The SBIR Program – An Economic Stimulus for Small Business

At the National Association of Seed and Venture Funds Conference in Oklahoma City, Fred Patterson offered me a guest post. Fred has an amazing knowledge of the SBIR program, so I asked him to give us an introduction to it. -Becky

by Fred Patterson – The SBIR Coach

Over 25 years ago, the Federal government created a way to ensure that innovative solutions to tough science and technology problems would be developed. And, very cleverly, they did it in way that bolsters the largest job creation sector of our economy – small business. This initiative is called the Small Business Innovation Research (SBIR) Program.

Here’s how it works: The largest Federal agencies (those that spend over $100 million annually on outside research and development), must set aside a percentage (currently 2.5%) of their R and D budget for SBIR projects. In 2008 this represented over $2 billion of available funding. These projects are reserved for our domestic for-profit small businesses that are independently owned and operated by individuals (not large entities). The agencies pose problems, usually tough ones that they need solved to help fulfill their missions. The small businesses are invited to submit proposals for solving them, describing how they’re going to do the work and spend the money (up to $850K in two phases – feasibility and prototype development).

The proposals are evaluated and the best ones are funded, based solely on the merits of the planned project, the qualifications of the team, and the potential for turning the technology developed into a business with potential customers being from both the government and the private sector. It’s very competitive – only about 10-15% of the submitted applications get funded. The awards are essentially grants. There’s no debt to repay, and no equity to give up, And there are special rules whereby the small business gets to keep exclusive rights to intellectual property (called SBIR Data Rights) protected long enough for patents to be filed. In fact, it’s the intellectual property aspects of SBIR that make it uniquely attractive for inventors and entrepreneurs seeking to fund their development without losing control of their inventions.

Since the first SBIR projects were funded, way back in 1983, literally thousands of companies have gotten their initial seed funding via SBIR, and tens of thousands of jobs have been created. Many of the companies that got their start this way have been acquired by larger companies or gone public, creating wealth for their owners, both founders and investors. Not to say that it’s easy to have such success. In fact many more companies fail to achieve commercialization than succeed – it’s hard to do, but that’s the nature of a capitalist economy. Only the best achieve true success, and it’s because they were the best – producing a technologically excellent product that solved a problem and served a market need – that the economy grows as a result of their success.

So, if you have an idea for an innovative technology, check out the SBIR Gateway (www.SBIRgateway.com) for information on what projects are currently being sought. And if you’d like some help in doing that and then crafting a winning proposal, contact the SBIR Coach (www.SBIRcoach.com).

Photo provided by Fred Patterson.

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About Becky McCray

Becky started Small Biz Survival in 2006 to share rural business and community building stories and ideas with other small town business people. She and her husband have a small cattle ranch and are lifelong entrepreneurs. Becky is an international speaker on small business and rural topics.