The goal of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer Research (STTR) legislation is to support small businesses to develop high-risk/high-reward technological innovations into commercially viable products. A credible commercialization strategy is required as part of the proposal. SBIR/STTR funding is not meant to be the sole source of company funding. The small business must meet legislatively proscribed eligibility requirements. The program is not meant to fund “virtual companies.” It is not meant as an alternative funding source to support university-based translational research.
The small business is in charge both a SBIR and STTR award. Set in the legislation is the small business requirements (see Table 1 below). A key requirement is that the small business must have company-controlled R&D facilities suitable to do the proposed work. For an STTR award, the company must do 40 percent of the work. The work cannot solely be done at the university. Academic spin-outs where money will be funneled back to the university to do all the research and development work is considered fraud.
Small business requirements for SBIR/STTR awards
- Requirements must be fulfilled at the time of the award (not at the time of grant submission)
- For-profit business
- U.S.-owned and controlled (>51%)
- < 500 employees
- Geographically located in the United States
- Suitable R&D facilities to do the work
- 93% of R&D must be performed in the United States
SBIR allows but does not require the involvement of a nonprofit research entity (e.g. academic partner). STTR specifically requires the collaboration with a nonprofit research entity. The PI and budgetary requirements are summarized below.
SBIR vs STTR
|Principal Investigator (PI) must be employed by the small business > 51% of full time
|PI may be employed by the small business or the primary subawardee (e.g. academic partner)
|Outsourcing of budget to an academic partner:
<33% of phase 1
<50% of phase 2
|If PI employed by the academic partner, the PI must be >51% of full time equivalent and must devote 10% of effort to the project
|Providing any percentage of the budget to an academic partner that is greater than the above requires a waiver for the funding agency prior to doing so
|Minimal participation on the funded project
>40% small business
>30% academic partner
Guidance for Faculty Participating in SBIR/STIR Grants
All investigators participating in SBIR/STTR grants must comply with all SBIR/STTR legislative requirements. In order to serve as a PI of an SBIR grant, the investigator is required to be employed >51 percent by the small business concern (SBC) and must adjust his or her ISMMS appointment accordingly.
SBIR and STTR grants are submitted by the qualified SBC, not by the academic partner. ISMMS investigators that are either proposed subaward PIs for SBIR/STTR grants or proposed PIs of STTR grants submitted by a SBC must review the project with MSIP before submission.
If the ISMMS PI has a financial interest with the SBC (e.g. consulting agreement, equity ownership, or intellectual property that is licensed to the SBC or would be utilized in performance of the project), the project must be reviewed by the COI office prior to submission.
Of particular concern is the potential for conflict of interest that may occur if the ISMMS PI is an equity owner in the SBC. The faculty member may not serve as both the small business PI and the ISMMS subaward PI on a subaward from the SBC. Before expenditure of any SBIR/STTR funding, the project will be reviewed by ISMMS Office of Research Compliance to assure that all programmatic requirements have been met.
Frequently Asked Questions
Below are answers to frequently asked questions about Small Business Innovation Research (SBIR) and Small Business Technology Transfer Research (STTR) grants.
Who is the contractor or grantee in an SBIR/STTR award?
The grantee is the small business concern, not the academic partner (not Mount Sinai). If work is to be done at Mount Sinai, there will be a subcontract given to the institution.
What is the Bayh-Dole Act?
The Bayh-Dole Act is landmark legislation that created an unprecedented opportunity for academic institutions to benefit financially from inventions deriving from federally funded research projects. As explained by the NIH: “The Bayh-Dole Act encourages researchers to patent and market their inventions by guaranteeing patent rights. This Act automatically grants first rights to a patent for an invention fully or partially funded by a federal agency to the awardee organization... This landmark legislation is important because it gives nonprofit organizations and small business firms the right to elect to retain title to inventions. The objectives are to: use the patent system to promote utilization of inventions arising from federally supported research.
If I receive SBIR/STTR funding, does Bayh-Dole apply?
Yes. In this case, an entity that receives federal funding (research grants, SBIR/STTR grants, etc.) would be considered a “contractor” and thus the Bayh-Dole Act would apply. For further information related to Bayh-Dole Regulations, please visit the NIH.