Since its enactment in 1982, as part of the Small Business Innovation Development Act, SBIR has helped thousands of small businesses to compete for federal research and development awards. SBIR is a highly competitive program that encourages small business to explore their technological potential and provides the incentive to profit from its commercialization. By including qualified small businesses in the nation’s R&D arena, high-tech innovation is stimulated and the United States gains as it meets its specific research and development needs.

The risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. By reserving a specific percentage of federal R&D funds for small business, SBIR protects the small business and enables it to compete on the same level as larger businesses. SBIR funds the critical start-up and development stages and it encourages the commercialization of the technology, product, or service.

In order to qualify for the SBIR program, a business must meet certain eligibility qualifications. These include the following:

• American-owned and independently operated
• For-profit
• Principal researcher employed by the business
• Company size limited to 500 employees

Each year, ten federal departments and agencies are required by SBIR to reserve a portion (2.5%) of their R&D funds for award to small business. On an annual basis there is approximately $1 billion in R&D funds reserved for SBIR. The following Federal agencies are responsible for awarding SBIR money, with the Department of Defense ($719 million) receiving the lion’s share of the money.

• Department of Agriculture
• Department of Commerce
• Department of Defense
• Department of Education
• Department of Energy
• Department of Health and Human Services
• Department of Transportation
• Environmental Protection Agency
• National Aeronautics and Space Administration
• National Science Foundation

Three-Phase Program

Following submission of proposals, agencies make SBIR awards based on small business qualification, degree of innovation, technical merit, and future market potential. Small businesses that receive awards or grants then begin a three-phase program.

• Phase I is the start-up phase. Awards of up to $100,000 for approximately six months to support exploration of the technical merit or feasibility of an idea or technology. The small business submits a report following the completion of Phase I.