1 Federal R&D Programs Reserved for Small Business Ronald S. Cooper, Ph.D Office of Technology U.S. Small Business Administration The SMALL BUSINESS INNOVATION.

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Federal R&D ProgramsReserved for Small Business

Ronald S. Cooper, Ph.DOffice of TechnologyU.S. Small Business Administration

The The SMALL BUSINESS INNOVATION SMALL BUSINESS INNOVATION

RESEARCH PROGRAMRESEARCH PROGRAM(SBIR)(SBIR)

and related programs

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SBIR ProgramSBIR Program

• Program structure

• Evolution and learning

• Economic impacts

• Outreach activities

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Congress designated 4 major goals of SBIR program:

Stimulate technological innovation

Use small business to meet federal R&D needs

Foster and encourage participation by minorities and disadvantaged persons in technological innovation

Increase private-sector commercialization of innovations derived from federal R&D

Small Business Innovation Small Business Innovation Development Act of 1982Development Act of 1982

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• National program providing $1.5 billion each year to small businesses for innovation

• Over 1,500 firms receive over 5,000 awards each year

• Enables US small businesses to engage in federally-funded R&D—with potential for commercialization

• Enables/encourages federal agencies to utilize the innovation advantages of small firms

• Established 1982, recently extended through FY 2008

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Program StructureProgram Structure

Federal agencies with “extramural” research budgets of over $100 million per year must reserve a percentage for small business through the SBIR program.

Amount of R&D budget to be set-aside for SBIR:

1982-86 1987-92 1993-94 1995-96 1997-present1997-present

0.2+% 1.25% 1.5% 2.0% 2.5%2.5%

Source of Funds for SBIR:

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U.S. federally-funded R&DU.S. federally-funded R&DTotal: $70 billion in 2002

Small Business 5%

Big Business 27%

Univ. & Colleges 34%

Non-Profit 7%

Extramural 74%

Federal Labs 27%

$62B

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Program StructureProgram Structure

Each participating Federal agency administers its own SBIR program– Solicitations (with technology topic areas)

– Proposal review & selection (scientific merit / commercial)

– Highly competitive: 16% of proposals accepted - Phase I

SBA has oversight and outreach responsibilities

- Policy directive - Monitoring - National conferences

- Evaluation - Outreach programs - Reporting to Congress and activities

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• Defense (DOD) 600 • Health (HHS,NIH) 487 • Space (NASA) 110 • Energy (DOE) 95 • Science (NSF) 78 • Agriculture (USDA) 17 • Commerce (DOC) 7 • Education (ED) 7 • Environment (EPA) 6 • Transportation (DOT) 6

SBIR participating agenciesSBIR participating agencies

TOTAL ~ $1.4 BTOTAL ~ $1.4 BFY 2002FY 2002

$ millions SBA (oversight)

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SBIR’s 3-Phase StructureSBIR’s 3-Phase Structure

PHASE I Feasibility of idea $100,000 (6-12 months)

PHASE II Full R&D $750,000 (2 years) Commercialization plan

PHASE III Commercialization stage Use of non-SBIR funds

(private capital or federal follow-on) Fed: data rights, and noncompete

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Organized for-profit U.S. business

At least 51% owned and controlled by U.S. citizens (individuals)

Small business located in the U.S.

500 or fewer employees

Principal Investigator’s primary employment must be with the small business

Research partners are allowed/encouraged (up to 1/3 of Phase I, up to 1/2 of Phase II)

SBIR Eligibility—Who may apply?SBIR Eligibility—Who may apply?

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Key featuresKey features

Contracts & grants, not loans (high-risk research, no debt burden)

Small business owns intellectual property– Agencies must protect IP for 4 years

– Agency retains royalty-free license for government use only of technical data (IP)

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National Policy ContextNational Policy Context 1950s, 60s -- Federal role was to support basic

research in Federal labs and large businesses

1970s, 80s -- Policy shift towards: - commercialization of federal R&D - government-industry partnerships - greater role for small business

• “Stevenson-Wydler Act” of 1980

• “University and Small Business Patent Procedure Act” of 1980 (Bayh-Dole Act)

• “Small Business Innovation Development Act” of 1982 established the SBIR program

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SBIR/STTR: Historical Relationships1982 1997

FederalGovernment

SmallBusinesses

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SmallBusinesses

StateGovernment

Quasi-Government Corporations Economic Development Entities Technology Centers

FederalGovernment

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SmallBusinesses

StateGovernment

Quasi-Government Corporations Economic Development Entities Technology Centers

FederalGovernment

Academia University Research Parks Faculty & Graduate Students Technology Incubators Research Foundations

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Small Business Technology Transfer Program Small Business Technology Transfer Program (STTR)(STTR)

Promoting Small Business-University CollaborationPromoting Small Business-University Collaboration

• Set-aside program to facilitate cooperative R&D between small businesses and U.S. research institutions

• Established 1992, recently extended through 2009

• Similar structure to SBIR, administered by SBIR offices

• Funding: – Set-aside = 0.3 % of extramural R&D →→ $200 million– Agencies with extramural R&D > $1B must participate

• FY2002: 356 Phase I awards 114 Phase II awards

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• Defense (DOD) SBIR/STTR 25.4

• Health (HHS) SBIR/STTR 16.8

• Space (NASA) SBIR/STTR 4.2

• Energy (DOE) SBIR/STTR 3.5

• Science (NSF) SBIR/STTR 2.8

• Agriculture (USDA) SBIR .6

• Commerce (DOC) SBIR .3

• Education (ED) SBIR .3

• Environment (EPA) SBIR .2

• Transportation (DOT) SBIR .1

SBIR/STTR participating agenciesSBIR/STTR participating agencies

>$1 B

/yr

>$1 B/yr

Extramural Budget ($B)

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STTR - SBIR DifferencesSTTR - SBIR Differences

• STTR requires research institution partner University or college / non-profit research org. / FFRDC

• Research partner share: min.= 30% max.= 60%

(SBIR: permits/encourages partners: Phase I: max. 33% Phase II: max. 50%)

• Award always goes to small business

• Requires written agreement allocating IPRs

• Principal Investigator’s primary employment can be with research institution or small business SBIR: Primary (>50%) employment must be with small business

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SBIR program impactsSBIR program impacts

Is often only source of funding available

Enables new startups, spin-offs

Induces entrepreneurial activity (“demonstration effect”)

Enables small firms to develop innovative capacity

Complements private ventures (reduces risk)

“Success rate”: 39% of projects had sales attributable to SBIR (55% had sales or additional investment)

Addresses gap in innovation financing

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SBIR addresses innovation finance gapSBIR addresses innovation finance gap

Dimensions of the gap SBIR program

1. Information Certification effect, outreach

2. Short timeframe Awards/grants (no payback)

23Source: MoneyTree Survey—PricewaterhouseCoopers, Thompson Venture Economics, NVCA.

1.4%

62.7%

19.2%

16.7%

Expansion

Early Stage

Late Stage

Start Up

US Venture Capital InvestmentsUS Venture Capital Investments by Stage, 2002by Stage, 2002

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US Venture Capital Investments by Stage

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 1996 1997 1998 1999 2000 2001 2002

Source: MoneyTreeSurvey

Later Stage

Expansion

Early Stage

Startup/Seed

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Dimensions of the Gap SBIR program


2. Short timeframe Awards/grants--no payback

3. Size of financing Small grants (< $1m)

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US Venture Capital Disbursements by size of financing round

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

Source: NVCA and Venture Economics, special tabulations.

Mill

ions

of 1

998

dolla

rs

> $10 million

$1-$10 million

< $1 million

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Dimensions of the Gap SBIR program

4. Few technology areas Wide range of technologies

5. Geographic specialization Broad geographic coverage


2. Short Timeframe Awards/grants--no payback

3. Size of financing Small grants (< $1m)

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Angels28%

Federal Gov't25%

VCs8%

State Gov't5%

Univs3%

Industry31%

Federal Gov't21%

Angels24%

Univs4%

State Gov't

2%VCs2%

Industry47%

Funding Sources for Funding Sources for Early-stage Technology Development in U.S.Early-stage Technology Development in U.S.

Lower estimate: $5.4 Bil. Upper estimate: $35.6 Bil.

Note: Proportional distribution is similar regardless of restrictive or inclusive definitions.

[Source: Philip Auerswald, Lewis Branscomb, Between Invention and Innovation]

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• Integrating commercialization reporting into on-line application

• National Research Council (NRC) 3-year review

Improving SBIR Program evaluation

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Outreach & assistance initiatives:“63% of SBIR projects need assistance with commercialization activities”

• SBIR & STTR outreach to low-income communities, women-owned businesses, and socially/ economically disadvantaged

• Federal & State Technology Partnership (FAST)

• Rural Outreach Program

• Coordinate with other programs (SBIC, VC/AC networks)

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Federal and State Technology Partnership Federal and State Technology Partnership (FAST) Program(FAST) Program

• Purpose: to provide support to state-level organizations that help small businesses in, or interested in, the SBIR program– Mentoring networks: Business advice & counseling

• Matching grants to state-level organizations– incentive for states with lower levels of SBIR participation

– administered by SBA

• Target: All states eligible, one grant per state

• Funding = FY 2001: $3 million, 30 grants FY 2002: $3 million, 27 grants

FY 2004: $2 million, 10 grants(Grant size: $100K)

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Rural Outreach ProgramRural Outreach Program

• Purpose: to geographically expand competition for SBIR awards by supporting outreach efforts in states with low levels of program participation.

• Target: 25 rural states

• Matching 5-year grants: one per state, 1:2 (state:federal)

• Funding level: FY 2001: $1.5 million, 25 awards FY 2002: $500K, 10 awards

FY 2004: $250K 5 awards

• Grant sizes: $40K, $52K, $80K

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SBIR & STTR ProgramsSBIR & STTR ProgramsOffice of Technology

U.S. Small Business Administration

For more information• Contact individual agency websites• Cross-agency websites:

www.sba.gov/sbirwww.sbirworld.com

Ronald S. Cooper

[email protected]

(202) 205-6455

1 Federal R&D Programs Reserved for Small Business Ronald S. Cooper, Ph.D Office of Technology U.S. Small Business Administration The SMALL BUSINESS INNOVATION.

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