The Small Business Innovation Research (or SBIR) program is a United States Government program, coordinated by the Small Business Administration, intended to help certain small businesses conduct research and development (R&D). Funding takes the form of contracts or grants. The recipient projects must have the potential for commercialization and must meet specific U.S. Government R&D needs.
The SBIR program was created to support scientific excellence and technological innovation through the investment of federal research funds in critical American priorities to build a strong national economy ... one business at a time. In the words of program founder Roland Tibbetts: "to provide funding for some of the best early-stage innovation ideas -- ideas that, however promising, are still too high risk for private investors, including venture capital firms." For the purposes of the SBIR program, the term "small business" is defined as a for-profit business with fewer than 500 employees, owned by one or more individuals who are citizens of, or permanent resident aliens in, the United States of America.
Funds are obtained by allocating a certain percentage of the total extramural (R&D) budgets of the 11 federal agencies with extramural research budgets in excess of $100 million. Approximately $2.5 billion is awarded through this program each year. The United States Department of Defense (DoD) is the largest agency in this program with approximately $1 billion in SBIR grants annually. Over half the awards from the DoD are to firms with fewer than 25 people and a third to firms of fewer than 10. A fifth are minority or women-owned businesses. Historically a quarter of the companies receiving grants are receiving them for the first-time. Besides the DoD, there are also programs with the National Institutes of Health, the National Science Foundation, the Department of Agriculture, and others.
The program was established with the enactment into law of the Small Business Innovation Development Act in 1982 to award federal research grants to small businesses. The SBIR program has four original objectives: to stimulate technological innovation; to use small business to meet Federal research and development needs; to foster and encourage participation by minority and disadvantaged persons in technological innovation; and to increase private sector commercialization innovations derived from Federal research and development.
The program must be periodically reauthorized by the United States Congress, but reauthorization is generally included in each new budget. The program was re-authorized through FY2017 by the 2012 Defense Authorization Act (P.L.112-81).
Through a "decentralized network of public institutions" such as Small Business Innovation Research program (SBIR), the National Science Foundation, The Defense Advanced Research Projects Agency and NASA, the United States "government acted as strategic investors" in Silicon Valley. For example, Tesla received a nearly $500 million government-guaranteed loan "to help it develop the Tesla S car, a product that is considered an archetype of Silicon Valley innovation."
Each Federal agency with an extramural budget for R&D in excess of $100,000,000 must participate in the SBIR Program and reserve the following minimum percentages of their "extramural" R&D budgets for awards to small business concerns:
A Federal agency may exceed these minimum percentages.
In 2010, the SBIR program across 11 federal agencies provided over $2 Billion in grants and contracts to small U.S. businesses for research in innovation leading to commercialization. The company owns the intellectual property and all commercialization rights. Companies such as Symantec, Qualcomm, Da Vinci Surgical System, Jawbone, Lift Labs, Natel Energy and iRobot received critically important early-stage funding from this program.
A similar program, the Small Business Technology Transfer Program (STTR), uses a similar approach to the SBIR program to expand public/private sector partnerships between small businesses and nonprofit U.S. research institutions. The main difference between the SBIR and STTR programs is that the STTR program requires the company to have a partnering research institution which must be awarded a minimum of 30% of the total grant funds. As of 2014 federal agencies with external R&D budgets over $1 billion were required to fund STTR programs using an annual set-aside of 0.40%.
The Small Business Technology Council, a member council of the National Small Business Association, hands out the Tibbetts Award annually "to small firms, projects, organizations and individuals judged to exemplify the very best in SBIR achievement."
Federal and State (FAST) is a program of State-based business mentoring and assistance to aid small businesses in the preparation of SBIR proposals and management of the contracts. It is more active in some states than others.
Rep. Mazie K. Hirono (D-HI) has proposed the `SBIR Enhancement Act of 2011' as HR 447 of the 112th Congress, which increases the funding for SBIR by increasing the funding tax from the original 2.5% up to 5%, raises the Phase 1 amount to $200,000 and provides for economic adjustments every five years.
The National Institutes of Health (NIH) is the second largest SBIR/STTR granting agency.