You’ve heard about SBIR grants and know companies who got them. But you have also heard the horror stories about them or maybe you had a bad experience yourself with a previous submission. Never fear, we’ll walk through step by step on everything you need to evaluate if these grants are a fit for your company and how to get started.
What’s an SBIR? The Small Business Innovation Research program enables US small businesses to engage in research and development work with commercialization potential (https://www.sbir.gov/about).
Actually, there are two programs, SBIR and STTR, and we’ll explore the differences in a section below. STTRs are Small Business Technology Transfer programs. In a nutshell, STTRs require a nonprofit research institution collaborator whereas SBIRs allow it but don’t require it.
Grants also have phases with different requirements and funding amounts for each phase so we are covering this in a section below.
Table of Contents
SBIR vs. STTR: What’s The Difference?
Which SBIR Agency Are You Applying To?
Grant Phases and Funding Amounts
The Big Benefit Nobody Talks About
Are You Eligible?
Before you spend any time fretting about who’s going to write the proposal, how long it will take, and whether it will get funded, start with this: are you eligible?
There are several eligibility criteria that must be met. Check the specific eligibility requirements in detail but here is a quick summary for small businesses applying for an SBIR:
- Organized for profit, with a place of business located in the United States
- More than 50% owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States, or by other small business concerns that are each more than 50% owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States; and
- No more than 500 employees, including affiliates
If you’re still unsure after reading the eligibility requirements, you can contact them to get clarification.
SBIR vs. STTR: What’s The Difference?
So your company is eligible. What’s the difference between an SBIR and an STTR? Which one should you go after?
Think about the project for which you want funding, and who is going to perform the work. Is it primarily a nonprofit research institution with your company acting as a collaborator? Or is your company leading the efforts? If you have an academic collaborator who is going to perform a portion of the research, weigh your options and the budget. Most academic institutions have a hefty overhead rate, 40-50% and even higher for some schools, so if you plan on subcontracting some of the research and signing a research collaborative agreement with the school, find out exactly how much it will cost.
According to sbir.gov, STTR differs from SBIR in several ways, including:
- For an STTR award, the small business must perform at least 40% of the work and the single partnering research institution must perform at least 30% of the work, while the remainder can be outsourced.
- STTR requires the Small Business Concern (SBC) and its partnering institution to establish an intellectual property agreement detailing the allocation of intellectual property rights and rights to carry out follow-on research, development, or commercialization activities.
As an SBIR applicant, you may subcontract out up to 33% of the work for a phase I grant. This sometimes comes as a surprise to small businesses who plan to subcontract a large portion of the work. Subcontracts are different than vendors so make sure you read about the budget requirements carefully in the solicitation, supporting documents, and online resources provided by the funding agencies.
Which SBIR Agency Are You Applying To?
There is no single entity that handles all SBIR submissions. There are currently 11 federal agencies that participate in the SBIR program and 5 of them in the STTR. For biotech and medtech companies, the main agencies are:
- Department of Defense (DoD)
- Department of Health and Human Services (HHS)
- National Science Foundation (NSF)
- National Aeronautics and Space Administration (NASA)
- Department of Homeland Security (DHS)
Maybe you’re not too familiar with HHS but you have probably heard of the National Institutes of Health (NIH). The NIH is part of HHS. And you may have heard of another HHS program, the Biomedical Advanced Research and Development Authority (BARDA) that’s not an SBIR program but is a funding resource.
Another detail to keep in mind is that your NIH SBIR proposal will land on one of its institutes. And the NIH has 27 institutes and centers. So depending on the topic of your research, your NIH SBIR will get routed to a particular institute or center.
Each agency has its own SBIR page, and the 5 agencies mentioned above that more closely apply to biotech and medtech companies all offer STTR programs as well. For example, the NIH has two grant flavors: with or without clinical trials, whereas NSF focuses more on preclinical work. Take your time and do your research.
Here are the links to their SBIR program pages to save you a little time: DoD, NIH, NSF, NASA, DHS.
Grant Phases and Funding Amounts
The funding agencies provide support for the different stages of a project. Phase I grants support feasibility research while Phase II grants are for full research or R&D efforts initiated in Phase I. Only Phase I awardees are eligible to apply for Phase II grants so small businesses typically start out with a Phase I proposal.
There is an alternative starting path that was launched as a pilot program called Direct to Phase II for small businesses who have completed Phase I milestones using non-SBIR funds so look for any relevant solicitations if this path might be a good fit for your company.
Another funding option is Phase IIB grants, sometimes called supplemental or bridge grants to help Phase II awardees take the next step towards commercialization. These are typically matching funds to a third-party financial investment the company may receive as a direct consequence of the Phase I/II outcomes.
Phase III is defined as the commercialization stage that the agencies do not support with SBIR funding.
The funding amounts and project timelines vary a bit from agency to agency so make sure you dig into the budget and project duration details from your funding agency.
For NSF SBIR grants, Phase I projects are typically 6 to 12 months and may receive up to $256,000, whereas Phase II projects last up to 24 months and can receive up to $1,000,000.
Should You Apply?
Every startup and small business loves non-dilutive funding. It’s free, right?!? Well, we paid for it through taxes, but yes, it’s now “free”!
However, you know that putting the proposal together is a TON of work! Ok, maybe you didn’t know, but now you do…
Let’s go through a checklist to figure this out. Should you invest your time and resources on putting together a proposal?
First question is, how important is this funding to you and your company? Is it a must have or a nice to have? In other words, what happens if you get the funding? What happens if you don’t?
If your answer is that you must get the grant, consider this. Even though preliminary data is not required, it sure helps to make your proposal more competitive. And to get that preliminary data and show commercialization potential, you usually need some funding. If you’re still at the idea stage and haven’t pursued seed stage funding yet for your startup, you might want to look for alternative funding sources (friends and family, business competition grants) to collect some data that can strengthen your proposal. But if you have some preliminary data and need the grant to make further progress, that’s a more realistic scenario.
Second question is, do you know the stats? SBIR success rates are available online and are broken down by year, state, phase, etc. On average, you will find that success rates for SBIR phase I NIH and NSF grants fluctuate between 12% and 19% over the last 10 years or so. Which means that your odds of getting funded are relatively low. Of course, you’re applying hoping to get the grant but you need to go into it fully aware of the stats and how competitive these programs are.
The third, and perhaps most critical, question is, how much is it going to cost? Because it is going to cost time and money. And even if you do all the work on your own and don’t spend any cash, there is still the opportunity cost, where you spend your time preparing the proposal instead of working on other aspects of your business. To create an estimate, check out the How Much Will It Cost section below.
Of course we’re assuming here that you have a project that is innovative, addresses an unmet need, and will have a broad impact on society. So, if this funding is very important for your company, and you’re on board with the stats and how much it will cost, then you’re in a good position to go for it.
Step By Step Guide
Where do you start? Follow the steps below.
Step 1: Check eligibility criteria.
Don’t waste any time thinking about these grants unless you’re eligible.
Step 2: Do the research.
Do you have somebody who can do the grant research and figure out the right agency and solicitation? This is when you develop your grant strategy. Do you submit one proposal or multiple? You cannot get funded for the same work from multiple agencies, but you can submit multiple proposals and disclose where you’re submitting.
Step 3: Check submission due dates.
Once you have selected the solicitation(s) you will be pursuing, read them carefully. Reach out to the program directors/officers with any questions. Make sure you set realistic time frames for preparing a proposal. If you have submitted one before, the time frame can be shorter. If it’s your first one, you will need to allow for a lot more time. How long? I’d recommend at least 2-3 months. You may be able to write the research plan in a week but putting the whole proposal together requires a lot more items, some of which will depend on others outside of your organization. Some agencies have fixed submission due dates whereas the NSF, for example, has adopted a rolling submission deadline schedule.
Step 4: Make a project plan.
Yep. I said it. This is going to be a project. Make a checklist of all the deliverables, interdependencies, collaborators, vendors, consultants, letters of support, due dates, budget, and champions for each activity. If you don’t know how to do this and figure out all the deliverables, outsource it to a pro. Each agency has a slightly different application process. For example, the NSF requires a project pitch submission that’s evaluated for fit before you’re invited to submit the full proposal.
How Much Will It Cost?
This will depend greatly on your experience, resources, skillsets, and the agency you apply to. Here is a list of what you will need to prepare.
- Company registrations. You’ll need a bunch! DUNS, EIN, SBC Control ID, registration to submission platform (e.g., eRA Commons), and SAM registration that can take 6 weeks or more for processing. Start early! If this is your first time do not underestimate the time investment here.
- Figure out who the principal investigator (PI) will be. This is important as there are specific requirements for serving as the PI.
- If your study includes animal testing or clinical trials, there are additional documents that will need to be filled out.
- Identify all team members, collaborators, consultants, contractors, new hires you’ll need, subcontracts, outsourced R&D and/or manufacturing, and vendors. Determine what documentation you might need from each: bio sketches, letters of support, quotations, etc.
- Identify key stakeholders for letters of support. These will vary depending on the agency you’re applying to and the grant phase (e.g., I, II, Fast Track). Stakeholder groups to consider include existing/potential investors, research collaborators, key opinion leaders, and existing/potential customers.
- Prepare the main documents and adhere to the format and page limits outlined in the solicitation document. This is the bulk of the effort. Gather your market research data, preliminary data, list of patents and references, and details of the proposed research plan. Identify who is going to do the writing and who is going to review the proposal and give you feedback prior to submission.
- Plan for calls/emails with the program director and administrators for questions you will have along the way.
- Upload all documents on the submission platform and check, double-check, and triple-check them to make sure everything has been uploaded in the right spot and correctly.
- Hit submit way before the deadline time. If it’s down to the wire and you’re submitting it on the due date, make sure you do so early in the day in case something goes wrong.
Do an honest assessment of your team, your strengths, and weaknesses. Do you have a technical expert? How strong is their technical writing? Do you have business experts who know the commercialization plan inside out? How strong are their writing skills? Has anybody on your team written a grant before? Do you have administrative support? Do you have somebody with strong project management skills who can put a plan together and make sure progress is being made all the way to proposal submission?
Some companies completely outsource grant writing and the whole process. In my humble opinion, having helped companies prepare their proposals and having served as an SBIR reviewer for years, that’s not in the company’s best interest. I think that only you know your technology the best and can provide the level of detail that’s needed. So at least put together a first draft before you outsource the rest of the work.
If the grant agency requires a commercialization plan (e.g., NSF or phase II grants), it really helps if you have a well thought out business plan in place. If all you have is a handful of PowerPoint slides, this section will take a lot of work.
One of the deficiencies I often see in the proposed research plans is the lack of clear targets. Spell out clearly and succinctly your success criteria, and ideally in a quantitative fashion. How will you know your work was successful? Another major deficiency is poor design of experiments. Grant writing needs to be solid, not fast and loose.
Hopefully you have a better idea now of the skillsets you will need and whether your team has them or not. If you can think of team members who can check all the boxes, you’re good to go! If you are finding gaps, it’s time to figure out who’s going to help you and how much it will cost.
The Big Benefit Nobody Talks About
I have left the best for last. These proposals have a magic power: they are excellent at revealing your company’s technology and business plan gaps in a major way! Any weaknesses, blind spots, unknowns, areas you’ve ignored, team knowledge gaps, they are all going to come out.
While that might feel scary, it is actually a very good thing for your medtech or biotech business. You might be looking at how long it is going to take and how much it might cost putting a proposal together, but the intangible benefits are huge. You will be “forced” to face reality and will get free feedback from program directors and reviewers. Instead of looking at them as adversaries you have to convince, treat them as allies who are giving you unbiased feedback. Is it always going to be correct? Maybe not, but odds are, they are right on and you should heed their advice.
The funding agencies and sbir.gov have a ton of free resources online for applicants. Many states also have local resources you should check out at https://www.sbir.gov/local-assistance.
And if you would like to work together and get some help, get in touch!