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Non-Dilutive Funding Options from the National Heart, Lung and Blood Institute

12/12/22 | 6 MIN READ

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National Institutes of Health (NIH) Small Business Grant Programs

The two main grant programs that the NIH participates in are the Small Business Innovation Research (SBIR) grant program and the Small Business Technology Transfer Research (STTR) program. 

Within the NIH, the SBIR program distributes allocated federal funds for small businesses completing research and development (R&D) that align with the NIH’s interests. The STTR program provides funding to facilitate cooperative R&D between small businesses and US research institutions, usually universities. This program is to yield technology to be commercialized. 

The NIH has a $1.23 billion budget to fund SBIR and STTR grants. The National Heart, Blood, and Lung Institute (NHLBI), one of the institutes that make up the NIH, awards approximately $120 million non-dilutive funds annually.

SBIR and STTR funding is called non-dilutive capital because there is no repayment needed once funds are disbursed, and small businesses retain their intellectual property. This is one of the biggest advantages of obtaining SBIR/STTR funding. These grants are usually awarded to technologies that have not been de-risked to private investors. The NIH makes risky investments in early stage technology, with the goal of investing enough federal dollars in these technologies so they are sufficiently de-risked and ready for external investors. SBIR and STTR grants provide recognition, verification, and visibility to new technologies, and can be leveraged to gain future funding.  

NIH funding programs have two phases, and small businesses apply to different phases of funding depending on their situation. Phase I encompasses feasibility and proof-of-concept. Phase II includes full R&D, and scaling and commercialization offers. Businesses can also apply to the Fast-Track or Phase IIB funding. The Fast-Track allows companies to receive Phase I and II funding without having to reapply, given they reach their Phase I milestones. Phase IIB provides companies that need FDA approval an additional $3 million over 3 years, to encourage the FDA approval process. While other agencies in the federal government participate in Phase III programs, where the US government acts as a buyer of commercialized technologies, the NIH does not because small businesses beyond Phase II no longer align with the NIH’s interests in funding nascent technology and research.

Eligibility requirements

SBIR and STTR awards are only made to small businesses. To be eligible, small businesses must meet the following requirements:

  • Be an organized for-profit U.S. business
  • Have 500 or fewer employees, including affiliates - though most small businesses funded through the NHLBI’s programs have 50 or fewer employees. 
  • The work must be completed in the U.S. (with a few exceptions) 
  • More than 50% of the business is U.S. owned by individuals and independently operated. 

If the last requirement is not met, your small business can still apply if it is more than 50% owned and controlled by one other business concern that is more than 50% owned and controlled by one or more individuals. For the SBIR only, it is possible to apply if more than 50% of the small business is owned by multiple venture capital operating companies, hedge funds, private equity firms, or any combination of them. 

Technical and Business Assistance (TABA) Funds

TABA Funding, an NIH-wide program that the NHLBI participates in, assists businesses with product development concerns. The NIH provides $6,500 for Phase I and $50,000 for Phase II applicants, to support activities not related to specific aims of the project. This includes funding the purchase of a vendor who provides market research and commercialization activities. These funds do not count for budget caps and must be requested at time of application.

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Application Timeline

The NIH SBIR/STTR grant timeline takes 5-8 months. Each application is reviewed by NIH employees with scientific and business expertise and assigned a score that correlates to funding priority. There are application cycles on January 5, April 5, and September 5, with submission delays if the cycle falls on a federal holiday. Businesses are expected to start their project only when funding is disbursed.

The application cycle length differs based on funding cycles - for example, the September funding cycle has the greatest delay because it coincides with the congressional budgetary process. The application cycle is a long process, so it is important for businesses who are seeking funding to apply as soon as they can, in order to secure funding earlier. 

🔬Read about:  Understanding the SBIR Review Process

NHLBI Mission Space

The NHLBI funds technologies focusing specifically on preventing, treating, and diagnosing heart, lung, blood, and sleep related diseases. As a caveat, if the NHLBI does not fund oncological lung and blood diseases - those applications should be sent through the national cancer institute. 

Approximately 35% of the current NHLBI’s portfolio is therapeutics, including biologics, peptide therapeutics, small molecule drugs. The next largest section of the portfolio consists of supportive or therapeutic devices to support surgery or treat conditions. Another area of the NHLBI's portfolio consists of research tools and in vitro diagnostics and monitoring or sensing devices. The rest of the portfolio consists of health IT or digital health applications and imaging devices.

Compared to other institutes, the NHLBI's portfolio is device heavy. However, funding for NIH grant programs come through omnibus funding opportunity announcements - so the NHLBI does not fund specific tech areas or disease areas, and rather looks for both clinical and non-clinical programs. 

If there is confusion about what institute your technology falls under - such as cardiovascular complications of diabetes, which overlaps with the national institute for diabetes, digestive, and kidney diseases - it is recommended that you reach out to a NIH grants officer. 

NHLBI Innovation Office Programs and Resources

The NHLBI Innovation Office not only provides opportunities for small businesses, but also provides support and knowledge for academic innovators and translational researchers. The office has three main branches: academic innovation, small business innovation, and innovator support. 

Academic Innovation

The programs designed to cater towards academic innovators are: 

  • The Catalyze Program, which provides a comprehensive suite of support and services to facilitate the translation of discoveries in the NHLBI’s scientific focus into viable products ready for human testing. Catalyze supports product definition and preclinical activities, including developing assays, prototype development, scale manufacturing, and animal testing. However, Catalyze does not support clinical or FDA engagement work. Nonprofit researchers and US small businesses can apply for this. 
  • CAPCat is intended to provide “late-stage” entrepreneurial and regulatory support. It focuses on technologies that can be rapidly deployed to enhance diagnosis, monitoring, management and/or treatment in the area of the NHLBI’s scientific focus areas. The CAPCat program also has an additional interest in projects that incorporate complementary and integrative health approaches. 
  • NIH Centers for Accelerated Innovations and Research Evaluation and Commercialization Hubs (NCAI/REACH), which are academic proof-of-concept centers that help academics translate their discoveries from the bench into commercial health products.

Small Businesses

The NHLBI Small Business Innovation program is housed within the NHLBI Innovation Office, and provides funding, professional support, and supplement programs that small businesses can utilize. Its programs aid small businesses in securing privatized funding and investor partnerships, and fall into three categories: commercialization programs, awards to accelerate commercialization, and diversity programs. 

The commercialization programs include: 

  •  I-Corps, an intense 8-week NIH program focused on customer discovery.
  • C3i, an entrepreneurial training program for medical device innovators. 
  • Technical and Business Assistance (TABA) Needs Assessment Program, which is available to any company receiving a small business grant and did not request TABA funds in their application. Eligible small businesses can obtain a comprehensive assessment of their Phase I project, showing areas of their company that are ready for investors and areas where de-risking is required. 

The awards granted by the NHLBI include:

  • The main SBIR and STTR awards, and Phase IIB awards
  • Commercial Readiness Pilot (CRP), which provides commercialization support to previous or current SBIR/STTR Phase II and IIB awardees. These funds focus on later stage R&D that are not typically supported through Phase II or IIB grants or contracts.

🔬Learn more: 9 Strategies for Winning Grants at the NIH and Beyond

The programs that specifically aim at increasing diversity and inclusion within the small business grant program include:

  • The diversity supplement program, which gives small businesses additional funds for salary support for candidates from underrepresented minority groups including female candidates.
  • Applicant Assistance Program (AAP), which is a free 10-week coaching program for new and previously unsuccessful Phase I grant applicants. This program encourages submissions from businesses owned or led by historically underrepresented individuals including women. The AAP provides Phase I preparation support, application mentorship, and submission process coaching, but does not submit the application for you or provide grant writers.  

Innovator Support

A unique aspect of the NHLBI is its team of entrepreneurs-in-residence and entrepreneurial experts that provide advice and consultations to academic innovators and small business grantees. There is the NHLBI Mentor Network, which engages business experts not employed by NHLBI, to provide targeted mentoring based on company needs. Another resource is NIH SEED support. The NIH SEED office is the main small business and entrepreneurial office at the NIH, and the NHLBI works closely with the NIH seed office. 

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NHLBI Budget Specifics

Federal agencies have general guidelines for budgets, which tend to be $150,000 for 6-12 months of Phase I projects and $1 million for Phase II projects over 2 years. 

The NIH has special agreements with the Federal Small Business Administration that increase the hard caps; the hard caps at the NIH are typically $259,000 per 6-12 months for Phase I projects and 1.73 million per 2 years for Phase II projects. 

The NHLBI provides funding over the hard caps for some projects: the key is to specify one of the small business administration-approved waiver topics when you submit your budget justification. If your small business is going to be requesting more than $300,000 for Phase I or $2 million for Phase II proposal, it is recommended you reach out to a NHLBI officer in advance because grants larger than these will change the budget of the SBIR and STTR grants programs. 

🔬Read more about: How Incubators Can Improve Your SBIR/STTR Grant Application

Frequently Asked Questions

Q: Does the NHLBI allow CRO-type activities to count as small business costs?

A: Yes, provided that a) the service must be commercially available, b) data analysis is done by small business, c) it must be done on a fee per basis so you are paying just for the service. 

Q: What is the difference between TABA Funding and TABA Needs Assessment?

A: TABA Funds are requested at the time of application, and are a requested cost in the application. TABA Needs Assessment is a report for Phase I SBIR or STTR awardees who were not awarded TABA funding within the Phase I award budget.

Q: What are the biggest mistakes that SBIR/STTR applicants make?

A: It depends on the type of mistake. In registration, companies can wait too long to complete registrations, and run into issues. On the grant proposal, some write a small business grant like a research project grant, and don't touch on the commercialization potential or how it furthers the NIH mission.

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