America’s Seed Fund is composed of two programs: the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR).
SBIR/STTR programs were to expire in 2022, however, in September 2022 President Biden signed the SBIR and STTR Extension Act of 2022, which authorized the SBIR/STTR programs to continue through fiscal year 2025, so these two financial instruments will keep on working to invest in early-stage technology.
What are the SBIR and STTR Programs?
SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) are highly competitive programs that target small businesses and encourage them to engage in Federal Research/Research and Development (R/R&D) with enough potential for commercialization.
Both SBIR and STTR are award-based programs that help small businesses develop their technological potential and benefit from its commercialization. The main objective is to boost high-tech innovation and, therefore, promote the entrepreneurial spirit in the United States targeting specific research and development needs.
As the funds aim at helping early-stage startups develop their technology, they provide annual investments worth $200 million, so around 400 startups are funded every year. The average ticket size is $2 million and the verticals include nearly all areas of technology, including artificial intelligence, digital health, photonics, medical devices, etc.
What are the differences between SBIR and STTR?
Image retrieved from NIH.gov.
The main differences between both programs can be summarized in three aspects:
- For STTR, the small business awardee and its partnering institution must provide an intellectual property agreement containing the allocation of intellectual property rights to carry out follow-on research, development or commercialization activities,
- For STTR, the small business must perform at least 40% of the R&D and a single partnering research institution must perform at least 30% of the R&D,
- The STTR program allows the Principal Investigator to be primarily employed by the partnering research institution.
Only United States small businesses are eligible to participate in the SBIR/STTR programs, but companies must also fulfill some requirements, including:
- Companies must be organized for profit, with a place of business located in the United States,
- Companies must be more than 50% owned and controlled by at least one individual resident in the United States, or by other small business which is more than 50% owned and controlled by at least one individual resident in the United States, and
- Companies cannot have more than 500 employees, including affiliates.
In the case of the STTR program, the partnering nonprofit research institution must also meet some eligibility criteria, such as:
- They must be located in the US,
- They must meet one of three definitions:
- It must be a nonprofit college or university,
- It must be a domestic nonprofit research organization, or
- It must be a federally funded R&D center (FFRDC).
The eligibility guide is also available for more detailed information.
The three phases of SBIR/STTR programs
There are three phases:
- Phase I: determining the technical feasibility, merit and commercial potential of the proposed project to set the quality of performance of the small business awardee organization. This phase generally provides $50,000 – $250,000 for 6 months (SBIR) or 1 year (STTR).
- Phase II: companies continue to develop their projects. Funding depends on the results obtained in Phase I and on the scientific and technical merit and commercial potential of the project proposed in Phase II. Awards are generally $750,000 for 2 years.
- Phase III: the objective is to pursue commercialization. However, the SBIR/STTR programs do not fund Phase III
More information on FundingTrip.com.
Image by Leonhard Niederwimmer in Pixabay