Spend any time around small tech companies trying to crack into the defense sector and you’ve heard of SBIR—the Small Business Innovation Research (SBIR) program. It’s one of the most commonly-reference tools to help tech companies crack into the defense sector.
Unfortunately, it's wildly misunderstood what SBIR is—and what it isn’t.
What is SBIR
Branded as “America’s Seed Fund,” the SBIR program solicits industry three times a year for their innovative ideas and, if selected, helps mature them.
The program is funded through a Congressionally-mandated 3.2% set aside from federal R&D accounts.
For the DoD, that works out to be ~$1.8B a year specifically reserved for this small business program.
SBIR consists of 3 phases:
- Phase I: ‘research the research’ to determine feasibility and viability; $275K max
- Phase II: further develop Phase I proposal based on the scientific and technical merit; $1.8m max
- Phase III: a squishy non-SBIR funded phase to pursue commercialization of Phase II research
The first two phases offer SBIR funding but take no intellectual property (sort of) and no stake in a company. In fancy speak, it’s called “non-dilutive capital.”
Back it Up
With SBIR-101 out of the way, it's time for SBIR-201: the history lesson.
The program was created back in 1982, the same year E.T. phoned home and Phoebe Cates dropped her top during that scene from Fast Times at Ridgemont High.
But there were two other things going on back then:
1. Cold War defense spending was about to peak.
2. The first wave of defense industry consolidation had already begun.
So What
With that context in mind, which do you think is the purpose of the SBIR program:
- Door #1: “identifying small businesses that could provide a solution to the warfighter in a faster, more efficient manner.”
- Door #2: “support scientific excellence and technological innovation through the investment of federal research funds in critical American priorities to build a strong national economy.”
Yep, it’s Door #2 (btw, Door #1 is the Air Force’s interpretation).
Why This Matters
A fundamental part of innovation is implementation, and that’s where all the issues with the SBIR program start to manifest.
When you think about it though, the name of the program says it all.
The SBIR program is not innovation—it's innovation research—and it’s called SBIR, not SBIR&D (read this if you don’t know the difference between R and R&D).
What Now
This matters for a ton of reasons, but we’re just getting started.
We’ll continue to poke and prod SBIR over the coming months to shine some much-needed light on the program's shortfalls and how to fix it, and there’s a very good reason we’re doing it:
SBIR is a program codified in law, but Congress must periodically reauthorize the program (it was last reauthorized in the 2017 NDAA).
Guess what: the current statute authorizing the SBIR program expires September 30, 2022, meaning Congress must write language in the FY23 NDAA to reauthorize the program.
Sounds like a mighty convenient time to inject some much-needed SBIR program reform.
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