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SBIR Delivers Critical Capital for Small Businesses through Its Grant Program

Published on Aug 5, 2013


Read our article, 'SBIR Delivers Critical Capital for Small Businesses through Its Grant Program' at 'Time to Start Up,' the small business blog by BizFilings.
After initially incorporating your business, research and development funding should be taken into consideration. Luckily, entrepreneurs and small business owners have an option that few consider - The Small Business Innovation Research (SBIR) program. Find what you need SBIR is a federal grant program established to award federal research grants to small businesses. The program encourages small businesses to engage in research and development, resulting in technological innovation in the small business sector. Grants typically range from $150,000 to upwards of $1 million, and aid in the commercialization of federally funded investments. Just ask Austin, Texas-based Ascendant Engineering Solutions (AES), which has received multiple SBIR grants for technology developments, such as its miniature camera. The Department of Defense was behind this particular SBIR grant; however several federal agencies participate, including:
  • Department of Agriculture
  • Department of Commerce - National Institute of Standards and Technology
  • Department of Commerce - National Oceanic and Atmospheric Administration
  • Department of Education
  • Department of Energy
  • Department of Health and Human Services
  • Department of Homeland Security
  • Department of Transportation
  • Environmental Protection Agency
  • National Aeronautics and Space Administration
  • National Science Foundation
Each of the above federal agencies adheres to guidelines established by Congress in the Small Business Act and by SBA in the SBIR Policy Directive. Participating agencies designate R&D topics in their solicitations, followed by a review of proposals from qualified incorporations.  After a competitive analysis and proposal evaluation, awards are made. There are three phases of the SBIR Program, which small business owners should consider after incorporating a company. Phase I The objective of Phase I is to establish the technical merit, feasibility, and commercial potential of the proposed Federal Research  and to determine the quality of performance of the recipient prior to providing further Federal support in Phase II. Phase I grants normally do not exceed $150,000 and have a six-month period of performance. Phase II The objective of Phase II is to continue the Federal Research initiated in Phase I. 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. Generally, only Phase I recipients are eligible for a Phase II award. Phase II grants normally do not exceed $1 million and have a two-year period of performance. Phase III The objective of Phase III, where appropriate, is for small businesses to pursue commercialization objectives resulting from the Phase I and Phase II Federal Research. The SBIR program does not fund Phase III grants.  In some Federal agencies, Phase III may involve non-SBIR funded R&D or contracts for products or services intended for use by the U.S. Government. As part of the award process, the SBIR-participating Federal Agency and the small business enter into a funding agreement that outlines the performance of R&D funded by the Federal Government. Entrepreneurs have used SBIR for many purposes, including:
  • Substitute for seed round
  • Primary source of revenue
  • Ongoing source of R&D funding
  • Establish research collaborations
  • Gain credibility for other research programs
  • Impress VCs
As always, when incorporating a company, small business owners must think thoughtfully, and dedicate the appropriate amount of time and money into the growth of their business.  After reading this post, we hope any small business owner invested in the innovation of their company’s technology will look to the SBIR program as a potential investor!