Indiana Economic Development Corporation 21 st Century Research and Technology Fund SBIR/STTR Handbook 1
TABLE OF CONTENTS Introduction Page 3 About the IEDC and the 21 st Century Fund Page 3 History of the SBIR/STTR Program Page 4 Overview of SBIR Program Page 5 Who is eligible? Page 5 Where is the funding? Page 5 Three Phase Program Page 6 Overview of STTR Program Page 7 Difference between SBIR and STTR Page 7 Preparing to Apply Page 7 Requirements for Applying Page 8 Elements of Proposal Page 9 Developing the Proposal Page 10 Keys to Success Page 10 Do Not Overlook Page 11 Common Criticisms Page 11 Available Assistance from IEDC/21 st Century Fund Page 12 Topic Matching Page 12 Plan Review Page 12 Proposal Assistance Page 12 Technical and Proposal Reviews Page 12 2
SBIR/STTR Handbook Indiana Economic Development Corporation 21 st Century Research and Technology Fund Introduction In 1982, the Small Business Innovation Development Act became law. This Act created the small business innovation research program or SBIR. The SBIR program promotes technology and commercialization at the small business level. The small business technology transfer program (STTR) promotes cooperative research & development between small businesses and United States research institutions. Small business and technology provide a strong business base and economy and therefore are important to Indiana government. Indiana small businesses can access opportunities for SBIR/STTR funding through the Indiana Economic Development Corporation (IEDC) and the 21 st Century Fund. This handbook will serve as a general overview of the SBIR/STTR programs, and the proposal process. It will explain how to get started, the proposal development process, suggestions for a successful application, and the resources available to applicants. About IEDC and the 21 st Century Fund The IEDC as the State of Indiana's lead economic development agency was officially established in February 2005 to replace the former Department of Commerce. In order to respond quickly to the needs of businesses, IEDC operates like a business. Led by Indiana Secretary of Commerce and IEDC Chief Executive Officer, E. Mitchell Roob, Jr, IEDC is organized as a public-private partnership governed by a twelve-member board. The IEDC Board of Directors is chaired by Governor Mitch Daniels and reflects the geographic and economic diversity of Indiana. IEDC focuses its efforts on growing, retaining, and attracting businesses in Indiana, and has incorporated all state entities with economic development responsibilities into its organizational structure. The Indiana 21st Century Research and Technology Fund was created in 1999 by the General Assembly to stimulate the process of diversifying the State's economy by developing and commercializing advanced technologies in Indiana. The Fund is now an integral element of the IEDC s Small Business and Entrepreneurship Division. 3
Recognizing the impact that small technology-based businesses have on the Indiana economy, the IEDC SBIR Initiative has evolved to assist Indiana businesses with the commercialization of ideas, new technologies, initiatives, and innovations. The IEDC SBIR Initiative provides significant services to assist with the establishment and expansion of high technology business in Indiana. The SBIR/STTR program of the 21 st Century Fund is intended to increase the capacity of the State s commercial and academic sectors to compete for and acquire federal SBIR/STTR funding. In 2003, the 21 st Century Fund put into place a Phase I matching program designed to support early-stage technology commercialization in small/medium sized businesses. This matching program is a dollar for dollar match of the federal award, up to $100,000. In addition to the matching program, the IEDC/21 st Century Fund SBIR initiative is committed to increasing the number of successful SBIR/STTR proposal submissions from Indiana. History of the SBIR/STTR Program The Federal SBIR program was created in 1982 as part of the Small Business Innovation Development Act. The Act increases Research & Development (R&D) funding opportunities for small businesses as federal agencies seek out their Research & Development (R&D) needs. Federal agencies with annual outside R&D budgets over $100 million must establish SBIR programs, and commit 2.5% of their extramural budgets. Currently 11 federal agencies participate. The SBIR program was reauthorized in 2000 through FY2008 and extended through March 2009. Currently the SBIR program is on a Continuing Resolution until 4/30/2010. Reauthorization will occur, but the specific features and requirements of the new program have yet to be finalized. After more than two decades, the SBIR program has established itself as one of the most effective technology programs in the federal government. 3,555 awards were made in FY2008 for a total of more than $2.5 billion. Indiana companies submit approximately 160 SBIR Phase I proposals each year. We are currently winning about 52 Phase I awards/year. The Indiana 21 st Century Fund currently provides about $5 million per year in matching awards. During 2008-2009, the 21 st Century Fund provided Foresight Technology primary market research to 8 of its phase I awardees. This was very well received, and as a result, the IEDC now provides this market research to all Phase I awardees, including an initial interaction with the Indiana Small Business Development Corporation (ISBDC) regional staff. The ISBDC provides secondary market services and business development assistance. These services help resolve a persistent weakness of Phase I awardee business plan development in anticipation of a Phase II proposal. 4
Overview of the SBIR program Federal SBIR funding is intended to encourage a working relationship between small business and federal government agencies. This is accomplished by providing seed money to conduct research and development initiatives, encouraging the development of new and innovative technology or the use of an existing technology to a new application. SBIR funding is intended to facilitate the commercialization of innovative technologies and is best suited for companies with a committed R&D program/strategy and long term focus. The SBIR program is highly competitive. It targets the small business entrepreneurial sector because that is where most innovation and job growth occur, but there is inherent financial risk for small businesses to develop new technology. SBIR funding helps manage such risks and allows small businesses to compete with large businesses and encourages the commercialization of the technology, product or service, which in turn, stimulates the economy. Who is Eligible for SBIR funding? Businesses must: Have less than 500 employees, including affiliates; Be for profit ; Be American owned and independently operated; and Principal Investigator must be employed by the business at the time of the award. Where is the SBIR/STTR Funding? Each year, eleven federal departments and agencies are required by SBIR to reserve a portion of their R&D funds for award to small business. These agencies publish requests for funding proposals (solicitations) on R&D topics: Department of Agriculture Department of Commerce Department of Defense Department of Education Department of Energy Department of Health and Human Services Department of Homeland Security Department of Transportation Environmental Protection Agency National Aeronautics and Space Administration National Science Foundation 5
Three Phase Program The Small Business Administration (SBA) sets some overall guidelines for the entire SBIR program, such as a 25-page limit for proposals. However, each agency will also establish individual funding priorities, award limits, proposal deadlines and review processes. Funding through the SBIR program is a three-phase process. An applicant must enter the process through Phase I. Phases I and II are supported through funds allocated through the SBIR program. In Phase I, the federal agencies listed will periodically publish solicitations for project proposals. Phase I awards are funded up to a maximum of $100,000 for six months. (There may be exceptions depending on the agency). Typically, Phase I awards fund research and development intended to explore the technical merit or feasibility of an idea or technology. Following the submission of proposals, agencies make SBIR awards based on a merit review process including: small business qualification, degree of innovation, technical merit, and future market potential. Historically, one out of ten proposals is funded. Businesses successfully completing Phase I awards are eligible for Phase II funding. Phase II awards further the results of Phase I with additional R&D and prototype work, and the implementation of a commercialization plan. Phase II awards can be a maximum of $750,000 for as many as 2 years. However, larger agencies such as the Department of Defense and the Department of Health and Human Services are exceeding this award amount for some projects. On average, one out of two or three Phase II project proposals receive an award. In the Phase II proposal process, businesses are required to show evidence of a contingent Phase III private funding commitment. Including this funding possibility in the Phase I proposal whenever possible will strengthen the application even if only an outline for this aspect of the project exists. Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. No SBIR funds are available for Phase III. The small business must find funding in the private sector (or other non-sbir federal agency) such as; corporate contracts, strategic alliances, manufacturing contracts, venture funding, marketing channels, and joint venture or distribution partnerships. This is a challenging time for small companies, since the technology readiness level of their technology usually does not support market entry and significant technical and market validation risks remain. This period has been called the valley of death. All businesses submitting proposals must include a commercialization report. This report must have a specific strategy for commercialization with clear and measurable milestones. Quantitative results from any prior Phase II projects (if prior awards have been received) should be included. The IEDC provides Foresight Technology primary market research and access to ISBDC secondary market analysis expertise to all Indiana Phase I SBIR/STTR awardees. 6
Overview of the STTR Program The Federal Small Business Technology Transfer (STTR) program was modeled after the SBIR program to expand the ability of small business to be innovative in technology. The STTR program creates a public/private partnership for joint venture opportunities between small businesses and nonprofit research institutions such as universities. Creating this joint partnership opportunity is beneficial to both parties because the risk and expense of research & R&D are often cumbersome for a small business and high tech innovations through universities and research institutions are frequently theoretical and not practical. Many aspects and requirements of the STTR are similar to the SBIR Program. Maximum award amounts and project timetables are relatively the same. However, before receiving an STTR award, a contractual agreement between the small business and the research institution must be negotiated. This agreement manages potential conflicts of interest and should establish facilities access and intellectual property rights between the parties to permit follow-on research, development, or commercialization. Currently, there are 5 participating federal STTR agencies: U.S. Department of Defense U.S. Department of Energy U.S. Department of Health and Human Services National Aeronautics and Space Administration National Science Foundation Important Differences between STTR and SBIR For STTR, the Phase I award period is usually one year instead of six months. For DOD, NIH, and NASA, the Principal Investigator may be primarily employed by the partnering research institution and does not need to be an employee of the small business. (Does not apply to NSF and DOE) In an STTR project, 40% of the work must be done in house for Phase I and Phase II. (For SBIR projects the requirement is two-thirds of the work in house in Phase I and onehalf in Phase II.) The non-profit research partner must do at least 30%. The remaining 30% may be done by either party, or by others. The STTR program has significantly less funding available than the SBIR program. Preparing to Apply This section will provide overall guidelines for preparing a successful proposal. It is important to remember that applicants are expected to know the STATE OF THE ART in the field they are pursuing. Proposal reviewers are volunteers who are generally academics with expertise in that particular field of study. Applicants are encouraged to conduct homework before and during the proposal period including acquiring knowledge of the current literature and related prior successful proposals. After a solicitation is identified, applicants must read very thoroughly what is being requested. Proposals must be responsive to a topic, or they will not be 7
reviewed. Do not assume your technology will be accepted by the agency. Understand the market for the technology you are proposing. Lastly, be certain the project will align with your business overall mission. Solicitations SBA is required by law to prepare and electronically publish Phase I SBIR and STTR Solicitation Announcements for all participating federal agencies. The best way to access and search these solicitations is by using online resources. The SBA web page is www.sba.gov/sbir. Another useful resource is www.zyn.com/sbir. Finally, the IEDC sends out frequent newsletters that include information about sources of federal and private sector support of R&D, including SBIR/STTR solicitations. To receive this e-newsletter, just go to: http://www.21fund.org/contact.aspx and follow the directions. Published solicitations are the official list of priority topics for each agency. Prior to releasing the official topics, it is possible for interested applicants to speak with agency officials. This opportunity allows for discussion of the technical topics and specific proposal ideas. Interaction with agency officials can provide important insight for submitting a successful idea. Getting to know federal SBIR program officers is also an effective way to suggest future solicitation topics. After topics are released, agencies have limited ability to discuss topics or answer questions. Submission Requirements Begin the application process early. Allow 2-3 weeks for completion. Grants.gov is the submission portal for all granting agencies. A D-U-N-S Number and Central Contractor Registration are required and information on obtaining these can be found on the grants.gov website. A DUNS Number is a unique nine digit identification number for a physical business. A DUNS Number is required to register with the U.S. Federal government. Obtaining a DUNS Number is free. Double check that there are no additional agency-specific registrations requirements. General Requirements for SBIR and STTR Proposals Proposals shall not exceed 25 pages including cover page, budget, and all enclosures and attachments. Agencies differ on whether letters of support are to be included in the 25 page limit. Each agency will have its own set of submission forms and these can be found in the solicitation information contained in the websites referenced in the solicitations section of this handbook. 8
Pages should be of standard size (8 ½ x 11 ) and should conform to standard formatting instructions; in particular, 2.5 cm margins and no smaller than 10 point font size should be used. A good proposal will have solid technical and commercial background and strong craftsmanship. A proposal will typically require 150-200 professional hours to complete. To be competitive, here are other important points when formulating a proposal: A strong Principal Investigator is critical. Someone with credentials and a proven track record. Ideas should be scientifically innovative projects that overcome technical barriers. A product or process that will have a technical or economic impact. Clear commercialization strategy with measurable milestones is very important. Outside funding sources to leverage resources and validate commercial potential. A strong internal and external team. Strategic partners to bolster any weakness, add credibility and validate technical/commercial potential. A written business plan is required as part of Phase II. Elements of the Proposal 1. Proposal Cover Sheet 2. Abstract/Project Summary The abstract is the most important page of your proposal. It is the first introduction of the project to reviewers; it is the marketing piece. The abstract serves as a summary of the project much like the executive summary of a business plan and is typically written last. It is absolutely essential that you clearly communicate exactly what you plan to do. Any delay in presenting this statement will irritate your reviewers and frequently lead to misunderstandings. 3. Technical Content This section serves as the meat of the project. In this section you will discuss the specific need or problem being addressed. You will list the Phase I technical objectives, the Phase I work plan, and related Research or R&D. You will identify key personnel and include a bibliography of directly related work. State the anticipated results you would expect to see should the project prove successful. Include the significance of Phase I outcomes in establishing a foundation for a Phase II project. Include a detailed description of the facilities to be used in the project. You do not have to have access currently to the facility but, once the award is received you must have control of the space. Finally, a detailed budget must be included. The budget must be presented in a format that conforms to the rules of the solicitating agency. Ensure that your budget corresponds well with your narrative. Include a justification of all listed expenses. 9
4. Other elements of a Proposal Keeping in mind your 25 page limit, proposals will often include other items such as, letters of support, any human subject usage, biographical sketches, any current or pending outside support, publications lists, and bibliography and references cited. Developing the Proposal Remember, in general, across the ten participating agencies, 10 to 25 percent of proposals are funded for Phase I, and 35-50 percent are funded for Phase II. Overview Proposals should be focused on one main idea or concept. Proposals should address high-quality research or research and development. Ideas should be at the cutting-edge of the subject being investigated. Proposals should be directed toward an advanced concept related to an important scientific problem or opportunity. Proposals should have significant commercial potential. Ideas should have the opportunity to penetrate many different markets. Proposal Concept or Idea Must be a new and innovative idea. Not a simple extension of earlier work. Not currently in the Public Domain. Carefully developed. Keys to Success Complete and submit the proposal on time. Read, follow, and completely understand the proposal preparation guidelines. Adequately research the project. Develop and rework the research approach. Define objectives. Design a work plan to satisfy the objectives. Prepare at minimum two complete drafts prior to preparing final submission. Convince the reviewers that YOU are the BEST QUALIFIED business to carry out the project. Include expert consultants in your project. Obtain support from an industrial partner. 10
Do Not Overlook If you are not the real expert or you do not have real innovation, do not waste your time. If you cannot reference prior publications, research, and/or hardware in the specific proposal area you will not be perceived as a real expert. You must have a real company. Describe the innovation and significance of the project concisely, quickly, and accurately. Describe why your innovation is an improvement to the state-of-the-art. Do not waste the reviewer s time with fluff and boilerplate. Do not clone proposals and/or reuse proposals. Good ideas will suffer from poor presentation. Common Criticisms Poorly written and presented. Principal Investigator lacks necessary technical expertise. Insufficient literature review. Insufficient technical information. Cannot be completed within timeframe allotted. Research already exists. Too vague and unfocused. Failure to indicate how project can go into Phase II. Poor commercialization potential. 11
Available Assistance from the IEDC/21 st Century Fund. SBIR assistance from the 21 st Century Fund can be obtained anywhere in the application process. However, we encourage you to involve the IEDC SBIR program from the very early stages to ensure proposal success. The 21 st Century Fund is interested in increasing the number of high quality proposals that are likely to result in successful attraction of federal funding to the state. Topic Matching It can be cumbersome and somewhat overwhelming to search through the thousands of SBIR/STTR topics and solicitations. Identifying topics and agencies interested in your ideas should be an on-going process. Searching through the closed solicitations will provide a glance at the agencies that are investing in your technology area. We suggest you experiment with the SBIR/STTR Search engine SBIR/STTR Gateway and other tools on the 21 st Century Fund homepage. Plan Review The IEDC has partnered with the Indiana Small Business Development Centers (ISBDC) to conduct personalized counseling either one-on-one or by telephone for high-tech small business clients interested in pursuing SBIR/STTR funding. ISBDC counselors can provide feedback on the business s state of readiness for the funding pursuit, the technology match with the topic, and the qualifications of the team. The review will also assist in determining the level of support needed to proceed. The counselor and company will collectively determine the strategy and services needed to successfully navigate the submission process. Proposal Assistance: Proposal/grant writing support may be available to clients that demonstrate a strong potential for SBIR/STTR success. Previously submitted applicants that were unsuccessful and first time applicants are eligible for this service. You will be paired with a successful SBIR/STTR writer that will assist during the initial submission process and provide you with the skills needed for future SBIR/STTR endeavors. The IEDC SBIR Initiative believes that education on the proposal writing process is one of the critical steps in achieving Indiana s goal as a front runner in SBIR/STTR awards. Technical and Proposal Reviews: Technical and Proposal reviews are available for clients that feel comfortable with their proposal writing skills but would like a critique prior to their submission. This is a great opportunity to have a third party evaluation by experienced federal reviewers and field experts. The evaluation will critique the: Innovativeness of the technology Solidify the technology match with the topic Look at the articulation of the proposal writing Review the flow of the proposal formatting Once the critique is complete, you will be provided a document with comments and suggestions on how to strengthen your submission. The typical turnaround time of a technical and/or proposal review is approximately 5 days. Plan ahead and watch your solicitation timeline. 12