An SBIR Primer for Government and Small and Large Businesses
This article provides a pragmatic perspective on how small and large
businesses can use Small Business Innovation Research contracts (SBIRs)[1]
to increase revenue, defray risk, and add new customers. It also
explains how government agencies can leverage SBIRs to access innovative
solutions and build a robust small business vendor ecosystem.
However,
this is not meant to be an exhaustive discussion of the program, and
this article will gloss over many exceptions and administrative
niceties. The endnotes and figures will add detail, but the goal of this
article is to help people understand the basics of how to integrate
SBIR into their business strategies and pipelines.
The SBIR Program[2]—A Brief Overview
There are three important things to know about federal SBIR programs:
- SBIRs fund corporate development of solutions to government needs,
- The company that develops the solution keeps the intellectual property (IP) and ownership, and
- Solutions developed under an SBIR can be procured from their creators without competition.
A
government agency’s SBIR program allows the agency to fund the
development of technologies that will help to deliver on its mission.
Eleven agencies[3]
currently participate and, predictably, the types of solutions they
fund reflect their underlying missions and goals. (Refer to FIGURE 1.)
As
a procurement vehicle, SBIRs are not new, but have recently become
increasingly popular as a way to engage the start-up and innovative
small business community, which might not otherwise be interested in
government contracting but is hungry for growth capital.
Each agency structures its program slightly differently, but the following elements are consistent:
- A need is identified and published as an SBIR solicitation—i.e., a “SBIR topic”;
- Companies with ideas propose solutions;
- A
review committee evaluates the proposals based on their technical and
commercial merits and whether the proposing team will be able to
execute;
- Winners build a proof of concept of their solutions
under an SBIR Phase I, which typically last between four and 12 months,
and typically funded between $50,000 and $200,000 (refer to FIGURE 2);
- Following Phase I, progress is reviewed, and promising companies go on to Phase II;
- During
Phase II, companies mature their proofs of concept into a prototype
over 12 to 24 months, with Phase II funding ranging between $500,000 and
$1.5 million; and
- Following successful prototype development,
the government can purchase the solution without competition under a
Phase III SBIR contract.
Two Important Variants
While
all the SBIR programs share the same basic goals and three-phase
structure, there are two important variants—namely the National Science
Foundation (NSF)’s SBIRs and “dual-purpose” SBIRs.
- The National Science Foundation
Generally,
SBIRs focus on an agency’s needs. However, the NSF’s SBIR topics focus
on needs in the American economy at large. For example, the NSF saw
promise in 3D printing a decade before it became popular and was issuing
SBIR topics to help the technology and industry mature. As a result,
NSF topics tend to be much broader than those of other agencies and they
tend to fund much earlier stage technologies.
- The Dual-Purpose SBIR[4]
The
“dual-purpose” SBIR (a.k.a., the U.S. Air Force special open-topic of
the AFWERX SBIR for commercial technologies and solutions), is different
from a traditional SBIR in two important ways:
- Caveats for NSF
Evaluating
whether to pursue an NSF SBIR is a bit different from the process
previously described. As such, ask yourself the following two questions:
●
Do you have a truly revolutionary idea for a technology that will push
the state of the art in an important industry/technology domain?
● Do you have one or more PhDs who did their dissertations on that tech?
If the answer to either is “no,” then don’t apply. If the answer to both
is “yes,” start reaching out to the NSF SBIR program office. They are
great and shockingly accessible. Then, follow the process previously
described.
- Caveats for the Dual-Purpose SBIR
As with NSF, there are a million exceptions that apply to dual-purpose SBIRs, but here are two questions to ask yourself:
● Do you have a commercially successful product?
● Does DOD have the same need as your commercial customers?
If the answer to either is “no,” then the dual-purpose SBIR probably isn’t right for you, but if the answer to both is “yes”—
- Identify groups within the Air Force that have the same need as your commercial customers.
- Begin reaching out to the groups and do some customer discovery to learn:
- Is this a big or a small problem for them?
- How does their use align or differ from your commercial customers’ use?
- What is their reaction to your solution?[6]
- If there is good overlap in the needs and interest in your solution, then apply for a dual-purpose SBIR.
An SBIR Primer for Large Business Contract Managers
There are three important things that large business contract managers should know about SBIRs:
● “Small business” means that you have fewer than 500 employees,[7] so you might still qualify;
● SBIR can be a leadership development tool for you; and
● You can get most of the benefits of SBIRs through partnerships with small business winners.
Large Can Launch Small
Large
companies face challenges in delivering entrepreneurial practices,
products, and services to government clients. Doing so involves
overcoming some fundamental hurdles, including:
● How do you develop entrepreneurial thinking in a large organization?
● How do you retain future leaders who have lots of options?
● What do you do with employees who are between contracts?
● How do you credibly bring innovation to government when you’re the incumbent?
● How do you identify small businesses that understand your culture and meet your standards?
At
the risk of overpromising, the SBIR program can underwrite and become
the basis for an entrepreneurship track for up-and-coming leaders in
your company. Here’s how:
- Identify high-potential people in your organization with an interest in entrepreneurship and product development.
- Help them incorporate a limited liability company (LLC) and register in the necessary systems.
- When
SBIRs come out, help them identify topics that align with their
interests and capabilities—which, given that they work for you, likely
align with your service areas.
- (Optional) License technology to them that your company developed that can be part of their solutions.
- Help them write their SBIR proposals.
- Give the winner a six-month to 12-month leave of absence to execute his or her Phase I SBIR.
- (Optional) You can subcontract with the winner to help with product development and compliance.
- When
the winner completes his or her Phase I SBIR, bring him or her back
into your company for four to 12 months—the typical time between Phase I
ending and Phase II starting.
- If they win a Phase II, then they can quit and you can subcontract/collaborate with them on the Phase II.
- When the Phase II SBIR is complete—
- You are uniquely positioned to help sell in Phase III,
- You have a new small-business subcontractor that “grew up” in your culture,
- You have access to a product built for a government customer,
- You are perfectly positioned to provide services that wrap around the product, and
- The program and the products give your firm excellent “innovation” credibility.
- If
he or she does not win a Phase II, you get a young manager who has had
an extraordinary entrepreneurial experience to bring back into your
company.
Traditional SBIR Partnerships
More traditionally, large companies leverage SBIRs by partnering with a small business that has won one.
Once
a company has won an SBIR, the government can issue a sole-source
contract to that company for the resulting product and services.
However, most new product companies are not well versed in systems
integration, training, and maintenance, and most do not have existing
customer relationships. Helping fill these deficits creates an excellent
partnership opportunity for large companies.
With these things in mind, there are three things for large business contract managers to do:
- Keep track of SBIR-funded products that are relevant to you (which is easy if you set up automated alerts)[8];
- Track
SBIR solicitations to see if any are worth pursuing through an internal
leadership development program or through a partnership; and
- Because
tens of thousands of products have already been funded and most of them
have never been sold to the government, consider reaching out to the
winners to see if they are interested in collaborating with you to
complete a sale.
Conclusion
SBIR has
existed for decades, yet historically it has played second fiddle to
high-dollar research grants and contracting. Thanks to innovative
thinkers inside the government and industry, however, the SBIR program
is finding a new life at the center of the government’s efforts to
attract a new generation of small businesses and acquire the best and
most innovative solutions.
Whether you are looking for a solution
to your program’s perennial problem, want to build a product, or hope to
expand your business, SBIR can provide the funds and customer access
you need. CM
Geoff Orazem
- CSO, Eastern Foundry.
- CEO, Agency Capital.
www.agency-capital.com
[email protected]
Endnotes
[1]
Editor’s Note: Within this article, the acronym “SBIR” is used to refer
to “Small Business Innovation Research” in the general sense (i.e., for
both the SBIR process in general and individual SBIR programs), as well
as to a “Small Business Innovation Research contract” (e.g., “an SBIR”
contract vehicle), includingthe Small Business Technology Transfer
Research (STTR) program and grants-based SBIR and STTR programs.
[2] See, generally, “What Is SBIR?” available at https://www.sbir.gov/.
[3] For a list of the participating agencies, see https://www.sbir.gov/agencies-landing.
[4] See https://www.afwerx.af.mil/sbir.html.
[5]
As an example, “FedScout” is a free automated SBIR tracker created by
Agency Capital. (For more information, see www.agency-capital.com.)
FedScout is available for download on the Apple IOS and Google Play app
stores.
[6] Note, however, that this is not a sales call. You are legitimately there to get their thoughts on your solution.
[7] For SBIR eligibility requirements, see https://www.sbir.gov/faqs/eligibility-requirements.
[8] See, generally, note 5.