Show Notes
I was pleased to have Ben Van Roo on the Acquisition Talk podcast to discuss data on the Small Business Innovation Research (SBIR) program and potential reforms. The SBIR program was created in 1982 and is currently funded with 3.2 percent of extramural R&D performed by larger agencies. Coming from a founder and VC perspective, the question Ben asked was whether an emerging tech company should be going after SBIR money.
While it is sometimes call "America's Seed Fund," Ben found that some companies will each receive tens of millions in SBIR awards year after year. These firms, sometimes called "SBIR mills," have by-and-large failed to receive significant DoD follow on contracts, indicating a failure to commercialize. The top 25 firms won $1.5 billion in SBIR awards over a six year period, or more than 20 percent of the SBIR total. Overall, Ben finds that perhaps 50-60 percent of all SBIR funding will go to incumbent firms that have sophisticated proposal writing functions.
Another 20 to 30 percent of SBIR funding goes towards firms that use third-party consultants to write their proposals. These consulting firms often employ former procurement officials who can help navigate difficult parts like large, open-ended cost volumes. This is where you'll hear "pay to play" in the SBIR world. Ben's rough estimates for these services are $3,000 to $6,000 per month, and there may be different fee structures where the consultants can receive some equity in the company or a fraction of the award if successful.
That means between 10 and 30 percent of SBIR funding is up for grabs to emerging tech companies, meaning that their likelihood to win is relatively low. While SBIR may be one of the most accessible programs to get into the defense industry, it is not one designed to transition dual-use tech firms into fielded capabilities. Ben notes that comparatively few firms that received DIU or In-Q-Tel funding also won SBIR awards, perhaps because they were more focused on growth opportunities of companies that are already commercializing (Series B or Series C).
This podcast was produced by Eric Lofgren. You can follow me on Twitter @AcqTalk and find more information at https://AcquisitionTalk.com
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