SBIR Overview

Basically, you have to start with phase one which is max $100K for research and feasability then phase II - max $500K Phase IIB - is the one that requires matching funds and they can be from an investor.!

C.1. Phase I. SBIR Phase I is a six-month experimental or theoretical investigation on the proposed innovative research or activity. It should determine the scientific, technical and commercial merit, and feasibility of the idea or concept. The STTR Phase I project is a collaborative effort with a Research Institution (see definition) and is a 12-month effort. The work proposed for SBIR/STTR Phase I should be suitable in nature for subsequent progression to Phases II and III. Contingent upon the success of the effort in Phase I, the ultimate aim of the research should be to develop products, processes, devices, or techniques, that can be commercialized. The Principal Investigator should approach the SBIR/STTR Programs with the objective of bringing the project to fruition in Phase III, via a Phase II effort.

SBIR/STTR Phase I proposals should be prepared in accordance with the current Program Solicitation. Evaluation and selection criteria are described on the SBIR/STTR Evaluation & Selection Criteria web page.
A Phase I Final Report is required for the completion of a Phase I SBIR/STTR project. All Phase I Final Reports should be prepared in accordance with the Reporting Instructions. SBIR and STTR Phase I awards are fixed-price grants.
C.2. Phase II. Phase II further develops the proposed concept, building on the feasibility project undertaken in Phase I and incorporating the reassessment of scientific, technical, and commercial merit and feasibility, as well as other relevant information in the Phase II plans. Only an NSF SBIR/STTR Phase I grantee who successfully completes a Phase I project and submits an acceptable Phase I Final Report is eligible to submit an NSF SBIR/STTR Phase II proposal pursuant to that Phase I award. Phase II SBIR/STTR awards have an expected period of performance of 24 months. The SBIR/STTR Phase II program offers a supplemental program called Phase IIB; for information, reference the Phase IIB web page.

SBIR/STTR Phase I awards are fixed-price grants and will not exceed $100,000. Typically, about 80% of those grantees that receive SBIR/STTR Phase I awards will apply for SBIR/STTR Phase II awards. The SBIR/STTR Phase II fixed-price grants typically will not exceed $500,000 per award. SBIR/STTR Phase II awards normally will be made for a 24-month period of performance. (For information on Phase II, please reference Phase II Proposal Preparation.)
Reasonable fees for profit will be considered under both phases. Cost-sharing is permitted, however, it is not required, nor will it be a factor in the evaluation of a proposal.

Prior to making an award, the Foundation may require certain organizational, managerial, and financial information for various administrative purposes. The submitting small business concern will be requested at that time to provide documentation that supports the costs proposed. This information should be returned to the requesting office as expeditiously as possible (see Certification of Current Cost or Pricing Data Requirements, for specific documentation requirements).

Eligibility for Phase IIB
The Following permits a company to participate in the Phase IIB process:

1. Completion of one year of work on the Phase II grant (or special permission from your Program Officer).
2. Funding from a third party investor (reference definition of third party investor).

The third party investor must commit a minimum of $100,000. NSF will match up to 50% of funds received. The cumulative total of the grant (Phase II plus the Phase IIB-match) cannot exceed the legislative maximum of $750,000. The additional federal funds can be used only for advancing the research-related elements of the project. The third party investor funds can be used for research or other business related efforts in order to accelerate the innovation to commercialization. Market research, advertising, patent applications and refining of the business plan are good examples of uses for the third party investor funds.

A letter of commitment from the third party investor must specify the amount of the investment and the method by which the investor will provide the funding to the company. The third party funding can be cash, liquid assets, tangible financial instruments but not in-kind or other "intangible assets". A proposer may submit the original third party funding commitments submitted along with the Phase II proposal, provided new updated commitment letters were obtained.

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