There are two key differences between the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. First, an STTR project requires the small business–which is always the applicant–to coordinate with a non-profit research institution, typically a university or Federal Laboratory.
Secondly, the STTR program focuses on the transfer of technology from the Research Institution (RI) to the small business and ultimately to the marketplace through a Phase 1-2-3 sequence. This second difference has expanded over time to include situations where the innovation belongs to the small business, but the business still needs essential resources from a non-profit RI in the technology’s development. Research institutions typically have sophisticated laboratories and personnel with needed expertise.
Subcontracting
There are several other, more subtle differences between SBIR and STTR. One important difference is the primary employment of the project’s principal investigator (PI). In an SBIR project, the PI must be primarily employed at the proposing small business, meaning that he or she cannot work full time elsewhere during the project period. With an STTR, the PI could be primarily employed at either the RI or the small business. Also, an STTR project can subcontract up to 60 percent of the research effort. An SBIR can subcontract up to 33% in Phase I, and 50% in phase II.
When Is it Best to Use SBIR?
Let’s look at situations where it is best to apply for an SBIR award instead of an STTR. When you submit an SBIR proposal, you can include another company–large or small, as a subcontractor to enhance the capability of your team. You can also add a university or another type of research institution such as a Federally Funded Research and Development Center or FFRDC as a subcontractor. In general, the SBIR program will be a better opportunity in the following situations:
- Situation 1. If you don’t plan to include a non-profit research entity in your project as a subcontractor, then STTR is not a consideration. Choose SBIR.
- Situation 2. If you decide to subcontract to a research institution but do not need to subcontract more than 33% of the Phase I research effort to the RI, then SBIR is the most appropriate choice.
- Situation 3. In some cases, potential investors don’t like the idea of involving a non-profit in a project. This can be due to perceptions about the “culture” of non-profits or concerns about intellectual property rights. (In an STTR, the small business and the non-profit must establish an agreement detailing the allocation of intellectual property. ) In this case, an SBIR would be the most appropriate choice.
- Situation 4. If RI staff would prefer to participate as independent consultants rather than representatives of the institution, choose SBIR. A small firm that hires consultants is not eligible for STTR because no non-profit is acting as subcontractor.
When Is it Best to Use STTR?
Now, let’s explore when it’s best to consider STTR. Please keep in mind that there are only five agencies in the STTR program. Therefore, STTR will only be a consideration when seeking opportunities with the Department of Defense, The Department of Energy, the Department of Health and Human Services, the National Aeronautics and Space Administration, or the National Science Foundation. The STTR program would be a better choice in the following situations:
- Situation 1. In order to have the best team, a large portion of the award must be subcontracted. The guidelines for STTR state that the small business must perform 40 percent of the work on the project, and the research institution must perform at least 30 percent of the R&D. This leaves an additional 30% that can be outsourced either to a research institution or another subcontractor.
- Situation 2. The small business and the research institution see themselves as equal partners in the project. STTR is a “collaboration” between the two. The players are equals even though the award always goes to the small business, and the firm must maintain overall control and responsibility for the project.
- Situation 3. When there is a higher likelihood of winning an award when paired with a RI.
- Situation 4. If the subject of interest has limited applications to only STTR, there is no opportunity to submit SBIR proposals.
Linda Rawson, who is the founder of DynaGrace Enterprises (dynagrace.com), an 8(a) graduate and EDWOSB, contributed to the content of this blog. She is the founder of GovCon-Biz. For further information, please connect with Linda on LinkedIn, or contact her at (800) 676-0058 ext 101.
Please reach out to us at GovCon-Biz should you have any questions.
