A Tool to Finance Early-Stage Technology

Paula M. Powell

With fiscal 2003 funding of roughly $834 million and $45 million, the US Department of Defense's Small Business Innovation Research (SBIR) and Small Business Technology Transfer programs collectively form the largest source of early-stage technology funding in the US. Their goal is to provide seed money to help companies with 500 or fewer employees (most have fewer than 100) develop new technology of benefit to the government. From their inception, they have helped several photonics companies fund new research.

The two programs differ primarily in that the latter funds cooperative R&D involving a small business and a research organization. Both have three phases: to explore feasibility of a product, to develop it to prototype stage and to commercialize it. The federal government awards grants for only the first two phases -- up to $100,000 for Phase 1 and up to $750,000 for Phase 2 -- with success during the first phase qualifying a firm to compete for Phase 2 funding.

Roughly 34 percent of Phase 1 awardees are first-time participants. Overall, some 59 percent of competing firms have received five or fewer awards. Almost 40 percent, however, are small high-tech firms that have successfully parlayed six or more grants into an engine to fuel their product development efforts. Sensors Unlimited in Princeton, N.J., which recently received four new Small Business Innovation Research contracts, is one example.

A dual-wavelength InGaAs/InGaAsP pyrometer for high-temperature measurement.
An InGaAs focal plane sensitive throughout the visible, near-IR and short-wave IR, with the goal of reducing the inventory of cameras needed for imaging applications.
A phase-sensitive focal plane array designed for use in surveillance and covert communications.
Geiger mode avalanche photodiodes for photon-counting applications in the 0.9- to 1.7-µm band to enable 3-D imaging.
"Almost to a tee, everything that we've worked on in the SBIR realm has fed our commercial products or become a commercial product in and of itself. It's essentially a funded form of R&D for our company that also benefits the government," Dries said.
So what is key to a successful grant proposal? "The No. 1 thing is to only go after research that is commercially viable for your business when reading the solicitations posted by participating agencies," he said. "These essentially list problems they are looking to resolve. There is a temptation when reading them, however, to say, 'We can do that,' but if it's not part of your own business plan, then you should just stay away from it."
Dries also recommends that companies establish a line of communication with the parties writing the solicitations. "Right after the solicitations come out, there is a window of opportunity in which to talk to them that closes once the government begins considering grant proposals. This window allows companies to ask questions such as, 'This is what I'm interested in doing. Is this what you are looking for?' "
And then there is the patience quotient. The funding cycle is relatively slow. "After its posting," said Dries, "the solicitation will be open for about four months or so, and then you will write the proposal and not hear anything for three or four months after that. It will take another month or two to actually get the funding in place for Phase 1, which then lasts six months for SBIR." He noted that the Phase 2 funding cycle takes even longer but that the results often make it worth the wait.