What Are the SBIR and STTR Programs?
The Small Business Innovation Research (SBIR) program is a competitive award system that provides funding to small businesses for research and development with commercial potential. Eleven federal agencies with extramural R&D budgets exceeding $100 million are required to allocate 3.2% of those budgets to SBIR awards, collectively providing over $4 billion annually.
The Small Business Technology Transfer (STTR) program is similar but requires formal collaboration between a small business and a research institution (university, federal lab, or nonprofit research organization). Five agencies participate in STTR. The key difference is that STTR requires the research partner to perform at least 30% of the work.
Both programs use a phased structure: Phase I is a feasibility study, Phase II is full development, and Phase III is commercialization. The programs are designed to bridge the "valley of death" between basic research and commercial products, providing non-dilutive funding that doesn’t require giving up equity.
The Three Phases of SBIR/STTR
Phase I awards are typically $50,000 to $275,000 over 6-12 months, depending on the agency. The goal is to demonstrate the feasibility and technical merit of your proposed innovation. You’re essentially answering the question: "Is this idea viable?"
Phase II awards are $500,000 to $1.5 million over 2 years, funding full research and development of the concept proven in Phase I. Only Phase I award winners are eligible for Phase II. This is where the substantive development work happens.
Phase III is the commercialization phase, where you bring the technology to market. There is no specific SBIR/STTR funding for Phase III, but agencies can (and often do) award follow-on contracts using non-SBIR funds. Phase III contracts can be sole-sourced, making them potentially very valuable.
Eligibility Requirements
To qualify for SBIR, your business must be a U.S.-owned small business concern (under 500 employees), with the principal investigator primarily employed by your company during the project. The research must be performed in the United States.
For STTR, the same basic eligibility applies, plus you must have a formal agreement with a qualifying research institution. The small business must perform at least 40% of the work, and the research institution must perform at least 30%.
Foreign-owned businesses, non-profits, and businesses that are majority-owned by multiple venture capital, hedge fund, or private equity firms face restrictions. Carefully review the specific eligibility criteria for the agency you’re targeting, as some agencies have additional requirements.
Finding Topics and Applying
Each participating agency publishes SBIR/STTR solicitations at different times throughout the year. The DoD typically has multiple "open topics" with broad areas of interest. NIH, DOE, and NSF have specific topics aligned with their research priorities. SBIR.gov is the central portal for finding open solicitations across all agencies.
Applications are submitted through agency-specific portals (Research.gov for NSF, Proposal Submission Portal for DoD, ASSIST for NIH). Each agency has its own format requirements, page limits, and evaluation criteria. Typical evaluation factors include technical merit, commercial potential, and the qualifications of the principal investigator.
The selection process is competitive, with award rates typically between 15-25% for Phase I. Strong applications clearly demonstrate both technical innovation and a credible path to commercialization. Agencies want to fund research that will eventually generate economic value, not just academic publications.
SBIR/STTR as a Growth Platform
SBIR and STTR programs are uniquely valuable because they provide non-dilutive R&D funding that lets you develop technology while retaining full intellectual property rights. For technology-focused small businesses, they’re an essential funding mechanism.
Start by identifying agencies whose research priorities align with your technology, review their past awards to understand what gets funded, and submit a strong Phase I proposal. The SBIR/STTR ecosystem rewards persistent, innovative companies that can clearly articulate both the technical challenge and the commercial opportunity.