CREATIVE SOURCE OF FUNDING FOR YOUR COMPANY'S PRODUCT DEVELOPMENT
Money may be available for your company’s IC-specific product development, but not as a hand-out, more of a collaborative endeavor, sponsored by your friendly Department of Defense. Have you ever considered the Small Business Innovative Research (SBIR) program that the federal government runs? Below is an introduction to SBIR, and I found this to be very helpful. Keep in mind that the DoD drives approximately 70% to 80% of the intelligence community’s mission. So, the IC connection is via the DoD-specific SBIR segments. This money will be spent on innovation; that is the law; so, if you believe your innovation is truly unique, it’s worth a look.
Note: there are knowledgeable consultants in this field, and then there are true experts who differentiate themselves, i.e., are current on the state of the SBIR and can help you win. This material is from the SBIR Coach™ Fred Patterson (see http://www.sbircoach.com). I am thrilled guys like Fred exist which allows me to stay an expert in my area and not feel I need to become an expert in his.
My next Blog Entry will discuss how to not just submit a proposal but how to win!
Why should an emerging tech provider consider SBIR?
All organizations need capital to operate. The riskier the business the harder it is to obtain that capital. Emerging technology startup companies are inherently risky. After exhausting personal funds and contributions from “friends, family and fools”, there are very few places for a technology startup to turn for funding. SBIR is one of those places – one of the very few places.
What is the SBIR Program?
The SBIR Program is the application of the incredibly creative, innovative, and entrepreneurial spirit of small businesses to solving technological problems faced by agencies of the Federal Government.
Each year, by Federal law, and with oversight of the SBA, Federal agencies who spent over $100 million on externally funded R&D in the prior year must set aside 2.5% of their external R&D budget in the current year for providing, under the protective legislation of the SBIR Act, the funding of small business technology development from design to prototype to commercialization.
For GFY2009, this small business set-aside represented about $2.2 billion [yes billion] dollars!
Which agencies participate in the SBIR Program?
In GFY2010, the 27 SBIR participating agencies and their components are:
1. Dept. of Agriculture
2. Dept. of Commerce (NIST, NOAA)
3. Dept. of Defense (Army, Navy, Air Force, DARPA, DMEA, OSD, SOCOM, MDA, CBD, DTRA, DLA, NGA)
4. Dept. of Education (IES, OSERS/NIDDR)
5. Dept. of Energy
6. Dept. of HHS (NIH, FDA, CDC)
7. Dept. of Homeland Security (S&T, DNDO)
8. Dept. of Transportation
9. Environmental Protection Agency
10. National Aeronautics & Space Administration
11. National Science Foundation
The agencies select the technical topics (problems or problem areas for which they are seeking solutions) for their annual (or semi-annual or even more often) solicitations, publish them on their web sites, and provide guidelines for proposal content and submission. Opening and closing dates for agency solicitations are staggered throughout the year so that there are always open solicitations.
Small businesses search the topics for a match with their capabilities, and prepare proposals for solving the government problems with innovative applications of their technology. Proposals are submitted to the originating agency for evaluation.
The agencies review the proposals, and rate and rank them according to the degree of originality and innovation, technical
merit, credibility of the proposing team, and the future market potential. The best proposals, on average one of every ten, are funded. Awards are issued in the form of a grant or contract. SBIR awards are not loans. There’s no interest to pay and no equity to give up!
How does a small business qualify for SBIR funding?
There are only four requirements for a small business to participate in the SBIR program:
1. Be American owned (>50%) by individuals, US located, and be independently operated
2. Have no more than 500 employees
3. The principal researcher is an employee of the business
4. Be organized for making a profit
What are the three Phases of the SBIR program?
Phase I -- Feasibility & Design.
Awards are made averaging $150,000, for between six to twelve months of effort, to support both a feasibility study and the design of the solution to the problem posed in the solicitation.
Phase II -- Prototype Development.
Awards averaging $1,000,000, for as many as two more years, expand meritorious Phase I designs to "proof of concept". During this time, along with the prototype development work, the stage is set for commercialization. Only Phase I award winners may be considered for Phase II.
Phase III -- Commercialization.
During this period the developer moves the innovation from the laboratory into the marketplace. No SBIR set-aside funds support this phase. The business must find funding either from the private sector, or from non-SBIR government sources.
Who owns patent rights on the resulting intellectual property?
You do! The small business retains intellectual property rights to all inventions and technical data for a period of up to five years following the completion of the final Phase of the project.
How difficult is it to win awards?
The SBIR program is extremely competitive. On average, only 10-15% of the submitted Phase I proposals are funded. What about the 85-90% that are not funded? Was it because the ideas or technologies were without merit? On the contrary, it's more likely that the applicants either:
- did not address an agency priority (it is coming out of their R&D budget),
- did not meet agency standards for defining a good R&D project,
- did not meet agency credibility criteria for the principal researcher and/or the proposing team,
- were deemed to have too low a potential for commercialization success,
- or, simply, did not articulate their proposed innovative solution clearly enough to compete successfully with those who did.
Standards and evaluation criteria differ widely, agency to agency, and even component to component. Applicants are advised to seek guidance from an experienced coach.
Question – to readers: have you seen examples of a DoD SBIR funding what eventually became a useful solution to the IC?