The Small Business Innovation Research program, and the related Small Business Technology Transfer program, were created to help small companies work with government agencies and large contractors to bring new technologies to market.

The program is set to currently operating under a continuing resolution (CR) with re-authorization due for re-upping on March 20.  Now, the House and the Senate have reached a compromise on legislation that will amend PL 110-235 (the current CR) to extend the SBIR Program from March 20, 2009 to July 31, 2009. This means that there will be yet another urgent need for re-authorization in just a few months.

On another front, SBIR availability appears to have dodged a bullet after President Barack Obama’s stimulus package lacked support for the SBIR program. The current stimulus bill has a section granting $7.5 billion to the National Institutes of Health to fund research. But that funding comes with a stipulation that it cannot be used for certain projects, including the SBIR program (15 U.S.C. 638(f)(1) and 15 U.S.C. 638(n)(1)) — a stipulation added by the NIH.

The SBIR and STTR programs have provided small tech companies with more than $26 billion in funding since the programs were launched in 1982. Nearly 18,000 firms have participated, with 6,244 currently active in at least one project. Those companies have also obtainedmore than 67,500 patents.  SBIR accounts for over half of all the federal R&D awards that small companies receive.

The Senate Committee on Small Business & Entrepreneurship (SBE) Chair, Mary Landrieu (D-LA) and ranking member Olympia Snowe (R-ME), sent a letter to Mr. Charles E. Johnson, Acting Secretary of Health and Human Services to express their concern over the $8 billion in ARRA funding exempted from SBIR. They are asking for a response from Secretary Johnson by March 24, 2009.

Senators Russell Feingold (D-WI) and Benjamin Cardin (D-MD) have sent their own letter to NIH stating:

Thus, notwithstanding passage of the ARRA, HHS remains responsible for allocating 2.5 percent and .3 percent of its research and development funds to SBIR and STTR, respectively. Since the ARRA provided $8.2 billion to the NIH for research and development, HHS must ensure that an amount equivalent to 2.8 percent of this total, or $229 million, is allocated to these two programs. We look forward to HHS’s explanation of how it will meet these requirements. 

Basically, the NIH claims that there are not enough “high quality” SBIR proposals from small businesses to fund with ARRA dollars before the expiration date. The NIH also claims that it can use some ARRA monies for SBIR/STTR where appropriate, and contend that their new NIH Challenge Grants in Health and Science Research, will have $200m available for 200 or more grants up to $1m each (see here).

For now, SBIR money should remain available.

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  1. The main hurdle facing SBIR is the 8-year reauthorization that was stalled in congress last year. At issue is whether majority VC-owned firms should be allowed to access SBIR funds.

    Almost all small businesses oppose this: if a company has millions in VC money why do they need a $100k research grant? Of course, the main target is NIH’s jumbo Phase II awards (which have been awarded in amounts up to $8M).

    The only way to preserve SBIR for small independent businesses and keep VCs at bay is for the small business community to be vocal and register their support for SBIR in its current form. Please call or fax your congrssional representatives, Senators, and the small business committees so that your voice can be heard!

  2. I agree with James White. The SBIR Program is working well with the current eligibility rules. Expanding eligibility to majority VC controlled small businesses un-levels the playing field.

    If a company has secured VC funding, they literally have millions of dollars more in financial resources than those who have chosen not to dilute their ownership in that fashion. SBIR will contribute only a very small amount relative to what the company has received from the VC. Why even compete for that money? Is it greed?

    Keep up with the debate over the next few months by monitoring and get involved!

  3. As a long-time reviewer of SBIR grants, a president of a university spin-off that has tapped into the SBIR route and an academic researcher, I see two problems with the program. First, it certainly has been true that there has been a paucity of good applications. Until recently, almost anything that wasn’t triaged was funded. Second, there are “businesses” that make a living doing research but never produce a product. In recent years, as a number of established companies that I would consider as medium sized (they still fit the legal definition of small businesses) have tapped into this, the quality of proposals has increased markedly. No longer is getting a score tantamount to being funded, which is as it should be. In my opinion, requiring a product and examining the past record as well as establishing an upper limit for available funding would solve many of the problems. There is much talk of these venture-funded firms with “millions” in the bank. Perhaps we should examine more closely what that actually means. After all, the objective is to bring new products to the market. Should venture-funded firms be automatically excluded? I will say that my firm is choosing to build value by SBIR research, and I would hate to see our opportunity vanish. On the other hand, as a reviewer, I also hate seeing proposals from firms or individuals that I know have no chance (or intent) of commercialization or with a record of taking funds without ever commercializing a product competing for funding.

  4. […] many companies, SBIR can be key to accessing critical financing, and as Patent Baristas recently […]