Would your company be out of business without federal SBIR funds? If so, and you’ve been at it for 10 years already, it’s time to step aside.
The U. S. remains at the forefront of technology innovation due to entrepreneurs that take risks. When combined with access to capital, these risks enable an entrepreneurial ecosystem that gives the U. S. a competitive edge. But where does an entrepreneur turn for capital when either the endeavor is too early stage, involves too much technological risk, and/or targets a market of insufficient size to warrant private investment (i.e., without the potential to deliver on a >10x ROI within three years)?
The U. S. government’s Small Business Innovation Research (SBIR) program, established in 1982, has been a lifeline for these kinds of businesses over the last few decades. SBIR’s mission is to “support scientific excellence and technological innovation through the investment of federal research funds in critical American priorities to build a strong national economy.” In short, it’s a jobs program intended to create the businesses of tomorrow that position the U. S. as a global leader in technology innovation. It is an incredibly powerful program that U. S. taxpayers should be proud of.
Despite its strengths, the SBIR program suffers from abuses that cause critics to see it as corporate welfare. With VC seed deals dropping significantly since last year, according to CB Insights, seed funding from SBIR is critical right now as it’s perhaps the only funding option for entrepreneurs who are too early stage for traditional VC, or involve too much technological risk. So just as the media is warning hedge funds and other businesses not to take advantage of PPP loans, I would like to educate entrepreneurs on the outright abuses of the program and encourage more responsible practices from those who choose to participate during this critical time in our history.
Congress created the SBIR program and its cousin the STTR to grow small businesses, foster their participation in the federal acquisition process, and facilitate commercialization of innovating technologies coming out of U. S. universities and National Laboratories. The funding is administered by 11 federal agencies that allocate a small percentage of their R&D budgets (3.
