You have an idea for a nifty new technology and you want money to develop it. You will need to persuade some person, company, foundation, bank, or agency to give you money. First, you will need to convince this “investor” that you really do have a “nifty” idea and you have the technical know-how to make it happen, but just as importantly, if not more, they want to know if anyone will actually pay money for it once it is developed. Does it have true potential to make money—not only will investors want a return of their initial investment, but in most cases, a compounded return.
If you are seeking an investment via an SBIR or STTR award, you might not think you need to explain its market potential –after all, you don’t have to “pay back” the award. Well, that’s true, you do not have to write a check and pay them back, but the American tax payer is investing in your idea. The government is taking a chance on your idea and your company; they want to know that you can take their investment and make a sustaining product that will enable your company to grow. If you grow, you create jobs, and job creation means growth in the economy.
Writing a well crafted commercialization plan can help you make your case.
Your commercialization plan needs to be detailed and well thought out. Avoid generalized statements like “there is a huge market” or “we can make lots of money”. Start by answering some basic questions: Is there a market pull—who’s asking for the technology or who has indicated that they actually NEED your technology? What is the size of the market? How will you manufacture, market, and sell it if you only have a 1-person company? Do you have a plan to get it from your laboratory into the hands of your customer? How will you price it in order to make profitable—if the cost to produce far exceeds the amount customers are willing to pay, how will you make a profit? How is your management team structured—has anyone brought a technology from inception to market? Not only do you need to answer these questions, you need to make sure you’ve done market research to support your claims with hard facts–do not make claims you cannot back.
For a more comprehensive list of concepts to include, see Elements of Your Commercialization Plan.
R =Research. Research is defined as “a diligent and systematic inquiry or investigation into a subject in order to discover or revise facts, theories, applications, etc”.
Since the focus of SBIR/STTR is funding for your research, you need to fully explain to the funding agency what that research will be. Yes, all parts of your proposal are important, but the meat of your proposal needs to be your Research Plan (also known as a Work Plan). This is what the agency is going to pay you to accomplish.
The plan needs to be a step-by-step outline of not only what you will do, but also how you will actually do it, who will do it, how the predicted results will move the overall idea forward, where it will be done, and when it will be accomplished–a timeline for completing the work. Every aspect of your research needs to be spelled out exactly; do not make the reviewer guess or assume! Time after time companies fail to realize how detailed it needs to be.
Writing out a clear plan also helps you think through your overall goals. Once you start detailing, you might discover you need to modify your strategy to actually meet your desired objectives, or you might need to scale back your research to complete it within budget and time-frame. Creating a detailed Research Plan will help your company–whether you receive the SBIR/STTR Award or not.
Over the last two years the NIH has implemented new guidelines and procedures to “enhance peer review”. For instance, reviewer comments and scores for each of 5 criteria are indicated on the summary sheet. The research proposal section has also been restructured, to more closely match the criteria by which the reviewers critique a proposal.
For those submitting SBIR/STTR applications to the NIH, April 5th is the first time the restructured proposal will be in effect. This is daunting for both first time and returning SBIR/STTR applicants.
The NIH has been inundated with questions and comments concerning these new processes. In an effort to address these questions they are holding a webinar (through GoToMeeting). This will be an opportunity for NIH staff to discuss the restructuring of the Research Plan, new page limits, new scoring, and other changes resulting from Enhancing Peer Review and to provide a forum for you to ask questions.
When: March 15, 2010 – 2:00 to 4:00 PM EST
REGISTRATION: https://www2.gotomeeting.com/register/735602218
(Note: the session is free, but you must register to participate)
The Department of Health and Human Services (DHHS) released its 2010 SBIR/STTR grants omnibus solicitations (PA-10-050 and PA-10-051). Those interested in funding from the NIH, CDC, FDA, & CFA should investigate submitting applications. General information and resources for submitting proposal applications can be found on the DHHS SBIR/STTR page.
Submission dates for 2010:
- Standard Receipt Dates: April 5, Aug 5, Dec 5
- AIDs and AIDS-Related Receipt Dates: May 7, September 7, January 7, 2010
As always, do NOT wait until the last minute and attempt to submit. NIH recommends companies begin the registration process AT LEAST 6 weeks before the deadline.
***NOTE*** Changes have been made to the submission of grant applications; these changes will be in effect for the above submission dates. If you have previously submitted applications and think you know the process, please play close attention to the modifications. Refer to Julie Collins’ January 6th article for more details.
SBIR stands for Small Business Innovation Research, so the “S”= “Small”, but what really is “small”? The SBA (Small Business Administration) defines a company as “small” if they have less than 500 employees, so technically, a company is qualified for SBIR if they have at least one employee or as many as 499 employees. Does that mean that companies of both sizes would be equally qualified? No. As with many facets of SBIR, it depends on the sponsoring agency and their needs/requirements.
All agencies are looking for successful SBIR companies. If you can demonstrate that you are realistically capable of doing all the work necessary to complete your Phase I work, then you stand a good chance. “Realistically capable”, means you have the education, experience, facilities, equipment, and time to complete the work. If your company does not have all these appropriate elements, then you need to find partners, subcontractors, or hire additional full-time/part-time employees to complete the work. Remember though, with SBIR, you may only subcontract up to 33% of the work.
Looking at first-time SBIR award recipients across all agencies, 70% of the companies have less than 25 employees with 41% having between 2-9 employees. In other words, small companies DO receive government awards! Agencies individually, though, vary, so know your agency and what it expects. Agencies, which tend to have more broad or researcher-initiated topics, tend to be more willing to fund the smaller start-up companies (as long as you can demonstrate you can successfully do the proposed work), rather than the agencies that utilize SBIR in their procurement process; these agencies not only evaluate the initial research, but evaluate how well the company will then develop, produce, and deliver the end-product.
If you are a company with less than 25 employees, don’t dismiss SBIR because you think you are too small—small companies are driving innovation in the marketplace. If you are a company with say 400 employees, don’t dismiss SBIR because you think it is only for startups—in this tight economy, you might be able to create a new product line which can sustain your company.
Bottom line: when small, think BIG with SBIR!
Did you know that if you are submitting an SBIR or STTR to the NIH in response to a PA (program announcement) that you can request your grant be reviewed by a specific study section? In fact it's encouraged.
NIH SBIR and STTR grants are reviewed by Special Emphasis panels coordinated by the Center for Scientific Review. To take a look at the current SBIR Special Emphasis panels go
here. Use the cover letter component to request the most appropriate study section and one or more appropriate funding Institutes or Centers.
This reduces the burden on NIH staff and affords you the best chance at determining your own fate.
You are preparing your SBIR/STTR proposal and have determined you will be partnering with another company or a research institute to complete some of the research. [NOTE: If you are preparing an STTR, you are required to subcontract with a non-profit research institute for 30-60% of the technical work. If you are preparing an SBIR, you can subcontract up to 33% of your work to another company, individual, or research institute (but not required).] Before you put a subcontractor in your proposal, ask yourself a few questions:
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What will be their level of involvement?
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What exactly will they bring to the table that you can’t do in house?
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Do they have the technical expertise to do the work you need done?
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In theory they might be perfect for the job, but do they have the time to complete the work you need done?
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If the work is to be done at their location, do they have the appropriate space, equipment, staff, etc. to carry out the work?
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What's their track record for other projects?
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Do they complete projects on time and on budget?
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Have you checked their references?
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Do you have an agreement (in writing) verifying their willingness to participate in the research study, along with a task list and their rate?
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Who will own the Intellectual Property?
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How will they track their time/measure their effort?
When you submit a proposal with a subcontract, the reviewing agency will evaluate all aspects of your proposal, including the capabilities and track record of your subcontractors. Don’t just pick a company out of the air; pick the BEST contractor: carefully evaluate them and what you need them to do.
You’ve spent time writing what you think is a pretty decent proposal and now you are ready to submit it…or so you think. Have you thought about how will you submit it? Read the solicitation and read it early (see The Basics: Reading, Writing, and Arithmetic (Part 1)). Each agency is different. Does the agency require a paper or electronic submission? If paper submission, did you allow time for the physical delivery of your proposal? Have you obtained all necessary data elements and completed any necessary electronic registration processes?
IMPORTANT: Electronic registration and obtaining basic data elements can take a few days, but it might take weeks (for example, NIH recommends new companies start no later than 6 weeks before proposals are due). There are several steps that MUST be completed prior to the actual registration. Each step is dependent on information generated from the previous step. Your hands are tied when waiting for each data element to be supplied/validated from its issuing organization. The length of time for the whole registration process depends on how many elements your company will need to obtain.
So how many elements will your company need? That depends on how established your company is, what you have already obtained by conducting other normal business, and if you have previously submitted a proposal. You might need to obtain some, all, or none of these basic data elements before you can submit a SBIR or STTR proposal:
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Does your company have a Tax ID Number (also known as an EIN)? New companies will need to obtain one from the IRS. Once assigned, the EIN will need to be validated (numbers are assigned immediately, but it can take 2-5 weeks to activate a new number).
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With activated EIN in hand, you can next apply for a Data Universal Numbering System (DUNs) Number from Dun and Bradstreet (D&B). This 9-digit number is a unique number for each physical location of your business. Once requested, a DUNs number is issued within 24-72 hours.
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With EIN and DUNs, you are now ready to register in Central Contractor Registration (CCR). CCR is the primary registrant database for the Federal Government. Registration will not only require your EIN and DUNs, it will also require banking Electronic Funds Transfer (EFT) Information for payment of invoices. Your CCR registration will be processed complete after 24-48 hours. Note: If you do not have a CAGE code(Commercial and Government Entity Code), necessary for any DOD submissions, CCR will assign one.
With these basic data elements in hand, you are now ready to register with the specific agency to which you will submit your proposal–read the agency's solicitation to know which system (grants.gov, FastLane.com, eRA Commons, dodsbir.net, EHB, etc). I will cover these specific registrations in future postings…
In talking with companies about SBIR funding and how it might fit their need to develop a new technology into a marketable product, we often hear “There is no competition for this product” and “No one has anything like this”. It is surprising then when they get back the debriefing from a federal agency on their rejected proposal to see comments from the scientific reviewers like “Proposal lacks innovation” and “This technology is crowded with companies attempting a similar research and development approach”.
One of the first things we suggest to companies is that they do their “homework”. They need to understand what solutions to the opportunity are already out in the market and what other research and development is going on in that area. Too often companies get too focused on their own technological approach that they do not keep up with what others are doing.
The most obvious shortcoming of not knowing what others are doing is that they might have already developed something similar or have a solution that can beat you out in the marketplace. If your answer is that you have done a patent search and found nothing, see our May 15th posting on Patents and Potential. You need to dig deeper.
Even if you are correct that you have a unique and superior technological approach to an opportunity, you still need to be able to discuss what others are doing in this field.
- First, it is expected that the Principal Investigator on a SBIR project is up on the latest developments in the area of technology that he/she is working in. If you don’t know what others are doing, you lose creditability.
- Second, if you cannot outline what others are doing, how can you claim that you have an innovative and superior solution?
At the NIH there are rules governing your allowable indirect cost rate. First time Phase I applicants are allowed to request an indirect cost rate of up to 40% of all direct costs. If you request an indirect cost rate of 25% or less, however, the rate will be granted without further justification. The NIH does not negotiate indirect costs on Phase I proposals. So if you do not have a previously negotiated rate with the federal government you are limited to 40% of all direct costs.
I always recommend first time Phase I applicants request between 25 and 30% in indirect costs. This will cover your most basic indirect costs such as rent and benefits.
SBIR and STTR Phase II NIH applicants are not limited in the amount of indirect costs they can request. Unless you want to provide extensive justification, however, you are only allowed to request an indirect cost rate of 25% or less. Many first time Phase II applicants have been caught up in months of indirect cost rate negotiations. These occur after the notice of grant award which could be 9 or 10 months after submission. In short you could be waiting for over a year to receive funds.
Well the NIH now allows first time applicants to request an indirect cost rate of up to 40% of all direct costs without further justification. This is good news for newbies. Many companies, however, have indirect cost rates much higher than 40% and may still need to request a higher rate. If you do not have a negotiated F&A rate with the federal government just be forewarned that the negotiation process can be lengthy.
To find out how to estimate your indirect cost rate contact SBIR GA!