SBIR vs. STTR: Which Grant is Right for You?

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are two of the most popular sources for funding medical device innovation. Understanding the differences between these two grants is essential to making an informed decision about which grant is best suited for your project. In general, both SBIR and STTR grants are designed to fund projects focused on developing new products or services that have commercial potential. The key differences are how that innovation is being developed and where the work is expected to be done. This will have impacts on the relationship between partnering organizations, how work is allocated, and how much money is available for a grant. Entrepreneurs like yourself spend countless hours wrestling with these two starting paths to determine where their project might fit. In this post, we’ll draw on our extensive experience to discuss the meaningful differences between these two programs and why you might be interested in one over the other.

Principal Investigator Role Differences

The Principal Investigator (PI) is responsible for directing project staff and subcontractors, preparing reports, and meeting applicable timelines on behalf of both the small business and research institution. The PI should have extensive knowledge of their field of study as well as industry-specific experience to effectively manage project operations.

Projects funded by SBIR grants require that the PI be employed by the small business applying for the grant. This does not mean that the PI must work for the small business exclusively, but the small business must be their primary employment. This means more than 50% of their work is allocated to the small business seeking the grant.

On the other hand, STTR grants are designed to promote collaboration between a small business and a research institution. In this program, a partnership with a non-profit research institution is a requirement as opposed to simply being permitted. As a result, the PI in an STTR grant can be employed at the small business or someone from the partnering research institution.

Outsourcing

Budgeting and outsourcing requirements are key factors to consider when applying for either an SBIR or STTR grant. Both types of grants have different allowable costs, direct and indirect costs, subcontracting activities, and procurement and management of support services. Knowing the differences between them can help businesses make an informed decision on which grant type is best suited for their project.

Although proposing and managing a budget might seem overwhelming at this point in your application journey, there is one key consideration to help you determine if an SBIR or STTR grant is right for your project. Outsourcing is a common practice in the medical innovation space as it opens small companies’ access to expertise and equipment they may not otherwise readily have. The SBIR and STTR programs place differing restrictions on outsourcing that an applicant needs to be aware of.

For an SBIR grant, 66% (2/3rd) of the project work must be done by the small company itself. The remaining 1/3rd can be outsourced. These allocations change if the research in applying for a Phase II grant. In that instance, up to 50% of the project work can be outsourced.

Allocations are different in a STTR grant. In this program, the National Institute of Health (NIH) provides minimum work requirements for each of the partnering organizations. The small business is required to perform at least 40% of the work. The partnering research institution is required to perform at least 30% of the work. The remaining 30% of the work needed to be performed can be outsourced, performed by the small business, and/or performed by the partnering research institution.

During the application process, you would indicate your compliance to SBIR or STTR work requirements through your budget allocations. Additionally, quotes and commitments from subcontractors would be established in letters of support. You will also want to demonstrate that your team is capable of performing the work that your budget indicates in the application.

Funding Differences

The NIH dedicates specific funds to support both the SBIR and STTR programs. This also represents a meaningful difference between the two programs. The SBIR is allocated 3.2% of the NIH budget, whereas the STTR is allocated 0.45% of the NIH budget. Does this mean that you should automatically go for the SBIR because more money is allocated to it?

Not necessarily. Your project may lend itself more to the collaborative goals of the STTR program making that the better program for you. Additionally, many applicants do reach that conclusion of going after the higher allocation even if it’s not in their project’s best interest. That means there is potentially even more competition in the SBIR than STTR program. But ultimately, you really need to assess your project, your project team, and have a discussion with a program officer to see which program helps you accomplish your goals of innovation and commercialization best.

Making Your Choice

In this post we have presented some of the key differences between the SBIR and STTR program. Perhaps while reading the post you immediately saw where your project fits in and you are ready to apply today. On the other hand, you might be thinking through how your project might benefit by being in the SBIR program for some things, but STTR seems appealing for other reasons. Ultimately, this is not a straightforward choice. Each project is unique, and each team has specific strengths and weaknesses that the PI, outsourcing, and funding arrangements of the two programs might be able to augment. Are you able to manage 66% of the work? Do you have a crucial non-profit partnering research institute that you want to make sure is included in your grant? These are great questions to work your way through while planning your application.

Blue Haven Grant Consultants have over a decade of experience working through these questions and successfully applying to both SBIR and STTR grant programs. Our approach is tailored to your project, not some one size fits all template. Through discussions with you, we’ll help you make the program choice that serves you best and also is most likely to fund your project. All with our no risk, “BHGC Pay Upon Award”™ model. Feeling overwhelmed at some of the program possibilities ahead of you? Schedule a free consultation with us and experience the BHCG advantage.