Introduction
Can a university or non-profit directly apply for SBIR funding? The short answer is no. SBIR (Small Business Innovation Research) grants are designed specifically for U.S.-based, for-profit small businesses. These entities must meet specific criteria, such as size limits and majority domestic ownership, to be eligible. However, that doesn’t mean universities or non-profits are left out of the process.
In fact, research institutions—including universities and some non-profits—play a vital role in many SBIR and STTR (Small Business Technology Transfer) projects. While they can’t apply directly for SBIR funds, they can collaborate as subcontractors or formal partners through STTR grants. These paths open opportunities to contribute expertise, access facilities, and support commercialization efforts that align with federal R&D priorities.
This article explains how these institutions can legally and effectively participate in SBIR and STTR projects, and what both sides need to know to build a successful partnership.
Why Only Small Businesses Can Apply for SBIR
The SBIR program is exclusively available to U.S.-based small businesses. To be eligible, a company must meet the definition of a Small Business Concern (SBC) as outlined by the U.S. Small Business Administration (SBA). This strict definition helps ensure that federal research funding supports innovation in the private sector and contributes to economic growth.
To qualify as an SBC under SBIR rules, a business must:
- Be organized for profit. Non-profits, academic institutions, and government entities are automatically excluded.
- Be at least 51% owned and controlled by U.S. citizens or permanent residents, or by other SBCs that meet the same criteria.
- Have no more than 500 employees, including affiliates.
- Be physically located in the United States and conduct business primarily within the U.S.
Only the applying business can receive SBIR funding directly. The principal investigator (PI) leading the research must also be primarily employed by the small business—not a university or non-profit—at the time of award and during the project. This requirement helps ensure that the business, not an outside institution, remains the central innovator.
Although these rules limit who can apply, they do not prevent universities and non-profits from contributing meaningfully—as we’ll explore next.
How Universities and Non-Profits Can Participate
Even though universities and non-profits cannot apply directly for SBIR funding, they play an important supporting role in many projects. These institutions can participate in two main ways: as subcontractors in SBIR projects or as formal research partners in STTR awards.
As Subcontractors Under SBIR
In SBIR projects, small businesses often need specialized research capabilities, facilities, or technical expertise they don’t have in-house. Universities and non-profits can fulfill this need by serving as subcontractors. This means the small business includes the institution in its project proposal and allocates a portion of the funding to them.
However, there are limits:
- In Phase I of SBIR, no more than one-third of the total work can be subcontracted.
- In Phase II, up to 50% of the R&D effort can be outsourced.
These limits ensure that the small business remains the central innovator. Universities may be involved in designing experiments, analyzing data, or providing technical support, but they cannot lead the project or receive the majority of the funding.
As Partners Through STTR
The STTR program is specifically designed to foster collaboration between small businesses and research institutions. In an STTR project, a nonprofit research institution (typically a university or federally funded R&D center) is a required partner.
Here’s how STTR partnerships work:
- The small business must perform at least 40% of the work.
- The research institution must perform at least 30% of the work.
- The remaining work can be shared or further subcontracted.
Unlike SBIR, STTR allows the principal investigator to be primarily employed by either the small business or the research institution, giving universities more flexibility and influence.
STTR is often a better fit for projects that originate in academia or require deep scientific expertise. It provides a formal structure to move lab innovations into commercial products with the help of an entrepreneurial partner.
Structuring a University or Non-Profit Collaboration
For an SBIR or STTR proposal to be successful, the relationship between the small business and the university or non-profit must be well-defined. That means clear communication, aligned expectations, and precise documentation—especially around the scope of work and intellectual property (IP) rights.
Developing the Scope of Work
A strong proposal outlines exactly what each party will do. The small business should define the innovation, lead commercialization efforts, and manage the overall project. The university or non-profit typically provides technical services, lab work, or domain-specific research.
Key items to agree on and include in the proposal:
- Division of labor: Who is responsible for each task?
- Budget allocation: How much funding goes to the subcontractor or partner?
- Deliverables and timelines: What outputs are expected and when?
In an STTR proposal, a Letter of Commitment from the research institution is typically required. This letter confirms the institution’s role and support, and it’s a critical part of the application.
IP and Commercialization Considerations
One of the most common friction points in SBIR and STTR collaborations is intellectual property. It’s essential to clarify who owns what—before the project begins.
Here are key points to address in an IP agreement:
- Ownership of pre-existing IP: If the university brings patented technology or data, will the small business get a license?
- Newly developed IP: Who will own or share rights to inventions or data developed during the project?
- Commercialization rights: Can the business license university-owned technology? Will there be royalties or milestone payments?
STTR projects, in particular, often begin with university-originated inventions. In these cases, formal licensing agreements or options to license should be in place to avoid delays in moving forward with commercialization after funding is awarded.
Common Pitfalls and Best Practices
While collaborations between small businesses and universities or non-profits can be highly productive, they can also falter without careful planning. Here are some common mistakes to avoid—and tips for ensuring smooth and successful partnerships.
Common Pitfalls
- Exceeding subcontracting limits: A frequent error is allocating too much of the work or budget to a university partner. Review the SBIR or STTR guidelines closely to stay within allowed percentages.
- Unclear division of responsibilities: Vague scopes of work or overlapping tasks can lead to duplicated efforts or missed deadlines. A detailed work plan can prevent confusion.
- Late-stage partnership formation: Waiting until the proposal is nearly finished to involve a university partner can lead to rushed or incomplete documentation, hurting the application’s competitiveness.
- Misunderstanding IP policies: Each university or research institution has its own rules for handling IP and technology licensing. Failing to align on these terms early can delay commercialization or even derail a project.
Best Practices
- Start discussions early: Successful partnerships often begin months before the proposal is due. Use that time to build trust, align goals, and plan logistics.
- Document everything: From letters of commitment to IP agreements, put all terms in writing. This protects both parties and strengthens the proposal.
- Communicate regularly: Set expectations for regular check-ins and updates. Clear communication helps keep the project on track and builds long-term relationships.
- Involve tech transfer offices: When working with a university, loop in their tech transfer or sponsored research office early. They can help with licensing, contracts, and proposal approvals.
- Match capabilities to needs: Don’t bring in a research partner just to meet a requirement. Instead, select collaborators whose expertise genuinely enhances the project’s innovation and execution.
Finding and Forming Partnerships
Whether you’re a small business looking for a research partner or a university seeking to engage in SBIR/STTR work, building the right relationship is essential. These collaborations are more than transactional—they require shared goals, mutual respect, and operational clarity.
For Small Businesses: Approaching Academic and Non-Profit Partners
If you’re an entrepreneur or founder, here’s how to connect with potential institutional collaborators:
- Start with existing contacts: Former professors, alumni networks, or past colleagues can be excellent entry points.
- Attend tech transfer events and university-hosted pitch sessions: Many institutions host events to connect with industry.
- Use federal and agency directories: Some SBIR/STTR agencies publish past awardee lists and databases where you can identify frequently involved research institutions.
- Craft a value proposition: Be clear about what your company is developing, how it aligns with the institution’s research interests, and what role you envision for them.
Be professional, specific, and early in your outreach. Institutions often have long lead times to review proposals and approve sponsored projects.
For Universities and Non-Profits: Attracting Business Collaborators
If you’re a university or non-profit research center, positioning yourself for SBIR/STTR involvement involves outreach and visibility:
- Publicize your capabilities: Maintain an updated list of core research strengths and facilities that are available for external collaborations.
- Engage with regional economic development organizations or SBIR resource centers: These groups often connect innovators and institutions.
- Designate a point of contact: A clearly listed liaison—often within the tech transfer or research office—can make it easier for small businesses to initiate conversations.
- Create template agreements: Having a standard non-disclosure or research agreement can simplify the onboarding process with new partners.
Whether you’re a small business or an institution, prioritize partnerships where the mission alignment is strong and both sides are committed to long-term outcomes—not just proposal success.
Final Thoughts
While universities and non-profits can’t apply directly for SBIR funding, they play a critical role in the innovation pipeline. Through subcontracting relationships in SBIR projects or formal partnerships in STTR awards, these institutions bring technical expertise, research infrastructure, and scientific credibility to the table.
Small businesses benefit from this collaboration by strengthening their proposals, filling technical gaps, and accessing top-tier research environments. Universities and non-profits, in turn, gain opportunities to commercialize research, create real-world impact, and support economic development.
The key to making these partnerships work is clarity—clear communication, well-defined roles, and early coordination on IP and scope of work. With those elements in place, the combination of entrepreneurial drive and academic depth can lead to powerful, fundable innovations.
If you’re a small business looking for a competitive edge or a research institution eager to translate ideas into impact, SBIR and STTR offer a proven path to meaningful collaboration.