By Ryan L. Bays

The National Science Foundation must have a set of back laboratory experiments which proves that once again the new solicitation for the NSF SBIR is upon us. And with the new solicitation, comes another opportunity for Georgia's small businesses to grow those dormant ideas - ideas waiting to be tested and in need of that elusive yet vital part of the commercialization process - seed money.

When one typically thinks of seed money, they think angel investors or venture capitalists. Individuals and firms looking to buy in to a business idea at some early phase of growth and then profit on their risk at an exit event. This is certainly not the territory of federal government scientists. Or is it?

The SBIR program is precisely designed to play the role of angel investor, further explained in the words of the program founder Roland Tibbets, the program is meant to "provide funding for some of the best early-stage innovation ideas -- ideas that, however promising, are still too high risk for private investors, including venture capital firms." Ideas that have government application and commercial potential.

First, some background:

The government recognized decades ago that innovation is not the sole domain of large corporations; and in fact, the majority of innovation happens on the other end of the business pendulum, with individual scientists, inventors, and small businesses. This fact coupled with a rapidly shrinking federal workforce alerted the government that our nation would be faced with a shortage of new marketable ideas. To fill this growing gap, the government created the SBIR program as a means to promote innovation at the small business level.

SBIR is an acronym which stands for Small Business Innovative Research. As the name suggests, the program was developed specifically for small business concerns - firms under 500 employees - and is meant to promote innovative problem solving on some of the nation's most pressing technological challenges.

The SBIR program rests under the Small Business Administration; however the rubber meets the road at the 11 federal departments authorized to spend SBIR Research and Development dollars. A list of those agencies should give you an idea of the breadth of technological problems the nation faces. Some agencies, such as the Department of Defense and the Department of Homeland Security, seem obvious members, but others, such as the Department of Agriculture, remind us that technological hurdles exist in areas outside of military and law enforcement.

The 11 departments are:

• Department of Agriculture
• Department of Commerce
• Department of Defense
• Department of Education
• Department of Energy
• Department of Health and Human Services
• Department of Transportation
• Environmental Protection Agency
• National Aeronautics and Space Administration
• National Science Foundation
• Department of Homeland Security

Which brings us to the latest SBIR release from the National Science Foundation. Keep in mind that each department operates on their own SBIR release schedule so it is important to monitor sites such as www.sba.gov to find out what solicitations are planned and what phase of the process they are in.

Let's look at the National Science Foundation's new SBIR solicitation (NSF 09-541) for an idea on how the process unfolds. First we see that the solicitation is open and proposals are due on all topics by 5:00pm on June 9th, 2009. Next we see that the NSF proposal is asking for R&D topics under the following four broad categories:

• Biotech and Chemical Technologies
• Education Applications
• Information and Communication Technologies
• Nanotechnology, Advanced Materials and Manufacturing

Under each of these, are dozens of specific subtopics. For example, a scan of the Biotech Technologies top category reveals an interest by NSF scientists to explore subtopics such as Biosensors, Bioenergy, Tissue Engineering and Repair, and so on.

So if you are a high tech small business concern, and you happen to have an idea on how to develop and commercialize a biosensor, you need to understand the nuts and bolts of the SBIR proposal process.

The process is broken down in to three phases.

Phase I (the NSF example above is a Phase I release) is essentially the feasibility study; the government is willing to give excellent ideas up to $150,000 to move forward. Walking through the details of the proposal is beyond the scope of this article, but as a point of reference, according to the SBA, "an SBIR Phase I proposal must describe the research effort needed to investigate the feasibility of the proposed scientific or technical innovation. The primary objective of the Phase I effort is to determine whether the innovation has sufficient technical and commercial merit for proceeding into a Phase II project. A secondary objective is to assess potential commercial feasibility of the proposed work."

With that context, Phase II is the prototype project; the government is willing to give proven feasibility studies up to $500,000 to move forward.

Phase III is commercialization - by this time your prototype has significant commercial potential and you must secure outside financing to advance.

In summary, the SBIR program is a government funded stepping stone process for small businesses to launch and grow an idea. That being said, do not be lulled in to thinking that everyone who applies under a subtopic, will receive seed money for their feasibility study - the SBIR Phase I process is fiercely competitive and only the most well constructed and frankly, well presented ideas will receive that breath of life called investment dollars.

Ryan L. Bays is with Outsourcing Advisory Group - Kennesaw, Georgia