Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

Copyright © 2001 by Greenwood Consulting Group, Inc.

SBIR proposal writers sometimes get confused whether they should focus their Phase I proposals on the technology or on its commercialization. We’ve reviewed proposals that thought it was one or the other, and we think they missed a key point: a Phase I SBIR proposal must focus on BOTH the technology and commercialization.

Make no mistake: SBIR projects must be based on a sound approach to a pressing problem or opportunity that can be exploited through innovation, with that innovation often coming in the form of new or enhanced technology. The urgency of the need, the opportunity to exploit it, and the ability of your company to exploit it (as exemplified by your work plan and key personnel) are important considerations in your proposal being selected for an SBIR award.

However, it is not enough these days to simply propose "good science." You must convey to the reader a credible vision of how this project will lead to some product or service that can be used by the government (typical in DOD and NASA proposals) or in the private sector.

Although Phase I SBIR proposals should have this dual focus, they must be carefully written to avoid undesirable overlaps and gaps between technology and commercialization. The following are some suggestions on how to avoid some typical problem areas:

1. Focus on technical feasibility, not on market feasibility. Hopefully you know that a Phase I SBIR project is supposed to be a feasibility study. In it, you are supposed to "prove" that your innovation solves a particular problem or allows you to exploit an important need. However, the proposal must focus on technical feasibility, or proving that your innovation has the characteristics or capability to mitigate or otherwise solve the technical problem. It is not acceptable to base a Phase I proposal on market or commercialization feasibility, or proving that customers will buy your product or service. In other words, SBIR exists to compensate you for the risk and effort to prove the technical feasibility of an idea or application you’ve not proven before, not to pay you to prove its market viability.

2. Do not include business tasks in the work plan. The Phase I SBIR work plan should be devoted to technical tasks—those that must be completed to prove feasibility of your technology. There should be no tasks that focus on writing business plans, conducting market surveys, and similar commercialization activities.

3. Don’t ignore or babble on about your commercialization strategy. We see a lot of proposals that are pretty well conceived in terms of the technology, the work plan and the research team. However, this is not enough to overcome a weak or non-existent discussion in the commercialization section of the proposal. "Trust us," "we’ll exhibit at trade shows and everyone will want one," "we’ll worry about commercial applications in Phase II" and "we will become the sole source supplier of a critical component to major industry" are examples of poorly conceived commercialization plans in a Phase I proposal.

If you think about it, the problem described in #2 poses a real financial dilemma for many SBIR competitors: how can you prepare to go into the Phase III commercialization if you can’t devote any of our SBIR funds to commercialization activities? The answer is really pretty simple. While it is not allowable to include commercialization tasks in your work plan, we recommend that you perform those tasks concurrent with the Phase I technical effort and fund them out of your company’s indirect rate. For every dollar you charge the government for some of the technical research in the work plan, you also should charge it some additional amount to cover indirect costs such as rent, fringe benefits, office supplies, clerical support, and allowable "Bid and Proposal" efforts. You also can use the fee or profit that you are allowed to charge on your SBIR grant or contract for commercialization activities. Of course, if you don’t ask for any indirect cost reimbursement or fee/profit on your SBIR project, then you won’t have these important sources of money for commercialization activities.

Next time we’ll talk about some of the commercialization activities that can be charged as part of your indirect rate. Not all tasks that businesspersons categorize as "marketing expenses," for example, are allowable expenses in terms of what you bill the government in your indirect rate.