A Government Program Every American Startup Should Know About
When startups learn about the Small Business Innovation Research (SBIR) program for the first time, a common reaction is, “Wait a second. A federal government program provides for-profit firms $1 million or more to develop technology, commercialize it and after, the firm keeps all of the Intellectual Property?”
That’s right: Each year SBIR and its sister program for non-profits, the STTR program, invest in American entrepreneurs to stimulate technological innovation and address national needs in areas such as health, education, and national defense. Providing over $2 billion in competitive awards each year, SBIR/STTR are the largest source of early-stage capital for innovative small companies in the United States.
In other words, SBIR is “America’s seed fund,” says Javier Saade, associate administrator of the Small Business Administration’s Office of Investment and Innovation, which oversees both programs across the federal government. “SBIR helps ‘de-risk’ technology ideation, conception and development so that eventually private capital and industry help these small businesses take the ball further and commercialize the wide array of technologies funded.”
Combining technological R&D with a commercial purpose helps startups become the next Qualcomm, Genentech, Symantec, Z-Corporation or iRobot—all recipients of SBIR capital—and leads to technological breakthroughs like 3-D printing, LASIK technology and the Sonicare toothbrush.
The Department of Education’s SBIR program operates out of ED’s research arm, the Institute of Education Sciences. With an annual budget of $7.5 million, ED/IES SBIR funds the R&D of education technology products to support student learning and teacher practice, in both regular and special education. Many ED/IES SBIR-funded startups have successfully leveraged the funding to develop award-winning technologies that now have solid marketplace traction. A few examples include: Filament Games’ life-science games; Sokikom’s math games; Teachley’s math games; Mindset Works’ platform that teaches students to use a growth mindset approach to learning; ThereNow’s professional development classroom video system; and Handhold Adaptive’s tools to support students with autism-spectrum disorder.
So how can startups tap into America’s seed fund? To apply for funding, firms submit a proposal in response to the solicitation, otherwise known as the Request For Proposals. The 2015 RFP is now open, with proposals due in January 2015. All proposals are reviewed by qualified government officials and scored against the evaluation criteria in the solicitation. The highest scoring proposals win the awards, with notification coming within 90-days of submission.
The program operates in three phases. Phase I provides up to $150,000 for prototype development and initial research with end-users. Phase II provides up to $900,000 for full-scale product development, including iterative research with end-users that leads to refinements, and a pilot study to test whether the fully-developed product functions, can be integrated within typical practice, and shows promise for leading to the intended outcomes compared to a control group. In Phase III, the goal is private-sector commercialization, whereby products are disseminated to end-users (e.g., schools, teachers, and students) and the company generates revenue to sustain the product and the business over time.
A Few Bits of Advice
The great news is that SBIR funding allows firms to pursue the game-changing technologies while owning all IP rights; the bad news is that the program is very competitive. In last year’s competition, 12 of 252 (4 percent) proposals received Phase I awards.
How can savvy entrepreneurs make their applications stand out? Here are a few things to keep in mind as you write your proposal.
1) Get out your crystal ball. I use the analogy of a “crystal ball” when I talk to potential applicants about the need to provide a clear and powerful vision for what the product will look like after development is complete. Much like the one-minute pitch that entrepreneurs make at a 1776 Challenge Cup event or on the TV show “Shark Tank,” reviewers who read proposals need to quickly understand exactly what is being proposed and why it is unique.
2) Research, research, and more research: Given that IES is the research arm of ED, reviewers expect to see that you’ve done your research. Strong proposals often present findings from user-concept testing with students and teachers that support the proposed idea. Some also present findings from pilot studies, in order to demonstrate the promise of existing versions of the technology and to justify that further development is warranted. As noted above, proposed research during the project includes iterative studies and a pilot study in schools and classrooms. To these points, the program highly recommends that the project team include an individual with education research expertise in designing, carrying out and publishing studies on topics similar to what is being proposed.
3) Strong stakeholder endorsements: Strong proposals include letters from individuals or entities that endorse the significance and the business plan for the proposed product. Such letters often come from publishers, marketplace digital platforms, investors, associations or organizations in the specific area of the proposal, or from school administrators or practitioners who would purchase or use the product if it were available. The letters provide reviewers an indication of whether the firm has the necessary stakeholders and plan to bring the proposed technology to the market once it is completed.
Of course, many startups are focused on topics outside of education. In case you did not know, SBIR/STTR programs operate at the National Institutes of Health, the National Science Foundation, Energy, the Environmental Protection Agency and DARPA provide opportunities for entrepreneurs developing products for use in areas such as health and the environment. While SBIR programs across agencies share features, each individual program is different and works on its own timeline, so make sure to read the fine print.