To qualify for the Fast Track, small companies and their outside investors must follow the procedures detailed in section 4.5 of the SBIR solicitation. The most important of these procedures are summarized as follows.

First, toward the end of a small company's phase I SBIR (or STTR) project, the company and its investor submit a Fast Track application. In the Fast Track application, the company and investor:

• State that the investor will match both interim and phase II SBIR (or STTR) funding, in cash, contingent on the company's selection for phase II award. The matching rates needed to qualify for the Fast Track are as follows:

• For small companies that have never before received a phase II SBIR or STTR award from DoD or any other federal agency, the matching rate is 25 cents for every SBIR (or STTR) dollar. (For example, if such a company receives interim and phase II SBIR funding that totals $750,000, it must obtain matching funds from the investor of $187,500.)
   

• For all other companies, the matching rate is 1 dollar for every SBIR (or STTR) dollar. (For example, if such a company receives interim and phase II SBIR funding that totals $750,000, it must obtain matching funds from the investor of $750,000.)

The matching funds may pay for additional R&D on the company's SBIR (or STTR) project or, alternatively, they may pay for other activities (e.g., marketing) that further the development and/or commercialization of the technology.

• Certify that the outside funding qualifies as a "Fast Track investment," and the investor qualifies as an "outside investor," as defined in DoD Fast Track Guidance. Outside investors may include such entities as another company, a venture capital firm, an individual "angel" investor, a non-SBIR, non-STTR government program; they do not include the owners of the small business, their family members, and/or affiliates of the small business.

Second, DoD will notify each Fast Track company, no later than 10 weeks after the end of phase I, whether it has been selected for phase II award. Once notified, the company and investor must certify, within 45 days, that the entire amount of the matching funds from the outside investor has been transferred to the company.

Tips for Prospective Investors

The Fast Track policy offers prospective investors a major new opportunity to leverage their investments in small technology companies working on R&D projects with defense and commercial applications. What follows are suggestions to such investors for taking full advantage of the new policy.

If you, as a prospective investor, are aware of promising small technology companies that are not yet participating in the SBIR or STTR programs:

• encourage them to apply for a phase I award (your interest in a small company will lend credibility to its phase I proposal); and
   

• during phase I, qualify them for the Fast Track with your commitment of matching funds.

If you are looking for small technology companies in which to invest, search the list of ongoing phase I SBIR and STTR projects and, where you find promising opportunities, invest in the company, thereby qualifying it for the Fast Track.

If you have questions or seek assistance regarding the Fast Track

• See DoD's Fast Track Guidance, which discusses what types of relationships between a small company and an outside investor qualify as a "Fast Track investment."
   

• See our list of private-sector sources of early-stage technology financing.
   

• If you have other questions regarding Fast Track, please contact the SBIR/STTR Help Desk by Email or telephone 866-SBIRHLP (866-724-7457).

The Minority Business Round Table (MBRT) is a national non profit 501(c) 3 membership organization for CEOs of the Nation’s largest minority-owned companies. MBRT was founded with the objective of promoting, supporting and advocating businesses owned by ethnic minorities including Native American, Hispanic American, African American and Asian American. Since inception the organization has worked incessantly toward taking its members businesses to a new level through workshops, conferences and formulating and articulating public policies that impact minority-owned businesses.

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