SBIR & STTR Programs: Complete Guide to Federal Research Funding
Learn how to win SBIR and STTR awards for your small business. Understand eligibility, proposal writing, funding phases, and commercialization strategies for federal R&D grants.
Quick Answer
SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) are federal programs providing over $4 billion annually in non-dilutive funding for small businesses to conduct R&D. SBIR is for small businesses alone; STTR requires partnership with a research institution. Funding ranges from $50K-$275K (Phase I) to $750K-$1.75M (Phase II).
What are SBIR & STTR Programs?
SBIR and STTR are highly competitive federal programs that encourage small businesses to engage in research and development (R&D) with potential for commercialization. Created by the Small Business Innovation Development Act of 1982, these programs have funded over 170,000 awards totaling more than $50 billion.
Unlike traditional venture capital, SBIR/STTR funding is non-dilutive—you don't give up equity in your company. You retain intellectual property rights while receiving federal funding to develop innovative technologies that address government needs.
Key Benefits
- Non-dilutive funding—keep 100% of your equity
- Retain intellectual property rights to your innovations
- Built-in government customer for your technology
- Credibility and validation for additional fundraising
- Path to Phase III production contracts
SBIR vs STTR: Key Differences
While both programs fund small business R&D, they have distinct requirements for research partnerships and work allocation.
SBIR
Optional (encouraged but not required)
At least 67% (Phase I) / 50% (Phase II)
Must be primarily employed by small business
3.2% of extramural R&D budget
STTR
Required (university or research institution)
At least 40%
At least 30%
0.45% of extramural R&D budget
Eligibility Requirements
To qualify for SBIR/STTR funding, your company must meet specific ownership and size requirements.
Small Business Size
500 or fewer employees, including affiliates
Majority U.S. Ownership
More than 50% owned and controlled by U.S. citizens, permanent residents, or other qualifying entities
For-Profit Entity
Must be organized for profit in the United States
Principal Investigator (SBIR)
PI must be primarily employed by the small business (more than 50% of time during project)
Research Institution Partner (STTR)
Must partner with a U.S. nonprofit research institution (university, federal lab, or nonprofit research organization)
VC/Private Equity Ownership
Small businesses majority-owned by venture capital, hedge funds, or private equity firms may still qualify for SBIR/STTR at some agencies (DoD, NIH, DOE, NSF, ED). Check each agency's specific policies, as rules vary significantly.
SBIR/STTR Funding Phases
Both programs use a phased approach to funding, with increasing investment as technology matures.
Phase I - Feasibility
Proof of Concept
Establish technical merit, feasibility, and commercial potential. Demonstrate proof of concept and ability to achieve Phase II objectives.
Phase II - Development
R&D and Prototype
Conduct full R&D, develop prototype, and prepare for commercialization. Based on Phase I results and continuing scientific/technical merit.
Phase III - Commercialization
Production & Sales
Commercialize technology through government or private sector sales. Not funded by SBIR/STTR set-aside, but SBIR/STTR status enables sole-source contracts.
Participating Agencies
Eleven federal agencies participate in SBIR, and five participate in STTR. Each agency focuses on different technology areas.
Department of Defense (DoD)
Defense technologies, weapons systems, cybersecurity. Largest SBIR budget (~$2B annually).
National Institutes of Health (NIH)
Biomedical and health-related research. Second largest program (~$1.2B annually).
Department of Energy (DOE)
Energy efficiency, renewable energy, nuclear, environmental cleanup.
National Science Foundation (NSF)
Broad range of science and engineering disciplines. America's Seed Fund.
NASA
Space, aeronautics, and related technologies for exploration and science.
Other Agencies
USDA, DHS, EPA, DOC (NIST), DOT, and Department of Education.
Writing a Winning Proposal
Success in SBIR/STTR requires a compelling proposal that addresses technical innovation, commercial potential, and team capability.
Address the Topic
Respond directly to specific agency solicitation topics. Generic proposals fail.
Technical Innovation
Clearly articulate what's new and innovative about your approach.
Commercial Potential
Demonstrate clear market opportunity beyond the government customer.
Strong Team
Highlight relevant expertise and past success of key personnel.
Clear Objectives
Define specific, measurable milestones and success criteria.
Realistic Budget
Provide detailed, justified costs aligned with proposed work.
Pro Tips for Success
- • Contact the TPOC (Technical Point of Contact) before submitting to understand agency needs
- • Review past awards on SBIR.gov to understand what wins
- • Start with agencies that match your technology area
- • Build relationships before you need funding
- • Consider the Direct to Phase II option if you have significant preliminary data
Path to Commercialization
The ultimate goal of SBIR/STTR is commercialization—turning R&D into products and revenue.
Commercialization Pathways
Phase III Government Contracts
Non-competitive contracts to provide products or services developed under SBIR/STTR. Can be awarded by any federal agency.
Commercial Sales
License technology to larger companies, sell directly to commercial customers, or spin off new ventures.
Follow-On Funding
Use SBIR success to attract venture capital, strategic investors, or additional federal R&D funding.
Acquisition
Larger companies may acquire SBIR/STTR companies for their technology and government relationships.
Frequently Asked Questions
How long does it take to get an SBIR award?
Typically 4-9 months from submission to award, depending on the agency. DoD can be faster (3-6 months); NIH is typically longer (6-12 months).
Can I submit to multiple agencies?
Yes, but you cannot submit the same proposal to different agencies. You can submit related proposals addressing different agency needs. Disclose all pending/active SBIR/STTR awards.
Do I need a Phase I to get a Phase II?
Usually yes, but many agencies now offer Direct to Phase II options for companies with significant preliminary work or prior Phase I awards in related areas.
Who owns the intellectual property?
The small business retains IP rights. The government gets a royalty-free license for government purposes only. You can commercialize freely.
What is the success rate?
Phase I success rates range from 15-30% depending on agency and topic competitiveness. Phase I to Phase II transition rates are typically 40-60%.
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