The Small Business Innovation Research (SBIR) is a federally funded program offering $2 billion annually to small businesses to conduct research and development. Eleven federal agencies participate in the program including NIH and DoD.

Increase your chance of SBIR success by incorporating some of the proven concepts prescribed by successful SBIR award winners.

"SBIR provides technical validation and a source of R&D funding during a time when they are unavailable anywhere else," points out John Craichy, former Executive Vice President of Quantum Logic Devices and current Director of Business Development for the North Carolina Biotechnology Center. Quantum Logic's $400,000 grant was one of the largest Phase Is ever awarded by the NIH. "It is a fantastic way to further technology development. Where else can you find nondilutive capital?"

Joe Smith, CEO of Syntherica Corporation agrees: "The greatest value is the technical validation from the peer review statements. It adds credibility to your early stage research." Syntherica is Smith's second SBIR funded company. His first company, Novalon Pharmaceutical Corp., won five NIH SBIR awards and was sold to Karo Bio AB in 2000. "SBIR grants increase the value of the company. Consider it 'risk mitigation' through a relationship with NIH."

"While technology companies cannot rely solely on SBIR grant funding to subsist, SBIR grants do lend credibility and can be leveraged into other funding opportunities," notes Dr. Giles Shih, co-founder of BioResource International in Raleigh.

"SBIRs are so easy," says Dr. Melissa DeRosier, CEO of 3-C Institute for Social Development and 3-C Family Services of Cary. "That was the first SBIR myth I learned. Before I started my business, the word-of-mouth rumors were that 'getting an SBIR is easy.' In fact, SBIRs are extremely competitive." Four years following her departure from academia, her 3-C companies have grown into a multi-disciplinary child mental health firm with 22 employees. 3-C provides a true combination of clinical and research services for improving child mental health. The firm has been awarded 12 SBIRs totaling more than $2 million.

"Our recent SBIR proposal was rejected twice before being funded," says Joe Smith, CEO of Syntherica Corporation of Durham. "The SBIR competition is never easy."

Coming from academia, Dr. Todd Steck was proficient in non-SBIR funding. Yet he recalls that his first SBIR grant "was filled with many stupid mistakes." Steck, the founder of BioTrackers, Inc., recalls that, "USDA trashed my first proposal. Their feedback indicated I didn't spell everything out clearly."

Adds DeRosier: "The SBIR process is very competitive, and it's become more competitive over the past few years since venture funding became restricted."

Phase Is are typically awarded in the $100,000 range and are best described as a research feasibility study. But the real money is found in the Phase II awards. Phase I "is a $100,000 investment for the agency to get to know you and judge whether you can be trusted with a subsequent $750,000 Phase II project," says Gail Greenwood. Gail and, husband, Jim provide SBIR consulting services through their Florida based company, Greenwood Consulting Group. "You are trying to establish credibility in Phase I to convince the agency to invest in you for Phase II."

"One of the keys to success is that management has to make writing SBIR proposals a priority. At Novalon, everybody hated writing them," confides Smith. As a result, Novalon's early SBIR applications were incomplete, and their SBIR success rate was low. That is until Smith assigned a manager with the responsibility of winning SBIR awards. "Staying focused on SBIRs requires discipline. SBIRs must be assimilated within the company." Last year, Syntherica Corporation received a $1.3 million SBIR Phase II award to research a new test method expected to reduce the time and cost for performing tests for PCB contamination.

Dr. DeRosier agrees. "You must be dedicated to the SBIR effort from the very beginning. I wish that I would have taken my first proposal efforts much more seriously. Revision and resubmission consume time - up to nine additional months! That's a lot of time for an early-stage small business. It's just too much work not to take seriously."

"Phase II is the goal," adds Dr. DeRosier. Most firms "lose money on Phase Is, so you must have a long-term focus on the Phase II."

"Small companies have to stay focused. Don't apply for an SBIR that is inconsistent with your company's mission," according to Smith. Noting that many companies have strayed from their business plan to pursue inappropriate SBIR funded work, Smith adds, "Don't be tempted. Don't let SBIR money become a distraction."

"Proposal development is a process that requires a clear understanding of your business goals and how you plan to achieve them. In other words, everyone on your team must share a consistent vision," says UNC Small Business and Technology Development (SBTDC) SBIR Specialist John Ujvari. "Find a solicitation that fits with your company and its R&D objectives."

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