The Small Business Innovation Research (SBIR) Program and what it means for startups

6 min readAug 31, 2022

By Jennifer Weinhart, Policy Manager, Engine Advocacy & Foundation

The SBIR program, which serves as a critical funding source for many startups engaged in research and development (R&D), is set to expire at the end of September. Without Congressional reauthorization, agencies participating in the program will no longer be able to award the competitive awards that lead to the commercialization of new technologies.

Background on the program:

The SBIR program, along with the Small Business Technology Transfer program, are part of America’s Seed Fund, grant programs to further R&D and technology commercialization with the support of the government. The SBIR program, launched in 1977, falls under the purview of the Small Business Administration (SBA), however multiple government agencies, including the National Science Foundation and the Department of Defense, administer awards. The program is not technically permanent, but it has been regularly reauthorized since its inception, including in 2016 as part of the 2017 National Defense Authorization Act (NDAA), when it received a five year extension.

The SBIR program seeks to boost technology innovation in support of the R&D needs of the federal government. Commercialization of technology is a general goal for SBIR outcomes, and the program aims to support the inclusion of women and socially or economically disadvantaged populations. Requirements and guidance for the awards differ based on the offering agency, and awards are offered in three phases. Phase I awards are to “establish the technical merit, feasibility, and commercial potential” of a research/R&D effort and to evaluate the performance of a small business prior to Phase II. Phase II awards are given to continue the efforts from Phase I awards and are based on Phase I results. Phase III is not a monetary award, but rather supports commercialization efforts, though Phase III could be supplemented with non-SBIR funded R&D or contracts.

The SBIR program is a critical funding source for many startups. Not only do the funds help startups to engage in costly R&D efforts, they also provide a government connection, which can lead to other lucrative government contracts and funding. Some startups are able to use the SBIR program as a means to cross the Valley of Death, “the period between the emergence of a company’s new tech and its arrival to the marketplace,” and attribute the program to their continued success as a startup.

Where are we now?

The SBIR program expires at the end of September. Without reauthorization, agencies will be unable to award new grants. The program has faced some criticism from policymakers, with some concerned about companies receiving multiple awards and some awards failing to lead to commercialization. Few vehicles remain to reform and reauthorize the program before its expiration date. While a standalone bill is always possible, there is little time left between now and September 30. And the recently passed CHIPs and Science Act failed to include a reauthorization. Though a 2-year extension was tacked onto the House-passed NDAA, the Senate has yet to clear the bill. Lawmakers could pass a temporary reauthorization as part of a larger government funding bill before the deadline.

How can the program be improved?

Because the program provides such a critical source of funding and a doorway to meeting and fulfilling government objectives, policymakers should eye permanently reauthorizing the program.

  • Why? A permanent reauthorization would eliminate this situation from arising again. Reports already indicate that some agencies may be winding down their awards process because of uncertainty surrounding reauthorization.

Improve diversity amongst awardees to better and more accurately reflect the diversity of the startup ecosystem and America’s small business community.

  • Why? Fostering and encouraging diversity is a stated goal of the SBIR program. But some agencies, like the National Science Foundation, have much greater diversity amongst awardees. Agencies should have concrete metrics for measuring success of diversity, equity, and inclusion initiatives. Agencies administering the SBIR program, as well as the SBA should conduct outreach to diverse populations, including through HBCUs, to encourage participation in the SBIR program. As suggested by the Bipartisan Policy Center, policymakers should work to ensure SBIR review panels are also diverse.

Improve and facilitate more and better participation of startups in the SBIR program.

  • Why? Startups are amongst the most innovative companies in the U.S. The novel technologies developed by our nation’s startups have the potential to better meet government needs than many incumbent companies. But, the startup lifecycle is challenging. In their early days they are often short staffed with limited funds and without support, face closure quickly. The SBIR program timeline is often too lengthy, and it can take six months to a year to find out if an award has been given. The application process is time consuming and complicated and for a startup with few resources, could be impossible to complete.
  • Neil P. Ray, founder of San Ramon, CA based startup Raydiant Oximetry told Engine, “The funding life cycles for SBIR need improvement. If I have an idea and want to apply for a grant, I can only submit that idea three times a year, and I’ve got to wait almost a year before it gets funded. That timeline doesn’t work for startups that need to act quickly. We have received SBIR funding from both the National Science Foundation (NSF) and the NIH, and the NSF has recently streamlined the process to six months.” He went on to explain, another option policymakers should consider to accelerate funding is to award SBIR funds to incubators and accelerators, “who can then more quickly deploy the capital to innovative startups in their community. Policymakers could also consider implementing and better tracking startup participation, as well as conducting outreach to startup support organizations — like incubators and accelerators — to ensure founders are aware of the opportunities the SBIR program provides.

Improve participation in the program and welcome more innovation by considering broad submissions for awards.

  • Why? Many agencies request applications for awards on specific R&D goals or topics. But, government agencies are often not best equipped to know what innovation they would most benefit from. Shifting to broader requests, or open topics (which the Air Force and National Science Foundation have begun doing), allows small businesses and startups to come to the government with their ideas and novel technologies outside of narrow parameters, allowing more innovative companies to compete, and possibly better innovation to arise.

Bridge the gap between Phase II/III and what comes next with post-SBIR program, contracts and/or awards.

  • Why? Many of the undertakings of the companies participating in the SBIR program are incredibly costly — significantly more expensive than the total amount for an award. In lieu of applying for many SBIR awards, agencies and policymakers should think about implementing more post-SBIR programs and contracts to continue to facilitate the R&D efforts and commercialization, while meeting government needs. According to Jamie Gull, co-founder and CEO of Los Angeles, CA based Talyn, “It’s also important for government agencies to work on bridging the funding gap between Phase II SBIR and something bigger. That gap between early stage funding and actually getting out into the market and selling a product is what we call ‘the valley of death.’ For companies like mine, a million dollar SBIR is great, but it’s not going to get you through that valley.” In addition to SBIR funding, Talyn is also receiving post-SBIR funding with private matching funds, from government sources like the Air Force, to continue to carry on their work.

Clarify the affiliation rule for venture-backed startups.

  • Why? Startups backed by venture capital may not be eligible for SBIR funding due to the SBA’s affiliation rule, which could disqualify them from being considered a small business per the SBA’s definition. The SBA should consider promulgating a rule to clarify that affiliation with a venture capital fund does not affiliate you with the fund’s portfolio companies, for the definition of a small business.

Engine is a non-profit technology policy, research, and advocacy organization that bridges the gap between policymakers and startups. Engine works with government and a community of thousands of high-technology, growth-oriented startups across the nation to support the development of technology entrepreneurship through economic research, policy analysis, and advocacy on local and national issues.




Engine is the voice of startups in government. We are a nonprofit that supports entrepreneurship through economic research, policy analysis, and advocacy.