Thank you for joining us. My name is Patricia Swayne and I am the communications specialist for the NIH SBIR/STTR central office. I am introducing our presenter today, Dr. Matthew Portnoy who is the SBIR/STTR program coordinator and director of the division of special programs. This will cover the basics of the program, touch on funding and policy updates, and will briefly discuss clinical trials. You can access the PDF in the handout tab of your Control Panel. You may also submit any questions using the questions tap. Will do our best to answer all at the end of the webinar. For your convenience, this will be recorded and transcribed and these materials will be posted on our website within the next two weeks.
Good morning everyone. It's my pleasure to present this webinar about parent grant solicitations. If you attended the webinar yesterday, I am in full disclosure, we will cover everything we covered yesterday minus a few extra slides on clinical trials. If you attended yesterday and got your questions answered, we will not take it personally if you choose to leave the webinar. We will record this and post materials within a week or two on the website.
In today's webinar we will cover these areas talking about authorization, clinical trials changes in definition and rules. We will presume you will not do clinical trials and we wont provide more in-depth information about that form. If you are and you missed yesterday's webinar, we'll post that as well within a week or two. If you missed yesterday's webinar, you can obtain material when we posted two weeks.
We will be talking about the omnibus deadlines and we should have plenty of time at the end to answer questions. If we can't get your questions, feel free to email us or call after the fact it will make sure everyone gets the questions answer.
We will begin by pitching we have an annual conference and we are coming up on our 20th annual conference I will be held in Dallas Texas. Please stay tuned to the website and social media for updates. We don't yet have registration available or the agenda finalized. We are pleased to be in Dallas centrally located so will be no more than three hours from any part of the country to get to. These are information packed conferences we put together for attendees. Stay tuned for more information on that.
Today we will talk about SBIR and STTR. The main source of information and screenshots can be seen at our website. We keep this regularly updated and you can navigate using the blue menu on the left and find all the things you need. The program you will find a particular use is the about tab. The funding tab lists all of our solicitations and resources tab which has all resources to help you put in a successful application.
What are we talking about? Are talking about the small business innovation research and small business technology transfer research. These are two congressionally mended programs which requires federal agencies to set aside a percentage of their bread budget for the sole purpose of making grant and contract orders for profit small businesses for purposes of them using the funding to do research and development and develop technology they plan to commercialize.
In our case, that has to be biomedical or biobehavioral related. SBIR funds early-stage companies . STTR
is similar and will talk about differences and doesn't require the small business to formally collaborate with a nonprofit research partner, typically a university. If you're new, we recommend the main page you will see this yellow box. Click that will take you to interactive info graphic which will step you through the program when you go to this page and hover over each of these circles you get more information and links to additional and it takes you through step-by-step it's a good place to get a lot of information in one place.
These are congressionally mandated programs. There called set-aside programs meeting we are required to set aside a portion of our budget. SBIR is 2.2% of the budget, this fiscal year and for all years beyond and I'll talk about that in a moment. Zero point 45%. We'll see what those numbers are in a minute in terms of our dollars but for the foreseeable future, those percentages should remain the same there set by law in Congress and we will add these throughout the next five years.
The SBIR program was started 36 years ago by an act of Congress in 1982. The SBIR program has four high-level congressional goals stated here to stimulate technological innovation, you small business to meet needs, foster and encourage participation and increase private sector commercialization derived from research and development.
The programs were recently authorized a year ago using public law 114 328 which he authorizes the program through fiscal year 2022. Basically, another five years from now.
STT air was started 10 years later in 1992 has essentially the same goals with the distinction the program is designed to stimulate and foster innovation with the goal to have technology transfer. They started 10 years apart, both are combined in the same cycle of reauthorization and STTR is also authorized through 2022.
As you heard me say, these programs are congressional in nature. Congress must pass laws to keep them going and make substantial changes. A year ago, Congress passed a five-year reauthorization as part of the national defense authorization act. The programs are good for five years from the current fiscal year 2022. This was a simple one line date change.
That extension did not extend important pilot programs from the last reauthorization. Those had separate distinct expiration dates and all these and some of these programs expired September 30 and are not available to apply for or for you to have access to until such time as Congress passes another law to extend or alter those provisions.
The first is SBIR direct phase 2. A relatively popular revision expired. We are not able at this time make any new awards nor can we have funding opportunities to solicit for those applications.
The direct phase 2 program is essentially closed.
For the direct phase 2 awards we did make, we will complete funding through their budget period.
The second is the civilian commercialization readiness pilot program. We also call this the SP1 program so the program also expired at the end of 2017 and we are unable to make new awards and we are not able to solicit to funding opportunities for additional applications. We will continue to fund the applications in fiscal 16 and 17 through their natural course.
Should Congress extend or reauthorize these for any length of time, we will go through those laws reading them carefully to decide and determine if any changes are required based on new laws and we will revise and reissue funding opportunities when it if that becomes available.
It won't be immediately. It takes time to evaluate the new law to revise and write new solicitation to get them on the street. It may be several months or more after the laws are passed or extended whereby we would offer these programs again.
The third bullet is in reference to the agencies having access to 3% for administrative or admin fund. This has been the main source prosody many additional things that augment the program and make it stronger such as a lot of outreach, efforts to streamline the processes and virtualization support. We no longer have access to those admin funds. The most immediate consequence of that lapse in funding, we are reducing the amount of outreach we are able to do simply because we don't have the funds to do. We will continue to do some amount of outreach to the national conference. Our own conference of course. Most other types we are civilly not able to travel due to lack of funding. We will as always entertain during webinars and we do those for many other folks and this is part of that as well.
Last provision is the proof of concept centers. That particular authority is expired and those go through their last year of funding. There is hope. There are bills circulating in Congress as we speak to extend all four of these pilot provisions and do a few other things from 1-5 years. House has a bill for five-year, Senate for one year. All of these and their status are publicly available information, you can go to the house and Senate small business committees and final versions of the bills but nothing has passed. Absent that, these are not available to us or you. Please stay tuned for what happens in Congress with extension of these provisions as well. The overall program is solid for the next five years. All aspects of the program are all fine and authorized for the next five years. The program is stable and moving forward.
The programs are trans government programs where 11 federal agencies only one of which is NIH and the small business administration which oversees the entire program. This chart shows the size of the program two years ago. In 2015, the combined program was around 2.5 alien dollars across all agencies which set aside solely for profit small business technology. If we look at the right side, these five agencies have both SBIR, STTR programs. Department of Energy, NASA and the National Science Foundation. These five agencies comprise approximately 95% of the overall programs by dollars. You can also see HHS comprises one third of the program. We are a major player in these programs.
Back to the lower right, these agencies only have SBIR programs at the amount shown here. These all have SBIR programs. You can see the range of size of agencies. This chart and slide are color-coded I would agencies are granting or contrasting which is the main two vehicles by which we make these awards. HHS while tagged as a granting agency reissue contracts. Approximately 10% of overall dollars go into those contracts. 90% go to grants. From your point of view, the program is essentially the same. To make the awards via a grant or contracting mechanism.
It's the second largest player and these are from last fiscal year. NH had a combined budget of $861 million for SBIR and hundred 21 million for STTR which is around $980 million combined. CDC has a budget of around 11 million. You can see combined in 2017, we were around $995 million. But he closed to $1 billion which is about a $200 million increase from two years ago.
When we talk about our programs, it's important to note to their other parts that have these programs. The CDC and FDA join us and CDC is -- does contracts. We advertise for them and post it on our websites. You can't find out about all the programs on the website. Will start to dig into the weeds
Arguably is the most confusing is company viability. Falls into a simple category. First and foremost, the program is only open for two for-profit businesses. We get this question quite a bit, can universities be the applicant? The answer is no. Nonprofits are not eligible to be the applicant and warty. Only for-profit. Small means 500 or fewer employees including affiliates. The vast majority of our companies are quite small, 10-20 employees. Many companies are less than 10. Many are true startups. We have a truly small business.
The work must be done in the U.S. With a few rare exceptions and those are there's a unique patient population that can only be found in foreign countries organizations. Because it can be done cheaper is not an acceptable just vacation has to be unique patient population or work to be done outside. Now we turn to ownership. The vast majority fall into the first I'm going to discuss here and is the most simple form of eligibility. SBIR, STTR, small businesses must meet greater than a majority owned and operated individuals for U.S. citizens or permit residence.
Of the vast majority of companies fall into this category. Most have one-two or small helpful handful of founders.
That's mean bullets and most of our companies fall into that.
The second, and eligible small business must be greater than 50% or majority owned and controlled by other small businesses that are themselves majority-owned by individuals who are U.S. citizens or permanent residences. We can have a firm owned in majority by one or more other firms or combination of individuals.
That is a relatively small number of the companies fall into this other firm.
We only talk about majority ownership here. By and large, we don't particularly care what the total sum is because it could be farm investment, nonprofit, we care about what the majority is. I will say that 50-50 ownership is not majority. If we have two founders one of which is a U.S. citizen, one of which is not, each owning exactly 50%, that is not eligible. The U.S. citizen would need to own 51% or more.
The last bullet is only specific for SBIR. This is venture capital. Small business can be eligible if it's majority-owned, more than 50% by multiple venture capital operating companies, hedge funds, private equity firms or any combination. There are a couple of keywords. Majority means more than 50% and multiple meeting two or more. We may have a case where we have, those firms need to be U.S. owned and operated. Each owns 30% of a small business for total of 60%. That is okay.
You cannot have one owning 60% but to each owning 30% and that is eligible. This is an even smaller number every year. Usually less than 10 or so of our firms which fall into ownership. All of this eligibility is determined at time of award. We occasionally get companies who work on their eligibility restructuring at time of application and they can do so as long as they can certify they meet the eligibility requirements at time of award.
A STTR includes all provisions shown here. And also at the additional percentages shown here. It's a partnership between small business and research. The applicant and warty is always a small business. We get this question every round. The applicant is always a small business. It requires a form of cooperative effort between the small business and institution at certain minimum mandated percentages. The small business must get percent of the budget. In small business control facilities with small business employees. The research institution must get 30% to be done in university control facilities by university employees. The remaining 3% can go into small business to the partner University or to a third or fourth party and it is not depleted by law. The key is a small business has to do a substantial portion of the facility. They cannot just sub it all out. They could lease or rent facilities from the University and that's okay. That is company controlled space and we will ask typically prewar for copies of the agreement so it's clear they have their own facilities.
Nonprofit institutions is relatively defined. It covers a lot of things like psychologies and universities. Other organizations of federal R&D laboratories, things of that nature. In STTR, the business and university need to negotiate between them in agreements and this is not something we collect at time of award we want to make sure the parties are clear about who will own what. The intellectual property and data rights belong to the small business, not the government. Through standard subcontracting people who work on it get rights to certain work they are doing as well but it belongs overall to the organization and not the government.
The overall program is structured as a vase research program. While we will not talk Daschle talk about clinical trials, SBIR phases are not related in any way, shape or form.
Phase 1 is a short feasibility site, typically under $50,000 total cost or direct cost end cost and pure profit typically six months to year. This time and budget are guidelines. They can typically ask for more, two and 5000, maybe more. Typically they ask for year. If you're thinking about asking for additional time or money, we recommend you contact and discuss plans on the budget and time. If you plan to ask for really large by the -- budgets , we strongly recommend you call an officer and discuss as we have to have topics covered for budget waivers and we have topics that cover most things that folks with ask for. We ask you to talk and get advice.
Phase 1 is a relatively small amount of money. That rolls into phase 2. Phase 2 is a full research R&D effort typically $1 million over two years. Occasionally three years. We want to make sure we appropriately fund projects so the program in a work gets done so the project gets to a certain point where it can be attractive downstream partners.
There is a regular phase 2.