ARE YOU IN THE RIGHT PLACE?

Report
www.scibiz.net
SBIR 101
Converting Your Innovation Into a
Successful Business

Vivian Lauderdale, MS, MBA, RAC
Managing Partner – Scibiz Services
www.scibiz.net

The Orange County Chapters of
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The IEEE Computer Society
The IEEE Consultants Network
The Communications & DSP Societies
The American Institute of Aeronautics and Astronautics
May 23, 2005
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ARE YOU IN THE RIGHT PLACE?

Do you have an idea or concept of how something could be
done better?
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Is that idea or concept technologically-based?
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If that idea proves to be feasible, can it be used to expand an
existing business, or make a new business, or be licensed to
someone who will use it that way?

Is it your desire to successfully develop and then
commercialize products/services based on the idea?

Do you need financial support to accomplish this goal?
A neutron walked into a bar and asked, “How much for a drink?”
The bartender replied, “For you, no charge.”
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Origin, Purpose, History
SBIR
Small Business Innovation Research
STTR
Small Business Technology Transfer Research
Government agencies receiving > $100M research funding MUST set-aside

2.5% of research funds for SBIR

0.15% for STTR
Established by Congress in 1982- Small Business Innovation Development Act
Re-Authorized and Strengthened in 1992 - Small Business Res.& Dev. Enhancement Act
Re-Authorized in 2000 (until 2008) by Public Law 85-536, “2000 Small Business Act”
Contracts and Grants available
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WHAT MAKES SBIR SO IMPORTANT?
With SBIR, Inventors/Small Businesses Can:

Fund innovative, high risk, early stage projects

Acquire funding quickly

Generate CASH revenues in advance of work

Retain ownership of the technology & intellectual property

Retain full equity ownership (no stock for funds requirement)

Preserve cash for operations (no payback requirements)

Receive additional, active support for business planning, commercialization
and venture capital acquisition
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Gain credibility with marketplace and potential investors

Establish a bid-advantaged, sole-source marketing position with the world’s
largest, ready-made customer base.
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A CUSTOMER FUNDING SOURCE
SBIR/STTR
Is the most important source of
early-stage venture funding in
the U.S.A.
Biology is the only science in which multiplication is the same thing as
division
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SBIR PROGRAM-PARTICIPATING AGENCIES

SBA Has Program “Oversight” Responsibility

11 Federal Agencies Involved
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Defense (DoD - $999 million )
Health and Human Services (National Institutes of Health, Centers for Disease ControlHHS/NIH - $574 million )
National Aeronautics and Space Administration (NASA - $108 million )
Energy (DOE- $102 million)
National Science Foundation (NSF - $94 million)
Agriculture (USDA - $18 million)
Transportation (DOT - $4 million)
Environmental Protection Agency (EPA - $8 million)
Education (ED - $9 million)
Commerce (National Oceanographic and Atmospheric Administration NOAA /National
Institute on Standards and Technology NIST- $7 million)
Homeland Security ($33 million)

Almost 65,000 Awards to Date (~$10 billion)

Approximately $1.5 Billion Per Year in Funding

4000 – 5000 Projects Funded Annually
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Phases & Schedules
PHASE 1
FUNDS:
TIME:
PURPOSE:
PRODUCT:
Up to $100,000 (some less – some unofficially more)
6 months (some 9 months)
Demonstrate feasibility (can be on paper)
Report and Phase II Proposal
PHASE II
FUNDS:
TIME:
PURPOSE:
PRODUCT:
Up to $750,000 (some less-some more)
Up to two years (or more)
Test/demonstrate the concept
Report and/or prototype
PHASE III
FUNDS:
TIME:
PURPOSE:
PRODUCT:
Unlimited (no SBIR funding BUT can market sole-source to US Gov’t)
Unlimited (no graduation, no size limit)
Commercialization of the concept
Products or services for sale
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How to Start?
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REQUIREMENTS FOR PARTICIPATION
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No more than 500 employees
Organized as “for profit” firm
Independently owned and operated
51% owned by U.S. citizens/resident aliens
Principal place of business: USA
Principal investigator of SBIR must be primarily (51%) employed by
the proposing firm at time of funding (SBIR).
STTR Principal Investigator must have a formal appointment with the
proposing firm. Research institution must have formal IP agreement.
At least two-thirds of the Phase I and one-half of Phase II must be
accomplished by the proposing/prime contract firm (joint ventures and
limited partnerships are permitted)
All work must be performed in the USA
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OFFICIAL SBIR/STTR DEFINITION OF R/R&D
1.
A systematic, intensive study directed toward greater knowledge
or understanding of the subject studied.
2.
A systematic study directed specifically toward applying new
knowledge to meet a recognized need.
3.
A systematic application of knowledge toward the production of
useful materials, devices, and systems or methods, including
design, development, and improvement of prototypes and new
processes to meet specific requirements.
* Paraphrased from NSF SBIR-2000
Question: What is the fastest way to determine the sex of a chromosome?
Answer: Pull down its genes.
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Official Examples of Unacceptable Objectives*
1.
2.
3.
4.
5.
6.
7.
8.
Systems studies
Market research
Commercial development of existing products or proven
concepts
Straightforward engineering design for packaging or
adaptation to specific applications
Literature studies/surveys
Laboratory evaluations
Incremental product/process improvements
Modifications of existing products without innovative changes
NOTE: Projects determined to be unacceptable will be returned without further consideration.
* Paraphrased from NSF SBIR-2000
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PROJECTS SHOULD OFFER

Solution to agency’s problem or enhancement to agency’s mission

Early stage, innovative, technology-based idea/concept

Actual research (required to show feasibility – real possibility of failure)
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Feasibility can be determined within the funds available (>$50k-$100K)
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Prototype can be demonstrated with limited phase II funds (>500k-$750K)
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A demonstrable business opportunity for you
NOTE: THIS IS NOT A PLACE TO:

Acquire funds for plant/equipment, advertising, patents, etc.
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MAJOR AGENCY VARIATIONS

$ Value and Time of Performance Limits

Profit % Allowed
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Phase I to II Interim Funding
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Paper vs. Electronic Procurement Package
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Paper vs. Electronic Submission
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Concern for Compliance
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Research Plans (GRANTS) vs. Project Plans (CONTRACTS)
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Evaluators (contractors vs. government)
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Proposal Sections/Formats, Support Documentation, Terminology
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Submission Addresses, Dates, Etc.
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WHY PURSUE SBIR/STTR?

Supports your business plan

Supports high risk/early stage projects
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Retained ownership of intellectual property
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Provides credibility for outside investors
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Easy to win (if you do it right)
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Customer funding source
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Ready-made customer base
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Supportive of long term commercialization
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Creates a “sole-source” marketing position
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WHY DECLINE TO BID?
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Does not fit your current business planning
(not really interested in commercialization)
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Timing is wrong for the technology
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Timing is wrong for the market
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Can’s live with the funding gaps

Royalty free use of your technology
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Lack the available resources for a proposal
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Afraid of “government contracting”
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Can’t/won’t follow very precise submission rules
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Not “surfing” the Internet yet
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Project is not “REAL” research
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SBIR/STTR TIME LINE
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INTELLECTUAL PROPERTY
THE ISSUE (37 CFR, Section 401)
THE GOVERNMENT GETS:

Royalty Free Use of Technology (world wide)
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March In Rights
YOUR RESPONSIBILITY:
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Timely Reporting of Inventions
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Protect Inventions (world wide)
AVOIDANCE ACTIONS:
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Develop Keys to Technology on Your Nickel
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Report the Above in Proposal
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HOW TO PARTICIPATE (PHASE I)

Acquire procurement package (get on the mailing list, or download electronic
version from Internet) for the agency(s) of your choice.
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Review procurement package for items (elements) of interest – an opportunity.

Conceive solution(s) to the problem/opportunity of interest.
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Publish a proposal in response to the RFP element.
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RFP=request for proposal
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PA=program announcement
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RFA=request for application
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PROPOSALS/GRANT REQUESTS
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Publish & submit a COMPLIANT proposal:
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Publish & submit a compelling proposal:
- Innovative
- Feasible (within program constraints)
- Technically complete
- Internally consistent
- Cost effective
- Fits culture of the agency
- Commercially viable concept.
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Submit the same idea/proposal to more than just one agency.
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STATISTICS
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Average size of applicant firm is 12 persons
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Approximately 20% are lone individuals wanting to start their own Co.
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Approximately 50,000 Phase I proposals submitted annually
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Win ratio is one Phase I award for every 4 to 10 proposals
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Up to 33% (17% on average) at some agencies are NON-compliant
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Typically one award made for every 2 to 3 opportunity elements
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Often no proposals received for any given element
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Typically one in 2 to 3 Phase I winners will win a Phase II
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Typical Phase I winners have submitted two or more prior proposals
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BASICS OF PROPOSAL WRITING
A COMPETITIVE PROPOSAL IS:
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Compliant
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Compelling
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Consistent
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Cost Effective
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COMPLIANT
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Submit On-Time

Submit Precisely in Specified Format
- Paper/disk/other
- Page count
-Fonts/margins/line spacing/forms
-Foldouts/drawings/graphics/photos
-Certifications and representations
-Corporate brochures/information
-Appendices/add-on materials
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Submit Exact # of Copies & Forms
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Submit Original Signatures
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Submit Budget/Cost Detail
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Follow Online Given/Implied in Solicitation
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COMPELLING
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Responsive to Need
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Improvement From/Over Current Situation
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Credible plan, Personnel, Facilities and Costs
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Low Risk (at least manageable)
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Highly Readable:
- Proper English
- No jargon
- Few acronyms
- Useful figures/tables/etc.
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Evaluation Factors Clearly Visible & Well Met
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CONSISTENT
INTERNALLY CONSISTENT AND MUTUALLY
SUPPORTIVE:
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Technical Proposal
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Management Proposal
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Budget/Cost Proposal
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Appendices & Attachments
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COST EFFECTIVE
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Customer Promised What He Wants to Pay
For:
- True/best solution
- Direct labor vs. overhead/G&A/ODC
- Low risk
- Career enhancement

Worth the Risk (both business and
technical)
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Best Value (new/changing rules apply)
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EVALUATION CRITERIA
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TECHNICAL QUALITY: soundness, technical merit, and innovation
of the proposed approach and the probability of incremental progress
toward topic or subtopic solution
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CREDIBILITY: qualifications of the proposed principal investigator,
key & supporting staff, subcontractors and consultants – NOTE:
Qualifications include both the ability to perform R&D and the ability
to commercialize the results
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POTENTIAL; potential for commercial application in the government
and/or private sector and the importance of the benefits expected to
accrue from this commercialization
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COST: appropriateness of the budget proposed
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RESOURCES: adequacy and suitability of facilities, and research
environment
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SPECIFIC AIMS/OBJECTIVES
TECHNICAL OBJECTIVES

State the Overall Objective – Phase III goals
(technological and socio-economic gains)
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Provide Short List of Major Phase I Milestones
& Identify the Success Criteria for Each One
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Last Milestone is “Feasibility Demonstrated”
(best stated as a specific number/measure)
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The Objectives (your milestones) Should Map
Directly Into Your Project Plan

Relate Phase I to Phase II & Overall Objectives
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PROJECT PLANS

Organization & Management
- organization charts
- resume vignettes
- subcontractors
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Work Breakdown Structures
- discuss each with narrative
- tie to objectives

Schedules (Gantt, PERT, etc.)
- discuss with narrative
- may need Phase II as well
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Issues and Risk Mitigation
- safety, environmental, security, political issues
- probability of failure
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Question: What is the name of the first electricity detective?
Answer: Sherlock Ohms
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QUALIFICATIONS TO PERFORM
Personnel:
PI – primary contributor/ 51% employed by bidder
 Others – state what each will do and why
 Resumes/CVs – condense to just what is required (no
long lists of papers, honors, faculty positions, etc.)
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Facilities:
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Demonstrate adequacy
Positively state availability (letters, etc.)
Environmental Compliance
Subcontractors:
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Justify use and clearly describe tasks
Demonstrate adequacy for task(s)
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COMMERCIALIZATION PLANS
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Company Description: discuss principal field(s) of interest, size and current products
and sales. BEST story is to tie new technology to “growth” in current markets using
current distribution channels.
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Commercial Applications: Specify customers, specific needs which will be satisfied,
existing competition, etc.
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Competitive Advantages; Discuss advantages in application, performance, technique,
efficiency, or costs which the technology will have over existing/anticipated customer
choices.
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Markets Served: Discuss specific markets for the resulting technology, their estimated
size, classes of customers, and your estimated market share for the first five years.
NOTE: DO NOT EXAGGERATE.
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Commercialization Strategy:
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Funding Phase III: Discuss plans to raise money to support your commercialization
plan?
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Intellectual Property: Discuss plans to protect any IP
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Follow-on Commitments/Fast Track: Prove access to the funding
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BEFORE YOU WRITE
PLAN THE WHOLE THING
Phase
I
SS Inc.
Phase II
Prototype & Test
Phase III
Commercialization
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WRITING SBIRs & STTRs

Direct the proposal at research/R&D in RESPONSE to specific topic chosen.

Focus on meeting the primary evaluation factors in the solicitation:
1) Are you the right person/firm to do the work
2) Significance of the problem to be solved (especially to the agency)
3) A cogent, scientific, well-grounded plan for “how to get there from here”
4) Scientific/technical quality, innovativeness, and originality of the work
5) Likelihood of this work going somewhere (getting it to market)

Take into account, and deal with, the viewpoints of the reviewers
objections and skepticism).

When possible, write to explain the graphics rather than using prose to make the
point.

Make the proposal be direct, concise, and informative; don’t include unrelated
language or discussions. Don’t include marketing literature.

Arrange points from strongest to weakest, but put second strongest last.
(including their
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MAIN REQUIREMENTS FOR WINNING PROPOSALS
* solution to the agency’s problem
* an enhancement to the agency’s mission
* a demonstrable business opportunity for you

PROVIDE:

An Early Stage, Innovative, Technology-Based Idea/Concept

“Real” Research (required to show feasibility – real possibility of failure)

Feasibility Can Be Determined within Phase I Funding (<$50K - $100K)

Prototype Can Be Evaluated With Limited Phase II Funds (<$750K/$500K)
DO NOT TRY TO USE IT TO:

Acquire Funds for Plant, Equipment, Advertising, Patents, etc.

Do not send in an unsolicited proposal
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COST CHARACTERISTICS

REASONABLE
Does the cost exceed that which would be paid by a prudent person in the
conduct of a competitive enterprise?

ALLOCATABLE
Can all direct costs be identified and assigned to specific projects and can
all of the indirect costs be allocated reasonably among the projects?

ALLOWABLE
Are the costs identified allowed by the FARS* (31.2 has sections on
allowed, allowed with limitations and unallowed costs)?
*Federal Accounting Reporting System

CONSISTENT
Are the costs treated the same way among all of your various contracts?
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Human Subjects and Animals
Ensure you have the right certifications and
you do not forget to say so.
 For human subjects, minorities and ethnic
groups must be identified or reasons for
exclusion explained.
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PUBLISHING THE PROPOSAL

Specific Order Required for Sections/Pages
- research carefully / DO NOT DEVIATE

Simple Bindings (staples/rubber bands) ONLY
- specified in solicitation

Compliance and Detail
- Page, font & margin sizes (can extend to graphics)
- Page numbering and limits
- Order of sections
- Page formats
- Forms (especially picky)
- Originals vs. copies
- Attachments/appendices

Received on time
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Proprietary or Classified Data
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WHY PROPOSALS FAIL

Not Fully Compliant
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Not an Innovation / Research
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Inadequate Project Work Plan
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Unclear or Invalid Concept
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Unrealistic Scope for Budget and Time Constraints
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Not Relevant to Agency Mission/RFP Element
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Inadequate Phase III Commercialization Potential
Referee report: “This paper contains much that is new and much that is true.
Unfortunately, that which is true is not new and that which is new is not true”
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FINAL RECOMMENDATIONS
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Propose SBIR/STTR as a strategic opportunity
to grow a business which
-Fits the underlying intent of Congress
-Fits the award/funding amounts available
-Fits the required schedules & phased structure

Check out your idea with the customer BEFORE the procurement
package/RFP comes out.

Use EXTREME care in submitting a compliant proposal.

Ensure that the evaluation criteria are visible and well met.

Tailor the proposal/grant request to the culture of the agency.
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Have your proposal critically reviewed & respond to the critiques.

“If at first you don’t succeed try, try again.”
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Murphy’s Ten Laws for Experimentalists
In a scientific experiment
1)
if something can go wrong, it will do so just before your grant is up for review;
2)
if the reading on your detector is correct, then you have forgotten to plug it in;
3)
if several things can go wrong then they will do so all at the same time;
4)
if nothing can go wrong with your experiment, something still will
5)
left unto itself, your experiment will go from bad to worse; on the other hand, if you pay attention
to the experiment then it will take three times longer to complete than you thought it would;
6)
nature is both subtle and malicious (Murphy stole this one from Albert Einstein);
7)
a straight line will never fit your data, and using a wiggly line will result in the rejection by referees
of the publication of work;
8)
if you make a great discovery today, you will find a major error in your methods tomorrow
(experienced experimentalists call this effect “here today, gone tomorrow”);
9)
in contrast to a radio, banging your apparatus when you are at peak frustration will not fix it but
permanently break it (for this reason, it is important for experimentalists to remain calm at all
times);
10)
when your experiment is just about to succeed, you will run out of grant money.

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