1. Overview of The SBIR & STTR Programs October, 2014

2. The purpose of the SBIR program as established by law is to: Stimulate technological innovation in the private sector Strengthen the role of small businesses in meeting federal research and development needs Increase the commercial application of these research results Encourage participation of socially and economically disadvantaged persons and women owned small businesses SBIR OBJECTIVES

3. Phase I. Evaluate scientific technical merit & feasibility of an idea. Up to $150K 6-9 months Phase II. Expand the results of, and further pursue the development of Phase I work. Main R&D activity May involve prototype creation & testing, clinical trials, etc. Up to $1 million for 24 month period (varies by agency) Phase III. “Commercialize” results of Phase II. No SBIR funds available for this phase May use private money, or non-SBIR federal funding THREE PHASES OF THE SBIR PROGRAM

4. Note 1: Must enter program thru Phase I: Can’t go directly to Phase II (except possible pilot programs @ NIH, DOD, DoED) Note 2: Sole source procurement OK in Phase III Notes:

5. 1.Contract Agencies Have a specific problem or need You must grasp & respond to that need o “Only proposals submitted in response to topics in this solicitation will be considered” –DoD FY08.2 o “Focus on what we asked for, not what you think we need” –Susan Nichols, DARPA SBIR Prog Mgr, 11/11 2.Grant Agencies Want to support “good ideas” You must determine what they think “good” is TWO TYPES OF SBIR AGENCIES

6. ≤500 employees, including affiliates o Must be “for profit” o ≥51% owned & controlled by US citizens or permanent resident aliens SBA ruling: SBIR/STTR applicant firm can be owned/ controlled by one or more other small businesses, of parent company(ies): o ≤500 employees o 51+% owned by US citizens o Awards can go to firms majority owned by multiple Venture o Capitalists/Hedge Funds/Private Equity Funds if agency elects to do so Relationship between small business ownership and university/faculty members must be carefully managed o Caution: no consistent, firm rules here o Caution: what is allowed in Phase I may not be acceptable in Phase II SMALL COMPANY ELIGIBILITY FOR SBIR PARTICIPATION:

7. May want to include consultants, subcontractors to round-out your team Can subcontract ≤33% of Phase I Can subcontract ≤50% of Phase II For profit or non profit Large or small Individual consultant or company However, all work must be done in the U.S. SUBCONTRATOR ELIGIBILITY FOR SBIR

8. Agency FY08 FY09 FY10 (WAGS) FY11 (WAGS) FY12 (WAGS) FY13 (WAGS) Dept of Agriculture 77 70 85 90 85 65 Dept of Commerce 40 40 45 35 25 19 Dept of Defense 1826 2018 1800 1800 1700 1300 Dept of Education 33 18 40 25 24 22 Dept of Energy 280 373 300 280 223 279 Dept of Health & Human Services 806 739 900 699 808 Dept of Homeland Security/HSARPA 28 52 60 50 50 29 Dept of Transportation 11 16 19 15 21 9 Environmental Protection Agency 25 23 35 28 25 26 NASA 276 348 300 450 258 259 National Science Foundation 224 311 300 272 223 177 APPROXIMATE NUMBER OF PHASE I AWARDS BY AGENCY

9. PHASE I SOLICITAION SCHEDULE

10. SBIR Principal Investigator Involvement Must be primarily employed by the company o Cannot work full time for another employer o Some agencies say <75%, others <50% Other agency-specific requirements o DOE: 111 hours on the Phase 1 project (3+ hrs/wk minimum) o NSF: PI must devote >1 FTE month to Phase 1 SBIR Liberal Patent Rights Recipient can apply for worldwide patent rights Federal government gets royalty free license Funding Gap Problem Gap #1: 6-10 months between Ph I proposal submittal & award o Agencies must award within 90 days of proposal deadline (1 year at NIH & NSF) Gap #2: 4-18 months between Ph II proposal submittal & award o Ditto comment above: 90 day at all but NIH & NSF o Some agencies have options, early decision programs  NSF: PhIB: match 1:2 of 3rd party $$ up to $50k NSF $$s OTHER

11. Phase I Historically: 1 out of 10 proposals funded FY12 estimate: ~15% In comparison, VCs fund 2.4% VCs don’t fund start ups VCs are geographically concentrated o Entrepreneur.com, 3/06 Phase II Between 1:2 and 1:3 FY 12 estimate: 45% But competition is tougher SBIR SUCCESS RATIOS

12. Modeled after SBIR Small company must team with Federal Lab, University or other non-profit R&D entity Only 5 Federal agencies participating o DOD Not all components o DHHS/NIH o DOE o NSF o NASA “Small” compared to SBIR SMALL BUSINESS TECH TRANSFER PROGRAM (STTR)

13. SBIRSTTR Number of participating agencies115 FY14 budget as % of outside R&D budget2.8%0.4% Min. Phase I small business participation67.0%40.0% Max. Phase I subcontractor participation33.0%60.0% Min. Phase I subcontractor participation0.0%30.0% Principal Investigator employerSmall BsnsSB or RI* SBIR vs STTR * STTR: PI can be at Research Institution (except at NSF).

14. SMALL COMPANY ELIGIBILITY FOR STTR

15. Located in U.S. and meets one of the following: Non-profit research institution per Stevenson-Wydler Technology Innovation Act of 1980 o Owned/operated exclusively for scientific or educational purposes o No profits benefiting private shareholders or an individual Non-profit college or university o Public or private Non-profit medical or surgical hospital Federally Funded Research and Development Center (FFRDC) o GOGOs do not qualify o www.federallabs.org www.federallabs.org NOTE: a single research entity must qualify as the partner on an STTR (& receive ≥30% but ≤60% of funds) RESEARCH ENTITY ELIGIBILITY FOR STTR PARTICIPATION

16. Mandatory participation by nonprofit R&D Institution in STTR Participation by nonprofit R&D institution is allowed but optional in SBIR Secondary difference: STTR is an R&D “collaboration” between the small business & the nonprofit 2011 CHANGES Fraction of agency’s SBIR budget can go to previously ineligible firms Firms majority owned by multiple Venture Capitalist/Hedge Funds/Private Equity Funds ≤25% of NIH, NSF, DoE SBIR budgets ≤15% of all other agencies Agencies have to elect to do this or not PRIMARY DIFFERENCE BETWEEN SBIR vs STTR

17. Step 1. Formulate your proposal strategy Draft the proposal Get a review of the draft before submitting it Get a debriefing after winners are announced Step 2. Formulate your proposal strategy Draft the proposal Get a review of the draft before submitting it Get a debriefing after winners are announced Step 3. Formulate your proposal strategy Draft the proposal Get a review of the draft before submitting it Get a debriefing after winners are announced Step 4. Formulate your proposal strategy Draft the proposal Get a review of the draft before submitting it Get a debriefing after winners are announced 4-STEP PROCESS FOR DEVELOPING A PHASE 1 SABIR/STTR PROPOSAL

19. Lack of technical detail o especially problematic: vague research/work plans No evidence of innovation or uniqueness No statement of the feasibility question, risk, or solution measure Much too much background stuff: the technology trap discussed earlier Failure to present a credible commercialization story Lack of credible PI &/or team Lack of credible/defensible/sensible cost proposal COMMON WEAKNESSES

20. 1.Poorly written & presented 2.PI lacks necessary expertise 3.Insufficient literature review 4.Insufficient technical information 5.Cannot be done in 8 months 6.Inadequate bibliographical information 7.Lacks letters from consultants 8.Research already done by others 9.Too vague, unfocused 10.Failure to state where project would go in Phase II 11.Doesn’t address an important problem 12.Doubtful commercialization potential 13.Insufficient detail in experimental plan 14.Too much of the research will be done at a university 15.Should add consultant w/expertise where PI is deficient Common Errors