Two federal programs that support innovations and small businesses are in danger of disappearing unless Congress acts by Sept. 30
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The Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) are two federal programs that were established 40 years ago to enable U.S. small-business innovation. The programs help academic and industry scientists commercialize their inventions by providing early-stage funding. The programs also aim to increase the participation of minorities and socially and economically disadvantaged individuals in entrepreneurship and to satisfy federal R&D needs through engaging small businesses.
Eleven federal agencies with extramural R&D budgets of $100 million or more including the DOD, DOE, NIH, NSF, and NASA participate in the SBIR program through only a 3.25% allocation of their research budgets. Five federal agencies with extramural R&D budgets of $1 billion or more allocate an additional 0.45% to STTR: a program for academic spinoff companies. Both programs need to be reauthorized by Congress every 5-6 years and on September 30th they face the possibility of cancellation.
In February the House of Representatives included a 5-year extension of the SBIR/STTR programs as part of the America COMPETES Act, a bill intended to maintain America’s technological advantage over its competitors. However, the Senate passed its own version termed the USICA (the United States Innovation and Competition Act), which did not include an SBIR/STTR extension. The two Houses must reach a compromise and reconcile the differences between these two bills. With time running short and few legislative options left before September 30th, the path to reauthorization is unclear.
In July, the Senate released a new compromise version of the two bills termed “CHIPS+” which focused on chip manufacturing and did not include SBIR/STTR reauthorization. There is still hope that a compromise on language for reauthorization will be reached, but with Congress going into its annual recess until mid-September, a lapse in the programs might be imminent.
These programs have helped grant the United States technological dominance by fueling major innovations in the defense, technology, and medical sectors, and according to the SBA, have resulted in 136,000 patents and 829 public companies. The programs have generated $22 in return for every federal dollar spent according to an assessment by the DOD. Another study by the National Academy of Sciences has shown a 50-60% commercialization rate for SBIR/STTR investments, which helps the economy and puts taxpayers’ dollars to great use. The programs fund life-saving high-risk high-reward proposals that traditional investors would not consider like the mRNA technology that has been used to create Pfizer and Moderna’s COVID-19 vaccines. The Washington Post has detailed how this idea was ahead of its time and considered too risky for investors that the founders struggled to find funding sources to continue their research.
This last example is the case for many small businesses that have revolutionary and pioneering technologies where investors need to see these technologies de-risked and with a clear path to commercialization before they would invest. The SBIR/STTR programs guarantee that these technologies would see the light and that small businesses would cross that “valley of death” successfully.
The DOD who is the largest provider of SBIR grants, $1.7 billion covering 3500 SBIR awards in 2021, has issued several letters pleading with congress to approve the extension of the SBIR/STTR programs. To quote Undersecretary of Defense for Acquisition and sustainment William LaPlante and Undersecretary for Research and Engineering Heidi Shyu, “Failure to reauthorize the programs will result in approximately 1,200 warfighter needs not being addressed through innovative research and technology development. In addition, any lapse could result in thousands of small businesses being forced to lay off workers.”
Another letter signed by 117 state and national organizations, universities, and trade associations urged Congress to extend the SBIR/STTR programs as soon as possible.
Federal agencies are already taking measures to deal with the situation in case the programs do not get re-authorized. For example, the DOD announced that they will not give out new awards or accept new proposals after September 30th, and the Navy already dropped out of a current solicitation. In absence of funding, small businesses will not complete time-sensitive R&D or reach the milestones needed to attract investors or generate sales revenue.
The timing cannot be worse given how much small businesses have already suffered the last couple of years due to the pandemic and given the current economic state that is making raising private funding very challenging. In addition, the cancellation of the SBIR/STTR programs will slow down those much-needed job creation activities.
Luckily for Indiana, Senator Todd Young serves on the Senate Committee on Small Business & Entrepreneurship; I encourage you to take a few moments to contact him and other members of Congress, asking them to support the reauthorization of these programs.
The SBIR/STTR programs have been an integral part of our economy and play a major role in ensuring we preserve our technological edge. We cannot let these programs disappear.
Dr. Sherine Abdelmawla is co-founder and Chief Executive Officer of Akanocure Pharmaceuticals, Inc.