SBIR and STTR Grants: Fuelling Innovation in Nanotechnology for Investors
For early-stage companies developing groundbreaking nanotech solutions, securing funding can be a significant hurdle.
But in the US there are two key funding programmes which offer critical financial support for young companies seeking to translate innovate ideas into commercially viable products.
And they can prove key indicators to investors as to the all-important R&D progress of emerging good ideas.
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) operate under the same Small Business Administration (SBA) umbrella and are often referred to as America’s Seed Fund.
They have set agreed goals – which include “increasing private-sector commercialisation of innovation derived from federal research and development funding”, stimulating technological innovation and “foster and encourage participation in innovation and entrepreneurship by women and socially/economically disadvantaged individuals”.
The SBIR spends a minimum of USD3.2 billion a year – the STTR at least USD450 million.
The key requirements are the for-profit firm must be based in the US (and be at least 50% owned by individuals who are either citizens or permanent residents), have less than 500 employees and the focus of involment is on performing R&D as opposed to purchasing equipment, commercialising a technology that has already been developed, or one that has very low risk and only needs capital.
In other words, perfect platforms for the breakthroughs inherent in nanotech.
Both have three phases and are focused on developing innovative solutions to pressing problems that can then be commercialised as new products and services or as improvements.
Common to both, phase one is a period of innovation and research, where the scientific merit and commercial viability is studied. Phase two focuses on the innovation’s development, demonstration and delivery, while the final phase involves preparation for commercial roll-out and is funded externally.
As of October 2023, agencies may issue a phase one award up to USD306,872 and a phase two of up to USD2,045,816 without seeking SBA approval. Any award above those levels will require a waiver.
The key difference is that to obtain a STTR grant, the small company applying for the funding must partner with a non-profit research institution. Think university or federal research lab.
It will also require a partnership to be struck when it comes to the intellectual property (IP) rights with the non-profit partner.
Typically, SBIR will have 11 agencies co-operating – STTR five. As a consequence, any small business looking to go down the STTR route needs to be alert to their business plan appealing to the Department of Defense, Department of Energy, the Department of Health and Human Services, the National Aeronautics and Space Administration (NASA) or the National Science Foundation.
All of which are likely to appeal to those with a nanotech idea they wish to pursue – even if it may not at first be obvious.
In 2022, NASA, for example, launched its SBIR Ignite programme which distributed nearly USD2 million among 12 selected companies.
Explained Jason L Kessler, programme executive for the NASA SBIR/STTR scheme: “One of the reasons we launched the pilot SBIR Ignite programme was to appeal to companies that had goals separate from those of our main opportunities, those whose end customers may not be only NASA but are still creating technology that NASA cares about.
“It’s excellent that many of the selected companies can begin their work with the NASA SBIR/STTR programme through this opportunity.”
Added Maxwell Briggs, entrepreneurial engagement lead for NASA’s SBIR/STTR program: “By investing in these early-stage ideas, we want to help these companies reduce risk for their technologies, which we hope will help them on their journey in the NASA-relevant commercial market.”
Unlike venture capital funding, SBIR and STTR grants do not require equity ownership from the government, allowing businesses to retain full control.
Applicants should identify agencies that align with their interests, such as the National Science Foundation for fundamental research or the Department of Energy for clean energy applications.
Another key difference lies in the commercialisation focus. While both programs aim for practical applications, STTR projects often have a stronger emphasis on bridging the gap between basic research and market adoption, potentially leading to faster commercialisation.
For example, SBIR can be suitable for early-stage ventures with promising ideas, while STTR might be more relevant for companies transitioning from research prototypes to commercialisation.
Applicants will find the grants provide a layer of financial validation and derisk the initial development phase, reducing the inherent risk of early-stage R&D.
For future investors too, early investment in successful SBIR/STTR-funded companies can lead to significant returns.
Several success stories showcase the power of these programs in propelling nanotechnology ventures.
American Nano, a US company that received SBIR funding from the National Cancer Institute, developed a nanocarrier platform to deliver targeted cancer treatments with higher efficacy and reduced side effects.
C2N Diagnostics, a US company that received STTR funding from the National Institutes of Health, developed a rapid diagnostic test for infectious diseases using innovative nanofluidic chips.
SBIR and STTR grants play a crucial role in driving innovation in nanotechnology, offering valuable support to small businesses at a critical stage.
For investors seeking exposure to this rapidly evolving field, SBIR/STTR-funded companies present compelling opportunities.
Author:
Chris Britcher
Nano Magazine | The Breakthrough
