SBIR/STTR INNOVATION WORKSHOPDECEMBER 9, 2015

SBIR and STTR 101Small Business Innovation Research Small Business Technology Transfer

Karmjot GrewalProgram Manager

Office of Community and Economic DevelopmentEmail: kgrewal@csufresno.edu

2

At ~$2.5B, SBIR/STTR is the largest Federal program available to help small business inventors negotiate the innovation ecosystem: >Over $40B and 145,000 awards since 1982 Averaging 10 patents/day

For innovation investors, SBIR/STTR is non-diluted funding (no equity taken) used to reduce risk, accelerate technology, and preserve your IP rights.

This Fall Regional SBIR/STTR Innovation Summit in Austin is a one-stop entry into SBIR/STTR for entrepreneurs – a great chance to talk directly with funders.

SBIR/STTR reauthorization in 2011 focused on commercializing technology: on delivering product or process to a customer.

Why SBIR/STTR?

Why SBIR/STTR? (cont.)

Government’s incentives Test drive small business capability Proactive risk reduction Early/high-risk S&T with SBIR/STTR funding Competing approaches open up additional technology alternatives Non-competitive follow-on awards High level of matching funds

Small Business’ incentives Largest source of early stage R&D funds for small firms Company retains data rights for 4 years (5 for DoD) Builds credibility of company’s research Follow-on awards are non-competitive

3

4

Program Overview

Small Business Innovation Research (SBIR): a set-aside program created by Congress in 1982 for small business concerns to engage in Federal R&D -- with potential for commercialization.

Small Business Technology Transfer (STTR): a set-aside program created by Congress in 1992 to facilitate cooperative R&D between small business concerns and U.S. research institutions -- with potential for commercialization.

3.0%FY2016

0.45%FY2016

SBIR and STTR were reauthorized by Congress in P.L. 112-81 for 2011 – 2017, with annual increases in the assessment of Federal

extramural RDT&E funds.

5

SBIR & STTR Funding Levels

Agencies allocate a percentage of their extramural R/R&D budgets for the SBIR & STTR programs SBIR: 3.0% (FY 2016), for agencies with >$100B in extramural R/R&D STTR: 0.45% (FY 2016), for agencies with >$1B in extramural R/R&D

Congress has increased the allocation percentages since the programs were initiated

1980 1985 1990 1995 2000 2005 2010 2015$0.0$0.5$1.0$1.5$2.0$2.5$3.0

$B

1980 1990 2000 2010 20200.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

SBIRSTTR

ALLOCATION PERCENTAGEAVG AMOUNT AWARDED*

*source: SBIR.gov, 5/15/2014

6

Program Goals

SBIR est. 1982 Stimulate technological innovationUse small business to meet Federal R&D needsFoster and encourage participation by minorities and disadvantaged

persons in technological innovationIncrease private-sector commercialization innovations derived from

Federal R&D

STTR est. 1992 Stimulate and foster scientific and technological innovation through

cooperative research and development carried out between small business concerns and research institutions

Foster technology transfer between small business concerns and research institutions

7

SBIR Program Eligibility Organized for- profit U.S. business 500 employees or fewer, including affiliates More than 50% directly owned and controlled by one or more individuals who

are citizens or permanent resident aliens of the United States PI’s primary employment must be with the small business concern

New eligibility authority available to Agencies from reauthorization: More than 50% directly owned and controlled by one or more for-profit

businesses, each being more than 50% owned and controlled by one or more individuals

NIH initiative: Be a concern which is more than 50% owned by multiple venture capital operating companies, hedge funds, private equity firms, or any combination of these. No single venture capital operating company, hedge fund, or private equity firm may own more than 50% of the concern.

8

STTR Program Eligibility Applicant is a small business concern Formal cooperative R&D effort

Minimum 40% by small business Minimum 30% by U.S. research institution

U.S. Research Institution College or University; other non-profit research organization Federal R&D center (added by reauthorization statute)

Intellectual property agreement Allocation of data rights for four years Right to carry out follow-on R&D and commercialization via

Phase III contracts and investment

9

PHASE II Full Research, R&D to Prototype Award Guideline: $1M (SBIR)/$1M (STTR) … varies by Agency … can

rise to $1.5M, or more with waiver Duration: 2 years

PHASE III Commercialization Subsequent investment to achieve commercialization, or sale Use of non-SBIR/STTR Funds

PHASE I Feasibility Study Award Guideline: $150K … varies by Agency … can rise to $225K Duration: 6 months (SBIR)/12 months (STTR)

SBIR/STTR: 3-Phase Competitive Program

10

PHASE II Full Research, R&D to Prototype SBIR: 33% of Awards | 74% of Funds | Average Size $919,943 STTR: 30% of Awards | 67% of Funds | Average Size $862,820

PHASE III Commercialization Use of non-SBIR/STTR Funds

PHASE I Feasibility Study SBIR: 67% of Awards | 26% of Funds | Average Size $158,304 STTR: 70% of Awards | 33% of Funds | Average Size $189,530

SBIR/STTR: Phases by the Numbers (FY2014)

11

What Are My Funding Options?

DiscoveryProof-ofConcept

ProductDesign

ProductDevelopment

Manufacturing/Delivery

Idea Pre-seedFunding

Seed Funding

Expansion/MezzanineOperating Cap.

Friends and Family

Angels

Seed Funds

Venture FundsFounder

Institutional Equity

Loans / BondsAngel Groups

Start-up Funding

SBIRPhase I Phase II Phase III

12

SBIR and STTR Awards

Critical Early Stage R/R&D funding The SBIR & STTR programs provide funding for high risk,

innovative projects SBIR & STTR awards provide credibility when seeking funding

or partnersSBIR/STTR awards are executed as grants or contracts

No repayment No dilution of company equity No cost sharing is required for Phases I and II. Cost sharing

may not be used as an evaluation criteria.

13

What Does a SBIR/STTR Firm or Entrepreneur Look Like?

Doesn’t have to have yet formed the companyCompany must be for profit, US owned and operated, and

under 500 people Typically they are primarily a R&D organization both in what

they do and their staff. Average firm size is 9. As they get larger (over 30) you see balance or product development and sales in addition to R&D

Focus is on performing R&D – Not for purchasing equipment, commercializing a technology that has already been developed, or one that has very low risk and only needs capital

14

Intellectual Property

Patent rights Small business concerns

normally retain the principal worldwide patent rights to any invention developed with Government support

Government Use The Federal Government

receives a royalty-free license for Federal Government use http://www.uspto.gov/

15

Data Protection

Protection Period Data generated from your R/R&D is

protected from public disclosure for a minimum of 4 years (civilian agencies) or 5 years (DOD) after the conclusion of your award (Phase I, Phase II, or federally funded Phase III)

Government Use The Government retains a royalty-free

license for Government use of any technical data delivered under an SBIR award, whether patented or not

16

BUDGETS

17

SBIR/STTR Budgets by Agency, FY 2015

DOD

NIH*

DOENSF NASA

All Others

~$2.5B in FY15across all agencies

Agencies with SBIR & STTR Programs Budget

Department of Defense (DOD) $ 1.070 B

Department of Health and Human Services (HHS): National Institutes of Health (NIH)*

$797.0 M

Department of Energy (DOE), including Advanced Research Projects Agency (ARPA-E)

$206.1 M

National Science Foundation (NSF) $180.1 M

National Aeronautics and Space Administration (NASA)

$ 176.0 M

Agencies with SBIR Programs Budget

U.S. Department of Agriculture (USDA) $20.3 M

Department of Homeland Security (DHS): Science and Technology Directorate (S&T) and Domestic Nuclear Detection Office (DNDO)

$17.7 M

Department of Education (ED)* $8.4 M

Department of Transportation (DOT) $7.9 M

Department of Commerce (DOC): National Oceanic and Atmospheric Administration (NOAA) and National Institute of Standards and Technology (NIST)*

$7.5 M

Environmental Protection Agency (EPA) $4.2 MGrants

Contracts*NIH and ED also issue contracts; Within DOC, NIST issues grants and NOAA issues contracts

18

Snapshot Across the US (FY2011-2014)

$3,790,314,574.23

$289,879,650.33

$432,061,165.72

$433,781,861.53 $452,770,411.58 $467,026,829.68 $532,377,340.20

$543,594,132.06

$634,710,717.00

$1,333,573,513.20

$2,283,767,814.83 All Other States & US TerritoriesFLOHPATXCONYMDVAMACA

Top total award dollars went primarily to 10 states: CA, MA, VA, MD, NY, CO, TX, PA, OH and FL

19

Agency SBIR Differences

Granting Agencies Investigator initiates approach Less-specified topics Assistance mechanism More flexibility

DOD DHS HHS/NIH NASA

EPADOT DOC

Contracting Agencies Agency establishes plans,

protocols, requirements Highly focused topics Procurement capability More fiscal requirements

HHS/NIH NSF

USDA DOE

DoED

20

TOPICS

Identifying Agencies With Topic Areas Aligned With Your Interests/Technologies

Search Agency Solicitations Agency Websites: available at http://www.sbir.gov/agency-contacts sbir.gov: http://www.sbir.gov/solicitations grants.gov and fbo.gov: www.grants.gov, www.fbo.gov SBIR Gateway: http://www.zyn.com/sbir Follow up with agency personnel listed with individual topics

Attend SBIR Conferences: national, regional, and state One-on-one meetings with agency program managers

21

22

sbir.gov

23

sbir.gov

24

Fastest Way to Find Topics That Relate to Me? Use www.zyn.com

Search with key words that describe your tech expertise,

such as “additive manufacturing”

25

Search Results on www.zyn.com/sbir for “Additive Manufacturing” Topics

National SBIR/STTR Gateway Search Service Results by Zyn Search© Searched SBIR/STTR Topic files for "additive manufacturing" and found 25 matches.

(SBIR) Air Force - Electron-Beam Additive Manufacturing Process Control for Titanium AlloysScore: **** Electron-Beam Additive Manufacturing Process Control for Titanium Alloys Air Force SBIR 2009.1 - Topic AF091C-002 Aviation and Missile RD&E Center (Missile) - Otho Thomas - (256) 842-9227 Opens: December 8, 2008 - Closes: January 14, 2009 AF091C-002 TITLE: Electron-Beam Additive Manufacturing Process Control for Titanium Alloys TECHNOLOGY AREAS: Materials/ Processes....

(SBIR) Navy - Additive Manufacturing for Transducer DevelopmentScore: **** Additive Manufacturing for Transducer Development Navy SBIR 2012.1 - Topic N121-094 ONR - Ms. Tracy Frost - tracy.frost1@navy.mil Opens: December 12, 2011 - Closes: January 11, 2012 N121-094 TITLE: Additive Manufacturing for Transducer Development TECHNOLOGY AREAS: Materials/Processes, Sensors ACQUISITION PROGRAM: This topic is intended to benefit future FNC projects for ASW, MIW & UUVs....

(SBIR) Air Force - Method for Evaluating Candidates for Additive Manufacturing (AM) ProcessesScore: **** Method for Evaluating Candidates for Additive Manufacturing (AM) Processes Air Force SBIR 2014.1 - Topic AF141-213 Opens: December 20, 2013 - Closes: January 22, 2014 AF141-213 TITLE: Method for Evaluating Candidates for Additive Manufacturing (AM) Processes KEY TECHNOLOGY AREA(S): Materials / Processes ...

(SBIR) Navy - Aluminum Alloy Development and Use in Additive Manufacturing Process Design for Drive System Gear BoxesScore: **** Aluminum Alloy Development and Use in Additive Manufacturing Process Design for Drive System Gear Boxes Navy SBIR 2014.1 - Topic N141-062 ONR - Ms. Lore Anne Ponirakis - loreanne.ponirakis@navy.mil Opens: Dec 20, 2013 - Closes: Jan 22, 2014 N141-062 TITLE: Aluminum Alloy Development and Use in Additive Manufacturing …

This search engine finds relevant Topics published by various Agencies.

26

What Does A Defense Topic Look Like?

27

What Do Health/Medical Topics Look Like?

28

APPLICATIONS

29

Keys to Submitting a Good Application

Read and understand the topic Communicate with the technical person at the agency responsible for the

topic if you require clarification on the topic scope Agencies, particularly contracting agencies, may have periods when you

cannot communicate directly with their personnel to ask questions because of fairness requirements

Comply with the application requirements (read the solicitation) Get registrations done early Include required documents; pay attention to word and page limits Don’t submit at the last minute!

30

Review of Applications

Granting agencies Typically use external peer review Reviewers agree to keep

application information confidential and certify that they don’t have conflicts of interest

Contracting agencies Typically utilize agency personnel

for review

31

COMMERCIALIZATION

32

Commercialization

“Commercialization” refers to technology maturation and customer capture, whether by direct sale or license of a technology, or integration into a larger product.

Since the SBIR and STTR programs were created there has been increasing emphasis on increasing positive commercialization outcomes from SBIR and STTR awards

The 2011 Reauthorization statute mandated these changes Implementation of Transition Rate metrics Increased flexibility for Technical/Commercialization Assistance Sequential Phase II awards Commercialization Readiness Pilot Program for Civilian Agencies

33

Commercialization Transition Rate

The SBIR/STTR Reauthorization Act of 2011 required all agencies to implement two transition rate metrics

Phase I Phase II transition rate Applies to companies that have received > 20 Phase I awards in the past

5 years Metric calculation example for FY 2014

𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑷𝒉𝒂𝒔𝒆 𝑰𝑰 𝑨𝒘𝒂𝒓𝒅𝒔 𝑭𝒀𝟐𝟎𝟎𝟗−𝟐𝟎𝟏𝟑𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑷𝒉𝒂𝒔𝒆 𝑰 𝑨𝒘𝒂𝒓𝒅𝒔 𝑭𝒀 𝟐𝟎𝟎𝟖−𝟐𝟎𝟏𝟐 ≥𝟎 .𝟐𝟓

34

Commercialization Transition Rate (cont.)

Phase II Phase III success rate Applies to companies that have received > 15 Phase II awards during the last 10 fiscal

years, excluding the two most recently completed fiscal years Metric calculation example for FY 2014

Companies that fail to meet either metric will be ineligible to apply for any Phase I awards for 1 year

Prior to submitting your application, companies can see if they fail to meet either metric by checking the SBA company registry (sbir.gov)

𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡+𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑓𝑟𝑜𝑚 h𝑃 𝑎𝑠𝑒 𝐼𝐼 𝐴𝑤𝑎𝑟𝑑𝑠 𝐹𝑌 2002−2011𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 h𝑃 𝑎𝑠𝑒𝐼𝐼 𝐴𝑤𝑎𝑟𝑑𝑠 𝐹𝑌 2002−2011 ≥ $100,000

OR 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑃𝑎𝑡𝑒𝑛𝑡𝑠 𝑓𝑟𝑜𝑚 h𝑃 𝑎𝑠𝑒 𝐼𝐼 𝐴𝑤𝑎𝑟𝑑𝑠 𝐹𝑌 2002−2011𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 h𝑃 𝑎𝑠𝑒 𝐼𝐼 𝐴𝑤𝑎𝑟𝑑𝑠 𝐹𝑌 2002−2011 ≥0.15

35

Commercialization Assistance

Technical/Commercialization Assistance Programs $5000 during Phase I and $5000/year in Phase II Agencies provide these services through one or more

contractors Small businesses may elect to specify their own vendor

instead of using the agency’s contractor(s)The goal of these assistance programs is to improve

commercialization planning and outcomes

36

Commercialization Readiness Programs

Commercialization Readiness Program (CRP) at DOD The purpose of the CRP is to accelerate

the transition of SBIR and STTR funded technologies to Phase III, especially those that lead to programs of record and fielded systems

Commercialization Readiness Pilot Programs at Civilian Agencies Pilot programs being initiated at some

of the agencies 10% of SBIR and STTR funding may be

used towards improving commercialization outcomes

Commercialization Paths

The path to commercialization requires many small businesses to successfully navigate a path that involves additional investment (federal and private), a choice of business models (licensing vs. manufacturing), and partnering arrangements

37

38

Tracking Commercialization Outcomes

Improving Commercialization Agencies and SBA are gathering commercialization outcomes in

order improve the operation of the SBIR and STTR programs The National Academy of Sciences is required to carry out a study

every four years on the SBIR and STTR programsData Requests

Please comply with requests to submit data on your follow-on investments and revenues as part of these efforts

Individual small business data will be kept confidential

39

P.L. 112-81, SIGNED INTO LAW 12/31/2011, CONTAINS 41 NEW PROVISIONS THAT TRANSFORM

SBIR AND STTR

SBIR/STTRREAUTHORIZATION UPDATE

40

Funding Related Provisions

FY Set-aside SBIR Set-aside STTR

2011 2.5% 0.30%

2012 2.6% 0.35%

2013 2.7% 0.35%

2014 2.8% 0.40%

2015 2.9% 0.40%

2016 3.0% 0.45%

2017 3.2% 0.45%

Section 5102 – SBIR and STTR Allocation Increase

41

Funding Related Guidelines

Section 5103 – SBIR and STTR Award Levels

Allowed to increase by up to 50% over guidelines after which need SBA Waiver

* Agency waiver from SBA required to exceed award + 50%

Program Phase I Phase II Previous

SBIR $150,000 $1,000,000 150K/1M

STTR $150,000 $1,000,000 100K/750K

Program Phase I Phase II PreviousSBIR $225,000 $1,500,000 Flexible

STTR $225,000 $1,500,000 Flexible

42

Provisions Impacting SBCs

Section 5108 –Special Acquisition Preference Agencies, prime contractors shall issue Phase III awards to the greatest extent practicable.

Section 5125 – Definition of Phase III “Phase III is work that derives from, extends or completes efforts made under prior SBIR/STTR funding agreements.”

Section 5138 – Technology Insertion Reporting Phase III award data must be included in SBA’s annual report to Congress.

Section 5144 – Simplified Paperwork Requirements SBA shall issue guidelines to ensure that each Federal agency simplifies and standardizes the paperwork requirements of small businesses.

Section 5162 – Competitive Selection Procedures All awards must be made pursuant to competitive and merit-based selection procedures.

43

Provisions Impacting SBCs

Section 5104 – Agency and Program Flexibility A firm may receive a Phase II award from an agency that is not the one that awarded

their Phase I award. A firm may receive a Phase II award under a program that is not the one that they

received their Phase I award under.

Section 5105 – Elimination of Phase II Invitations Invitation, pre-screening and pre-selection processes are no longer permitted for Phase II proposal submission.

Section 5106 – Pilot to Allow Phase Flexibility Authorized to establish a Pilot Program that will allow for a Phase II award to be made without regard to whether or not the firm received a Phase I award.

44

Provisions Impacting SBCs

Section 5107 – Participation by VC Firms Firms majority-owned by venture capital operating companies, hedge funds and private equity are now included in the SBIR program. NIH, DOE, NSF up to 25% NIH has implemented DoD and other agencies 15%

Section 5109 – Collaborating with Federal Labs No waiver is required for partnership with Federal Labs and Centers.

Section 5111 – Additional SBIR/STTR Awards Firms are eligible to receive one additional Phase II award for continued work.

Section 5121 – Technical Assistance for Awardees The amount allocated for Technical Assistance for awardees is increased to $5,000 per award per year. Phase II and STTR awards now included.

45

Provisions Impacting SBCs

Section 5122 – Commercialization Readiness Program at DoD The Commercialization Pilot Program is no longer a pilot, and is called the

Commercialization Readiness Program. Program is extended to STTR.

Section 5123 – Commercialization Readiness Pilot Program for Civilian Agencies Allows Civilian agencies to allocate not more than 10% of SBIR funds to establish commercialization readiness pilot programs.

Section 5126 – Shortened Award Decision Period Selections must be made within 90 days of the solicitation close.NIH & NSF one year from solicitation close.

46

Provisions Impacting SBCs

Section 5140 – Consent to Release Information Firms must give consent before their information is released to Economic Development Organizations.

Section 5143 – Reducing Fraud, Waste and Abuse SBA must include measures in the SBIR Policy Directive to prevent fraud, waste and abuse in the SBIR/STTR programs.

Section 5165 – Commercialization Success Federal agencies must establish a system to measure a firm’s success rate of

moving from Phase I to Phase II and from Phase II to Phase III. Agencies must establish a minimum threshold for these rates. If a firm does not meet these minimum thresholds, they will be suspended from

the program for one year.

47

Reporting Related Provisions

Section 5138 – Technology Insertion Reporting Phase III award data must be included in the annual report to Congress.

Section 5161 – Report on SBIR/STTR Program Goals Federal agencies will develop and report metrics that evaluate the effectiveness and benefit of the SBIR/STTR programs to the people of the United States.

Section 5167 – Report on Manufacturing Activities The Manufacturing report is now included in the Annual Report to Congress.

48

Audit/Study Related Provisions

Section 5136 – Accuracy in Funding Base Calculations GAO will complete an annual fiscal and management audit.

Section 5137 – Evaluation by National Academy The National Academy of Sciences (NAS) will evaluate the SBIR/STTR Programs. The NAS will evaluate the number of positions created by each SBIR award.

Section 5139 – Intellectual Property Protections The Comptroller General must conduct a study of Intellectual Property Protections in the SBIR program.

Section 5142 – GAO Study of VC Comptroller General shall conduct a study of the impact of requirements relating to VC operating company, hedge fund, and private equity firm involvement in the SBIR/STTR programs.

49

Status of SBIR/STTR Reauthorization Provisions

Phased implementation of reauthorization provisions commenced 28 January 2013 and is well underway

Policy Directives are issued and available at www.sbir.gov

Eligibility and other rules are described in detail in individual Solicitations: read the Solicitations carefully!

Coordinate with SBA and other agencies

See Agency-specific talks for details!

50

FAQs

51

GETTING THE MOST FROM THE FALL REGIONAL SBIR/STTR SUMMIT

52

What Federal Agencies Are Interested in My Technology?

Go to www.sbir.gov

Find “Agency Microsites” on the homepage.

Review Agency snip-its and websites describing Agency mission, website, uniqueness, budget, topic announcement schedule and other information.

Department of Defense Microsite

53

Proposals that Win SBIR/STTR Awards

Results differ by Agency, but government-wide about one-third of FY awardees are newcomers each year.

You can do this!

54

Intellectual Property, Data Rights Issues

While Federal guidance is available from the U.S. Patent & Trade Office (USPTO), many states provide assistance – learn how to search for it. USPTO Pro Bono Program attorneys are available here for consultation –

remaining space subject to availability

55

FY2016 Outreach Planning

56

Questions?