Small Business Innovation Research

The Small Business Innovation Research (or SBIR) program is a United States Government program, coordinated by the Small Business Administration, in which 2.5% of the total extramural research budgets of all federal agencies with extramural research budgets in excess of $100 million are reserved for contracts or grants to small businesses. In 2010, that represented over $1Billion in research funds. Over half the awards are to firms with fewer than 25 people and a third to firms of fewer than 10. A fifth are minority or women-owned businesses. A quarter of the companies in FY10 were first-time winners.^[1]

History

The program was established with the passing of the Small Business Innovation Development Act in 1982 to award federal research grants to small businesses. According to Rep. Sam Graves, (R-MO) the Chairman of the House Small Business Committee of the 112th Congress, the program had three main objectives

to spur technological innovation in the small business sector
to meet the research and development needs of the federal government
to commercialize federally funded investments. ^[2]

The program must be periodically reauthorized by the United States Congress, but reauthorization is generally included in each new budget. The latest authorization extends the program by continuing resolution until November 18, 2011.^[3]

The SBIR program was created to support scientific excellence and technological innovation through the investment of federal research funds in critical American priorities to build a strong national economy ... one business at a time.^[4] In the words of program founder Roland Tibbetts: "to provide funding for some of the best early-stage innovation ideas -- ideas that, however promising, are still too high risk for private investors, including venture capital firms."^{[citation needed]} For the purposes of the SBIR program, the term "small business" is defined as a for-profit business with fewer than 500 employees, owned by one or more individuals who are citizens of, or permanent resident aliens in, the United States of America.

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Research grants

The SBIR program agencies award monetary grants in phases I and II of a three-phase program:^[5]

Phase I, the startup phase, makes awards of "up to $150,000 for approximately 6 months support [for] exploration of the technical merit or feasibility of an idea or technology."
Phase II awards grants of "up to $1 million, for as many as 2 years," in order to facilitate expansion of Phase I results. Research and development work is performed and the developer evaluates the potential for commercialization. Phase II grants are awarded exclusively to Phase I award winners.
Phase III is intended to be the time when innovation moves from the laboratory into the marketplace. No additional SBIR funds are awarded for Phase III. "The small business must find funding in the private sector or other non-SBIR federal agency funding."

In 2010, the SBIR program across 11 federal agencies provided over $2 Billion in grants and contracts to small U.S. businesses for research in innovation leading to commercialization. (Note that the $1B in awards stated above in the first paragraph is the amount that only the Department of Defense awarded to small businesses through their SBIR program. All of the other SBIR agencies make up the other $1B.) The company owns the intellectual property and all commercialization rights. Companies such as Symantec, Qualcomm, DaVinci and iRobot were started with R&D funding from this program.

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Related programs

A similar program, the Small Business Technology Transfer Program (STTR), uses a similar approach to the SBIR program to expand public/private sector partnerships between small businesses and nonprofit U.S. research institutions, and is funded at present at .3% of the relevant agencies' extramural research budgets.^[1] In FY10, that amounted to over $100 Million ^[1]

The Small Business Technology Council, a member council of the National Small Business Association, hands out the Tibbetts Award annually "to small firms, projects, organizations and individuals judged to exemplify the very best in SBIR achievement."^[6]

Federal and State (FAST) is a program of State-based business mentoring and assistance to aid small businesses in the preparation of SBIR proposals and management of the contracts.^[4] It is more active in some states than others.

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Initiatives

Rep. Mazie K. Hirono (D-HI) has proposed the `SBIR Enhancement Act of 2011' as HR 447 of the 112th Congress, which increases the funding for SBIR by increasing the funding tax from the original 2.5% up to 5%, raises the Phase 1 amount to $200,000 and provides for economic adjustments every five years.^[7]

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