The Government’s Small Business Administration recently recognized 44 small U.S. companies for excellence in innovation, job creation, and value-added Federal Government R&D. The companies develop technologies ranging from nanoscale imaging systems used in materials and biomedical research, to payload and communications equipment for satellites. Each technology was developed using funding from the Small Business Innovative Research (SBIR) program.
The SBIR program distributes $2.5B per year in R&D grants across 11 Federal agencies, including $1.2B distributed by the Department of Defense. The grants are awarded in two phases: Phase 1 funding is about $100K and Phase 2 funding is up to $1M. Companies whose products have high transition potential are eligible for “Commercialization” funding, a program Arsenal Venture Partners manages for the U.S. Army.
The government prohibits funding to small businesses majority-owned by large venture capital firms. Instead, the government prefers companies having difficulty raising private funds, such as those with higher risk technologies or with capabilities only required by a government agency like the military.
Despite the restrictions, a few VC-back firms have been awarded SBIR contracts and have been immensely successful, including A123 Systems, who was recently inducted into the SBIR Hall of Fame.
