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SBIR: the billion-dollar R & D secret

BT Catalyst, Nov-Dec, 2003 by John Ujvari

This is the first column in a two-part series on the federal government's Small Business Innovation Research Program. Part one introduces the program. Part two, to be published in the January/February issue of BT Catalyst, will look at North Carolina's competitiveness in receiving SBIR funding and how our state's biotechnology companies can tap into the program more effectively. The author is a SBIR program specialist at the North Carolina Small Business and Technology Development Center. For further information, please contact him at sbir@sbtdc.org, 919-962-8297 or visit www.sbtdc.org/technology/sbirsttr.asp.

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NEVER BEFORE has the enthusiasm for federal R & D grants been greater. One of the best-kept billion-dollar R & D secrets is the Small Business Innovation Research (SBIR) Program. No other funding source offers pre-seed stage funding for high-risk research with such few strings attached. Sure, this is a program of the federal government, so you will not get a check tomorrow, but neither will you get a large chunk of your equity ripped from your small firm. In fact, the small business retains all intellectual property associated with the funded research in most cases. And best of all, the funding does not need to be paid back.

The SBIR Program is a highly competitive three-phase award system that provides qualified small businesses with opportunities to propose innovative ideas that meet specific research and development needs of the federal government. Federal agencies with more than $100 million in extramural R & D are required to allocate 2.5 percent of their budgets exclusively for small businesses, which resulted in the availability of about $1.6 billion in fiscal year 2002 to small R & D businesses.

Participating federal agencies include the following: Department of Agriculture, Department of Commerce, Department of Defense, Department of Education, Department of Energy, Department of Health and Human Services, Department of Transportation, Environmental Protection Agency, National Aeronautics and Space Administration, and National Science Foundation.

Eligibility

To participate in the SBIR Program, a business must be under 500 employees, be American-owned and independently operated and be for-profit. Therefore, your firm can be a relatively large "small business" and still be eligible.

Three Phases

SBIR is a three-phase program, two of which are federally funded. Phase I is a feasibility study to evaluate the proposed project's technical merit for which an awardee may receive a maximum of $100,000 for about six months. Phase II is the principal R & D effort, which expands on the Phase I results. This two-year project may receive up to $750,000 in funding. Only Phase I awardees are eligible to compete for Phase II funds. Phase III is the commercialization of the Phase II results and moves the innovation from the laboratory to the marketplace. This requires use of private sector or other non-SBIR funding. Some agencies do provide follow-up "Phase IIB" and/or matching funds to assist with commercialization activities.

Evaluation Criteria

The evaluation criteria for SBIR proposals are dynamic. Reviews are conducted by experts in the field for which the research covers. Reviewers are most often not employed by the agency and are not compensated for their reviews. They closely evaluate both the scientific and technical quality as well as the innovativeness of the technology development that is being proposed. Also assessed are the ability to carry out the project, i.e. qualifications of the principal investigator and other key personnel, adequacy of facilities and equipment, and soundness of work plan. And last but not least, due diligence is done on the impact of the research as evidenced by technical and/or economic benefits, the likelihood that the work would lead to a marketable product, or the likelihood the project could attract further funding. Reviewers sign confidentiality forms, but it is recommended that the small business take steps to protect any IP it divulges via patents. Note, however, that patents are not required.

Technology Industry

SBIR: the billion-dollar R & D secret

BT Catalyst, Nov-Dec, 2003 by John Ujvari

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