Are you an entrepreneur looking for some “free” money from the US government? The Small Business Innovation Research program, promoted as “America’s Seed Fund,” may be a resource worth considering.
You just need to meet the following requirements:
- For-profit business
- Fewer than 500 employees
- Owned by one more individuals who are citizens, or permanent residents of the US
- Majority shareholder cannot be a VC, hedge fund, PE firm, etc.
SBIR grants can be great since they don’t dilute ownership of your company and provide a path to partnering with a federal customer. On the other hand, the review and approval process can take a long time (measured in months/to a year…more on that below) and it may prove “distracting” if the grant doesn’t support a core aspect of your product.
Previous recipients of SBIR grants include iRobot and Qualcomm. Maybe your company will among the next to join their ranks?
Since SBIR is a government program, they publicly post information about awardees to their site here. Let’s review data from fiscal year 2019 (FY2019) to see what we can learn about Phase 1 SBIR grants.
Remember, since this is the government, FY2019 runs from October 1, 2018 to September 30, 2019.
$322 million was awarded to 1,500 companies during FY2019.
The grants seem to come in several distinct sizes generally ranging from $50,000 to $225,000. The SBIR website claims that starting in FY2020 agencies are allowed to award up to $256,580. If trends from 2019 continue, you shouldn’t plan on getting a grant at that amount. Only 15% of grants awarded were for $220,000 or more.
Additionally, 48% of the money awarded during FY2019 were from proposals solicited during FY2018. This suggests there’s a significant waiting period between applying for a grant and receiving approval.
Next, let’s review the abstracts of each award to see what terms stick out:
No discrete category or object seems favored, except grants dealing with new or novel materials or...data. I'm in luck!
How Much SBIR Funding from Each Federal Agency/Department?
The Department of Defense awarded $134M in SBIR grants during FY2019, making them the single largest awarding agency. It seems like “space tech” generally has an edge here, since either the DoD, NSF, or NASA could be an awarding authority. Those agencies comprise the majority of funding sources
Entrepreneur Level Data
The data provided by SBIR.gov allows us to explore who receives the grant money. First, let’s see where these entrepreneurs are located. The top 5 states for SBIR grants by award amount are:
- California $66.1M
- Massachusetts $30.2M
- Colorado $19.0M
- Virginia $18.6M
- Ohio $16.5M
SBIR guidelines allow for firms with up to 500 employees to apply for grants. We all know there’s a huge difference between a pre-product startup of 1-3 people compared to a 499 person firm. So who actually wins these grants?
The small firms certainly stand a chance!
43% of SBIR Phase 1 grants were awarded to firms with less than 9 employees.
Some other data points about who receives SBIR Phase 1 grants:
- 12.8% of the award money goes to women owned firms.
- 8.1% of the award money goes to firms owned by individuals categorized as “Socially and Economically Disadvantaged.”
- 60% of winners don’t have a website yet (or at least don’t list it).
SBIR grants are “free” money from the government! The data shows that there’s no such thing as being “too early” in your company (or idea’s) lifecycle to apply. Given the time from application to approval, you shouldn’t “count” on it as any kind of emergency funding.
SBIR Phase 1 grants are best seen as a way to diversify your company’s funding sources or get some seed money to “trial” an idea. If you’re pursuing a hard tech or science project, it seems likely that you can find an angle to pitch it to DoD, NSF, or NASA.