December 4, 2023

Technology Development

Technology Development, TheBest You Can Get!

Good News for Small Businesses Seeking Government Funding for Research and Development: SBIR/STTR Programs Extended Through 2025

Under the SBIR and STTR Extension Act of 2022 (the Act), signed into law last month, the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs were extended through fiscal year 2025. These programs provide grants or contracts to small businesses to fund early-stage research and development. Over a dozen agencies participate in the SBIR or STTR programs, including the U.S. Department of Defense, the U.S. Department of Energy, and NASA. According to the Small Business Administration, more than 5,000 new awards, amounting to over $3 billion, are made each year under these programs. The complete list and link to each agency’s website (including current opportunities) can be found here.

The SBIR and STTR programs (referred to as “America’s Seed Fund”) are similar but distinct programs. The goal of the SBIR program is innovation: to stimulate technological innovation and increase private sector commercialization of innovations derived from federally funded research and development. The goal of the STTR program is technology transfer: to facilitate the transfer of technology developed by a research institution to an entrepreneurial small business concern. In order to receive a contract or grant under either program, in general, applicants must be majority owned and controlled by U.S. citizens or permanent legal residents, organized as a for-profit entity, and have fewer than 500 employees.

In addition to extending the program through 2025, the Act made significant changes to the SBIR/STTR programs that impact both participants and the agencies. These changes are consistent with the U.S. policy objective of protecting intellectual property and limiting foreign influence/interference in domestic science and technological advancements.

For example, the law requires agencies that participate in the SBIR/STTR program to implement due diligence programs to identify security risks presented by program participants. As part of the award review process, agencies must now specifically assess participant cybersecurity practices, employee composition, patents, foreign ownership, or financial ties to any “foreign country of concern.”1 The law further creates limitations on the award to businesses with ties to a “foreign country of concern.” A “tie” can stem from foreign ownership (individual or via venture capital investment), subsidiaries, joint ventures, or contracts. Also of significance, the Act gives agencies the authority to claw back SBIR/STTR award funds where it is later determined that a recipient poses a national security risk; for example, security risks resulting from a change in ownership.

The SBIR/STTR programs present great opportunities for small businesses to obtain non-dilutive funding to support research and development of interest to participating agencies. However, applicants and participants must be sure they understand these new requirements, in addition to existing requirements concerning eligibility, performance and compliance as a government contractor. If you have any questions about the SBIR/STTR programs, or about any other government contracts matters, please contact Mark Fitzgerald, Mark Bass, or Seth Cowell.

[1] This list of countries includes China, North Korea, Russia, Iran, or any other country determined to be a country of concern by the Secretary of State.