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

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.

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Engine

Engine

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