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.

• 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.

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

If you are:

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.

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.

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.

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.

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.

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.

NOTE on AFWERX SBIR:

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.

• See FAR 15.2
• See FAR 1.102-2

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.

*https://fas.org/sgp/crs/misc/R44307.pdf

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

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.

Admin:

• 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.

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:

• AFWERX is the authority on the MOU.
• sbir@afwerx.af.mil

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.

• 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.

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

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

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.

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.

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

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:

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 VALLEYS OF DEATH

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: Layoff the people who worked on Phase I/II. 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

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.

How you acquire a solution will be determine by:

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