INNOVATE SBIR: Expanding the Number of Participating Companies and Fostering Commercialization

As the 119^th Congress considers reauthorization of Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) legislation, findings from CSIS research and other analyses on SBIR/STTR programs offer valuable suggestions. 

Established in 1982, the SBIR Program seeks to advance four objectives: (1) stimulate innovation, (2) increase the use of small businesses in addressing federal R&D needs, (3) foster the participation of socially and economically disadvantaged individuals in innovation and entrepreneurship, and (4) increase private sector commercialization of technologies derived from federally funded R&D. The complementary STTR Program was created in 1992 to facilitate the commercialization of university and federal R&D by small companies. Since their enactments, the programs have been extended and reauthorized several times. In FY2022, federal agencies obligated $4.12 billion for SBIR/STTR, with 91 percent in SBIR awards: $630 million across 2,927 new Phase I awards, and $3.14 billion across 2,344 new Phase II awards.  

The SBIR program has been subject to numerous rigorous, independent and comprehensive reviews—most notably by the National Academies of Science, Engineering and Medicine—which have found that the program achieves its legislative goals, including stimulating technological innovation and supporting agency R&D needs through small businesses. However, a recent study prepared by the Congressional Research Service (CRS) identified specific issues for Congress to consider as it analyzes the legislation. 

Expanding Participation  

According to CRS, some members of Congress and other observers have raised concerns over small businesses that receive multiple SBIR and STTR awards. Indeed, a variety of studies document that in some cases, a very small number of firms receive a disproportionate amount of funding, which can impede the program's broader objectives: 

• A Government Accountability Office (GAO) study requested by Congress in the SBIR/STTR Extension Act of 2022 found that from FY2011 to FY 2022, 22 firms received 50 or more Phase II awards each. In other words, these companies accounted for 11 percent of total Phase II awards and 10 percent of total Phase II dollars, despite representing fewer than 1 percent of all Phase II awardees (6,865).
• Small Business Administration (SBA) data show that in FY22, agencies made 3,859 Phase I awards to 2,560 companies; 61 “multiple award winners,” who received >15 Phase II awards over five years (2 percent) obtained 548 awards (14 percent). In some agencies, the ratios were greater: at the Department of Defense (DOD), 6 percent companies secured 22 percent of awards, while at the Department of Energy, 8 percent of companies received 17 percent of awards.
• Of SBIR awardees in quantum information science and technology from 2015 through 2023, 362 companies received 575 awards, an average of 1.5 per firm; three firms, representing fewer than 1 percent of the total, received 64 (11 percent) of the awards.
• Similarly, a study cited by the Defense Innovation Board found that over ten years, the top 5 percent of companies with the most Phase I/II awards received 49 percent of all Phase I/II funding, while the top 25 companies (0.53 percent of 4,703) received 18 percent of all Phase I/II funding—over $2.3 billion, averaging $92 million in Phase I/II awards per company.  

In response to such concerns, the SBIR/STTR Reauthorization Act of 2011 introduced Transition Rate and Commercialization Rate Benchmarks to track and measure the progress of awardees toward commercialization through the different SBIR phases. Transition rate benchmarks measure the ability of companies to proceed from Phase I to Phase II SBIR awards; by contrast, commercialization rate benchmarks, applied to firms with multiple SBIR awards, measures the degree of sales or investment. The SBIR/STTR Extension Act of 2022 further strengthened the standards for companies with multiple awards. However, the penalties for non-attainment are not proving significant.  

To address this problem, the INNOVATE Act of 2025 proposes to cap lifetime company awards to a total of $75 million. Perhaps the most powerful rationale is to limit “SBIR mills”—firms whose business model is writing SBIR proposals—which monopolize available funding, thereby “crowding out” resources that could go to a larger number of qualified companies with promising R&D capabilities. 

Crowding out promising firms impedes the ability of SBIR programs to achieve their legislative objectives. The author of this paper has been engaged with SBIR since 1983, and in the author’s experience, many high quality SBIR applications are not funded because of the limitation of the funding, not because of the quality of proposals.

The average Phase I selection rate in FY22 was just 15 percent in civilian agencies and 18 percent in DOD agencies. If the proposed INNOVATE Act cap had been in place, $425 million could have been freed up at DOD, enough to fund as many as 1700 Phase I awards ($250,000). Other sums would be available from other agency accounts.

Foster Commercialization 

Given current financial constraints, utilizing existing appropriations more efficiently would further the program’s objectives. However, expanding the funding available for young, small innovative firms is by itself not sufficient—helping firms commercialize and maximize the potential of funded research is necessary. Fortunately, agency practices and local government support programs have begun to address this challenge. 

For example, the National Institute of Standards and Technology (NIST), an agency with a traditionally small SBIR program, has leveraged new CHIPS & Science Act funds to expand commercialization support. In its 2024 NOFO, building upon earlier efforts to reward commercialization and encourage new firms to participate in the program, NIST’s CHIPS R&D Metrology Program offered up to $54 million for 24 awards to support commercialization. NIST used open topics as well as closed (“conventional”) topics, increased Phase I and II awards to their maximum levels ($285,500 and $1,910,000 respectively), encouraged Fast Track approvals, tracked Transition Rate Benchmarks and Commercialization Rate Benchmarks, required submission of Commercial Viability and Domestic Production (CVDP), and allowed Technical and Business Assistance (TABA) funding. 

TABA, a relatively new program, was authorized by Congress in 2019 to help cover commercialization and business assistance expenses not allowed under regular SBIR funding. Although program specifics vary by agency, generally up to $6,500 may be provided to Phase I winners in addition to the award amount, and up to $50,000 may be allowed as part of a Phase II award. The assistance must be provided by a third-party entity, either chosen by the company, or at its request, by the funding agency. Services include technology assessments, market analysis and strategy, business model development, commercial road mapping, investment readiness assessment, IP, and regulatory affairs support. According to FY22 SBA data, $5.99 million in TABA assistance was provided by civilian agencies, and $23.12 million was provided in award obligations. (Note: DOD uses other authorities, such as the Commercialization Readiness Program (CRP), to accelerate the transition of DOD SBIR/STTR funded technologies to Phase III.) 

Montgomery County, MD, the only county-level SBIR matching program, provides $25,000 to Phase I and $50,000 to Phase II awardees, with eligibility limited to small and young companies with few prior SBIR awards. The county has also recently created a local “TABA-lite” program requiring recipients to spend half their local grant on the reimbursement of third-party expenses attributable to technical, investment, or commercialization assistance.  

The INNOVATE Act’s “Phase 1A” proposal is another creative provision: it would provide one-time $40,000 awards through a simplified application to companies without prior awards. This would allow agencies to identify and transition first-time applicants into the standard Phase 1 process. The Phase 1A proposal has a similar goal to Phase 0 support programs that local organizations already include as part of their assistance program that encourage new companies to participate the SBIR program and advance commercialization.  

According to the State Science and Technology Institute, every state and Puerto Rico offers SBIR programs, which can include financial assistance (through matching grants to awardees), proposal development and mentorship, technical assistance, and networking opportunities. At least 31 organizations offer “Phase 0” awards to help first-time applicants prepare competitive proposals.  

An existing federally-funded, state-managed program is the SBA’s Federal and State Technology (FAST) Partnership Program, which funds competitive awards of up to $200,000 to provide specialized training, mentoring, and technical assistance. In October 2024, the SBA funded organizations in 48 States and Puerto Rico to provide support, generally in underserved communities, in applying for SBIR awards. For example, the SBIR/STTR Proposal Lab from the Maryland Technology Development Corporation, funded by the FAST Partnership Program, assists first-time applicants to apply for NSF funding.  

Recommendations 

These findings suggest specific legislative actions and program enhancements to address Congressional concerns, without requiring additional appropriations: 

• TABA is a relatively new program with significant potential. Widespread local organizational programs reflect the importance of technical assistance. Agencies should be encouraged to robustly advertise the availability of the program and maximize its usage.
• Similarly, the extensive network of local SBIR support programs should be embraced by federal agencies. Partnerships should be encouraged between agencies and States (and their associations such as SSTI). Local “TABA-lite” local programs should be fostered.
• The Phase 1A concept addresses a definitive need, attested to by the number of local Phase 0 programs. However, implementation of a federal program by agencies with diverse missions and practices is always challenging. Authorizing and carefully monitoring a pilot program is a proven policy tool. (Note: The SBIR program was initially piloted by NSF in the late 1970s.)
• An additional modest vehicle for identifying potential SBIR applicants, developed by NIST, can help connect applicants with alternative support programs. Applicants were given the opportunity to agree (via a checkbox on the cover sheet) to have their contact information publicly disclosed in the event they did not receive funding. Such a requirement would identify “pre-qualified” R&D oriented companies that could benefit from local assistance programs. A variant of the above is to encourage agencies to consider releasing “approved but not funded” (ABNF) lists of companies that would have been funded had there been more funding. This list would also identify “pre-qualified” companies. 

Conclusion 

The SBIR/STTR programs have delivered tremendous value for more than four decades. Reauthorizing the legislation provides an opportunity to address issues that impede the achievement of Congressional objectives and experiment with new features that could improve the program, namely discourage monopolistic “mills” and expand opportunities for new innovators. The INNOVATE Act provisions described above are a positive contribution to these goals. 

Phillip Singerman, PhD, is a senior adviser (non-resident) with Renewing American Innovation at the Center for Strategic and International Studies (CSIS). Previously, he served as NIST’s Associate Director for Innovation and Industry Service and the U.S. Assistant Secretary of Commerce for Economic Development. Singerman has been engaged with the SBIR program since 1983 as the funder of companies that participate in the SBIR program, as the manager of federal and state-sponsored support programs, as the executive responsible for SBIR programs at NIST, and as an NSF SBIR panel reviewer.