Federal Funding for Small Business

Small Business Technology Transfer (STTR) Program

The Small Business Technology Transfer (STTR) program is a United States government initiative that offers federal funding for small businesses with the goal of fostering scientific and technological innovation.

The U.S. government's Small Business Technology Transfer (STTR) program can be an attractive federal funding source for small companies.

In order to apply for an STTR funding grant, your firm must have 500 or fewer employees, must be a for-profit entity and must be located in the United States.

If you meet these simple qualifications, you may be eligible for STTR funding opportunities related to federal innovation research and development.

Getting STTR funding is not easy. The program is fairly competitive, but talented entrepreneurs should absolutely seek out this funding.

In short, the STTR grants exist because the government allocates a percentage of federal R&D funding to be granted to small businesses.

The grants recognize that smaller firms are a great source of new innovation but that these firms often struggle for funding, especially for funds to pursue ambition R&D projects.

At this time, five federal departments and agencies offer STTR grants: the Department of Defense (DOD), the Department of Energy (DOE), the Department of Health and Human Services (DHHS), National Aeronautics and Space Administration (NASA), and the National Science Foundation (NSF).

How STTR Funding Works

STTR funding is awarded in three phases.

Phase I is known as the startup phase. Phase 1 STTR awards fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology. An entrepreneur or small business can receive STTR Phase 1 awards of up to $100,000 for approximately one year.

Businesses that have previously applied for and received Phase 1 STTR grants can apply for Phase 2 STTR awards. These federal funding grants offer up to $750,000 over a period of as long as two years. The goal of Phase 2 funding is to encourage the business to expand their R&D work and explore commercial potential.

In Phase 3, the product is commercialized. For this phase, the business must seek its funding outside of the STTR federal funding program.

How to Apply for STTR Funding

Each participating agency defines R&D topics that they would like businesses to explore. These requests are called "solicitations" in STTR parlance.

You can get a list of all the STTR solicitations from the SBA. They issue a Pre-Solicitation Announcement (PSA) that lists all the projects from all the participating agencies. You can call (202) 205-6450 to get the latest PSA.

Once you have the PSA in hand, look through the various projects and see if there is one that your firm could credibly pursue. Ideally, you find a research area that you already have experience in and that fits with your firm's preexisting business goals.

The next step is to complete the application for funding. Be very careful to follow the instructions closely. A great application can easily be disqualified if it does not follow the required format and include all of the necessary information.

Writing a successful STTR grant is an art unto itself. There is a formula for success when writing STTR grants. Outlining what it takes to get an STTR grant could be a whole separate article, but, the important takeaway is that you need to look at past grants that have been awarded and reverse engineer the formula for getting grants of your own.

The STTR funding awards are granted based on small business qualifications, degree of innovation, and future market potential. You must do well in all three areas to get an STTR federal funding grant for a small business.

You may not succeed your first time. Keep trying. The federal agencies responsible for these grants will give you feedback on your grant request.

Take that feedback to heart and put it to good use in your next STTR application.

Assuming you have the right fundamentals, i.e. the potential to conduct great innovative research, you will, in all probability, eventually succeed and get some STTR funding.

Share this article

Additional Resources for Entrepreneurs

Lists of Venture Capital and Private Equity Firms

Franchise Opportunities

Contributors

Business Glossary