Regaining ground: business development and the SBIR Program in Texas.(April 2004)(Business Innovation Research Program)(Small Business Innovation Development Act of 1982)

The SBIR Coach Austin, Texas

The Small Business Innovation Research Program (SBIR) is a $2 billion federal set-aside for small, technology-oriented business development. SBIR funding helps young firms bring their products to market. Texas, despite a richly deserved and growing reputation as a technology hub for business start-ups, lags behind many other states in the rate of participation in this vast program. This article examines the reasons for this and explores some ways to bolster the state economy by promoting entrepreneurship through greater participation in the SBIR program.

SBIR Defined

A congressionally-mandated budget set-aside, the SBIR Program was established in 1982 under the Small Business Innovation Development Act. It is intended to increase the participation of small businesses in federal research and development. Each participating government agency (those that spend more than $100 million annually on external contracts and grants for R&D) must reserve 2.5 percent of its external R&D budget for competitively selected SBIR awards to small businesses. In government fiscal year (GFY) 2004, the SBIR set-aside pool is approximately $2 billion. A sister program, the Small Business Technology Transfer (STTR) Program, was added in 1992. STTR differs from SBIR only in the required involvement in the project of a research institution, such as a university. Universities may be included in SBIR projects, but only in a consulting or subcontracting role. For purposes of this discussion, the two programs will be considered together.

The SBIR Program taps into the innovativeness and creativity of the small business community to help meet government R&D objectives. In return, these small companies have the opportunity to develop technologies, products, and services that they can then commercialize through sales either in the private sector or back to the government. Projects are styled as grants or contracts from a government agency for work on a specific project, problem, or program of that agency, and applicants must meet only four requirements for eligibility (see sidebar, page 2). The awards are modest: typically about $850,000, available over two to three years, for work on first, the feasibility of the entrepreneur's idea to the government's problem and second, prototype development. The intellectual property created during the project belongs to the entrepreneur. That means that the small business retains all patent rights, but the government retains the right to use any resulting products without paying royalties.

Funding Phases

The twelve participating SBIR agencies (see sidebar, page 3) select the technical topics--that is, problems or problem areas for …