Ask YC: SBIR, STTR?

[rjett]

Has anyone in the HN community taken money through the government's SBIR (small business innovation research) or STTR (Small Business Technology Transfer) programs? In casually chatting with someone today and telling them what our startup's goals are, I was told, "Hey, you should look into SBIR and STTR." The person with whom I was chatting didn't really know much past passing a reference though so I'm wondering if anybody on HN can provide some enlightenment.

[antiismist]

My mom runs an sbir funded company and it has really worked out well for her. It takes a while to get up to speed as a business - you start out writing phase 1 proposals that will give you 100K for a project, and you might get funded ten percent of the time. But once you have the phase 1, you have maybe a one in two shot of making it to a phase 2 grant, which is funded at a much higher rate.

But keep in mind that you would be doing government contracting, and there are a lot of hoops that you have to go through, like doing accounting the government way, filing out reports and the like. So it is a big undertaking.

Anyway, you can drop me a line if you want to know more. And my mom is always looking for collaboraters, but her focus is in x-ray and neutron detectors...

[jmk58]

We received a Phase I SBIR in 2005 and we just got our Phase II, from the NIH. I've written 3 proposals, so that puts my success at 33%.

The posters who suggest it is easy money to get are cocky and I feel mostly wrong. The typical success rate for Phase I's are in the 10-20% range, and Phase II is higher, but not 50%. The problem is that each government agency has its own policies and success rates, as well, the judging is based on who else is submitting during the current cycle (and even when in the fiscal year the cycle occurs). Each agency has a certain set-aside $, so it all depends on how much they have and the scores of those you're competing with.

I think the biggest problem is that large businesses rightfully recognize that the SBIR/STTR process can be a cash cow, so they set up dedicated panels and proposal writers to vet and sharpen proposals, and then find a small company that can qualify and go after the $.

It can be good money (it is helping us enormously), but it's an arduous process. My best advice is to get a grant writer or grant coach who really knows the agency you're going after, and has a good track record. You will pay a few thousand dollars for help in writing the grant, and perhaps 5% if you win the grant, but it is well worth it. I found that just our coach's experience with handling the budget and now the electronic filing was well worth the fee.

[kf]

At Pitt I heard a presentation about getting SBIR/STTR loans from a consultant who helped people get those loans. His advice was to hire a consultant to help you jump through the hoops.

[multifarious]

I was the CEO for a company that one Phase I and Phase II SBIR grants joint with a University, and it can be a very good thing if the goals of the grant and your product goals are closely aligned. The goal of the grant is to fund the product development, not to make you rich, and you'll make a very small (like <10%) margin on the work.

[ivankirigin]

They are a bad idea for startups, I think.

It's easy to win them, but government money is like crack. You are locked into their cycle and it will make it harder to innovate.

That said, you'd be surprised to learn how easy it is to win a few hundred thousand dollars.

If you want to make a boutique research company, go ahead.

[tptacek → ivankirigin]

Do have any experience with SBIR-type loans, or know anyone who has any? Were you surprised to learn how easy it was? I'd love to hear the anecdotes.

[ivankirigin → tptacek]

I've worked on half a dozen, and written as many proposals. You need to write a 20 page proposal, and you get a stage 1 round. It's usually smallish like $100K.

You ask what the sponsor wants you to build, build it with $20K, use the rest on real work, and then get a $700K check to do a bigger project. You should be able to get a product to market with that money.

The problem is that the government doesn't expect you to do that. You meet expectations and just finish the work while writing other proposals. It isn't conducive to a growth startup.

For example, iRobot was a boutique research firm for almost a decade before they finally decided to make a product. I used to work for CRA in cambridge. That's still their schtick.