Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

Copyright © 2001 by Greenwood Consulting Group, Inc.

There seems to be confusion about the differences between the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. This confusion may cause you to select the wrong one for your proposal. Some of the differences include

STTR is focused on technology transfer and a collaborative project between the small firm and a non-profit research partner

There’s greater flexibility in the employment of the PI in STTR

SBIR has a shorter Phase I effort

STTR has more flexibility in the amount of the project done by the research partner versus the small company

STTR has a smaller Phase II funding level than SBIR

Probabilities of award are different in SBIR than in STTR

STTR is a distinct program from SBIR, with different goals

STTR has not been reauthorized beyond FY01.

Let’s spend a few minutes discussing some of the main differences.

SBIR is the older of the two programs, with its origins at National Science Foundation (NSF) back in the late 1970s. It also is much larger than STTR; while STTR is responsible for about $65 million in awards annually, SBIR grants and contracts exceed $1.2 billion per year.

Does it make much difference whether you apply to SBIR versus STTR? Yes and no. As we pointed out above, there’s a lot more money in SBIR than STTR, which may limit an agency’s ability to fund some "extremely innovative" projects in STTR whereas they may be more acceptable in SBIR. STTR in recent years has seen higher award rates than SBIR, meaning that a higher fraction of STTR proposals are funded than SBIR proposals. STTR also gives you the ability to subcontract more of the award to the non-profit research entity than you can in SBIR. However, SBIR Phase II awards typically are larger than STTR Phase IIs—SBIR Phase IIs are up to $750k, while those in STTR are capped at $500k.

One major difference between SBIR and STTR is the number of participating agencies. There are 10 agencies making SBIR awards, while only five of them (Dept of Defense, National Institutes of Health, NSF, NASA, and Dept of Energy) participate in STTR. Therefore, if you are applying to any of the other agencies (such as Dept of Education or Agriculture), you have no option but to apply for SBIR funding.

Another difference pertains to where the project’s principal investigator (PI) resides. In SBIR, the PI must be primarily employed by the proposing firm, and meet agency-specific guidelines. With STTR, at least two agencies (DARPA within DOD, and NIH) accept a PI who is employed by the university, federal lab, or non-profit research entity but who has an "official relationship" with the small firm. This can be an important difference, for example, if your technical "star" is a university professor who does not want to transfer their primary place of employment from that institution to your firm in order to be the PI.

The main difference between SBIR and STTR is the role of an independent, non-profit research entity. The STTR program requires that your small firm collaborate with such an entity (it might be a university, federal lab, or another acceptable non-profit research organization that fit the criteria) on both Phase I and II of the project. Here’s where some of the confusion between the programs occurs: It is perfectly acceptable to have such a non-profit research entity on an SBIR project, it’s just not a requirement as it is in STTR. Some folks seem to think that, if they are going to include a non-profit research entity on their project, then they must apply for STTR—that simply is not true.

Other differences between SBIR and STTR have diminished in recent years. In the past, each agency issued separate STTR and SBIR solicitations, containing totally separate topics, and with different deadlines for SBIR and STTR proposals. But now three of the five STTR agencies (NIH, NSF and DOE) have combined their SBIR and STTR solicitations, so their SBIR and STTR deadlines and topics are identical.

We recommend that you consider several factors in deciding whether to submit your proposal for STTR or SBIR funding. First, is the lower ceiling on STTR Phase II awards likely to be a factor in your project? Second, do you need the flexibility of STTR in allowing your non-profit research entity to have a greater fraction of the project budget than is allowed under SBIR? Third, is the best person to serve as your PI employed full-time in the university or federal lab, in which case STTR might be a better choice for your DARPA or NIH proposal? And fourth, what are the chances that Congress will continue the STTR program?

STTR is up for reauthorization at the end of FY01 and, if Congress does not reauthorize the program, it will terminate on September 30, 2001. Given the difficulty in getting the SBIR program reauthorized last year (SBIR is larger, has a more established small business constituency, and has been very popular in Congress), some of us are skeptical whether STTR will be continued (or continued as a separate program). So, if you submit and are awarded a Phase I STTR project in FY01 and the STTR program dies at the end of the fiscal year, what happens to your possibility of a Phase II award? Maybe the agencies would fund alternative ways of funding promising STTR Phase IIs, or maybe not…