The Complete Guide to SBIR/STTR Funding: How to Win Your First $2M Federal Grant

Every year, the U.S. federal government awards over $4 billion in grants to small businesses developing innovative technologies. Yet most researchers and early-stage founders have never heard of these programs—or assume they're too complex to pursue.

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs represent the largest source of early-stage, non-dilutive funding for deep tech innovation in the United States. Unlike venture capital, this funding doesn't require giving up equity. Unlike traditional grants, it's specifically designed to move technology from the lab to the market.

If you're a university researcher looking to commercialize your work, a deep tech founder seeking runway without dilution, or a small business developing breakthrough technology, SBIR/STTR funding could be your path from prototype to product.

This comprehensive guide covers everything you need to know: eligibility requirements, the difference between SBIR and STTR, how to find the right opportunities, and—most importantly—how to write proposals that win.

Understanding SBIR and STTR: What's the Difference?

Before diving into strategy, let's clarify what these programs actually are and how they differ.

The SBIR Program

The Small Business Innovation Research program was established in 1982 to stimulate technological innovation among small businesses while meeting federal research and development needs. Today, eleven federal agencies participate in SBIR, each setting aside a portion of their R&D budget for small business awards.

Participating Agencies and Their Focus Areas:

National Institutes of Health (NIH): Life sciences, medical devices, diagnostics, therapeutics
National Science Foundation (NSF): Fundamental science, advanced computing, AI/ML, materials
Department of Defense (DOD): Defense applications, dual-use technologies, cybersecurity
Department of Energy (DOE): Energy technology, advanced manufacturing, environmental science
NASA: Space technology, aerospace, Earth science, materials
USDA: Agricultural technology, food science, rural development
EPA: Environmental technology, pollution prevention, sustainability
Department of Education: Educational technology, learning science
Department of Homeland Security: Security technology, first responder tools
Department of Commerce (NIST): Standards, measurement science, manufacturing
Department of Transportation: Transportation safety, infrastructure technology

To be eligible for SBIR funding, your company must be:

A for-profit business organized in the United States
More than 50% owned by U.S. citizens or permanent residents
Fewer than 500 employees (including affiliates)
The primary employment location of the Principal Investigator during the project

The STTR Program

The Small Business Technology Transfer program, established in 1992, is similar to SBIR but with one critical difference: it requires a formal partnership between a small business and a research institution.

The STTR Partnership Requirement:

Under STTR, you must partner with a nonprofit research institution—typically a university, federally funded R&D center, or nonprofit research organization. The research institution must perform at least 30% of the work, while the small business performs at least 40%.

This structure makes STTR ideal for university researchers who want to commercialize their work. The researcher can be affiliated with both the university (as the research partner) and the small business (as a founder or consultant), though specific conflict-of-interest policies vary by institution.

Five agencies participate in STTR:

National Institutes of Health (NIH)
National Science Foundation (NSF)
Department of Defense (DOD)
Department of Energy (DOE)
NASA

SBIR vs. STTR: Which Should You Choose?

The decision depends on your situation:

Choose SBIR if:

You're an independent startup without university ties
Your Principal Investigator will work primarily at the small business
You want more flexibility in how work is allocated
Your technology has already been licensed from a university

Choose STTR if:

You're a university researcher spinning out your work
You need continued access to university facilities and equipment
The research institution's involvement is critical to project success
You want to maintain your academic position while launching a company

Many successful companies start with STTR (leveraging university resources and credibility) and transition to SBIR for later projects as they build internal capabilities.

The Three Phases of SBIR/STTR Funding

Both programs follow a phased funding structure designed to progressively de-risk technology as it moves toward commercialization.

Phase I: Establishing Feasibility

Funding: $50,000 - $275,000 (varies by agency) Duration: 6-12 months Purpose: Determine the scientific and technical merit and feasibility of the proposed innovation

Phase I is your opportunity to prove that your core concept works. Agencies aren't expecting a finished product—they want to see that you can achieve specific technical milestones that demonstrate feasibility.

What Success Looks Like:

Proof-of-concept data validating your core hypothesis
Preliminary results demonstrating technical feasibility
Initial understanding of the path to commercialization
Foundation for a compelling Phase II proposal

NIH Phase I Example: $275,000 for 6 months to demonstrate that a novel diagnostic approach can detect biomarkers with sufficient sensitivity and specificity to warrant further development.

NSF Phase I Example: $275,000 for 12 months to validate a new AI algorithm's performance on benchmark datasets and establish the technical foundation for a commercial product.

DOD Phase I Example: $50,000 - $250,000 for 6 months to demonstrate proof-of-concept for a dual-use technology with potential defense applications.

Phase II: Full Research and Development

Funding: $500,000 - $2,000,000 (varies by agency) Duration: 2 years Purpose: Continue R&D and begin developing a commercialization strategy

Phase II is where serious development happens. You'll refine your technology, build prototypes, conduct more extensive testing, and develop a concrete plan for bringing your innovation to market.

What Success Looks Like:

Working prototype or beta product
Validated performance data
Clear understanding of manufacturing/scaling requirements
Identified customers or partners
Concrete commercialization plan with milestones

Important: Most agencies strongly prefer Phase II applicants who have successfully completed Phase I. Some agencies offer "Direct to Phase II" programs for companies with strong preliminary data, but these are competitive and not available from all agencies.

Phase II Enhancement/Matching Programs:

Several agencies offer additional funding if you can secure matching investment from third parties:

NIH Phase IIB: Additional funding (up to $2M more) for projects with strong commercial potential
NSF Phase IIB: Matching funds based on third-party investment
DOD Phase II Enhancement: Additional funding matched by non-SBIR investment

These programs can effectively double your Phase II funding if you can demonstrate commercial traction.

Phase III: Commercialization (No SBIR Funding)

Funding: No SBIR/STTR funds—this phase uses private investment or non-SBIR government contracts Purpose: Move from R&D to commercial application and sales

Phase III is about transitioning your innovation into the market. This might mean:

Commercial product sales
Federal procurement contracts (agencies can sole-source to SBIR companies)
Licensing agreements
Additional private investment for scaling

The Phase III Advantage:

Companies that have successfully completed SBIR/STTR Phase II receive special consideration for federal contracts. Agencies can award sole-source contracts to SBIR companies for products developed under the program, bypassing normal competitive procurement—a significant advantage for companies selling to government customers.

Eligibility Requirements: Can You Apply?

Eligibility rules are strict, and misunderstanding them can result in disqualification. Here's what you need to know.

Small Business Requirements

Size: Your company (including all affiliates) must have fewer than 500 employees at the time of award. "Affiliates" includes parent companies, subsidiaries, and other entities under common control.

Ownership: The company must be more than 50% owned by:

U.S. citizens or permanent resident aliens, OR
Other small businesses that are themselves more than 50% owned by U.S. citizens or permanent residents

For-Profit Status: Your company must be organized as a for-profit entity. Non-profits cannot receive SBIR/STTR awards (though they can be STTR research partners).

Principal Investigator Employment: The PI must be primarily employed by the small business during the project. For STTR, this requirement is relaxed—the PI can be employed by either the small business or the research institution.

The Affiliation Trap: VC-Backed Companies

This is where many companies get tripped up. If your company has received venture capital investment, you may be affiliated with the VC fund's portfolio companies for size-determination purposes.

The SBA's Affiliation Rules:

Under SBA regulations, companies may be considered affiliates if:

A VC fund owns or controls more than 50% of your company
A VC fund has the power to control your company (through board seats, voting agreements, etc.)
Your company is part of a "portfolio" of companies under common investment management

The Exception for Investment Companies:

To address this issue, the SBA created an exception: companies that are majority-owned by multiple venture capital operating companies, hedge funds, or private equity firms may still be eligible if certain conditions are met. The rules are complex and change periodically—consult with a lawyer or SBIR specialist if you have VC backing.

For University Researchers: Special Considerations

If you're a faculty member considering SBIR/STTR, you'll need to navigate several additional requirements:

Forming a Company: You'll need to form a separate small business entity. This is typically a Delaware C-corporation or LLC, though structure depends on your commercialization plans.

Conflict of Interest: Most universities have conflict-of-interest policies that govern faculty entrepreneurship. You'll likely need to disclose your involvement with the company and may face restrictions on the relationship between your university and company work.

IP Licensing: If your technology was developed at the university, you'll need to license it to your company. This negotiation can take time—start early. Universities typically receive equity and/or royalties in exchange for licensing.

PI Location: For SBIR, the PI must be primarily employed by the small business. This may require a leave of absence or reduced university appointment. For STTR, this requirement doesn't apply—one reason STTR is popular with faculty founders.

Finding the Right Funding Opportunity

With eleven agencies and thousands of solicitations per year, finding the right opportunity requires strategy.

Agency Selection: Matching Your Technology to Funders

Different agencies have different priorities, funding levels, and review cultures. Choose based on fit, not just funding amount.

National Institutes of Health (NIH):

Focus: Life sciences, biomedical research, health applications
Phase I: Up to $275,000 for 6 months
Phase II: Up to $2,000,000 for 2 years
Culture: Strong emphasis on scientific rigor; commercialization matters but science comes first
Best for: Therapeutics, diagnostics, medical devices, digital health

National Science Foundation (NSF):

Focus: Broad range of science and engineering disciplines
Phase I: $275,000 for 12 months
Phase II: $1,000,000 for 2 years
Culture: Strong emphasis on innovation and broader impacts; expects customer discovery
Best for: AI/ML, materials, quantum, advanced manufacturing, software

Department of Defense (DOD):

Focus: Defense applications and dual-use technologies
Phase I: $50,000 - $250,000 for 6 months (varies by component)
Phase II: $500,000 - $2,000,000 for 2 years
Culture: Mission-focused; direct path to government customer
Best for: Cybersecurity, sensors, materials, communications, autonomy

Department of Energy (DOE):

Focus: Energy technology, climate, advanced manufacturing
Phase I: $200,000 - $256,000 for 12 months
Phase II: $1,100,000 - $1,600,000 for 2 years
Culture: Strong technical review; increasing commercialization emphasis
Best for: Clean energy, storage, grid technology, advanced materials

Topic-Based vs. Open Solicitations

Agencies release funding opportunities in two ways:

Topic-Specific Solicitations: The agency defines specific technical topics they want to fund. Your proposal must address the stated topic directly. Topics are often written by program managers with specific needs—if your technology fits a topic, you have a clear "customer."

Open/Omnibus Solicitations: Some agencies (notably NSF and NIH) accept proposals on any topic within their mission. This gives you more freedom but means your proposal competes against a wider range of technologies.

Strategy: Topic-specific solicitations often have higher success rates because there's a demonstrated need. If your technology fits a published topic, that's usually your best opportunity.

Using SBIR.gov to Find Opportunities

The SBIR.gov website is your central resource for finding opportunities:

Search Solicitations: Filter by agency, topic area, and keywords to find relevant opportunities
Review Past Awards: See what's been funded before to understand agency priorities
Track Deadlines: Set up alerts for solicitations in your area
Research Competition: Analyze past awards to understand who you're competing against

Pro Tip: Study the abstracts of previously funded Phase I and Phase II projects in your area. This reveals what reviewers find compelling and helps you position your proposal.

Writing a Winning Proposal

Your proposal is everything. A breakthrough technology with a weak proposal will lose to an incremental improvement with excellent proposal writing.

Understanding What Reviewers Want

Different agencies use different review criteria, but most evaluate proposals on these dimensions:

1. Technical Merit / Innovation (25-40% of score)

Is the proposed technology truly innovative?
Does the approach address a significant problem?
Is the technical approach sound?
Are the objectives achievable within the proposed timeframe?

2. Commercial Potential (20-35% of score)

Is there a real market for this technology?
Does the company understand the path to commercialization?
Is the market large enough to justify government investment?
Does the team have commercial capabilities (or a plan to build them)?

3. Team Qualifications (15-25% of score)

Does the team have the technical expertise to execute?
Is the PI qualified to lead this project?
Does the company have the resources and facilities needed?
Are there appropriate advisors, partners, or consultants?

4. Broader Impacts / Agency Mission Alignment (10-20% of score)

How does this technology serve the agency's mission?
What are the broader societal benefits?
How does this technology address national priorities?

The Proposal Structure

While formats vary by agency, most SBIR/STTR proposals include these elements:

Specific Aims / Technical Objectives (1 page)

This is your executive summary. Clearly state:

The problem you're solving and why it matters
Your proposed solution and what makes it innovative
The specific objectives you'll accomplish in this phase
How success will position you for future phases

Make this page compelling—it's the first thing reviewers read and often the most influential section.

Background and Significance (2-4 pages)

Establish the context for your work:

What is the current state of the art?
What are the limitations of existing approaches?
Why is your approach different and better?
What preliminary data do you have supporting feasibility?

Research Plan / Technical Approach (5-10 pages)

This is the heart of your proposal:

Describe your technical approach in detail
Break down work into specific aims with clear milestones
Identify potential risks and mitigation strategies
Explain how you'll measure success
Provide a realistic timeline

Commercialization Plan (2-5 pages)

Don't neglect this section—it's increasingly important:

Define your target market and size it credibly
Explain your go-to-market strategy
Identify potential customers, partners, or licensees
Describe your competitive advantage and barriers to entry
Outline your funding strategy beyond SBIR/STTR
Include any evidence of customer interest (LOIs, interviews, pilots)

Team and Facilities (1-2 pages)

Demonstrate you can execute:

PI qualifications and relevant experience
Key personnel and their roles
Company capabilities and track record
Available facilities and equipment
STTR: Describe the research institution and its role

Budget and Justification

Explain how you'll spend the money:

Personnel (largest category for most projects)
Equipment and supplies
Subcontracts and consultants
Travel (if needed for customer discovery, conferences)
Indirect costs

Make sure your budget is realistic and well-justified. Reviewers are skeptical of budgets that don't match the proposed work.

Common Proposal Mistakes

Mistake 1: Too Much Science, Not Enough Business

Academic founders often write proposals that read like grant applications. SBIR/STTR is about commercialization—show that you understand the market and have a plan to reach it.

Mistake 2: Weak Commercialization Plan

"We'll license to big companies" is not a commercialization plan. Be specific about target customers, pricing, distribution, and how you'll achieve market traction.

Mistake 3: Overpromising on Technical Objectives

Reviewers know what's realistic. If your objectives seem too ambitious for the budget and timeline, they'll question your judgment. It's better to propose achievable milestones and exceed expectations.

Mistake 4: Ignoring the Review Criteria

Every agency publishes review criteria. Address each criterion explicitly. If reviewers can't find evidence of commercial potential in your proposal, they'll score it low on commercial potential—even if you have it.

Mistake 5: Poorly Justified Budget

Don't just list expenses—explain why each line item is necessary for project success. Reviewers are allocating taxpayer money; they want to see that you'll use it wisely.

Mistake 6: No Preliminary Data

While Phase I is proof-of-concept, reviewers want evidence that you're not starting from zero. Include any preliminary data, published papers, or prototype results that demonstrate feasibility.

After Submission: What to Expect

The Review Process

Review timelines and processes vary by agency:

NIH: 3-4 month review cycle with study section review. Results typically 5-6 months after submission.

NSF: Rolling submissions with review typically 4-6 months. Includes program officer review and mail/panel review.

DOD: Varies by component (Army, Navy, Air Force, DARPA, etc.). Some have rapid timelines (60 days for DARPA); others take 6+ months.

DOE: Typically 6-9 months from submission to award notification.

If You're Funded

Congratulations! Here's what happens next:

Negotiations: The agency will contact you to finalize budget and project details
Contracting: Sign the award agreement and complete required registrations (SAM.gov, etc.)
Kickoff: Begin work and establish reporting schedule
Reporting: Submit technical and financial reports as required (typically quarterly)
Phase I to Phase II Transition: Start planning your Phase II proposal early

If You're Not Funded

Don't give up. The average SBIR/STTR awardee has been rejected multiple times before success.

Get Feedback: Most agencies provide reviewer feedback. Study it carefully to understand why your proposal wasn't selected.

Common Reasons for Rejection:

Weak commercialization plan
Technical approach didn't convince reviewers
Objectives not achievable in proposed timeframe
Poor fit with agency mission or topic
Strong competition from better-prepared applicants

Resubmission Strategy:

Address every reviewer criticism in your revised proposal
Strengthen weak sections rather than just defending your original approach
Consider whether a different agency or topic might be a better fit
Seek feedback from successful awardees or SBIR consultants

Resources and Next Steps

Official Resources

SBIR.gov: Central portal for all SBIR/STTR programs, solicitations, and resources
Agency Websites: Each agency has an SBIR/STTR office with program-specific guidance
SBA SBIR Road Tour: Free workshops and webinars on SBIR/STTR basics

Support Programs

FAST (Federal and State Technology Partnership): State-level programs providing proposal assistance
TABA (Technical and Business Assistance): Agencies can fund technical and business mentoring for awardees
I-Corps: NSF program teaching customer discovery (often good preparation for SBIR)

Key Deadlines to Track

NIH: Three submission cycles per year (January, April, September) NSF: Ongoing submissions with specific windows DOD: Multiple cycles per year, varies by component DOE: Typically 2-3 solicitations per year

Start your planning at least 3-4 months before submission deadlines. Strong proposals take time.

Ready to Find Your SBIR/STTR Opportunity?

The SBIR/STTR programs offer a remarkable opportunity: non-dilutive funding specifically designed to move innovative technology from lab to market. With over $4 billion awarded annually, there's significant funding available—but capturing it requires strategy, preparation, and a compelling proposal.

Use our free SBIR/STTR Navigator tool to identify the best funding opportunities for your technology, understand eligibility requirements, and build a customized application timeline.

Try the SBIR/STTR Navigator →