Low technology research funds

Nation's Business, April, 1986

Low Technology Research Funds In the first year of a five-year program designed to encourage innovation by smaller companies, most research and development contracts awarded went to firms less than five years old, having fewer than 50 employees and with annual revenues under $5 million.

The federal program, known as Small Business Innovation Research, has suddenly become a major source of seed capital for start-up companies, says Timothy P. Flynn, a senior manager for Peat, Marwick, Mitchell & Company's high technology practice in Minneapolis. The national accounting firm recently completed a survey of companies that received 1,800 such contracts.

Federal R&D contracts with small private sector companies are funding development of such things as low-flow separators for oily bilge water, new ways to control volatile emissions of organic compounds and a fish food consumption monitor.

"This program is an excellent opportunity for emerging science and technology-based companies to get started," Flynn says. R&D contracts worth about $860 million will be awarded by 12 federal agencies over the next 18 months. Firms supplying low-technology products and services to the federal government also participate in the program.

R&D funds totaling about 1.25 percent of overall federal R&D spending are earmarked for small companies under the program, which expires in 1988. It began in 1983, after officials recognized that small firms were getting squeezed out of federal research contracts. Historically, most major inventions have been made by small companies, and it is estimated that R&D spending by small companies is more than twice as effective than is such spending by big companies.

Robert E. Berger, Small Business Administration director of innovation and technology, says the SBIR program is working as intended, though it is too early to say how many start-ups that have received their initial funding as a result of SBIR contracts will become viable businesses.

Contracts of up to $50,000 are available for feasibility research and up to $500,000 can be provided for R&D activities.