Improving Illinois’ SBIR and STTR Competitiveness

Aug 20, 2013 | Catalyst

By Brian Jurczyk, President and Chief Executive Officer of Starfire Industries and Chairman of the CEO Roundtable

Many Illinois emerging small businesses benefit from the Small Business Innovation Research and Technology Transfer (SBIR/STTR) federal programs. In 2012, Illinois small businesses received 122 awards amounting to $41 million [see info graphic below]. Through an intensely competitive process, about $2.5 billion per year in early-stage technology funding is funneled into business creation across the United States—generating nearly $18 billion in economic activity, a 7×ROI on tax dollars.  This successful federal program is emulated worldwide due to its track record encouraging technology entrepreneurship, value creation and high-paying jobs.

As a result, there is intense competition at the state level to incentivize and attract federal SBIR/STTR dollars into regional economies.  In 2012, Illinois small businesses received only 1.4% of the nationwide total despite having 4.2% the U.S. population, the 4th largest concentration of Fortune 500 companies, flagship research universities and national laboratories and superior infrastructure.

As the SBIR/STTR program has evolved through congressional reauthorization, greater emphasis on commercial success probability and risk management have become critical to determining the likelihood of award. Today, awarded firms typically have a minimum of three letters of support including a “matching investment” contribution from a regional fund, State program or industrial partner—in addition to a compelling tech solution.  Teaming with companies and universities lowers technical risk, industrial partnership and customer “buy-in” lower market risk and in-kind or cash matching investments lower financial risk. In my own experience, our company which recently expanded beyond its incubation at the University of Illinois Urbana Champaign’s Research Park, leveraged a $100k State matching grant into a $750k Fortune 500 partnership bringing in over $3.5 million in federal dollars from two agencies.

Through discussions at our regional CEO Roundtable Forum, which brings together executives of technology businesses in Champaign-Urbana to address business operations and best practices, there is a consistent theme focusing on leverage and validation.  An SBIR/STTR technology has three key validating attributes: (1) it has been vetted by a team of technical experts and judged to have merit, (2) it fulfills an unmet market need with a potential sales channel and (3) there is a federal agency willing to provide R&D funds for proof-of-concept.  As a result, an SBIR/STTR technology is already a lower risk investment for industrial partners and early adopter customers.  The key is cultivating a corporate champion, arming them with transparent means to leverage internal support for the SBIR/STTR firm and using external resource leverage to capture the investment—all within a short timeframe typically less than 2 months.

It is critical that strategies directed towards aiding Illinois high-tech small businesses recognize these factors.  Given Illinois’ diverse industrial base and world-class universities, there is immense potential to use the SBIR/STTR program to make Illinois’ small and already-established businesses more competitive through locally-grown technology. In the process we will create sustainable economic growth through the creation of new products, processes and quality high-paying jobs.

 

Did You Know? 

The SBIR program is aimed at small high-tech businesses exploring promising new technologies independently or in collaboration with other private sector partners. STTR awards focus on small business collaborations with universities or nonprofit research organizations for purposes of technology commercialization. In 2012, Illinois’ high-tech small businesses won 121 SBIR/STTR awards and brought in over $41 million dollars in early stage federal funding for feasibility (Phase I) and prototyping (Phase II) projects. SBIR Phase I awards of up to $150,000 make up the majority of awards whereas SBIR Phase II awards, which can be as high as a million dollars, account for over half of the total value of all awards. Increasing the numbers of SBIR I and STTR I awards is critical since these awards are prerequisites for the larger Phase II. In 2011, legislation was passed to gradually increase the size of all awards, with SBIR Phase II awards reaching $1.5 million by 2017.

Watch and Listen:

University of Illinois faculty and innovators explain the role of SBIR/STTR in technology commercialization

Chicago-based company Sciaky Inc. discusses its SBIR-funded technology that could disrupt the manufacturing of high-value parts

Learn:

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