Winning SBIR grants

There’s a whole world of grants out there for climate startups. Along with the cash, these awards will help you forge partnerships, scale your impact, and boost your credibility - but navigating the application process can be overwhelming. 

In our new series, in partnership with Climate Finance Solutions, we’re doing a deep dive into the State and Federal Agencies that offer these transformative grants. For this second installment, we’ll outline how to find, apply, and win funding from the Small Business Innovation Research (SBIR) program from the US federal government.

What is SBIR?

The SBIR program provides non-dilutive funding to around 4,000 small businesses each year. It supports US-based small businesses to perform high-risk, high-reward research and development, with the end goal of commercializing impactful and innovative technologies. 

Eleven federal agencies offer SBIR grants and, while they share many similarities, funding amounts, program structure, and requirements vary by agency. The most relevant SBIR programs for climate tech companies (that also happen to have the largest awards) are offered by the National Science Foundation (NSF), Department of Energy (DOE), Department of Defense (DOD), and the Department of Agriculture (USDA). Other agencies like the Environmental Protection Agency (EPA), Department of Transportation (DOT), National Oceanographic and Atmospherica Administration (NOAA), and the National Aeronautics and Space Administration (NASA) still do often have SBIR programs and topics with relevance for climate tech. 

What types of grants are available under SBIR?

SBIR funding typically comes in two phases. In Phase I, you’ll prove your innovation is commercially and technically feasible. This phase lasts for 6-12 months and comes with funding worth $150k-300k, depending on the agency. In Phase II, you’ll move your innovation towards commercialization within a timeframe of 24 months and with funding up to $600k - 1.5M, again depending upon the agency. In almost all cases, you’ll need to have completed Phase I to be eligible for Phase II funding. 

After Phase II, some agencies follow up with a Phase III or Phase IIS, which comes with a larger award size. However, since you’re expected to commercialize after Phase II, it’s rare to be awarded this phase. 

Some agencies have started piloting more streamlined proposal and project processes that combine phases to varying degrees, such as NSF’s SBIR Fast Track and NASA’s SBIR Ignite programs.

Who’s eligible for SBIR grants?

SBIR grants are open to small businesses that are primarily (at least 51%) US-owned. There are also rules around what percentage of your business can be owned by venture capital firms, hedge funds, and Private equity; these rules will vary per agency, so you’ll need to check you meet their specific requirements. In general, you’ll need to read through the eligibility criteria carefully to avoid wasting time on opportunities you’ll never win. Small businesses must also conform to the SBA definition of a small business (i.e. typically companies with less than 500 employees and less than $10M in annual revenue).

How to find current opportunities 

Your primary resource will be the main SBIR website, but you can also check out the websites of the specific agency you’re interested in for information about their current and upcoming grants or go to Grants.gov

Writing a successful proposal

No matter the agency, the key word when it comes to SBIR is innovation. For Phase I, that means they’re looking for businesses whose research involves a high level of technical risk, and has the potential to create a novel solution to an urgent problem. You’ll need to find a way to balance this ambition with achievability, given you’re hoping to pull this off within the limits of a few hundred thousand dollars and 12 months of research. You’ll also need to convince them why the funding is necessary - that there’s no way your solution could exist without this opportunity.  This additionality component is a key element of any successful SBIR application. In Phase II, you must be laser focused on your pathway to commercialization, defining (and understanding) your target market, competition, and other important elements for the reviewers. In this phase, you must make significant progress from Phase I’s demonstration of technical feasibility to commercializing your innovation in the marketplace.

Common mistakes to watch out for 

You’ll need to make sure your project aligns with the SBIR program objectives as well as national strategic development goals. To help you know whether you’re checking these boxes and get confirmation that this award is right for you, reach out to the relevant SBIR Program Managers before you apply.

A typical mistake in writing an SBIR application is having research aims that aren’t well-developed and don’t have measurable outcomes. But you also need to have your eyes on the end goal of bringing a product to market, even as you’re writing your Phase I application. Make sure you’ve fully thought through your Phase II scope at this point, so you can show you’re intentionally laying the groundwork for the next phase.

You also need to understand the differences in the structures of the SBIR programs offered by the various agencies. Some, like NSF SBIR, have more or less open topic areas where you can propose any type of innovation in any industry vertical and technology category that fits with the other program requirements. Others, like DOE SBIR, have specific topic areas that you must select from and ensure that you are applying to the right one. The Program Managers can help you with topic/subtopic selection and understanding fit.

How SBIR evaluates grant applications 

After an initial screening to make sure you’ve met the basic eligibility and technical criteria, your SBIR application will undergo an agency and then a peer review process. Typically, an outside panel of three experts in your field will read and score your application, judging your project against criteria like the level of innovation, its technical and scientific merit, your team’s capabilities and qualifications, and the potential commercial impact.

Some SBIR agencies have a Project Proposal/Concept Paper stage (e.g. NSF), while others simply go straight to the Full Application (e.g. EPA) or have a four-sentence Letter of Intent stating your intention to apply (e.g. DOE). Make sure you understand the process and timelines before applying.

Typical timelines for a SBIR grant

For an SBIR Phase I, you’ll be notified of your award around six months after submitting your application, and ironing out the details of the contract could take another four weeks. Here, the SBIR program deviates from most federal grants, as some agencies (such as NSF) allow you to start spending the money in the interim between being notified and signing the contract. However, this is at your own risk - if something goes wrong and the contract is never signed, you won’t be reimbursed. Generally, the funding - at least for Phase I - is provided upfront as a lump sum, with 10% held in reserve until the end of the project.  For Phase II, funding is generally provided on a quarterly reimbursement basis, but sometimes can be more/less frequent.

Projects SBIR has funded in the past

SBIR programs have funded the development of technologies across a wide range of STEM disciplines, including climate tech and clean energy. To learn more about previous winners, check out the website of the agency you’re interested in applying to, as many have searchable databases of past awards. This may also be helpful in making sure that you are both staying within the agency’s areas of interest, while also differentiating yourself from previously-funded projects.

Keeping compliant with agency requirements 

You could face serious consequences if you break the terms of your award contract or the Code of Federal Regulations - so make sure you understand what’s expected of you. It’s also your responsibility to understand and follow the agency’s reporting requirements. 

To clear up any confusion or correct course if something’s going wrong, keep in close contact with your Project Manager. It’s better to overcommunicate than to let things slide, and if you need to change your scope or adjust your timelines, they’ll often be able to accommodate as long as you give them enough of a heads up.

The benefits of receiving a SBIR grant

As with any federal grant, receiving an SBIR award can significantly boost your credibility and make the next phase of running your business a far easier task. You’ll be well-positioned for follow-on federal funding, where programs often come with significantly more cash. It can also stand you in good stead for securing equity investment, as winning an SBIR will effectively de-risk your business in the eyes of an investor.

Looking to the future of SBIR grant programs

The SBIR solicitations are subject to change on an annual basis, so you can’t skip reading the entire document carefully, even if you’ve applied before. 

It’s also worth keeping an eye on new subprograms that are springing up in response to feedback that the SBIR process is too drawn out for startups who want to commercialize their innovations as quickly as possible. For instance, NSF is rolling out a SBIR Fast Track pilot program for companies to which it has previously awarded research funding. Here, businesses only need to submit a single application for both phases of the program, with total funding worth $2M. Similarly, NASA’s SBIR Ignite pilot program offers awards of $1M, with a more streamlined application than the standard SBIR program and an accelerated award schedule.

What to do if your grant application is unsuccessful

A rejection doesn’t mean you can’t successfully apply again with a second, improved proposal, but it’ll be impossible to do so without taking the agency’s feedback on board and addressing the weaknesses they’ve identified. Some agencies like NSF will provide written feedback and, if the reviews are generally positive, you can arrange to meet with your Program Managers to discuss the steps towards resubmitting your application. If you haven’t received feedback in writing you can request verbal feedback via a meeting or to view the reviewer feedback, again by contacting your Program Manager.

However, if the agency makes it clear your project isn’t a fit for the program, listen to them. As long as they didn’t say that your tech is not relevant for the agency, you can still resubmit to the same program in the future, as long as it is for a completely different project scope. Also, there are plenty of other major grants out there, many of which have much larger awards, which ultimately might suit your project better and give you a better ROI. To learn how to strategically analyze the funding landscape to find grants that will be a great fit for you––which you should do before submitting any grants––check out our previous Insight piece with Climate Finance Solutions.