Federal RD Programs Reserved for Small Business The

Federal R&D Programs Reserved for Small Business The SMALL BUSINESS INNOVATION RESEARCH PROGRAM (SBIR) and related programs Ronald S. Cooper, Ph. D Office of Technology U. S. Small Business Administration 1

SBIR Program • Program structure • Evolution and learning • Economic impacts • Outreach activities 2

Small Business Innovation Development Act of 1982 Congress designated 4 major goals of SBIR program: w Stimulate technological innovation w Use small business to meet federal R&D needs w Foster and encourage participation by minorities and disadvantaged persons in technological innovation w Increase private-sector commercialization of innovations derived from federal R&D 3

SBIR Program • 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 federallyfunded 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 4

Program Structure Source of Funds for SBIR: w 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 0. 2+% 1. 25% 1. 5% 2. 0% 1997 -present 2. 5% 5

U. S. federally-funded R&D Total: $70 billion in 2002 $62 B 6

Program Structure w 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 w SBA has oversight and outreach responsibilities - Policy directive - Monitoring - National conferences - Evaluation - Outreach programs - Reporting to Congress and activities 7

SBIR participating agencies Ø SBA (oversight) TOTAL ~ $1. 4 B FY 2002 • • • Defense Health Space Energy Science Agriculture Commerce Education Environment Transportation $ millions (DOD) (HHS, NIH) (NASA) (DOE) (NSF) (USDA) (DOC) (ED) (EPA) (DOT) 600 487 110 95 78 17 7 7 6 6 8

SBIR’s 3 -Phase Structure PHASE I Ü Ü Feasibility of idea $100, 000 (6 -12 months) PHASE II Ü Ü Ü Full R&D $750, 000 (2 years) Commercialization plan PHASE III Ü Ü Ü Commercialization stage Use of non-SBIR funds (private capital or federal follow-on) Fed: data rights, and noncompete 9

SBIR Eligibility—Who may apply? ü Organized for-profit U. S. business ü At least 51% owned and controlled by U. S. citizens (individuals) ü Small business located in the U. S. ü 500 or fewer employees ü Principal Investigator’s primary employment must be with the small business ü Research partners are allowed/encouraged (up to 1/3 of Phase I, up to 1/2 of Phase II) 10

Key features w Contracts & grants, not loans (high-risk research, no debt burden) w 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) 11

SBIR Program • Program structure • Evolution and learning • Economic impacts • Outreach activities 12

National Policy Context w 1950 s, 60 s -- Federal role was to support basic research in Federal labs and large businesses w 1970 s, 80 s -- 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 13

SBIR/STTR: Historical Relationships 1982 1997 Federal Government Small Businesses 14

SBIR/STTR: Historical Relationships 1998 1982 Federal Government State Government Quasi-Government Corporations Economic Development Entities Technology Centers Small Businesses 15

SBIR/STTR: Historical Relationships 2000 1982 Federal Government State Government Quasi-Government Corporations Economic Development Entities Technology Centers Small Businesses Academia University Research Parks Faculty & Graduate Students Technology Incubators Research Foundations 16

Small Business Technology Transfer Program (STTR) Promoting 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 > $1 B must participate • FY 2002: 356 Phase I awards 114 Phase II awards 17

SBIR/STTR participating agencies Extramural Budget ($B) yr / B 1 >$ • • • Defense Health Space Energy Science (DOD) (HHS) (NASA) (DOE) (NSF) SBIR/STTR SBIR/STTR • • • Agriculture Commerce Education Environment Transportation (USDA) (DOC) (ED) (EPA) (DOT) SBIR SBIR 25. 4 16. 8 4. 2 3. 5 2. 8. 6. 3. 3. 2. 1 18

STTR - 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 19

SBIR Program • Program structure • Evolution and learning • Economic impacts • Outreach activities 20

SBIR program impacts ð Is often only source of funding available ð Enables new startups, spin-offs ð Induces entrepreneurial activity (“demonstration effect”) ð Enables small firms to develop innovative capacity ð Complements private ventures (reduces risk) ð “Success rate”: 39% of projects had sales attributable to SBIR (55% had sales or additional investment) ð Addresses gap in innovation financing 21

SBIR addresses innovation finance gap Dimensions of the gap SBIR program 1. Information Certification effect, outreach 2. Short timeframe Awards/grants (no payback) 22

US Venture Capital Investments by Stage, 2002 on i s n a p x E Late Stage ge a t S Early Star t Up Source: Money. Tree Survey—Pricewaterhouse. Coopers, Thompson Venture Economics, NVCA. 23

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SBIR addresses innovation finance gap Dimensions of the Gap SBIR program 1. Information Certification effect, outreach 2. Short timeframe Awards/grants--no payback 3. Size of financing Small grants (< $1 m) 25

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SBIR addresses innovation finance gap Dimensions of the Gap SBIR program 1. Information Certification effect, outreach 2. Short Timeframe Awards/grants--no payback 3. Size of financing Small grants (< $1 m) 4. Few technology areas Wide range of technologies 5. Geographic specialization Broad geographic coverage 27

Funding Sources for 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] 28

Improving SBIR Program evaluation • Integrating commercialization reporting into on-line application • National Research Council (NRC) 3 -year review 29

SBIR Program • Program structure • Evolution and learning • Economic impacts • Outreach activities 30

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) 31

Federal and State Technology Partnership (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: $100 K) 32

Rural 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: $500 K, 10 awards FY 2004: $250 K 5 awards • Grant sizes: $40 K, $52 K, $80 K 33

SBIR & STTR Programs Office of Technology U. S. Small Business Administration For more information • Contact individual agency websites • Cross-agency websites: www. sba. gov/sbir www. sbirworld. com Ronald S. Cooper ronald. cooper@sba. gov (202) 205 -6455 34