SBIR/STTR Overview Charles Eason

SBIR/STTR Specialist

Director, Solano College SBDC

(707) 864-3382

charles.eason@solano.edu

What We Will Cover Today

• Overview of SBIR and STTR Program

• Researching Topics Under SBIR/STTR

• Preparing a Successful SBIR Proposal

Mission of SBIR Program

The statutory purpose of the SBIR Program is to strengthen the role of innovative small business concerns (SBCs) in Federally-funded research or research and development (R/R&D). Specific program purposes are to:

(1) Stimulate technological innovation; (2) use small business to meet Federal R/R&D needs; (3) foster and encourage participation by socially and

economically disadvantaged SBCs, and by SBCs that are 51 percent owned and controlled by women, in technological innovation; and

(4) increase private sector commercialization of innovations derived from Federal R/R&D, thereby increasing competition, productivity and economic growth.

History of the SBIR Program

• Small Business Innovation & Development Act of 1982 required all federal agencies with annual extramural R&D budgets of $100 Million or more to fund small business research by setting up SBIR programs.

• 11 Federal Agencies Participate.• SBIR Program was reauthorized in 1992.• Program reauthorized in FY2000 until 2008• Reauthorized in 2011 through Sept 2017.

SBIR/STTR Reauthorization• Reauthorizes the programs for six years

• Increases the SBIR program allocation from 2.5 to 3.2% and the STTR allocation from .3 percent to .45 percent, giving small businesses an increased role in the federal R&D enterprise, while preserving the bulk of federal R&D funding for basic research

• Allows for participation among small businesses with majority venture capital and private capital support in the program, increasing competition

• Helps participating agencies combat waste, fraud, and abuse within the SBIR and STTR programs, protecting taxpayer dollars in the program

• Tasks the National Research Council with evaluating the effectiveness of both the SBIR and the STTR programs

• Enables participating federal agencies to utilize 3% of program funds to improve administration of the program, combat waste, fraud, and abuse, and conduct outreach to underrepresented businesses.

• DOD SBIR/STTR

• HHS SBIR/STTR

• NASA SBIR/STTR

• DOE SBIR/STTR

• NSF SBIR/STTR

• DHS SBIR

• USDA SBIR

• DOC SBIR

• ED SBIR

• EPA SBIR

• DOT SBIR

SBIR / STTR Participating Agencies

TOTAL ~ TOTAL ~ $2.5 + B$2.5 + B

SBIR Awards by Agency

• Small Business Innovation Research (SBIR) Set-aside program for small businessconcerns to engage in federal R&D --

with potential for commercialization.

• Small Business Technology Transfer (STTR) Set-aside program to facilitate

cooperative R&D between small business concerns and U.S. research institutions -- with

potential for commercialization.

Program DescriptionsProgram Descriptions

3.2%

0.45%

Eligibility to Participate

• Must be a for-profit organization 51% owned by US Citizen or Permanent Resident Alien.

• Must be a Small Business (fewer than 500 employees).

• Do not have to have a legal structure set up to submit a proposal.

• PI’s primary employment must be with the small business concern at the time of award and for the duration of the project period

Who Participates in SBIR? Firms are typically small and new to the program.

About 1/3 are first-time Phase I awardees.

Small hi-tech firms from across the country.

Firm Size Distribution*

Extramural Federal R&D Expenditures

Source: NSF “Science and Engineering Indicators 2006” figures for 2005

Intellectual Property Rights

• Applicant retains worldwide patent rights.• Federal Government can force you to license

the technology to others under the following circumstances:– You fail to commercialize within 4 years– National Emergency

SBIR/STTR: 3-Phase ProgramPHASE I

Feasibility Study $150K and 6-month (SBIR)

or 12-month (STTR) Award

PHASE II Full Research/R&D $1,000,000 and 2-year Award

(SBIR/STTR)

PHASE III Commercialization Stage Use of non-SBIR/STTR Funds

Odds of Being Selected

• For Phase I, about 1 in 8 to 1 in 12 proposals receive funding. Many are first time proposers.

• For Phase II, about 1 in 2 to 1 in 3 receive funding.

• For Phase III, about 1 in 20 succeed in commercializing their technology.

Important Facts to Remember

• Eligibility is determined at time of award

• The PI is not required to have a Ph.D. or M.D.

• The PI is required to have expertise to oversee project scientifically and technically

• Applications may be submitted to different agencies for similar work

• Awards may not be accepted from different agencies for duplicative projects

Small Business Technology Transfer (STTR) Program

• Similar to SBIR Program.

• Business must team with a Federal Laboratory or Research University.

• Requires Cooperative Research Agreement

• Only five agencies participate.

• Much smaller total budget. $70 million versus $2.5 billion for SBIR Program.

SBIR AND STTR PROGRAMSCRITICAL DIFFERENCES

SBIR: Permits research institution partners [Outsource ~ 33% Phase I and 50% Phase II R&D]

STTR: Requires research institution partners [40% small business concerns (for-profit) and

30% U.S. research institution (non-profit)]

AWARD ALWAYS MADE TO SMALL BUSINESS

SBIR: Principal Investigator (PI) primary employment (>50%) must be with small business concern

STTR: PI primary employment not stipulated [PI can be from research institution and/or

from small business concern*]

*DISCUSS WITH AGENCIES

SBIR AND STTR PROGRAMSCRITICAL DIFFERENCES

Eligible Research Topics

• Proposals must match a topic that the agency is interested in funding.

• Each agency generates a solicitation listing the research topics they are seeking SBIR proposals.

• Solicitations are issued one to three times a year depending on the agency.

• Topics are selected by agency, but it may be possible to influence future topics by working closely to develop future topics.

Researching SBIR/STTR Topics

• Agency Websites• www.SBIR.gov• www.ZYN.com

Standard Phase I Process

• Agencies describe R&D topics in solicitations.

Evaluation

Ph I award

SolicitationTopics

ProposalSubmission

• Small Business Concerns prepare

short (usually 25-page)proposals.

Unsolicited proposals not accepted.

• Agencies evaluate based on technical

merit, firm’s qualifications, and

commercial potential / societal benefit.

• Agencies make Phase I awards.

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Writing Your Proposal

• Generally limited to 15-25 pages– Includes cover sheets, resumes, and budget.– 1” Margins– 12 Point Type

• The majority of the proposal should focus on the research plan or statement of work.

• Should tell a story as to why your concept is innovative and how you plan to show feasibility.

• Include concrete commercialization plan• Reference other work in the field

Sample SBIR Proposal Outline

• Cover Sheet• Project Summary• Identification of Significance of Problem or Opportunity• Phase I Technical Objectives• Phase I Work Plan• Related Work• Relationship with Future Research• Commercialization Strategy• Key Personnel• Facilities/Equipment• Consultants• Prior, Current, or Pending Awards• Cost Proposal

Develop Cost Proposal (Budget)

• Direct Costs– Material– Labor– Travel

• Indirect Costs– Overhead– G&A

• Profit– Most agencies allow up to 7%

Direct vs. Indirect Costs

LaborDirect Cost Materials

TravelOther Vacation/Holiday

Fringe Payroll TaxesSick LeaveInsurance

Total Costs OverheadRent

Other PhoneUtilities

Indirect Costs Supplies

General MgmtG&A General Admin

General Accounting

Profit

Calculating Indirect Cost Rate

• Each agency may have a different way of defining indirect cost.– Using direct labor as base (denominator)– Using all direct costs as base.

• Some agencies may limit indirect rate

• If you have an approved federal indirect rate, you can use that figure.

Why take a Profit?

• The direct expenses only cover the cost of performing the work.

• The indirect expenses cover the cost of running a business.

• Profit is your reward for taking on a risk.• Another reason for including a profits is that it can

be used for any purpose and gives you a buffer in case you did not estimate direct or indirect expenses properly.

The Budget:Putting it all Together

Direct Labor $45,000

Direct Material $15,295

Indirect Costs (55% of Direct) $33,162

Subtotal $93,000

Profit (7% of Direct and Indirect)$6,542

Total Project Cost $100,000

Basic Commercialization Plan

• The Market Opportunity

• The Company/Team

• The product or technology and competition

• Financing and revenue model

Submitting Your Proposal

1. Online submittal required for most agencies– www.grants.gov – www.fastlane.nsf.gov

2. Obtain Employer Identification Number (EIN) from IRS– www.irs.gov

3. Obtain DUNS number from Dun and Bradstreet– www.dnb.com

4. Register with System for Award Management (SAM)– www.sam.gov

5. Don’t wait till the last minute

Proposal Review Criteria

1. Scientific and Technical Merit

2. Importance of the Problem

3. Scientific or Technical Innovation

4. Potential Commercial Application

5. Investigator and Resource Qualifications

6. Budget

Common Reasons For Decline

• Screened out for format reasons.

• Not innovative or unique

• Workplan does not contain specifics as to how research will be carried out.

• Insufficient Technical Information

• Principle Investigator lacks necessary expertise.

Get Feedback After Award

• If you are declined, be sure to contact the agency to get feedback so that you can correct your mistakes on the next go around.

• If you win an award, you may be asked to provide more detail. Be prepared to justify budgets items.

Valley of Death

“Research is the transformation of money into knowledge and innovation is the transformation of knowledge into money.”

Valley of Death

Supplemental SBIR/STTR Funding

• NSF Phase IB ($50K)

• NSF Phase IIB ($500K)

• NSF Phase IICC ($40K)

• DoD FastTrack ($30-$50K interim funding)

• DoD Phase II Enhancement/Phase II Plus ($500K)

• EPA Phase II Verification Testing Option (50K)

• NASA Phase II Enhancement ($150K)

• State Matching Funding Programs

Conclusion

• Over $2.5 Billion Available

• Must be innovative R&D

• Keys to Success:– Be Responsive to agency need.– Demonstrate commercial application and strategy– Detailed Technical Workplan– Experienced Team with Credentials