A highly competitive grant program run by the U.S. government that provides funding to small businesses engaged in research and development (R&D) that has the potential for commercialization. The SBIR program aims to stimulate technological innovation, use small businesses to meet federal R&D needs, foster and encourage participation by socially and economically disadvantaged persons and women-owned small businesses in technological innovation, and increase private sector commercialization of innovations derived from federal R&D funding.
Program Structure
The SBIR program is administered by 11 federal agencies, each with its own eligibility requirements and focus areas. Funding is provided through contracts or grants.
- Phase I grants: Typically around $150,000 for feasibility studies.
- Phase II grants: Can be up to $1 million for more extensive R&D.
- Phase III: Focuses on commercialization with no SBIR funds awarded in this phase.
Eligibility and Allocation
Only U.S. businesses with fewer than 500 employees are eligible. A certain percentage of SBIR funds are set aside for businesses owned by socially and economically disadvantaged persons, women, and veterans. Approximately $2.5 billion is awarded through this program each year, with the United States Department of Defense (DoD) being the largest agency, providing approximately $1 billion in SBIR grants annually.
Impact on Small Businesses
Over half the DoD awards go to firms with fewer than 25 people, and a third to firms with fewer than 10. A fifth are minority or women-owned businesses. The SBIR program provides a great opportunity for small tech businesses to secure non-dilutive funding to advance their cutting-edge ideas.
