Seeing Green

Often overlooked by investors, small fund may lead to buried treasure
Magazine Contributor
7 min read

This story appears in the October 1998 issue of Subscribe »

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.

Technology Of Another Kind

SBIR and STTR awards are not just for high-tech firms. Case in point: "We were initially working with Tuskegee University to come up with a homemade syrup that could be made without preservatives and additives and that wouldn't turn to sugar," says George Hall, co-owner of Hall's Homemade Syrups, a 9-year-old Boligee, Alabama, company.

Tuskegee officials suggested that the entrepreneur approach the Department of Agriculture. Hall did and, on his first attempts with both, successfully obtained a $50,000 Phase I grant and a $190,000 Phase II grant in 1996. His Phase II award will fund his development of cane-based candies, a beverage sweetener and sugar cane juice.

Michael Bergman, owner of software development firm VisualMetrics Corp. in Vermillion, South Dakota, applied for a Phase I SBIR grant not for seed money, but for the opportunity to use the software he had developed to fill a need of the National Institutes of Health (NIH). Bergman liked the fact that the program gave him freedom. "SBIR placed no restrictions on my ability to maintain what I learned as proprietary. Therefore, the fruits of my research didn't go into the public domain; I retained ownership."

Bergman doesn't expect an immediate payoff from his Phase I grant. Instead, he's looking down the road and hoping to receive a Phase II award, which he thinks could help his 3-year-old company form an alliance with a drug conglomerate.

Get Going

To apply for an SBIR or STTR grant, first look at the request for proposals (RFPs) from participating agencies on the SBA Office of Technology Web site ( Under Pre-Solicitation Announcements, you'll find a master calendar of all RFPs as well as details on each agency's specific solicitation.

When preparing your proposal, consider these suggestions:

*"Because it's being reviewed by an outside group of scientists, your proposal has to be well-documented with citations, and each point in the proposal must be addressed," says Bergman, adding that clarity and brevity are critical.

*"It's important to be innovative," says Thompson. Demonstrating the commercial potential of your proposal is a must.

*Besides commercial viability and innovation, the agencies are also concerned about your business's capabilities and will look at your management team, says Hill.

Most grant recipients agree: Once you've assembled all the technical aspects of your proposal, obtaining the desired results is just a matter of perseverance.

Ready For Takeoff

Robert Severino knows life is ironic. Severino's company, Dubbs & Severino Inc., has developed a software program designed to eliminate what he says is the number-one reason for plane crashes: pilots getting lost. The Irvine, California, entrepreneur developed the program under the auspices of the government's Small Business Technology Transfer Research (STTR) and Small Business Innovation Research (SBIR) programs in conjunction with the Pasadena, California, Jet Propulsion Laboratory (JPL). He connected with JPL, thanks to a small-business development program created by former Secretary of Commerce Ron Brown.

"I had a [friend die] in an airplane crash in May 1993, and [I knew] a relatively inexpensive technological tool could have saved his life," says Severino, who went on to create such a device.

After some investigation, Severino realized the STTR program offered the best way to disseminate information about his product. "My solution is a graphic software package that includes digital maps, a global positioning satellite receiver and maps of an area's natural environment. All this is not new. Our innovation is to provide [this as software] that can be used on an inexpensive laptop."

Severino formed the alliance with JPL to tap into its expertise. "Typically a homebased business only becomes an expert in one field. By working with several small firms and a scientific powerhouse like JPL, my company can become world-class," explains Severino.

Severino likes the high return on investment he gets with the STTR program. "Any small business can submit an SBIR proposal, but only those allied with a federal research and development facility or university can submit an STTR," he says. "The STTR program is helping us forge a brighter future than we'd have if we just networked with other small businesses."

Where To Find Help


*Arizona. Pima Community College Small Business Development and Training Center consultants help identify which grants entrepreneurs can apply for; they also review proposals. They connect small-business owners with federal labs and assist with contractual agreements. Call (520) 206-4906 for more information.

*Illinois. Staff members at the Small Business Innovation Resource Center at Richard J. Daley College coach entrepreneurs through the SBIR/STTR application process. This free service is provided to companies in--or willing to relocate to--Illinois. Call (773) 838-0300 for more information.

*Minnesota. Minnesota Project Innovation Inc. offers workshops, one-on-one consulting and assistance finding a corporate partner. Consultants give entrepreneurs insights on what the government is looking for and help connect local businesses with the appropriate federal lab. Call (612) 338-3280 for more information.

*New Jersey. The Technology Help Desk & Incubator (sponsored by the New Jersey Business Development Center, the New Jersey Commission on Science and Technology, and the SBA) has a toll-free help line for entrepreneurs and offers free proposal writing assistance and, in some cases, help with proposal development. Call (732) 545-3221 for more information.

*North Carolina. The North Carolina Small Business Technology Development Center has a Web site ( that features links to all the federal agencies participating in SBIR and STTR. Links to related sites and descriptions of how the programs operate within each agency are provided. This month, the center is hosting the first of several regional SBIR/STTR educational conferences. Call (919) 962-8297 for more information.

*South Dakota. The South Dakota SBIR Center holds proposal review workshops that feature successful SBIR competitors. There is also an Internet-based SBIR proposal-writing course and day-long regional SBIR workshops introducing the entire program. Finally, an SBIR mentoring program pairs novice applicants with veterans for free counseling. Call (605) 256-5555.


Each SBIR and STTR agency also offers assistance to entrepreneurs. The Department of Defense, for example, has a toll-free help line that provides information on everything from proposal preparation to intellectual property protection. Call (800) 382-4634 for more information.

To determine the agencies' assistance levels, access their home pages at or call the SBA Office of Technology at (202) 205-6450.

Contact Sources

CHT Engineering Systems Inc., (605) 255-4401,

Dubbs & Severino Inc., (949) 854-2643,

Hall's Homemade Syrup, Rte. 2, Box 163-A, Boligee, AL 35443, (205) 372-4255

VisualMetrics Corp., (605) 624-6420,

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