State and Federal Grants

Small Business Innovative Research (SBIR) program

SBIR Fast Facts

Created in 1982, the SBIR program (and on a more limited basis, its sister, the STTR program) is a federal program designed to stimulate technological innovation, to strengthen the role of small businesses in meeting government R&D needs, and to increase the commercial application of government-supported research. The SBIR program has been one of the most successful programs for national small business development. Since companies receiving an SBIR grant can subcontract to a university a portion of the research to be performed under such grant, SBIRs are often considered the preferred source of funding for faculty start-up companies.

All government agencies with extramural research and development budgets in excess of $100 million are required to set aside approximately 2.5% of their extramural research budgets for the SBIR program, and 0.15% for the STTR program. In the year 2000, the amount of federal funds available under the SBIR program exceeded $350 million. The NIH, NSF, DOD, DOE and DARPA collectively fund over 90% of the SBIR grants received by university related start-up companies.

The SBIR and STTR programs are set up as three-phase programs, the first two of which are rewarded with government funds. Phase I SBIR awards are for approximately $100,000 for a 6-9 month project (same holding true for STTR awards); Phase II contracts are typically limited to a two-year period and up to $750,000 in funding, although the amount and time limits for such awards may vary slightly among granting agencies. Most Phase II STTR grants are capped at $500,000 for a two-year period. Money under an award can be used to carry out proof-of-principle experiments and related research and development, to cover related business development costs, and to a limited extent, cover costs of protecting intellectual property, an area of interest to the Patent Foundation. Furthermore, the company may subcontract up to one-third of phase I research (and up to one-half of phase II research) to a third party, namely a university. So the SBIR and STTR programs are excellent mechanisms to promote additional research at UVA. No federal funds are awarded for phase III, which is the commercialization phase. (SBIR/STTR comparison) 

SBIR restrictions

SBIR and STTR grant applications are evaluated by the granting agency in part on the basis of technical merit, qualifications of the principal investigators, and potential commercial application. There are, however, restrictions placed on such grants, of which a faculty start-up should be made aware. The principal investigator must be primarily employed by the company, and the company must be in a position to acquire laboratory space to carry out the research. Additionally, companies must supply the granting agency a business plan with their phase II applications. A primary role of Spinner Technologies is to help UVA faculty address some of these issues, as well as other requirements such faculty members must meet when seeking SBIR funding. It may be useful to note that the STTR program follows a different set of restrictions. For instance, unlike SBIR grants, the principal investigator of STTR grants can be primarily employed by either the company or the affiliated university.

State support of SBIRs

Small businesses in the Commonwealth of Virginia have long been successful in tapping into SBIR funding. For most of the last decade Virginia has ranked in the top five for businesses receiving SBIR funding. More recently the Commonwealth has set up an agency under the Secretary of Technology to assist small businesses in applying for SBIR funding. For more information on how the Commonwealth of Virginia can assist your company in the SBIR application process, please visit the website for the Office of Innovative Technology.