Update on the NIH Small Business Programs


It’s been a while since I mentioned our Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Several events have brought them to the forefront at NIH, so I thought now would be a good time to talk about them. For those of you who have not heard of our Small Business Programs, all federal agencies with an extramural research budget of more than $100M are congressionally mandated to set aside 2.5% to fund research and development on technology targeted for commercialization performed by eligible small businesses. Another 0.3% is set aside for technology transfer, which requires a partnership between a small business and a research institution. Among all federal agencies, NIH’s small business program is the second largest. We have a whole section on our RePORT website where you can find interesting data about the program.

Let me tell you about the myriad of activities that are impacting our SBIR and STTR programs in various ways. First, last week, President Obama released a memo in which he asked the heads of federal agencies to accelerate technology transfer and commercialization of federal research. As you might imagine, this is particularly applicable to our small business programs; in fact, SBIR and STTR programs are specifically called out in the memo, with the President asking us to look at best practices for managing these programs.   

This seems to be a topic on everyone’s mind as a few weeks ago Dr. Collins, the NIH Director, asked NIH’s Scientific Management Review Board to recommend strategies for optimizing the NIH Small Business Programs. He mentioned finding ways to foster innovation, attract quality proposals, and ensure success with our grantees. The board will be working over the course of the next year to come up with recommendations that likely will touch on the same areas the President mentioned.

Finally, congressional reauthorization of the programs is currently underway—the programs have been under a series of extensions since late 2008. Reauthorization represents an opportunity to make important changes to the program. There are several possible provisions in the reauthorization being considered by both sides of Congress, many of which affect the NIH programs. We will continue to update you on the status of the reauthorization on our website.

NIH is committed to the continued success of all our programs, and we look forward to helping maximize the investments we are making in our nation’s small businesses as a way to support innovation and economic development.


  1. Hi… very interesting!

    It’s probably buried somewhere on your web site(s) but please help me out. What exactly constitutes a “small business”? I assume companies with < XXX employees &/or < $YYY in annual sales qualify? What are XXX & YYY?

    1. Briefly, not more than 500 employees. It must also be principally based in the US with at least 51% US ownership/voting stock. For more information on what is considered a small business, see our glossary or the applicable funding opportunity announcement.

      1. Read the [National Public Radio] interview of M. Block of J. Wolfers Wharton School on “Who are the job creators?” He describes as the “myth” that small businesses create so many jobs.
        His mistaken view will harm efforts to authorize the SBIR/STTR programs. Here is a short portion and web site.

        Melissa Block: We hear a lot about small businesses being the engine of job growth in country. How true is that?

        Justin Wolfers: Categorically false. Small businesses create a lot of jobs but they also destroy a lot of jobs.

        Melissa Block: How so?

        Justin Wolfers: Small businesses, firms that are just starting out, some succeed and a bunch of them fail. If we only count the success, which would be the wrong thing to do, then we say they create an enormous number of jobs. But you know how difficult it is to start a successful small business. I’m sure they’re doing a lot of hiring in total but they’re also doing a lot of firing as well.

        But this was the kicker:

        Justin Wolfers: This is when the rhetoric of small businesses I think really leads us astray. If you actually look at the data of what we mean by small businesses or what they actually are, they’re things like real estate agents or my hair dresser. They’ll lawyers or they’re doctors. You talk to these folks do they have any interest in innovating or bringing new products to market or any of the things we think of as being the engines of economic growth. The answer is no. My dry cleaner likes to take my clothes and give me them to me four days later. Most small businesses don’t have any ambitions of being the engines of economic growth or the engines of jobs.

        1. Even this fella must grasp how out-of-context this kind of thing can be positioned! The example used is quite telling – with all due respect to dry cleaners, this is an industry that could certainly benefit from improved, and much GREENER and less toxic technical approaches to the task. I am sure that someone in those businesses would love to not have their employees (or themselves) breathing the stuff they do! Maybe this could be figured out by someone other than a $50B/yr chemical company! Maybe a small business using SBIR money?

        2. Thanks for bringing this interview to our attention. Justin Wolfers is wildly mistaken… and the SBIR/STTR programs are both wonderful and essential for helping innovative small companies.

    1. We encourage you to contact the NIH SBIR program office at sbir@od.nih.gov with a short description of your technology or idea. They can direct you to the appropriate NIH institute for further discussion and advice.

  2. The NIH SBIR/STTR programs are fantastic! I say this not only as a grantee, reviewer, close University collaborator, and industrial researcher, but also as a taxpayer. The various analyses of return on investment for the money spent on SBIRs have uniformly identified this as a remarkably successful investment, and one that the US leads the world on. This is not bragging, this is FOR REAL. I have followed the puppet show for the past several years on the reauthorization processes, as a series of CR legislations, and it is awesome that something may finally get done to give these programs an actual lifetime. I am sure that the next few weeks will bring many twists and turns as various special interest groups get their final bits into the actual legislation (especially on the DoD side), and this will be very telling on who is contributing how much to what legislators. There have been some real heros (heroines) in bringing this legislation forward.
    As far as management of the NIH SBIR/STTR programs go, KEEP UP THE GREAT WORK! I have observed up close that the process for adjudicating worthy activities is professional, selective, and effective in managing a competitive approach to SBIR grants and contracts (even when some of my proposals have fallen by the wayside). It has been claimed that the criteria for successful proposals is too hard for many SBCs to compete with full-time University research faculty for quality of proposals, but I think this is actually a good thing, and has a darwinian logic that I can accept. It may cut down the number of successful proposals, but those that make it a damn good. PLEASE DON’T FIX IT! Sure improvements are great, but do not mess with the process that has led to a highly successful activity.

  3. First, NIH (and our citizenry) is to be commended for funding this very important program. If not for NIH SBIR, we would be unable to advance and translate our discoveries. But, if there is one drawback to the strategy in optimizing the NIH Small Business Programs it is in attracting grant application reviewers that have small business experience, espeically in biotech. Most of our SBIR applications are reviewed by one or more academic specialists that lack small business experience leaving us very unsure as to what to correct or address in the reality of the small business world (in our case, less than 10 employees) and in turn, to translatable products. This is not always bad because the ‘academic expertise’ is very helpful to the science being proposed, but many miss how important it is to trim ‘ancilliary’ investigative pathways to very factual (sometimes boring) experimental design to rapidly advance a concept to commercial development in the very brief 6 month period (Phase I). In my opinion, SBIR and STTR reviews teams would benefit from greater participation by small business owners (if asked to serve) in the review process.

  4. I submitted a proposal to the NIH SBIR in August 2010. As of August 2011, I had still not received a decision on it. Moreover, I found that submitting an SBIR proposal to NIH is approximately 3 times more complicated than submitting one, to say, DARPA (speaking from experience). As a former SES-4 in the DoD, I managed an SBIR program of over $60M per year for nearly 15 years, and the inefficient programmatics I’ve experienced from NIH would have been unacceptable to my agency and its contractors. Are you planning improvements and streamlining to the SBIR process in the NIH any time soon?

    1. Welcome to the club! Our grant was in the funding/no-funding limbo land for 14 months before they made a decision.

  5. I have a practical suggestion for improving the SBIR program effectiveness.

    I applied for an NIH SBIR grant a few years ago, with assistance from an experienced business leader employed by the SBDC.

    He thought it a good grant, and so did others.

    However, feedback from the grant evaluators was definitely *mixed*, to put it politely.

    For example, one evaluator was expecting that I have a greater history of publications. While on the surface that may seem OK, the problem is that if I publish anything about my research, the intellectual property is in the public domain which makes patents virtually worthless. Which in turn makes it virtually impossible to attract investors.

    In other words, publishing anything about my efforts is stupid beyond all recognition.

    So the bottom-line appears to be that grant evaluators have little or no practical, small business experience, and as such, lack the qualifications necessary to perform a reasonable grant evaluation.

    If I was a PhD on someone’s research staff, well then maybe publications are expected.

    But for any small business owner who has any experience in technology development it is a no-brainer to avoid publishing ANYTHING.

    For that reason, plus due to the large investment in time required for the grant process, I no longer participate.

    I sure hope the folks trying to overhaul the process actually have small business experience rather than a bunch of academic living in the ivory tower of government jobs or academic appointments. It would be, well, refreshing.

    Just some thoughts to ponder.

    1. I would agree. I too prepared a SBIR proposal and had a very similar experience. The process took time away from development and cost money that could be better spent in other areas. The comments received from reviewers appeared almost cliche stating we had no process or experience. A year later we have a working prototype that performs fantastic. We will be bootstrapping the process from here on out.

    2. I agree that the Panels NIH assembles to review SBIRs are predominantly (as in 90%+) academics. They have little or no experience about what it means to run a small business, including IP protection. On a most recent review, a reviewer
      marked mine with a weakness because the patents had not issued yet.
      Anyone who ever filed for a patent knows the US Patent Office takes 4 to 5 years to issue one. What is a small business to do – wait 5 years and then submit a proposal?? Clearly that reviewer had never applied for a patent.

  6. Can a small business apply to the SBIR program with its own technology or does it need to license a university technology to be elegible?

    1. Yes, a small business can use its own technology for the program. It can also license it from a university, both are valid. The eligibility of the small business for the program, though, is based on number of employees, ownership, and U.S. location (as listed in our solicitations) and is not related to who owns the technology.

  7. I have a same feeling and experience that the application process of NIH Small Business is too complex and not very efficient for Small Business Companies. They have good ideas, but don’t have any professional skill to apply, no assistance resource to use, no extra fund for legal and application consulting, which will kill many great ideas in slow motions. The ideas and biotech experience should be the most weights on the approval of funding, not publications, even not collaborators. Please let them try the ideas first, then collaboration will be the next, which doesn’t need to say.

    Can somebody there in NIH could give small business fund applicant a free guidance from beginning to end, I mean Free. We don’t have extra fund for application! The application of Small Business Fund should be different with the process of other Academic Funds, it should be sample, be guided, and Free, to make the purpose of “transferring the knowledge to product”, a reality.

  8. Of $10.4 billion ARRA Stimulus fund, NIH set aside only $5 million for SBIR program in form of RFA-OD-09-009 solicitation and 689 applications from small businesses were received to access this funding. However, this minimal funding was enough for fund only about 33 applications, and this minimal investment interrupted the development pipeline of America’s innovation. The National Institutes of Science diverted the remaining $255 millon of the mandated 2.5% funds from the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs and directly countered the goals of the Recovery Act to create high-paying jobs, spur innovation and boost America’s competitiveness.

    We submitted two SBIR grant applications to this RFA-OD-09-009 solicitation and both applications were regarded by the reviewers as very valuable ones and were both ranked above the average. Nevertheless, we did not received any funding because NIH allocated only very small amount of Recovery funds for SBIR program.

  9. 500 employees doesn’t seem very small, and doesn’t seem like a typical start-up size. It is very difficult for a small lab to commercialize its inventions via the SBIR route when it has to compete with companies with several hundred employees and dedicated grant proposal writers. Second, when a proposal is near the funding range and you work hard to improve it for resubmission, it probably should not end up in the “unscored” pile, as did mine. This just means that the first score had no validity, and thus may reflect a problem in how proposals are reviewed.

  10. I have also submited both SBIR applications and regular academic grant applications, none of which have been funded. I found that the SBIR applicatiosn were acutally more difficult to write than the acadmic applications, since there was an expectation that there would be a high degree of scientific novelty AND a business strategy. Academics do not need to include the business component.

    My experience is that the review boards do not consider the requirements for validation necessary for a commercial product. These are often lacking in novelty from a scientific point of view, but, nonetheless, resource demanding. A commercial product has to work the way it is supposed to in a reliable manner. Academic researchers do not have to conduct the same validation, which probably accounts for the low degree of replicability discussed in todays Wall Street Journal.

  11. As a consultant who helps companies write SBIR/STTRs and other types of proposals, I have helped companies raise about $70 million from the NIH and DoD over the past 3-4 years. I have seen a lot of successes from the funded companies. So, from my perspective, the SBIR/STTR program is a good thing and it is well run. On the other hand, most things can be improved.

    Based on my experience (~12 yrs with the SBIR/STTR program in almost every capacity), three key improvements could be made that would help selection of the best proposals. The first is better reviewer training and mentoring. About one third of the reviewers are not in tune with the needs of applied science. They simply do not understand what it is. There is almost always at least one such reviewer who reads every proposal. The experienced writer therefore writes the proposal to that audience as well. Still, that is not always enough. Some proposals simply cannot be put into a form that a diehard academic would understand. That is not good or bad; it is just a practical matter. To address this weakness in the review process, I would have the SROs be far more active in keeping the reviewers focused on the SBIR/STTR review criteria, as opposed to R01 review criteria. A big effort is made in this area already and a good job is being done; but from the large number of Summary Statements that I see, there is room for improvement still.

    Secondly, the need for about 2/3 of the work to be done at the company is out of step with the current business model for most start-up companies. Today, many start-ups outsource most of their work. They are virtual companies to some extent. This allows for fast and inexpensive testing of new ideas (i.e. innovation). Now there are transparent legal ways to get around this ratio; but it is a shell game that wastes a lot of time and causes some reviewers to score an application poorly. It is understandable that some reasonable fraction of the monies should be spent at the company. I would move that amount to about 1/3.

    Thirdly and most importantly…I leave it to last because it will never happen, but that is no reason to not bring it up….reviewers need to learn to take risks with proposals. Most who have worked with the NIH for any period of time know the agency as “a reimbursement organization.” In order to get funding, you have to first show that your study will succeed using preliminary data. Preliminary data is not an administrative requirement for the SBIR/STTR program; however, it is a practical requirement for the reviewers. Again, this can be improved by training reviewers and by active SROs.

    Based on my experience, all in all, I think the NIH SBIR program staff and CSR, in particular, are doing an excellent job in the SBIR/STTR program. The proposal and review process has improved considerably over the past 5 years. The hard working SROs and CSR as a whole deserve a lot of credit, as do the SBIR/STTR POs at the Institutes themselves. The above observations are just some ways that the process might be improved a little further; although there may be bigger fish to fry in that regard.

    1. I couldn’t agree more. The SBIR community cannot expect granting agencies to successfully recruit only reviewers knowledgeable in the industrial aspects of the program (there just aren’t that many reviewers). However, the community should expect each SRO to enforce the review criteria in the study sessions s/he is managing.

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