SBIR and STTR Grants Explained
By Tom McCollum, ACA · Former KPMG Corporate Finance · Compass & Ledger
The short answer
SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) are US federal programmes that fund small businesses to carry out research and development with commercial potential. Funding is non-dilutive and runs in phases: Phase I tests feasibility, Phase II funds full development. STTR adds one requirement: a formal partnership with a US research institution.
For early-stage technology companies, SBIR and STTR are among the largest sources of non-dilutive funding in the US. Each participating agency runs its own topics, deadlines, award sizes and review process, so the same company can face very different applications depending on where it applies. Programme rules and authorisation can change, so always check the current solicitation and SBIR.gov before you start.
SBIR vs STTR: the difference
- SBIR. The small business carries out the research. The principal investigator is normally employed primarily by the company.
- STTR. The small business partners with a US nonprofit research institution, such as a university, which performs a minimum share of the work.
- Agencies. More federal agencies run SBIR than STTR, so check which programmes your target agency offers.
Who is eligible
- A for-profit US small business, generally with 500 or fewer employees including affiliates.
- Majority owned and controlled by US citizens or permanent residents, with specific rules for venture-backed companies at some agencies.
- Research and development carried out in the United States.
How the phases work
- Phase I. A shorter award to establish technical merit and feasibility.
- Phase II. A larger award to develop the work further, usually open to Phase I awardees.
- Phase III. Commercialisation, funded by private capital or non-SBIR government contracts rather than SBIR money.
Preparing a strong application
- Register early: SAM.gov, the SBIR.gov company registry and the agency's own portal.
- Pick the right agency and topic. Fit with the topic matters more than the size of the award.
- Show technical innovation and a credible commercial path. Reviewers score both.
- Build the budget properly: allowable costs, indirect rates and, for STTR, the research institution's share.
- Plan for post-award reporting and grant accounting before you win.
Frequently asked questions
Is SBIR a grant or a contract?
Both. Some agencies award SBIR funding as grants, others as contracts. The type affects how the solicitation is written, how you're reviewed and what reporting applies.
Do I have to give up equity?
No. SBIR and STTR awards are non-dilutive. The government doesn't take ownership of your company.
Can I apply to more than one agency?
Yes, but you can't be funded twice for essentially the same work. Each proposal should be tailored to the agency's topic.
What does SBIR application support cost with you?
SBIR/STTR Phase I applications start from $9,500 and Phase II from $14,500, typically over 8 weeks. Flat fees, no success fees.
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