Requirements for SBIR Program Applicants

The firm must be a U.S. for-profit business of 500 or fewer employees.

The firm must be research-capable. During Phase I, a minimum of two-thirds (67%) of the effort must be performed by the proposing small firm. In Phase II, the proposing firm must perform a minimum of one-half of the work effort. In SBIR Phase I, the proposing firm can subcontract out up to one-third (33%) of the work.

The principal investigator (PI) must spend more than one-half of the time (at least 51%) employed by the proposing firm. This does not mean that the PI needs to spend at least 51% of his or her time on the SBIR project but typically means that the PI cannot work full-time for any other employer. Some agencies put greater restrictions on their definition of “primarily employed” as it pertains to the PI, so a careful reading of the agency’s solicitation and instructions is critical.

The small business should typically be proposing high risk/high payoff research or R&D, meaning it must be readily applicable to the current field of interest as a unique technological product or as a new application of technology.

As a general rule for most participating agencies, the firm must be independently owned and operated. Ownership of 51% must be by U.S. citizens and/or legal aliens or by venture capital funds that are themselves owned 51% by U.S. citizens and/or legal aliens.

Work must be performed in the United States. A provision within the National Defense Reauthorization Act for 2012 (FY12NDAA) made it possible for participating agencies to make SBIR awards to companies that are more than 50% owned by multiple venture capital operating companies, hedge funds, private equity firms, or any combination of these. Ownership must be by multiple venture capital firms, however—no single VCOC, private equity firm or hedge fund may own more than 50% of the concern. As of December 2013, only the National Institutes of Health (NIH) has elected to allow small businesses that are majority-owned by multiple venture capital operating companies to apply for SBIR grants. The NIH has restricted awards to these types of companies so that they cannot exceed more than 25% of the agency’s set-aside SBIR program funding.