The Space Vehicle on Main Street -- Part Two
The Space Vehicle on Main Street -- Part Three
Federal grants are an overlooked option for bootstrapping startups
by Robert A. Adelson, Esquire
At first blush, space technology may not appear to be the arena where one would expect to find the smaller business. This is uncompromising high-tech stuff, the kind of work where we expect to find the Lockheed Martin Corporation, McDonald Douglas Corporation, and Computer Sciences Corporation (CSC). And, of course, we do!
But for every multi-million dollar contract awarded by the National Aeronautics and Space Administration (NASA) to a Rockwell International Corporation, NASA has hundreds of contracts with smaller businesses and entrepreneurs -- the names of many of these specialized companies not even being recognizable to most of us. Too many smaller companies are often unaware of the availability of these attractive contracts.
The US Congress established in 1982 a unique initiative within NASA -- the Small Business Innovation Research (SBIR) program -- to identify and foster increased opportunities for US-owned smaller businesses and entrepreneurs (companies with less than 500 employees) to participate in Federal research and development. The SBIR program encourages small firms owned by women or by socially and economically disadvantaged persons to participate in government research and development. SBIR provides seed capital to increase private sector commercialization of innovations resulting from Federal research and development. This program furnishes seed capital to accelerate private sector commercialization of innovations resulting from Federal research and development.
An important goal of the SBIR program has been to increase employment and improve US competitiveness. This program's specific objectives are:
- To stimulate US technological innovation,
- To utilize smaller businesses to meet Federal research and development needs,
- To foster and encourage participation by socially and economically disadvantaged persons in technological innovation, and
- To increase private-sector commercialization of innovations derived from Federal R&D.
In 1992, the Congress extended and strengthened the SBIR program and increased its emphasis on pursuing commercial applications of SBIR project results.
Eleven Federal agencies with research and development budgets exceeding $100.0 million have implemented SBIR programs. Funding is assured by allocating a percentage of each agency's external R&D budget for SBIR; in 1995, this percentage was two percent. Each agency administers its own individual program within guidelines established by the Small Business Administration (SBA). The SBA is responsible for establishing governing policy and for overall program monitoring, reporting, and analysis.
The structure of the SBIR program reflects the recognition by the Congress that the processes of innovation and bringing new products to the marketplace have a high degree of technical and financial risk. Therefore, this program has three phases:
- Phase I is the opportunity to establish the feasibility and technical merit of a proposed innovation. Selected competitively, Phase I contracts last for six months and currently may not exceed $70,000 at NASA.
- Phase II is the major R&D effort in SBIR. It continues the most promising of the Phase I projects based on scientific/ technical merit, conclusions of Phase I studies, expected value to NASA, capabilities of the company, and commercial potential. Phase II places greater emphasis on evidence of commercial potential than Phase I, particularly for non-government uses. Phase II contracts are usually for a period of 24 months and currently may not exceed $600,000 at NASA.
- Phase III is the process of completing the development of a product to make it commercially available. The financial resources needed must be obtained outside the funding set aside for SBIR. Private-sector investment in various forms is the usual vehicle for the Phase III process. A Federal agency may also fund Phase III activities for follow-on development or production of an innovation beyond Phase II for its own use.
This examination of the Small Business Innovation and Research (SBIR) program will be the focus of our subsequent column.
[Return to Main Index] [Return to Home Page]
227 Fuller Street
Revised: September 1, 2004 TAF
© Copyright 1996, 1999, 2003, 2004 Thomas A. Faulhaber / The Business Forum Online®, All Rights Reserved.