Introduction to the SBIR Program

05/19/21 | 6 MIN READ Revised 09/08/21

The SBIR program is a well-funded and extensive governmental funding program that aims to provide innovation grants to small businesses.

SBIR stands for Small Business Innovation Research. The SBIR program is a well-funded and extensive governmental grant program that aims to provide funding to small businesses in the innovation sector. There is another national small business funding program called the STTR, but this article does not cover STTR grants. If you want to learn more about their differences, check out this article.

🔬Read: What are SBIR/STTR Grants?

Portrait of young man filling in application form

What is an SBIR Application?

An SBIR application is a highly structured request for funding. Each step is carefully laid out, as it has been perfected by various agencies over many years. SBIRs are distinguished from many academic grants in the way that they are mainly focused on both science and product development. Many other grants are focused on just one of the two. There is limited hypothesis testing when completing and receiving an SBIR.

Two documents that you should be familiar with when applying for an SBIR grant are the Omnibus Solicitation and the general SBIR Instructions. Click the links to learn more, but don’t expect to read them in one sitting! Each is very long and incredibly detailed, so they should be used more as a reference guide than a how-to.

As tedious as it is, reading these two documents can be very helpful for understanding the SBIR process. It may be a good idea to spend a few weekends trying to digest the information a little bit at a time.

🔬Learn about: Do's & Don'ts of the SBIR Grant Application Process

Advantages of SBIR Funding

Despite its intense selection process, there are many advantages to applying for an SBIR grant. First and foremost, there is a higher probability of funding versus venture capitalist groups. Around 15% of companies that apply for a Phase I SBIR receive funding. Another important advantage of SBIR funding is that you do not need to give up ownership of your company in order to receive funding. This allows you complete control and freedom from investors that may not agree with your company operations. 

You also have the freedom to modify your development plan after you receive an SBIR grant. This can not be major modifications, but you are able to deviate from your specified plan if you think that is the best option. An SBIR grant also is a great asset if you wish to receive funding from investors later on. Receiving an SBIR grant shows that your company is legitimate enough to receive funding. This is a great way to put your business ‘on the map’. You can say that you have been funded by the National Institute of Health (NIH) or another organization.

Contact a Program Officer

Before starting a new project or researching new ideas in search of an SBIR grant, you should contact your program officer. It is best to first email your correct program officer and request a phone call. You can also send them a one-page outline that details your proposed application (using bullet points and not paragraphs). This way, the program officer is able to see what your idea is all about and whether or not it will fit into what their department needs. You should also ask if your project requires a budget over that of their statutory budget limit.

You need to be persistent when contacting SBIR program officers. They are often very busy, so shooting them a single email might not cut it if you want to develop a substantial relationship with them.

Division Topics and Priorities

Understanding what division your project will fit into is very important for gaining SBIR funding. The first way that you can find out which division your project will fall under is by studying the Omnibus Solicitation document. This document, although quite lengthy, will give you a good look into each division’s priorities and what a majority of their funding might go towards.

Another way to see what division your project could be funded by is to subscribe to Funding Opportunity Announcements. These announcements alert you when there is a new funding opportunity and what the latest priorities of each department are (more on that below).

There are also Strategic Plans and Visions for each institution that provides SBIR grants. In your proposal, it is worthwhile to mention whether or not your project aligns with these plans and visions. For example, if your project has applications to treating coronavirus it may be of more immediate use to the NIH and other institutions.

After doing some research on this you should be able to attempt to direct your application to that division. This will make it easier for the program officer to see if your application will work for their division’s priorities.

Subscriptions

As mentioned above, subscriptions are a great way to stay up to date with the NIH’s funding priorities. The links below are great to stay up to date and in the loop. 

Eligibility and Requirements

Small business eligibility and requirements for applying for an SBIR grant can be very difficult to understand. The best and first thing you should do is visit this website. It is the official NIH SBIR and STTR funding criteria website. This is where you can read about how your company's company setup and location can affect your eligibility for SBIR grants. There are a couple other things you need to be eligible for an SBIR grant. Click on the links to be directed to each site to learn more:

Most of these requirements are registrations, and are fairly simple to carry out. A common roadblock, however, is outsourcing or company ownership. SBIR grants do not allow for the grantee to outsource large amounts of work to other laboratories or foreign companies. That is not to say that you can not outsource some necessary work, but it must be limited to about 40% or less of the overall project.

Basic Program Structure

Here is the basic layout of the SBIR phase process. A company can be funded by an SBIR grant at Phase I or Phase II. Phase III is not funded by the NIH SBIR program, as Phase III is no longer innovative, instead Phase III is more marketing and manufacturing.

  • Phase I - Feasibility and Proof of Concept
  • Phase II - Research and Development, attempt to Complete Product
  • Phase III - Commercialization

Below are some of the goals of both Phase I and Phase II in easy to read bullet format:

Phase I

  • Proof of Concept
  • Often includes hypothesis testing
  • Establish foundation for Phase II, ‘paint the picture’
  • Reduce risk of further expenditure
  • Milestones/criteria for success 

Phase II

  • Follow through on the promises made in Phase I
  • Evaluate in human subjects
  • Demonstrate efficacy
  • Advisory Board Summary, thought leaders approval
  • Production-ready system or device (rarely the case in actuality)

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Valleys of Death

The 'valleys of death' are the time periods in between funding. Oftentimes, companies become stuck in these areas as they do not have access to new money or they have hit a stall in their production/research. The first valley of death is after Phase I and the second after Phase II, etc. Some options to attempt to get out of these valleys are finding alternate sources of funding. These are usually venture capitalist funding or finding an industry partner to fund your research. Although you may have to give up some ownership of your company, it is often worth it to propel your company to the next phase of production.

A common scenario is that companies fall into a loop after completing a Phase II study. Then, the company receives another Phase I award (for a parallel project) and the loop starts over again. This is a sign that the company is not actively looking to commercialize their product. Commercialization and manufacturing is an important part of the medical device or drug manufacturing market. Thinking about how your company can carry out or how they can find help to commercialize throughout the entire process is paramount to a product’s eventual success. 

Deciding Whether to Apply for an SBIR

There are several things to consider when your company is deciding whether or not to apply for an SBIR. First and foremost, you should examine the strength of your Value Proposition. A Value Proposition is what makes your company unique, and why it will be a good value to the market. You can learn more about unique value propositions in this article.

You should also think about whether or not your project will fit into the Phase I - II structure. Not all projects will be able to be governed by that means, and that is ok. If you project does not fit into it, is there a way you could modify it so it does fit into the structure?

An idea that goes along with whether or not your project fits is if you are able complete an application in the first place. Most successful SBIR applications are drafted by multiple people and can take many months or even years. Do you have the resources/time to do this, and then implement it? If you are a new principal investigator (PI) you can also be at a disadvantage because of the highly competitive arena. New PIs often do not have the necessary relevant business and scientific experience, and can lack the key personnel to carry out the project.

🔬Related: 8 Tips for Writing a Winning SBIR

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Budget and Time Limits

Below are the basic budget and time limits for each phase of SBIR funding. Many researchers end up finding out that there is never enough money or time, so try to plan accordingly! However, you can apply for a waiver if you qualify to exceed these limits. Be sure to ‘warn’ your program officer if you plan to submit an application with a waiver.

Phase I:

  • $150k
  • 6-24 months

Phase II:

  • $1 million 
  • 2-3 years

Takeaways

The SBIR grant program is a great option for small businesses looking for funding for a new research process. Although the application may be lengthy and confusing, 15% of Phase I applicants receive funding. The first step is to contact your program official and see whether or not your idea can fit into a solicitation. After that, it is up to you to draft an application to catches an agencies interest and fits their needs.


Frequently Asked Questions

Q: Are foreign-owned companies eligible for SBIR grants?

A: No; the SBIR program was intended to fund American businesses. 

Q: How necessary is it to follow the approved budget?

A: You would have to talk to your program officer as it is on a case-by-case basis. Oftentimes BIG changes are not allowed but reasonable changes are.

Q: Can you apply for a Phase II directly?

A: Yes, but reviewers will be expecting a lot of your application.

Q: Do you need a patent to apply for Phase II?

A: Not generally, but it should be an objective of Phase II. If you do not have the funds to pay a patent lawyer, you can get a letter from them expressing their interest in drafting a patent once you receive funding.


This content comes from a 4-week webinar series, hosted by University Lab Partners in partnership with ScienceDocs consultant, Dr. Jim O'Halloran.

📽️ Watch the full webinar, Introduction to the SBIR Program.

Dr. O’Halloran has more than 17 years of experience with the SBIR program and has received funding from the National Institute on Aging (NIA), National Institute of Mental Health (NIMH) and the National Institute on Neurological Diseases and Stroke (NINDS). He has served as principal investigator on more than 20 grants, totaling more than $10M.

Be sure to subscribe to the ULP Youtube Channel to never miss another webinar, and connect with us on LinkedIn to stay in the loop!

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