The U.S. Small Business Administration (SBA) has proposed updated commercialization performance standards for companies that win large numbers of Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awards. The proposal would apply to firms that received more than 25 Phase II awards across all participating agencies during the previous five completed fiscal years. To remain eligible for new Phase I or Direct-to-Phase-II awards, those firms would need to show that a minimum share of their total revenue comes from sources other than Phase I and Phase II SBIR/STTR funding. The threshold would be 33% non-SBIR/STTR revenue for the FY 2027 assessment and 50% beginning in FY 2028, measured over the previous three completed fiscal years. Phase III revenue and other government contracts would count as non-SBIR/STTR revenue. Firms that do not meet the benchmark would be ineligible to submit proposals for new Phase I or Direct-to-Phase-II awards for one year. SBA says the updated standards are scheduled to take effect Nov. 15, 2026, after review of public comments, which are due by October 31.
The proposal responds to a long-running concern that some high-volume SBIR/STTR recipients continue winning awards without showing enough progress toward commercialization or generating revenue outside the program. SBA is not requiring those firms to generate half of their revenue from private sector sales. Phase III awards, other federal contracts, commercial sales, and other non-SBIR/STTR revenue can count toward the benchmark. That distinction is important and necessary for defense and other federal technology contractors, whose path to commercialization often runs through government procurement rather than private markets.
Because the standard would apply only after a firm exceeds 25 Phase II awards in five years, it would affect a specialized group of experienced recipients rather than the typical startup or first-time applicant. A review of the SBA award data shows that only 27 firms received more than 25 Phase II awards during the most recent five-year period, 2021-2025. It is unknown how many (if any) of them reach the non-SBIR/STTR revenue threshold.