A Government Guide to SBIR

Everything you need to know about the Small Business Innovation Research (SBIR) Program

SBIR for Government (A summary)

What is SBIR: Small Business Innovative Research (SBIR) allows the federal government to fund the development of solutions to their needs.

Why SBIR may be interesting:

  • Through the SBIR program you can submit a need that you/ your program has, and small businesses around the country will propose solutions to it (almost always technology products).
  • Solution development funding comes from someone else’s budget.
  • There are over 50,000 existing SBIR solutions that you can buy quickly.

Historical issues with the program:

  • The long lag between when an SBIR is started and when a solution is delivered creates lots of problems:
    • The officer that started the SBIR may have rotated out.
    • Mission priorities may have shifted.
    • It is difficult to align funding to eventually buy the solution.
  • The company creating the solution is frequently developing “in the dark” (without much input from the end user) leading to solutions that don't actually solve the original need.
  • NOTE: Each of these problems can be mitigated through planning.

What you are committing to:

  • When you submit a need to the SBIR program you are committing to very little.
  • But if you do very little you probably won’t get the solution you’re hoping for

How to do SBIR “right”:

  • Know that the solution probably won’t be ready for ~ 3 years:
    • An exception is the AFWERX Dual-Use (AFX) program that can deliver solutions in 12 months.
  • You will need to help the company building the solution.
  • You need to plan and budget for the eventual purchase roughly when a winner to your SBIR is announced.

Why it's Worth Reading

Small Business Innovation Research (SBIR) is an extraordinary funding source that:

  • Can fund the development of bespoke solutions to your needs.
  • Doesn’t use any of your program/office’s money for the development of those solutions.
  • Has funded over 50,000 technology solutions that you can rapidly buy and use.

But, most government employees we talk to either haven’t heard of SBIR, or think that it is just for people in acquisitions.  But nothing could be further from the truth.  SBIR is there to help program managers and the people in the trenches doing the work get the tools that they need but can’t buy off the shelf.


So in this guide we try to provide a pragmatic perspective on how you can leverage SBIR to get innovative tools that will help you and your teams.

Download A Government Guide to SBIR

SBIR in Four Bullets and Whether You Should Read the Rest of This Guide

  • R&D for the little guy
    SBIR is R&D for everyone. The government is investing billions into curing cancer and going to Mars but if you just need a solution to make your communications network better or a little research into a disease SBIR may be right for you.
  • Spend other peoples’ money
    The funding for SBIRs come from each agency’s R&D budget.  As such funding solutions through SBIR is free to you.
  • Lots of “off the shelf solutions”
    SBIR has already funded over 50,000 technology solutions so before you spend the time and money to get your own SBIR solution rummage through the SBIR library HERE.
  • Rapid acquisitions
    SBIR funded technology can be sole-sourced making it much faster and easier than buying non-SBIR solutions.

Why SBIR Exists

The government needs lots of things, most of which are provided by commercial vendors, but when there is no “commercial off the shelf” solution the government can use SBIRs to fund the creation of a solution.

For interviews with previous winners about how SBIR has impacted them see HERE

  There’s an existing solution (buy it) There’s a solution that is “almost right” (Modify a near solution -AFWERX SBIR candidate) There is no existing solution (Make a solution -Traditional SBIR candidate)
Gov and industry have the same need

E.g. Trucks, computers, and IT services

(Buy from any vendor)

E.g.: Data analytics tools that need modifications to accommodate Gov data sets; or hardware that needs to be ruggedized to meet the DOD’s durability needs

(Fund modifications to a commercial solution)

E.g.: increasing energy density/stability in chemical batteries; an alternative to li-ion batteries for storage and transfer of power

(Fund the creation of a solution)

Gov has a unique need

E.g.: Weapons and intelligence services

(Buy from a defense contractor)

E.g. Communications & positioning technology that doesn’t require satellites; disabling drone swarms using electro-magnetic energy

(Fund the creation of a solution)

G. Nagesh Rao
Former Chief Technologist and Senior Policy Advisor of the SBA’s Office of Investment & Innovation (2013-2018) 

America's Seed Fund (SBIR/STTR) is more than accessing free non-dilutive R&D funding, it is an opportunity to de-risk cutting edge technologies, it’s validation for your startup, an opportunity to develop a federal revenue line and to join an ecosystem of innovative firms solving moonshot problems for the American public.

Whether you Should Read the Rest of This Guide

If you are:


A PM or contracting officer  looking for tech*


  • You have to deliver tools and support and stay in budget.
  • SBIR does all of those.

A frontline operator that needs a solution


  • If you need a brand new tool to do you job then  SBIR can be an outstanding way to fund its development.

A tech scout


  • The SBIR program has funded over 50K technology tool that you can bring to your customer.
  • Convincing startups to work with the government can be difficult, but offering them non-dilutive capital and an express lane for federal sales is very persuasive.

Just interested in innovation programs


  • SBIR is a pillar of government engagement with innovative companies.
  • The Dual-Use (AFX) SBIR has been incredibly successful at convincing new companies to work with government.

You are looking for foreign co. or large co. tech



  • SBIR is not open to companies with more than 500 people.
  • SBIR is only open to US companies.

Anyone else


  • Go read something better written and more interesting!

Is SBIR a Good Way to Find a Solution

Is SBIR a Good Option for You

There is a lot of energy around SBIR and it can deliver a bespoke solution to your exact need. But if you can’t answer YES to each of these questions it probably isn’t right for you

Are you looking for a solution to a need? It all begins when you need something, whether it comes:

  • Top down: A new mission requires a new solution.
  • Botton up: You get a need from the frontline.

Do you understand the need (root and surface)? To get the right solution you need to deeply understand the need:

  • Rigorous customer interviews and observations.
  • Clear understanding of the Who, How, What, and Why of the need.

Have you conducted a thorough review of the  commercial solution space?If you can find an existing commercial solution buying it will almost always be faster, better, and cheaper than building your own:

  • What do your commercial counterparts use.
  • Are there any solutions in Gartner, CrunchBase, etc.

If you can find a commercial product that is “almost” right, and you are in the Air Force the AFWERX Dual-Use (AFX) SBIR is an excellent option

Have you conducted a thorough review of the  government solution space? Government agencies share a lot of needs, learn from how other groups have solved it:

  • Who else has the same need.
  • How are they addressing it.
  • Have you looked for existing SBIR funded solutions.

Could someone develop a solution for $500K-1M? Developing solutions is expensive, and SBIRs are relatively small.  Could someone realistically deliver a solution in budget:

  • For the average SBIR funding for your agency see Page 13.

Are you willing to wait 2-3 years  for “the right” solution? The SBIR program and solution development takes time.  Can you wait?

  • If you need a solution faster consider using SBIR to get the “right” solution and put a bandaid solution in place till then.
  • For SBIR timelines for your agency see Page 14.

Are you willing to work with the team that is building the solution? If you’re using SBIR you’ve probably got an unusual need, so you will have to spend some real time with the team developing the solution.  See page 28.

Can you “allocate” $10M+ to buy the eventual solution? SBIR funds solution development but you will need to use your money to buy the eventual solution and if you start looking for cash when the solution is ready you’ll add another 6 months of delay.  So identify the cash to buy the solution when someone wins your SBIR.

Is there leadership and contracting buy-in to develop and buy a bespoke solution? Doing SBIR right takes your time and eventually the program’s money so make sure that leadership and contracting/ acquisitions are bought in from the start.

Does Your Agency’s SBIR Provide Enough Money to Develop a Solution

Average funding


Can SBIR Deliver a Solution in Time


The SBIR Process and Your Role in It

Is There a Previously Funded Solution?

Agencies share many needs and with roughly 50,000 solutions already funded there is a good chance that you can find interesting  existing solutions to search see HERE.


The Generic SBIR Process

SBIR topics are collected

The teams that administer the SBIR program develop their own topics and collect suggested topics from their Agency/ Service.

An SBIR topic is released

  • The agency release 1-200 SBIRs per cycle.
  • Depending on the agency there are 1-3 cycles a year.

Get proposals and select a winner

  • Interested companies propose solutions to one or more SBIR topics.
  • A review committee (generally including the office that proposed the SBIR topic) selects one-two winners per topic.

Phase I

  • Winners have 6-12 months and $150-250K to develop a proof of concept (POC).
  • Typically POCs don't fully meet the need but do demonstrate that the team has a high chance of being able to develop a full solution.

Phase II


  • The company has 12-24 months and $500K-1.5M to develop a prototype of their solution.
  • Typically prototypes address the need but may be difficult to produce at scale.

Phase III

Production and sales to government at scale.

What You Should Do During The Generic SBIR Process

Submit a topic: Once you decide that you can’t find a solution in the market and that you’re willing to be part of a 2-3 year development process find the team that administers the SBIR program and send them a description of your need (see P 46/47).

Work with the SBIR team  shape the topic: Work with the team that administers SBIR in your agency to improve your articulation of your need.

Answer questions during the proposal process: Once the SBIR topic has been published companies may send questions to the SBIR team about it which are then forwarded to you.  Send answers to the SBIR team.

NOTE: If a company engages you directly don't answer them and instead direct them to the SBIR team (see P24)

Work with the Phase I winner(s): Once a winner has been selected you can and should engage with the winner directly.  For more details on the typical support they will need see page 28.

Start identifying budget and engaging contracting: You will need money to buy the eventual solution so start identifying budget and working with contracting around the time a winner is announced.  For more details see page 26/36.

Work with the Phase II winner(s): Much like in Phase I you should be ready to support solution development in Phase II.

Finalize budget and contracting: Purchasing SBIR funded technologies is easier than a typical acquisition but it still requires money and the contracting team.  Begin engaging them during the Phase II so that you are ready to buy as soon as the solution is complete.  For more detail see pages 26/36.

Support the acquisitions: Even with good planning there are inevitably small issues that come up during the acquisitions process.  Be ready to convene stakeholders and answer questions so that the procurement goes quickly and smoothly.


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The Dual-Use (AFX) SBIR Process 
(Air Force Only)

An SBIR topic is released

Dual-Use solicitations are typically released with the traditional SBIRs.

Get proposals and select a winner

  • Companies submit proposals discussing how they would address an Air Force need (the need can be hypothetical).
  • Companies “ID” their own need but have to provide evidence that the need is meaningful and real.
  • Companies show that they have an existing solution that addresses a similar commercial need.
  • A review committee selects ~350 proposals.

Phase I

Winners have 3-4 months and ~$50K to find an Air Force customer with the need they identified and get a letter of support from that customer validating the need and solution (at least conceptually).  See P 29.

Phase II


The company has 12 months and ~$750K to evolve their existing technology to meet the specifics of the Air Force’s need.*

Phase III

Production and sales to government at scale.


* The amount and duration is evolving so check with the AFWERX team

What You Should Do During an Air Force Dual-Use (aka AFWERX) SBIR

Submit a Focus area: In Dual-Use companies identify their own need however there is usually a list of “focus areas” that alert interested companies to needs in the Air Force.  Make sure your need is on this list.

Create awareness: Typically the only companies that read SBIR listings are existing government contractors, so if you want a fresh solution from a fresh company you’ll have to help get the word out.  For more detail see Page 27.

Support proposal process: While fresh companies have fresh solutions they generally get scared off by the SBIR application.  While you can not help them directly you can refer them to external resources.  See our Service Provider’s Guide.

Work with the Phase I winner(s) on their MOU: Phase I focuses on validating that one or more USAF end users are interested and capturing that interest in an MOU.  For more detail see page 29.

Start identifying budget and engaging contracting: You will need money to buy the eventual solution so start identifying budget and working with contracting around the time a winner is announced.  For more details see page 26/36.

Work with the Phase II winner(s): Phase II “customers” are required to provide a Technical Point of Contact (TPOC) to participate in Phase II development and validate milestones.

Finalize budget and contracting: Purchasing SBIR funded technologies is easier than a typical acquisition but it still requires money and the contracting team.  Begin engaging them during the Phase II so that you are ready to buy as soon as the solution is complete.  For more detail see chapter 26/36.

Support the acquisitions: Even with good planning there are inevitably small issues that come up during the acquisitions process.  Be ready to convene stakeholders and answer questions so that the procurement goes quickly and smoothly.

Discussion of Specific Steps in the SBIR Process

Thoughts on Writing Good Topics

If you write a high quality SBIR topic the chances that you will get a high quality solution are much higher

For our analysis of current hot topics see HERE

For our analysis of topic trends and predicting them see HERE


Outcomes oriented:

  • If you want truly novel and exciting solutions then just explain what outcome you are trying to achieve and let American ingenuity do the rest.
  • If you include lots of constraints and requirements about “how” to achieve the outcome you may cut off interesting solutions that you wouldn’t have thought of.

Explain the use case:

  • The government uses things in ways that commercial customers never would.
  • If a company doesn’t do government work already it can be difficult to learn about how a piece of equipment will be used.
  • So describe how you will use the solution and what the need looks like in your operational environment.

Identify constraints:

  • Let people know if it has be used in unique circumstances:
    • Deployable on a secure system.
    • If it has to operate in space, or in sub-zero environments.
  • It may be obvious to you but if it’s a requirement then let people know.
Michael Kunkler
CEO NewCourse Strategies

To leverage the $140b/year in private technology investment, and maintain U.S. national security technological superiority over global competitors, the USG will need to empathize with the small business (SBA) world.  Unlike traditional USG vendors, SBAs don't have Fed-focused legal, contracts, and lobbying teams to ensure 100% compliance with thousands of pages of FAR and IT Requirements (or have them re-written).  Federal SBIR endusers and contracts officers need to accommodate and empathize with a lesser-sophisticated SBA-base to keep the U.S. at the top of the tech food chain.  Make instructions more "plain language" (ask your grandmother to interpret them!); communicate in a business-like manner (i.e. respond in <48 hours); and when there are problems, seek to remedy rather than disqualify.  Successfully engaging the domestic SBA base is a win for national security, a win for the taxpayer, and a win for the economy.

Answering Questions and Talking to Industry

Many government employees worry about talking to contractors, but if you want to get a high quality solution you’ll need to.  So follow these rules:

If the RFP has  not yet been published: If no RFP or other written solicitation has been published you generally can talk to any company you want to:

  1. Generally if you are receiving information and not giving it you are safe.
  2. If someone wants feedback on their product you can give it.  But keep in mind that you should give feedback on making their product better, not making their product more likely to win an SBIR.
  3. Don’t give them details about an upcoming solicitation.

If the topic is in pre-release (DOD only): During pre-release interested companies can ask questions about the need you have and the solution they are suggesting:

  • Questions should come to you through the SBIR office.
  • If a company reaches out to you directly refer them to the SBIR office.
  • Send your response to the SBIR office not the company.

Otherwise don't talk about your need, solutions, or anything related to this process during pre-release.

If there is a open solicitation (RFP)  for your need: This is simple Don't TALK TO ANY COMPANIES ABOUT THIS SBIR.  Don’t talk about the need, solutions, the process, anything.  If someone asks you tell them you’ll get back to them after an award is made and refer them to the SBIR office.

Once the SBIR has been awarded:

  • You can now go back to talking to companies like you could before the RFP was released. 
  • But don’t answer questions about the evaluation process or the winner.  Let the SBIR office handle process issues.


Because companies identify their own needs you can engage with them more freely (e.g. you can provide letters of support when the RFP is out).

If you’re unsure about how to answer a question, ask legal/ethics.

Prep Budgeting and Contracting So You Can Buy as Soon as Possible

To ensure there is money ready when the solution is ready you should start engaging in the budgeting process roughly when a Phase I winner is selected.


FY 21 Agency budget process

SBIR timeline


What you can do


Sept 2018


Phase I winners selected/awarded


Engage your leadership about your budget request


Dec 2018


Winner performs Phase I



Mar 2019


Sub-agencies (commands) and offices make their FY 21 budget


Request FY 21 money to buy the solution


Jun 2019

Agencies develop their FY 21 budgets



Sep 2019

President and OMB review FY 21 budgets from agencies

Phase II selection and winners begin


Check if your budget request was included

Dec 2019

Feb 1: President sends budget request to congress



Mar 2020

Congress reviews/ negotiates the budget



Jun 2020

Congress passes a budget



Sep 2020

FY 21 starts

Solution is ready and can be purchased

Purchase SBIR solution with dedicated (budgeted) money


If You Want Innovative Solutions You Need to Reach Innovative Companies


How to Reach Innovative Solutions Providers

If you want new solutions from new companies you’ll have to do some outreach.

Commercial Resources
  • Capital Factory
  • TechStars
  • Y Combinator
  • 500 Startups
  • For a non- comprehensive list see HERE
Venture Capital** (VCs)
  • Andreessen Horowitz
  • Google Ventures
  • For a non- comprehensive list see HERE
Databases of Companies
Government resources
  • Army Futures Command
  • 75th Innovation Command
Air Force
  • Air Force Ventures


  • DIU
  • NSIN


For a Startup's Perspective on SBIR

Startups guide to SBIR (Aug 27).001


Practical perspectives and analysis for Startups on the SBIR program. Including: 

  • Funding levels
  • Chances of winning
  • How to layer SBIR funding into a business plan
  • A low effort approach to finding SBIRs

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Helping Winners

Once a winner is selected, especially a winner than has not worked with the government much, you can do a lot to help them.In turn this will help you get the best solution possible.


  • Access to your facilities (e.g. CAC cards).
  • Access to a government lap top if needed.
  • Government email accounts.

Access to users: Help identify end users and schedule time with them.

Access to data:

  • Identify data sets that are useful.
  • Navigate access to that data.

Access to leadership:

  • Identify stakeholders that will have a voice in an eventual purchase.
  • Help schedule demos with leadership.

Access to contracting: Once Phase II starts you should have quarterly check-ins between you, the company, and contracting to plan the eventual purchase.

G. Nagesh Rao
(Former Chief Technologist and Senior Policy Advisor for the US Small Business Administration's Office of Investment and Innovation 2013-2018)

SBIR Phase III objectives for small businesses is to pursue commercialization of technologies resulting from Phase I/II R/R&D activities and easily address the President’s Management Agenda (PMA) Cross Agency Priority (CAP) goal to improve the transfer of federally-funded technology from the laboratory to the marketplace. Furthermore an ability for small businesses to diversify and generate a revenue stream from government contracting endeavors."

Understanding and Filling out the Dual-Use (AFX) Memorandum of Understanding (MOU)

What is the MOU: The MOU is a form letter that a command fills out which validates:

  • That they are interested in the company’s proposed solution.
  • That they will help (non-financially) the company develop any additional functionality needed.
  • That they will help with solution testing and end user engagement.

Why is it important:

  • One of the strengths of the Dual-Use SBIR is that the need is not specified which creates tremendous flexibility for the Air Force and the companies that apply.
  • One of the weaknesses of the Dual-Use SBIR is that the proposed customer may not actually like the solution or care about the need that much.
  • To address this weakness companies spend their Phase I looking for potential customers and if found, getting MOUs from them.
  • A signed MOU is a prerequisite for getting to Phase II.

What am I committing  to:

  • Not much.
  • At its core you are committing to help the company build their solution so:
    • Helping with their admin.
    • Accessing to end users.
    • Giving feedback on their solution.
  • What you are NOT committing to:
    • Buying their product.

Who needs to sign it:

  • Basically everyone needed for customer research and product development.  So usually:
    • The end users (technically this is the only needed signature).
    • The commander.
    • Data owners.
    • Testing and evaluation.
    • Budget, contracting, and legal.
  • If you are serious about getting the MOU signed in time you will want to assign a company grade officer to project manage the process.

Where can I get more info:

Purchasing SBIR Funded Solutions

Buying Solutions With and Without an SBIR

Buying SBIR funded solutions is much faster than typical acquisitions because you don't have to compete the RFP (you can “sole source” the solution) and because you don't have to write up a full RFP.

Buying without an SBIR


Buying with an SBIR


Write a description (the RFP) of:

  • What you want to purchase.
  • What standards need to be met.
  • How to propose a solution.
  • How the acquisition will be run.
  • Agree on a price and what will be purchased.
  • Find the budget to pay.
  • Publish the RFP.
  • Give people time to respond.
  • Review the proposals.
  • Select a winner.
  • Write up a contract.
  • Find the budget to pay.
  • Award a contract.
  • Award a contract


For more see:



Recommended Contract Vehicles

  • While “sole sourcing” makes the acquisitions process much faster you still need to create a contact between the government and the company.
  • You can use any contractual mechanic that you like.
  • We strongly recommend using an “other transaction” contract vehicle.

Where to Get the Money

Ideally you requested money during Phase I, but even if you didn’t there are a lot of places to get money.

Allocated budget:

  • As discussed in the Chapter 2 and 3 the “correct” way to get SBIR funding is to request it during the budgeting process.
  • Of course that was two years ago so that ship may have sailed.

End of year funding:

  • At the end of the fiscal year there tends to be a lot of extra federal money looking for a home.
  • End of year contracts are generally issued in late September so start talking to your contracting office in June or July to let them know you are looking for money.

Other programs:

  • Because budgets are created two years in advance they frequently don't reflect operational reality by the time the fiscal year actually shows up.
  • As such, programs frequently have unused budget.
  • Find a program that would get some benefit from the technology that you want to buy and see if they will give you budget.

The color of money:

  • When congress authorizes agency budget the dollars are assigned to different uses:
    • Operations and Maintenance (O&M): Money to “do the work.”
    • Research and Development (R&D): Money to develop new tools.
  • You may have additional flexibility in which types of money you can can use to buy SBIR funded tech.
  • So even if your program is out of one kind of money see if other types are available.*

* Budgeting is complex so we recommend speaking with your contracting team, but be sure to point out that there is more flexibility than with conventional contracts


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A Guide to Start-ups and How They Are Different From Traditional Government Contractors

The Characteristics of a Startup

Start-ups tend to have innovative ideas and can generate solutions quickly.However they tend to be resource constrained which can make them challenging to work with.

They are doing something  new:

  • Almost by definition a startup is building a product that does something new.
  • Which means they tend to have innovative ideas.
  • It also means that they have no playbook to follow so live in constant uncertainty.
  • Because of this uncertainty they are constantly:
    • Making hypotheses about what it will take to be successful.
    • Testing those hypotheses.
    • Shifting away (pivoting) from hypotheses that fail.
    • Doubling down on hypotheses that prove true.
  • All the testing and pivoting can make start-ups seem chaotic.

They are resource constrained:

  • Every startup we know dreams big.
  • Every startup we know has one tenth of the budget and staff that they need.
  • While this scarcity drives incredible stress it also creates ruthless efficiency and the ability to develop solutions on a shoestring.

Their “Holy grail” is product market fit (PMF):

  • The goal of every startup is to create something people will pay for and that means:
    • Creating the right product (features, functions, etc).
    • Creating the right pricing model.
    • Creating the right marketing and sales model.
  • If a startup finds PMF they can get lucrative investments.
  • If they can’t they pivot until they do, or go bust.

For a deeper dive on SBIR and startups see HERE

Comparison of Startups to Other Vendors

The choice to whether to work with a startup or a traditional government contractor comes down to whether innovation or customer knowledge is more important to delivering a solution.

The most important factor for success

Who can deliver

Commercially focused Startup:

  • These companies have fresh “commercial” ideas.
  • They tend to be good at doing a lot with a little.
  • They tend to work iteratively which can be challenging for government work programs that are more linear.
  • They are resource constrained so may go out of business.
  • Government is a secondary or tertiary customer, meaning you may not be their priority.


Innovation teams within established government contractors:

  • Many large contractors have set up “innovation teams” composed of high performing internal personnel and people hired from startups.
  • They tend to have newer ideas.
  • They are very well resourced.
  • They are part of large organizations so tend to move slower.
  • They tend to understand government use cases and culture more.


Established government contractors:

  • These companies live government so understand your mission and in fact likely worked for your agency before starting a business.
  • They generally have other government contracts making them reliable.
  • They tend to move at the pace and expense of government.
  • Because they are designed to service the government their ideas tend to reflect established practices.


Start-up Tech Development

Every start-up moves at their own pace, but the amount of money they have received from investors is a reasonably good benchmark for how developed their solution is.

Funding Round

Funding Amount

Tech development

Boot strapping


The company likely has no functioning solution and is just learning about their customers.

Friends and family

$10-50K The company likely still has no functioning solution and is using mock-ups and other simulations of their proposed tech to have deeper customer discussions.
Pre-seed $50-200K The company likely has a proof of concept (POC) that allows them to test unproven technical issues in their solution.
Seed $500K-1.5M The company likely has a working solution (minimum viable product), but that solution has an extremely limited feature set.
Series A $5M+ At  this point the company generally has a mature product but:
  • They are still adding features and functions.
  • It may not be ready for production/deployment at scale.
Series B $10M+ At this point the company has a fully mature product that is ready to be sold at scale.
Series C ? The product is mature and may be evolving to meet the needs of new customers and industries.

For More on an Investor's Perspective on SBIR

Investors guide to SBIR.001-2

Our Investor's Guide to SBIR provides practical perspective on:

  • Whether portfolio companies are a good fit for SBIR
  • SBIR impacts on returns
  • Investment risks associated with SBIR and how to overcome them

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Start-up Sales Development

There are two critical dimensions to start-up maturity, the maturity of their solution, and the maturity of their sales capability

Funding Round

Typical Revenue

Sales development

Boot strapping


The company is focusing on understanding the customer:
  • Their need.
  • How much they will pay.
  • How many of them there are.

Friends and family

$0 The company is collecting names and contact information for their customers.
Pre-seed ~$100s/mo The company may be charging a few “pilot” customers but there is no meaningful revenue.
Seed ~$1Ks/Mo The company has a repeatable process to get small customers.
Series A ~$10Ks/Mo The company has a repeatable process to get mid-sized customers.
Series B ~$100Ks/Mo The company has a repeatable process to get large-sized customers (enterprise sales).
Series C ? The company is selling and scaling in a way that indicates that they will be a market leader.

SBIR Funded Products Can Struggle With Sales

While commercial and SBIR funding amounts are relatively similar, commercial funding is based on the company’s technical and sales maturity, while SBIR is only based on technical maturity, until it’s too late

Commercial funding:

SBIR funding:

Confidence That You Will Buy, Speed and Quality

Most SBIR programs have significant gaps in funding.  If a company believes that you are going to purchase the eventual solution they may be willing to take on risk and invest through the gaps.  If they are unsure of an eventual sale they won’t leading to delays and quality issues.

Hypothetical cash in the bank



The gaps:

  • There is generally a 9-12 month gap between running out of Phase I money and Phase II money arriving.
  • At least a six month gap between completing Phase II and a sale (Phase III).
  • For more on Phase III see HERE

To manage these gaps most small businesses:

  1. Layoff the people who worked on Phase I/II.
  2. Hire new people If they win a Phase II/ make a sale.

Impact on your solution: These layoffs lead to devastating knowledge loss and impact:

  • Speed (time learning what the old team did).
  • Quality (bugs because the new team can’t figure out what the old team did).

How to avoid this: The only way to avoid this is if someone makes an investment to keep the team together.  Which is usually:

  • The company’s leadership.
  • An investor.

The only way the company or an investor will risk their cash is if there is a STRONG indication that the government will make a major purchase at the end.

For more on SBIR and investors see HERE

What this means for you:

If you want a great product on time try to help the company bridge these valleys of death through other contracts or strong assurance of an eventual purchase.

* This graphic was originally generated by the SBA

More SBIR and Government Market Resources

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Our resources section has everything you need to:

  • Understand the SBIR program
  • Explore the Government Contracting market
  • Get help registering your company
  • Master key GovCon topics

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Appendix and References

If SBIR Was a VC They’d Be One of the Biggest Investors in the World

Submitting a Need/ Focus Area

Each agency’s SBIR program is administered differently with their own unique submission requirements. So we recommend reaching out directly so you can learn what you will need to do.

Agency SBIR submittal
Air Force


Air Force (Dual Use)




Def. Advanced Research Projects Agency


Def. Health Program


Def. Logistics Agency


Def. Threat Reduction Agency


Missile Defense Agency


National Geospatial-Intelligence Agency




Office for Chem and Bio Defense


Office of the Sec. Def.


Special Operations Command


Agency SBIR submittal


Commerce: NIST


Commerce: NOAA








Homeland Security











Other Ways to Get a Solution

How you acquire a solution will be determine by:

  • How quickly you need it.
  • Whether you make or buy.
  • How much it will cost.

A High Level Overview of How Acquisitions Delivers Solutions to Your Needs

A High Level Overview of How SBIR Delivers Solutions to Your Needs



SBIR: Small Business Innovation Research (SBIR) A program that funds corporate R&D and product development that the government is interested in

STTR: Sister program to SBIR that allows companies to partner with universities and other public R&D orgs for their product development.  For simplicity if we say SBIR assume we are including STTR unless specifically noted

Agency: There are 11 government agencies (e.g. Dept of Defense, the Environmental Protection Agency, etc) that participate in SBIR

R&D team: The teams within each agency responsible for buying, funding, or developing new solutions to their agency’s needs

Phase I: During Phase I SBIR funded companies have to develop and deliver a proof of concept solution to the need in the SBIR

Phase II: During Phase II SBIR funded companies have to develop and deliver a prototype solution to the need in the SBIR

Phase III: During Phase III SBIR funded companies sell their solution to the government

Traditional SBIR: An SBIR where the government defines a need and may define how acceptable solution will meet that need

Dual-Use Technology: Technologies that have a commercial and government (typically Defense) applications

Dual-use (AFX) SBIR: An SBIR where the applicant identifies a need that can be addressed through their dual Use technology. Also referred to as the AFWERX or Open Topic SBIR

NSF SBIR: The NSF SBIR funds technologies that are much more technically risky than other agencies (bleeding edge ideas that may not work)

Topic: SBIRs are generally released in clusters, a topic is a single need statement within that cluster of SBIRs

Aligned Topic: When the need/work to be done under an SBIR topic is highly aligned to your existing or planned commercial product

Principal Investigator: The person responsible for delivering the solution under an SBIR contract


Sources of data for charts: All data used to produce the charts was downloaded from:


The Timeline chart: The timeline data required significant cleaning reducing the n value

The discounted value of a proposal chart: We used the formula: (% of winning Phase I X (Value of Phase I + (% of winning Phase II X (Value of Phase II))))

Non-data driven analysis and recommendations: These are entirely the product of our experience directly participating in and helping companies thinking through, plan and execute in the SBIR program

An Overview of STTR

What it is:

  • Sister program to SBIR
  • Same intent: Fund small business development of solutions to government needs
  • A small business is still the applicant
  • Key difference is that that small business has to be partnered with a non-profit Research Institute (RI), which is general a university of Federal lab
  • The RI can do up to 60% of the work (under SBIR subcontractors and partners are limited to 30-50%

Unless STTR is mandated, or an RI has incredible leverage, choose SBIR:

STTR mandated: Sometimes the topics mandates using an STTR.  So, if you want to go after the topic you better find an RI

RI leverage: Talent and resources: If an RI has truly unique talent and infrastructure that you couldn’t afford AND That talent and infrastructure makes if much more likely that you will win and deliver the solution

RI leverage: They have the IP: Sometimes a university has incredible IP that is critical to a solution AND That IP would be extremely time consuming/expensive to create on your won

Why we don’t like STTR

Expensive: RIs tend to have massive overhead costs that they pass on to you

Future investors: Investors are VERY skittish about investing if they think someone else has claims on your IP (e.g. you developed it in partnership with an RI)

You can do it under an SBIR: Having an RI on your proposal lends lots of credibility and can absolutely help you win, but you can get that credibility by doing an SBIR and contracting out 40% of the work to them