SBIR’s 22:1 Return—and Fight for Survival

A 22-to-1 Payoff for Taxpayers

For four decades, a little-known federal grant program has quietly delivered outsized returns to the American economy – and to U.S. taxpayers’ coffers. The Small Business Innovation Research program, or SBIR, was created in 1982 with a simple premise: fund high-risk, high-reward research by small companies, and let their ingenuity develop new technologies. By all accounts, that experiment has paid off spectacularly. A comprehensive Defense Department study found that every $1 invested in SBIR and its sister program STTR generated about $22 in economic output, amounting to $347 billion in total output from roughly $16 billion in funding(**). Those SBIR-backed innovations didn’t just boost growth – they also generated over $39 billion in federal, state and local tax revenues, more than 2.7 times the program’s cost. In other words, SBIR has more than paid for itself, while spurring breakthroughs from the labs of small businesses across the country.

Officials and researchers characterize SBIR’s economic impact as nothing short of remarkable. Data from the U.S. Small Business Administration shows that through 2019 the program made over 179,000 awards, totaling $54.3 billion in grants and contracts to small firms(**). These investments have fueled start-ups and research ventures working on everything from new medicines to cutting-edge electronics. According to the Pentagon’s latest economic impact analysis, the program ultimately supported 1.5 million jobs and $111 billion in labor income, alongside that 22-to-1 return on investment for taxpayers. In the words of advocates, SBIR may be “the most successful innovation program in government”(**) – a rare federal initiative that not only fosters groundbreaking technology but also directly returns money to public coffers through economic growth.

From Lab to Market: 40 Years of Breakthroughs

Behind those big numbers are hundreds of success stories and household names. SBIR has been the spark for inventions that many Americans rely on daily. Early SBIR grants helped develop the CMOS image sensor found in every smartphone camera today, as well as key components of GPS satellites-on-a-chip and even the mRNA vaccine technology used to fight COVID-19. Over the past 40 years, the program’s competitive grants have nurtured companies that went on to transform industries. Qualcomm (which pioneered mobile communications), Symantec (cybersecurity), Amgen (biotech therapeutics) and even the maker of the Roomba robot vacuum (iRobot) all received formative SBIR funding in their early days. These firms grew from scrappy startups into industry leaders – and they are far from alone. More than 800 companies that got SBIR awards have eventually gone public, and over 2,000 SBIR-supported ventures have been acquired by larger corporations, according to tracking by industry groups.

The SBIR pipeline has also contributed to America’s leadership in medicine and science. Between 1996 and 2020, 99 new drugs – about 12% of all novel U.S. drug approvals – originated from companies that received SBIR or STTR funding. That includes some “priority review” drugs that address urgent health needs, 16% of which were developed by SBIR-backed firms. Such results underscore how a modest federal program for small businesses has punched above its weight, fostering breakthroughs in health, defense, and technology that might otherwise have languished. The program’s structure – competitive awards based purely on technical merit – has been credited with its high success rate. Agencies select the most promising proposals from America’s entrepreneurs, rather than picking favorites based on politics or company size. “SBIR has had tremendous impact on America’s innovative economy,” one recent analysis concluded, producing “an outsized stream of innovations, job creation, tax revenue and high commercialization” over the decades.

A Final Hour Fight to Save SBIR

Now, after fueling 40 years of innovation, SBIR itself faces an uncertain future. The program is set to expire today, September 30, unless Congress acts to reauthorize it. By law, federal agencies cannot continue making SBIR awards without periodic reauthorization, and a previous extension in 2022 only carried the program through this fiscal year(**). Lawmakers on both sides of the aisle generally praise SBIR’s track record – it’s not often one finds a government initiative with such a clear return on investment – yet agreement on the program’s renewal has been delayed by debates over proposed changes. One Senate proposal, the “Innovate Act,” has raised alarm among small business proponents, who argue that altering SBIR’s competitive formula or capping repeat winners could “do grievous harm” to what has been a uniquely productive engine of innovation. Supporters point out that SBIR’s most successful participants have indeed commercialized their research at high rates, delivering not just prototypes for government use but follow-on products and even billion-dollar commercial markets.

As the deadline looms, entrepreneurs and innovation advocates are making a quantified case for saving SBIR. The facts, they say, are hard to ignore: a 22-to-1 economic payoff, hundreds of notable companies launched, and a program that effectively returns tax dollars to the Treasury multiple times over. All of this has been achieved with relatively small grants (Phase I awards are often around $150,000, Phase II around $1 million) spread across thousands of ventures, many of which never had other sources of early R&D funding. In an era when global competitors are investing heavily in technology, the potential sunset of SBIR has stirred concern that the U.S. would lose a quiet yet vital innovation pipeline. “SBIR has been a vital and essential part of the federal government’s innovative ecosystem for over 40 years, but its success shouldn’t be taken for granted,” wrote Jere Glover, executive director of the Small Business Technology Council, urging Congress to keep the program running in its current form.

Today, on what could be SBIR’s last official day, that warning carries a special poignancy. The story of SBIR is ultimately a rare good-news tale in government: a program that turned modest public investments into transformative technologies, thriving businesses, and robust economic returns. Whether that story continues now depends on decisions in Washington. For the scientists, engineers and entrepreneurs whose ideas have been nurtured by SBIR – and for an American public that has unknowingly reaped the benefits – the hope is that this unsung innovation engine will not be allowed to sputter out after driving so much progress. The numbers speak for themselves, and they argue that SBIR is an engine well worth fueling for many years to come.