In late February, after a five-month stalemate, the US Senate reached a compromise on reauthorizing funding for the Small Business Innovation Research (SBIR) program, one of the country’s most important innovation pipelines. The House followed up on the Senate in mid-March by passing the legislation as well. Since the program’s creation in 1982, it has been celebrated as “America’s seed fund.” The SBIR program invests about $4 billion annually in commercializing scientific research produced by small businesses, intended to support the growth of innovative companies and enable the transfer of federal research to market. Though SBIR funding has produced many successes, arguments over the program’s execution made it a target for reform.
The case for SBIR reform gained traction because of two major shortcomings of the program. First, evidence suggests that some companies have received SBIR awards for decades without actually commercializing their technology, crowding out new firms in the process. Second, the program frequently grants awards to companies that cannot transition technology production to market scale, despite procurement demand from federal agencies. Together, these weaknesses in the system have allowed a fraction of incumbent companies, so-called SBIR mills, to benefit at the expense of other promising businesses.
