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SBIRs are Not the Answer

Writer's picture: Jonathan MostowskiJonathan Mostowski
A long, dimly lit tunnel with graffiti-covered walls stretches into the distance
A long, dimly lit tunnel with graffiti-covered walls stretches into the distance

SBIR funding can provide valuable support for early-stage innovation and is a critical tool in the toolbox, especially considering the statutory preference for direct awards. That said, businesses should be mindful of some of the associated risks of the SBIR program and consider diversifying funding sources and market strategies to mitigate potential downsides. Here’s a breakdown of the potential pitfalls:


1. Funding Dependence:

  • Limited Diversification: If your business leans too much on SBIR funding, financial stability can become shaky, given the relatively small dollar amounts, long timelines, and difficulty of transition.

  • Policy Vulnerability: SBIR authority has been under review and there is uncertainty on the future of the program. Changes in government policies or budget allocations can drastically affect SBIR funding availability.


2. Innovation and Market Fit:

  • Commercialization Hurdles: Moving from SBIR funded research to market ready products can be tough and may require additional funding and expertise that your business might lack. The “Valley-of-Death” exists right on the other-side of SBIR completion.

  • Market Alignment: SBIR projects often focus on early-stage research, which might not always sync with current market needs, potentially leading to less commercially viable products.


3. Resource Allocation:

  • Time and Effort: Applying for and managing SBIRs can be a significant drain on your time and resources, potentially detracting from other critical business activities. SBIR processes from service to service and agency to agency differ, making it difficult to become profficient in the process.

  • Administrative Load: Compliance, reporting, and administrative demands associated with SBIR funding can strain a small business’s resources.


4. Scalability Issues:

  • Growth Constraints: SBIR funding is typically aimed at small businesses, which might limit growth opportunities if your business becomes overly reliant on this funding source. Projects are typically funded at low dollar amounts, requiring internal investments to muture capabilities until a follow-on program is identified, funded, and awarded.

  • Market Expansion: Scaling from SBIR funded projects to larger commercial markets can be challenging, especially if your business lacks the necessary infrastructure and resources.


5. Competition for Funding:

  • High Competition: SBIR programs are highly competitive, and securing funding through this approach carries a moderate to low PWIN. You might invest significant effort in applications without success.

  • Unpredictable Awards: The timing of SBIR awards can be unpredictable, making financial planning and long-term strategy development difficult.


6. Technical and Commercial Risks:

  • Technical Uncertainty: SBIR projects often involve high-risk technical research that may not lead to successful outcomes or commercially viable products.

  • Market Adoption: Even if you achieve technical goals, market acceptance and adoption can be uncertain, affecting the commercial success of the innovations.


While SBIR funding can provide valuable support for early-stage innovation and should be part of an overall go-to-market strategy, businesses should be mindful of these risks and consider diversifying their funding sources and market strategies to mitigate overreliance on this single pathway.

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