Disclaimer: The opinions expressed in the post are those of the author and not APEX and/or the U.S. Government.
In 2021, the federal government awarded Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) contracts worth $3.8 billion to nearly 7,000 companies. The size and scope of SBIR/STTR are enormous, indicating why it is referred to as “America’s Seed Fund.” The intent of SBIR/STTR is to incentivize high-risk research and innovation growth. If you are a small business or starting one, this is as close to free money that you are going to get. Both programs are highly competitive and encourage small businesses to engage in R&D with the potential for commercialization. There are many variations of these contracts, and the details vary by department and topic. This article focuses on a particularly accessible one, the Air Force Open Topic. The contents are as follows:
- Air Force Open Topic: Is it right for you?
- How to be competitive
- How to apply
Air Force Open Topic: Is it right for you?
The Air Force SBIR/STTR programs, according to the public access site, are the venture capital funds of the Air Force. The SBIR was established (for the greater Defense Department) by Congress in 1982 to fund research by small businesses and is now supported by eleven federal ￼agencies; see here.
The STTR was established in 1992 to fund R&D by small businesses and non-profit U.S. research institutions, such as universities. Five federal agencies participate in STTR. The requirements for SBIR/STTR awards are:
AFWERX is the Air Force’s team of innovators whose goal is to encourage and facilitate connections across industry, academia, and the military to create opportunities and foster a culture of innovation. The Air Force Open Topic, hosted by AFWERX is an open call for submissions. This means that, in contrast to other SBIR programs, which typically ask for a specific piece of technology or capability, businesses can bring tools and technology that the Air Force didn’t think to ask for. If you dig deep into the problem that the Air Force is trying to solve, this will be to your advantage because you will have room to do thorough research and truly understand the underlying needs of the problem instead of simply providing a band-aid solution.
The SBIR/STTR program operates in two phases (there are three, but the third is usually ignored because funding comes from outside of SBIR/STTR budgets):
- Phase I funds through AFWERX range between $50-$150k and are on a condensed contracted timeframe of 90 days. This allows businesses to conduct research on who their customers are within the Air Force (and relevant to the problem being solved).
- Phase II funds range from $500k to $1.7 million for a one- to two-year R&D effort. This is usually for a successful Phase I project, results in the development of a prototype, and identifies a government customer to acquire your product.
Naturally, your first question should be whether your business is eligible for SBIR/STTR. Your next question should be whether SBIR/STTR,￼ specifically with AFWERX, will be useful to your business. How could it not be? Well, the typical Phase I application takes 200 hours, more if you are not a Ph.D. or equivalent of expertise on the topic.
If you are not an expert on the topic, you can leverage APEX’s Air Force-sponsored resources to help you, including APEX consultants who provide one-on-one consulting from pre- to post-award. APEX consultants have been involved with the SBIR/STTR program in one way or another for years, and many of them have submitted to and won awards in the new AFWERX process. APEX consultants bring a collective of 100+ years of experience with SBIR/STTR, but what makes their expertise well-rounded is that many are simultaneously involved in growing their own businesses via SBIR/STTR awards. Therefore, each APEX consultant is very empathetic to and possesses a thorough understanding of the goals and challenges faced by companies going through the SBIR/STTR process and the nuances of the larger defense industry.
If you’ve established that the Air Force Open Topic is right for you, your next question should be how to get one.
How to be competitive
In other words, how do you write a research strategy for the SBIR/STTR? First, figure out what you can do for the Air Force. This is not about developing cool technology but about being able to provide something that the Air Force needs. It would be impressive, for example, if you could build a GPS capable of updating from underwater. But if they don’t need it, they won’t buy it. SBIR/STTR provides a paid opportunity to identify which government customers have problems your product can solve. Competitive proposals specifically identify exactly which customers, specify the problem(s), and provide evidence for alignment between your product and their needs.
First, identify an Air Force problem:
Discovering your competitive edge and how your product aligns with the Air Force’s needs begins with exploring potential Air Force problems that your solution can solve. You will find a list of current topics on the DOD SBIR/STTR website, and they generally fall under one of three types of calls:
- Traditional – these are the “strictest,” in that the requesting body specifies an exact problem, solution, or capability. For example, the Navy might need an Unmanned Underwater Vehicle (UUV) that weighs less than X lbs. and has a Y-hour battery life. Any proposed solutions would be UUVs that at least minimally fit those specifications.
- Open call – these express general interest in solutions within a particular category. At the time of this writing, one open call reads, “Phase I Open Call for Innovative Defense-Related Dual-Purpose Technologies/Solutions with a Clear Air Force or Space Force Stakeholder Need.” In this case, companies present technologies that somehow address or are relevant to the Clean Air Force initiative (AF_x22.4_Full.pdf (defensesbirsttr.mil))
- Fully open – these are catch-alls, all the ideas they might not have thought of: just bring innovative technology that you think might be interesting to the Air Force.
If you are responding to the traditional or open calls, you will be addressing some sort of problem statement. This statement is the requesting body’s best articulation of the problem that they are dealing with and what they think a solution would look like. Your problem statement will be your starting point and, often, your reset point. You will soon learn, however, that it is flawed. It is flawed (not wrong or false) because the problem is likely based on untested assumptions and because it is articulated from and constrained by a single perspective. It will be your company’s job to dig deeper, understand the needs that underpin the overlying issues, and create solutions that address those needs. Anything short of that will be a band-aid solution.
If you are responding to the fully open type, you will do the opposite. You will start with innovation or a capability and work backward to find an Air Force problem for which your product might be a good solution.
Determine who is most affected by the problem:
The two most important questions for your team to answer are, “Who has the problem?” and “What do they need?” For example, if the problem is “Find a way to process X-many datasets simultaneously,” this may sound like a request for technology, and, in a way, it is. But somewhere is a person or group of people for whom a solution would mean saving resources, saving lives or increasing overall chances of mission success. You need to find these people and hone in on them. This is not easy, or else everyone would be offering effective solutions, and you would not be needed. You might talk to multiple people whose opinions do not agree. This is part of the process. Your task will be to get a puzzle piece from each of them and put the pieces together. Demonstrate that the Air Force need is great enough, and the alignment to your product is tight enough to warrant an SBIR/STTR award. To do this, consider asking these questions:
- Who needs this? Who would use the solution if it was in front of them right now?
- What is the current solution, and why is it lacking?
The U.S. military loves numbers. Everything must be quantifiable. This can be in the form of dollars or man-hours, patients saved, the percentage of vehicles needing maintenance, etc. To establish metrics on a particular problem, you need to understand two things:
- How is value assessed concerning the problem and the person working on that problem? (e.g. dollars, man-hours, lives)
- How much value is considered a success? (e.g. $1 million/year, 20 man-hours/week)
These are important both so you can offer what the Air Force needs and also so you can set realistic goals. If, for example, they want a long-range UAV that is cheaper than $10,000, but the current cheapest model with similar capabilities is $50,000, then it might not be something you can tackle at this time. Your proposal must tell the Air Force how it will benefit from your solution and how that solution outperforms the product currently being used to produce the value identified.
Apply for the SBIR/STTR
How do small businesses apply for SBIR funding? Being that you’re working in a challenging environment, the steps can sometimes seem complicated or hard to follow. Below is a step-by-step guide to the process.
Register your business
To be considered for any SBIR/STTR contract, you must be registered in the U.S. government System for Award Management (SAM). This is done through the (SAMS) Unique Entity Identifier. This has replaced the Central Contractor Registration (CCR), the Online Representations and Certifications Application, and the Excluded Parties List System. Your business will also need a U.S. Small Business Administration Company Registration. Register for these ASAP as you will use them everywhere.
Once these are done, you may be ready to submit your proposal on the Grants.gov website. However, some government agencies require additional registrations before the submission of proposals. For instance, the Department of Defense requires you to access the DOD SBIR/STTR Small Business Portal. To do that, click on the blue sign-up button and then click register. You will be sent an email to the login page, where you click Join a Firm and connect your business to the account.
It will take at least two weeks for your company to register with the above organizations. If the deadline for submission is three weeks away, and you don’t have any experience submitting an SBIR/STTR, it is unlikely that you’ll be able to submit a proposal for that round.
Select a Grant topic
This task relates back to the “Identify and Air Force Problem” section above. Go to the DSIP website (Defense SBIR/STTR Innovation Portal). Once there, you will see a list of “Active BAAs.” Any of these whose titles begin with “Air Force X…” are Air Force calls. When you click on one, it should give you the option to click “Topics.” This will take you to a list of problem statements that, depending on the type of call (see section “Identify an Air Force Problem” above), will be more or less vague. Keep in mind that these topics are posted periodically on set schedules and remain open only for a limited period of time. If you find a topic that may fit your business, act quickly.
Prepare a proposal
Your proposal is your application for SBIR/STTR funding. Its intent is to state precisely where, to whom, and how your solution will be valuable to the Air Force. If you’ve honed in on the people most affected by the problem (see section above), then this should be straightforward. A competitive proposal details exactly why your proposed solution is innovative in nature; after all, the purpose of SBIR/STTR is to help the federal government capture innovation.
Articulating the importance of your innovation to the Air Force is imperative. The argument you must make in your proposals is why the Air Force needs your solution and how exactly the Air Force needs it. For example, “F-35 pilots need [your product] because they struggle to perform X and [your solution] adds value by increasing their capability to do X by 10, 20 or 200%, which will not only help pilots achieve their tasks but enable the broader unit/organization to achieve its overall mission.” A competitive proposal will also include data such as statistics and quotes from the people you talked to and interviewed as evidence.
After you submit the proposal, it will be reviewed for compliance with all the basic proposal guidelines, including proper font, margins, and other specifications. Take the proposal guidelines seriously! If you get these wrong, your proposal will not be considered. Next, if you meet the basic guidelines, your proposal will be evaluated on technical merit, commercial potential (if relevant), and the qualifications of your team.
As a first step, it may help to prepare a compliance matrix based on the details of the topic for which you plan to apply. This matrix will summarize all the requirements for the grant, including formatting requirements, registration requirements, and other details of what reviewers expect to find in your proposal. You can read about compliance matrices here and here.
Your proposal should also include an executive summary, a commercialization strategy (where possible), a description of each member of your team, and a technical section. The technical section should include an overview of the concept you are presenting, how the concept meets the needs of the agency to which you are applying, and descriptions of planned tests, experiments, and other details of your research. Again, emphasize how your concept is superior to whatever else is currently available and the positive difference it will make if it is implemented.
Your proposal will also require a budget section. Many companies are confused by the budget section and often require the support of an SBIR/STTR consultant or a professional accountant who is familiar with government grant applications. Expenses are categorized by allowability and eligibility, which can get complicated, and your proposal will need to take these categories into account. Budget elements will include direct costs, salaries of you and your employees, subcontractors, equipment, and basic business costs such as rent, utilities, internet, and overhead. You can also include up to 7 percent of the award as profit. Again, it may be wise to hire an expert.
In conclusion, if you want your proposal to be competitive, it will need to be strong. Make time for planning, outlining, proofreading, and going through multiple drafts. You can find templates, sample forms, videos, frequently asked questions, and other training materials in the learning and support section of the DSIP Defense SBIR/STTR Innovation Portal.
After submitting, you will have to wait while your application makes its way through the review process. This takes time, so it helps to have other funding sources available. Specific timelines may vary, but to provide a rough estimate:
After topics are released, companies have 2 months to turn in proposals. There is then a 4-month gap before Phase I winners are announced and then another 3 months before funds are distributed. Phase I funding allows you to conduct research into the topic you have chosen. Phase I participation may last from 6 to 12 months.
If you then apply for and are awarded Phase II, that will fund your process of turning your research into a product. If you are approved for Phase II, funding will be distributed roughly 9 months after your application. Sixty days after your company is awarded Phase II, you qualify for AFWERX’s Strategic funding and Tactical funding (STRATFI/TACFI), which ranges between $375k-1.7 million for TACFI and between $3-15 million of additional funding for STRATFI. STRATFI/TACFI will be covered in a future article.
If you think the SBIR/STTR program could be beneficial to your company, APEX consultants are available to support you. Go to APEX (https://apex-innovates.org/) to learn more about how their consultants can help you.
About the author:
Jeff Decker, Ph.D., is a APEX consultant, managing director of the Hacking for Defense Project at Stanford University's Pecourt Institute for Energy, and a co-instructor of the graduate-level Hacking for Defense course.