sbir

ESS Inc., a company that closed a deal to go public earlier this month, was able to leverage public capital at its early stages to accelerate its success as a startup. Founded in 2011, the Wilsonville, Oregon, based company manufactures batteries for long-duration energy storage applications. In 2012, ESS Inc. received a Phase I Small Business Innovation Research (SBIR) award from ARPA-E, and additional grant support from the Oregon Nanoscience and Microtechnologies Institute (ONAMI), an SSTI member. ONAMI is an Oregon-based non-profit that provides grants, equity funding and business development guidance to startups engaged in research-based scientific innovation. It receives funding from Business Oregon, also an SSTI member.

An SSTI data analysis finds that in FY 2020, small businesses were less successful in obtaining Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding from the Department of Health and Human Services (HHS) — particularly from the National Institutes of Health (NIH) — than they were in FY 2019. NIH provides more funding to the SBIR/STTR program in total than the other participating civilian agency combined, and is also the top funder of the program within most states among the civilian agencies. As such — and with the approaching June 4 deadline for applications to the Federal And State Technology (FAST) Partnership Program — organizations dedicated to supporting technology startups and bolstering local innovation economies should consider how to better assist companies prepare and submit quality SBIR/STTR applications to NIH while designing outreach, education, technical assistance, mentorship, and other entrepreneurial support programs.

States often estimate their participation in the Small Business Innovation Research (SBIR) program by counting the number of awards made, total of award value, or (when available) the success rate of applications in their state. In this edition of SSTI Useful Stats, we attempt to go beyond these measures to estimate states’ untapped potential for capturing future SBIR awards. This creates a baseline proxy for tailoring and assessing a state’s outreach and support activities.

SBA efforts to reign in abuse of the Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) program continue, yet companies that seem to use SBIR awards as a primary revenue stream rather than a means to creating future revenue paths through new product and process innovations persist, based on SSTI’s review of award data. Known as “SBIR mills” many of these companies appear to be clustered geographically in specific metropolitan areas, many of which house major federal labs or research centers, the analysis of SBIR data reveals.  This suggests, from a policy perspective, that the federal agencies could be doing much more to curtail the mills and redirect awards into companies more consistently focused on turning innovation into products, profits and jobs.

The data reveals the extent of abuse by the small number of SBIR mills among all awardees is not insignificant: awards made to potential mills account for more than 21 percent of all awards made during the period from 2009 to 2019.

Consideration of a state’s trends in the distribution of SBIR awards by federal agency may help program leaders and policy makers optimize the design and performance for state and regional support of innovation-based startups. For instance, knowing which federal agencies provide the dominant share of awards in a state can inform a program’s marketing and outreach efforts, and, more importantly for the startups being assisted, it can guide recruiting the right mix of mentors and knowledge assets to a program’s technical assistance capabilities. The data also can inform efforts to attract investors and potential customers with similar alignment of interests with companies in a state’s SBIR portfolio. SSTI’s focus this week on the agency distribution of SBIR awards by state over the past decade reveals some interesting insights. Next week we will take a deeper dive into the data and examine awardee distribution trends at the regional level.

An exclusive SSTI analysis reveals that for the 10-year period from 2009 to 2018, two federal agencies were the top contributors to SBIR/STTR spending in every state and the District of Columbia. The Department of Defense (DoD) accounted for the greatest SBIR/STTR spending in 29 states while the Department of Health and Human Services (HHS) was the greatest funder in 22 states. This trend remains the same when including 2019 award data, although it is important to note that as of the writing of this article, DoD’s complete 2019 SBIR/STTR data was not available.

A recent report by the National Women’s Business Council (NWBC) and the Small Business Administration (SBA) found that participation rates in the Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) programs by women-owned small businesses (WOSB) has essentially remained flat since 2011. Although participation rates vary by awarding agency, the report highlights several barriers faced by women entrepreneurs. Despite the gloomy findings, the report features promising practices from entrepreneurial support organizations (ESOs) that may “right the ship” in supporting women entrepreneurs through the SBIR/STTR program.