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  • Donald J. Pagel

Funding for Small Business Research & Development

Every year, the Federal government makes about $3.5B in early stage (seed) money available to certain small businesses. This money is administered through the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs of the U.S. Government. This is true seed money that is awarded to projects that are still in the “feasibility” phase before commercial viability has been established. Furthermore, the money does not have to be repaid nor does the government take an equity interest in the company. However, to obtain funding, the small business should thoroughly understand the SBIR program as there are many requirements and deadlines that must be satisfied to obtain funding. The program basics are described here.

What is the SBIR program? (Also known as America’s Seed Fund™ )

The SBIR program was created by Congress in 1982 to enable small businesses to undertake and obtain the benefits of research and development and to maintain and strengthen the free enterprise system and the national economy (15 U.S.C. §638). The program must be reauthorized by Congress periodically and is currently authorized through September 2022. The program requires that Federal agencies with extramural R&D budgets that exceed $100 million allocate 3.2% (since FY2017) of their R&D budgets to fund small businesses through the SBIR program. Currently, eleven Federal agencies participate in the SBIR program, and each of these agencies have their own procedures for making SBIR awards.

As an example of how an SBIR program works, look at the Department of Energy (DOE) grant process. On December 13, 2021, the DOE issued a Funding Opportunity Announcement (FOA) announcing the availability of $54M in funding for small businesses pursuing climate, energy and scientific R&D (read here). The DOE issues two of FOAs every year. The first FOA (Release I) was made in August 2021 and the second FOA (Release II) was made in December 2021.

To be awarded funding under the 2021 Release II FOA, an applicant would have needed to study the funding topics that were published on November 8, 2021. The funding topics can be quite broad and encompass a range of R&D projects. If a suitable funding topic is identified, a letter of intent to apply for funding was due before January 3, 2022, and a full application is due before February 22, 2022. Award notifications will be sent out on May 16, 2022, and the grant start date will be about June 27, 2022. Typically, grants are for about $200 to $250K and cover a one-year research project for concept development. If commercialization of the concept looks promising, additional funding may be available under Phase II of the SBIR program.

As this example shows, a small business attempting to obtain funding under an SBIR program must be thoroughly familiar with the procedures and deadlines established by the granting agency. The next chance for applying for SBIR funding from the DOE will start in July 2022 when the next round of DOE funding topics will be released (schedule). Of course, there are ten other Federal agencies that also participate in the SBIR/STTR programs, and these agencies have their own funding topics, procedures, and deadlines. For example, if a small business is doing R&D in the areas of semiconductors, biomedical applications, chemistry, or a some other type of basic research, it may want to look at the National Science Foundation SBIR program described here. Finally, Congress will need to reauthorize the SBIR program to keep it in effect beyond September 2022.

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