If at first you don't succeed, try, try again." Entrepreneurs applying for grants from the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer Research (STTR) programs should keep this adage in mind. Only one in eight applications submitted survive the rigorous approval gauntlet, according to Daniel O. Hill, assistant administrator for the SBA Office of Technology.
Scott Thompson knows the process well. It took 11 attempts--from 1992 to 1996--and the formation of several companies before the owner of CHT Engineering Systems Inc. in Hermosa, South Dakota, obtained SBIR funding for his human target tracking system.
Why subject yourself to this kind of torture? The answer is simple, says the homebased Thompson: "It's hard to get seed money for a high-tech company. Venture capitalists don't like to fund ideas."
If that's not incentive enough, consider that these two programs have more than $1.1 billion to give businesses every year. To compete for SBIR grants, a business must be for-profit, U.S.-owned, independently operated, and have 500 or fewer employees. The principal researcher for a project must be employed by the business.
Every year, 10 federal departments and agencies are required to solicit SBIR applications: the departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, and Transportation, as well as the Environmental Protection Agency, NASA and the National Science Foundation.
Initially, entrepreneurs compete for Phase I awards of up to $100,000 for a six-month exploration of the technical merits and feasibility of an idea or technology. Only those awarded Phase I grants can compete for two-year Phase II funding of up to $750,000. In Phase III, entrepreneurs must commercialize their products using private-sector funding.
STTR pairs small businesses and nonprofit research institutions. Five federal agencies offer grants under this program: the departments of Defense, Energy, and Health and Human Services; NASA; and the National Science Foundation.
There are also three phases in the STTR program. Phase I offers up to $100,000 for a year of research. Phase II provides up to $500,000 for a maximum two-year project expansion, and Phase III mirrors that of the SBIR.