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Home Back Issues No. 29: Grant Clinic: What Are Pros, Cons of Seeking SBIR Grant vs. the RO1?

May 17

No. 29: Grant Clinic: What Are Pros, Cons of Seeking SBIR Grant vs. the RO1?

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What Are Pros, Cons of Seeking SBIR Grant vs. the RO1?

Reader Question: I have been told that a research project I would like to submit is appropriate for the Small Business Innovative Research grant mechanism. What are the advantages and disadvantages to submitting an SBIR application rather than an R01?

Expert Comments: Most of us who seek grants are asking for funding to study one or more basic scientific questions that may or may not have direct implications for translation. Translation is the current expression that is used for what used to be called “bench-to-bedside” or “technology transfer”. These areas are sometimes termed “applied research” or “industrial research”.

SBIR funding can be utilized for many fields and specialties of research, but to focus our discussion I will consider here the “health and medicine” area with emphasis on National Health Institute (NIH) as funder.

Keep in mind that all proposals are about public-health concerns, no matter how basic they may be: If they don’t address a health problem that is of concern in the United States, Congress has no interest in funding it, and the NIH is quite sensitive to the wishes of Congress, as you might imagine.

Thus, all science, from the bottom up, is useful to the extent that it eventually leads to an intervention, whether pharmaceutical, surgical, device-driven, or behavioral.

Translation is the watchword at NIH these days, and with excellent reason: If there is no intervention that is sustainable (i.e., that outlasts the funding period), there isn't much point to any of it. So, NIH is very concerned about sustainable interventions and holds the attitude, correctly in my opinion, that if nobody’s making money there’s no intervention.

The SBIR and STTR (Small Business Technology Transfer) mechanisms address this issue. The focus of these awards is slightly different from that of the research mechanisms such as R01 or R21 or Program Projects in that, with the SBIR and STTR mechanisms, the researcher is interested in testing a particular product for the purpose of marketing it. Thus, if one developed a new blood-pressure monitor, physicians would want to know that the monitors had been validated in a patient population.

The product may be a medical device, a patentable animal model, or a behavioral intervention that can be packaged, but the essence of the SBIR and STTR award mechanisms is that they are expected to lead to something useful, marketable and profitable.

Most researchers tend not to think this way (although in some fields, such as the hunt for the magic gene that will cure a particular illness, that isn’t the case, by a large margin). But you can see that, in the interests of an intervention that is sustainable, one that is available to the public for its intended purpose (and presumably has been validated by the science for which you are requesting funds), capitalism is on the side of the angels.

A project that is suitable for a research grant — say, an R01 — may differ only slightly from one that is appropriate for the SBIR/STTR awards. Here is an example: Several years ago, I was funded with an RO1 to study the effect of controlled breathing.

We were using a particular device — call it “RR” (respiration reducer) — but we were not testing the effects of the RR in particular, but rather the scientific question. RR just happened to be one of several devices we were using; the focus was decidedly not on that particular one.

If a researcher wanted to work with the company that manufactures the device, that is a slightly different focus, and is thus suitable for an SBIR or STTR. (The differences between the SBIR and STTR are very subtle (see http://grants.nih.gov/grants/funding/sbir.htm).

One caution, which sounds like a no-brainer: Start up a company, submit the grant application, get funded, go into business, and retire a whole lot better off financially than your university or hospital pension is going to leave you. But know that the business part is problematic. Most of us are in this field for a reason, and running a business is a very different proposition than devising and conducting experiments. I have ideas I’d like to commercialize, but have realized that I would be no good at the business end. Plus, I like what I’m doing.

Finding a business person who wants to partner up with you is a possibility, but I have found this to be difficult as well, although not impossible.

If you decide to pursue the SBIR route, I wish you good fortune. Without these efforts, we lose the benefit of all the good work that came before.

Comments by William Gerin, PhD, P.I. e-Alert's chief grants consultant, professor of biobehavioral health, Pennsylvania State University, and author of Writing the NIH Grant Proposal: A Step-by-Step Process (SAGE Books, 2006)

The preceding information is of necessity general in nature and may not apply to every case: obtain professional advice for your particular situation.

This eAlert is brought to you as an informational training tool by the Principal Investigators Association, which is an independent organization. Neither the eAlert nor its contents have any connection with the National Institutes of Health (NIH), nor are they endorsed by this agency. All views expressed are those personally held by the author and are not official government policies or opinions.

Comments (13)
Collegiate Pofessor
written by G. Dressler, May 18, 2010
One thing to know also is that SBIR grants are significantly less money and are usually only 2 years compared to the 4-5 year R01. At least when I was review for NIH the SBIR were not percentiled among with R01s so the funding rate may be higher, it all depends on the amount of money the institutes have laying around. SBIRs also require a business plan and market review, something that we as PIs are not used t doing. As an academic, your institutions almost always prefer the R01s because they come with the indirect costs attached. That is a big plus for your Department and School.
VP Research, William Beaumont Hospital, Royal Oak, MI; Assoc Dean Research, Oakland Univ. William Beaumont School of Medicine
written by David Felten, May 18, 2010
In my experience, there is a HUGE difference between an RO1 and an SBIR. While both types of grants may seek scientific information, the former is an academic exercise, peer reviewed almost entirely by academics who have very little business experience, and the latter is peer reviewed by entrepreneurs with scientific expertise. The SBIR is not a grant to expand our scientific knowledge- it is a mechanism for launching a serious business- the business plan is more important than the scientific mechanistic discussions. Unfortunately, most academics are virtually clueless when it comes to setting up a business or seeking funding, but are reluctant to let go of their IP idea to anyone other than themselves. The SBIR needs to lead to a viable product (not just an idea or a journal publication) that can quickly enter the marketplace (hence the translational aspect) and make a profit. The RO1 is subject to very intense scrutiny (and criticism) for a variety of perceived flaws, usually along the lines of typical academic naysaying and "why dont you- yet but", while the SBIR is subject to intense scrutiny (and criticism) for having every i dotted and t crossed in establishing the business plan and executing it. This comparative topic would make an excellent round table discussion from people who have been successful in each, and from some who have been successful in both.
CETO, Bishanti Corporation, - An advance Technology Company, Portland, OR, Formerly Professor, Center Director and Head of School
written by Ashutosh Sharma "Bhraguvanshi", May 18, 2010
Professors Gerin, Dressler and Felton have provided excellent explanation as to the difference between the RO1 and SBIR grant mechanisms. I would add a little more to it as RO1 and SBIR/STTR are two entirely different mechanisms of funding and are designed to target unique audience: academic and commercial entrepreneurial. SBIR addresses a well defined need of the agency supporting it while as the ROI uses the broad scope of the agencies mission. Both mechanisms must respect the congressional wish - like it or not. As an academic RO1 will be a collaboration lead by you while as the SBIR/STTR projects must be led by commercial researchers. RO1 almost certainly will not deliver any product while as a successful SBIR or STTR must develop a marketable product/piece of information, etc, which is of use to the funding agency.
In my experience, statement by Professor Felton is a bit misleading as the SBIR is not a mechanism for launching business; rather it is a mechanism to support/encourage business or individuals to use their base and expertise to solve agency specific problems in technology and product need. Strictly speaking you do not have to be a scientist/engineer to write, bid and win a SBIR grant while as for applying for the RO1 you one must have a university position. RO1 on the other end simply supports the curiosity of human mind to explore and understand new concepts and applications of existing ones, and develop almost nothing as a commercially viable product. RO1 time frame of work delivery is flexible and is decided by the project. SBIR and STTR program work schedules are time bound and must follow the Phase 1, Phase II and Phase III approach which are well defined and documented (visit www.sbir.gov for details). With right product and agency SBIR/STTR can be very rewarding experience. It can allow several million dollars support, in multiple stages, as research and product supply contracts.
written by Marcy Harris, May 18, 2010
Collegiate Professor--Our company has received a number of SBIR grants. They also allow overhead expenses in SBIR's and the rates are determined, in our case, by DCAA and contracts since we are Defense Contractors.

Will someone please fill me in on what an RO1 or R 21 is? We are currently working on a very large project with University involvement. Perhaps it might be appropriate to look to one of the above for funding. The needs exceed the SBIR/STTR likely limits.

Direct approps from Congress also can work out very well for either a University or Business if the project has implications that will benefit Americans as a whole. Check it out with your local Representatives and Senators.
written by Marcy Harris, May 18, 2010
CETO--We've had a number of SBIR's and have yet to submit a business plan beyond just a short statement regarding a problem the agency is having, what is wrong with the current approach and how our approach might be better to solve the problem. Then a budget is submitted showing how the money will be spent. A little info on the technical team is usually requested but virtually none on the management team nor on the ways we intend to commercialize. This might be different in other agencies. Our work has been with DOE and DOD.
written by Marcy Harris, May 18, 2010
I think I answered my own question. Seems R01's and R-21's are only available to those seeking NIH funding and that would not be us. If you have other information please advise.

President and CEO, MetaMedia Training International, Inc.
written by Thomas Held, May 18, 2010
We have received a number of SBIR Phase I, Phase II, and Fasttrack grants through NIH. Commercialization is a major factor and a strong business plan is required to obtain Phase II funding. We're in the process of commercializing/marketing two products and that is a difficult undertaking. We have found that the key to a successful grant application is to concentrate on the significance of the problem, strong principle investigator(s), and a true innovative approach to the problem. Peer reviewed publications do not appear to be a factor since they contribute little to the bottom line (note-profits) of small businesses.

I would also like more information about R01 and R21 since we are not familiar with those programs. My understanding about the STTR program is a requirement to team with an academic institution for content and subject matter expertise. I believe that eventual ownership of the final program would pose an issue.
written by Joel MacAuslan, May 18, 2010
We have had several SBIR & STTR projects, and a few others, almost all from NIH. A few comments that might be helpful:

(1) The contrasts in this article are quite specific to NIH. NIH supports work through grants, even for SBIRs/STTRs. It does not expect to procure products from these projects (very much UNlike DoD).

(2) The STTR mechanism can be a good solution to some of the personality-type/career choices here. Specifically, it allows the PI to be an academic even while the small business receives & administers the grant and has the commercialization responsibility. (From our own experience, which has been mostly successful & productive, with a few academics working with us over many grants, I think of STTRs as "Rent-a-PI"! ;-)

(3) The NIH funding limits for SBIRs/STTRs have been substantially raised, although they are still -- usually -- somewhat smaller than R01s, and the time interval is still usually 3-5 years for both Phase 1 & Phase 2 combined.

(4) The funding rate for Phase 1's is usually 20-30%, about 2x that of R01's, although this varies by Institute and somewhat by year. The rate for the Phase 2's that follow them is typically 40-50%. (Thus, a small-budget entry to the SBIR world is easier than for R01's, although the overall probability of funding for all 3-5 years is similar to that for a full 5-year R01, or perhaps a little less.

(5) Universities have normally collected full overhead (indirect costs) from subcontracts/consortium agreements on our grants. Recently, however, some have taken to subsidizing Phase 1's by collecting no overhead on them. (I do not know if this reflect pressure from NIH.) They still expect to get the overhead for the much larger Phase 2's. The big different for them is that they only administer -- and collect overhead on -- say, 1/3 of the total budget for a single SBIR/STTR, whereas they would typically handle the entire budget for a single R01.

(6) Some for-profit companies do get R01 funding, though I do not know the details. (We have never tried.) The NIH party line is that they support this; however, I do not know if the external peer reviewers, who are overwhelmingly academics and who act as gatekeepers, hold companies to higher standards than universities when it comes to R01s.

I hope this is useful.
Professor of Biomaterials at a University Health Science Center
written by Barry K. Norling, May 18, 2010
I'd like to add a couple of clarification to the previous comments. SBIRs and STTRs are commercial enterprise based grants. The differences are usually boiled down into one consideration for an academic. An SBIR PI must be at least a 51% employee of the company. This limitation can present severe roadblocks for academics who may wish to work with a company on an SBIR. The primary problem is usually the university's policy on retention of tenure when one goes part-time. For the STTR, a faculty member may be the PI.

Second point: unlike RO1 and R21 grants SBIR and STTR grants have three phases. Phase 1 -- with a limited time period and smaller funding limits -- is usually a "proof of concept" period. Thus it is remote from considerations of commercialization although there needs to be clear evidence that success would lead in that direction. Phase 2 involves a longer time period and substantially higher funding limits. This is the development phase when the proven concept is refined to the point that it is commercializable. Phase 3 is the commercialization phase and --somewhat paradoxically -- involves no federal funding.
Research Director, Abratech Corp; Prof. Emeritus, UCSF
written by Don L. Jewett, May 18, 2010
Here are some ideas not mentioned so far:
1. Check with the Program Officers about funding rates for R01, and SBIR. A small Institute may have committed in prior cycles to several large Phase II's, and thus might not be able to fund a Phase I.
2. The SBIR application length is now 6 pages. R01 is twice this.
3. The Phase I SBIR allows "proof of principle" which will NOT get funded as an R01, since the Study Section only supports "sure things".
4. The Phase I does not need an extensive business plan, but the plan for a Phase II can be several pages.
5. An SBIR award allows for preferential purchases from Govt. Agencies.
6. Commercialization of an idea may spread the technique FASTER than waiting for others to cite and then start using a really good idea.
Professor, Vanderbilt University
written by Mark Boothby, May 18, 2010
"Thus, all science, from the bottom up, is useful to the extent that it eventually leads to an intervention, whether pharmaceutical, surgical, device-driven, or behavioral."

Good heavens, in seeing this line written by a PhD in relation to the overall scope of NIH funding, I am reminded of the old line from Pogo: "We have met the enemy and they is us." Sadly, some in the NIH are leaning too strongly toward the mistaken notion embedded in this sentence, but oddly enough even Congress tends to recognize the essential need for basic investigations that, individually, might not lead to an intervention. [A recent report from the Majority Staff of the Joint Economic Committee of Congress is a good point of reference on this front.]

At the time of inception from basic curiosity, the aggregate of research has proven to lead to most of our biggest interventional breakthroughs, and the government is far more open to funding such curiosity-driven research that leads either to our biggest breakthroughs, or nowhere other than training further scientists.

The R01 (and exploratory / developmental R21) represent investigator-initiated, non-programmatic grants the reflect the insight that central directorates of science (or industry) simply can't predict what the breakthrough ideas will be, or even the key next steps in solidifying fundamental insights.

The SBIR/STTR set-aside program (5% of NIH, NSF, etc research budgets by law) exists to catalyze cases where a concept could be taken to the step of generating a product or service that a company could sell, in those cases (far far less common in medical arena, where the costs of clinical trials, FDA regulatory oversight, etc are so high) where tech transfer mechanisms & partnership with biotech companies or pharma / device manufacturers won't work or seems less desirable.
CEO & General Manager, SBIR Resource Center® *
written by John Davis, May 18, 2010
CEO & General Manager, SBIR Resource Center® *
written by John Davis. 18 May 2010


I hardly know where to begin considering all the misinformation being presented on this one.

OK. Lets just start with the original question: “What Are Pros, Cons of Seeking SBIR Grant vs. the RO1"

ANSWER: The RO1 is an NIH-peculiar designation for one class of grant usually focused on investigator-initiated basic research projects to advance medical, bio-science or human services technologies. There is no requirement for, or expectation of, presenting a business plan or pathway to market for these grants as they presuppose (but are not limited to) applicants from academia and non-profit research organizations.

The SBIR Phase I/II carries the R43/R44 designation and STTR the R41/R42 designation. These classes of grant are intended to fund investigator-initiated applications research which, if successful, SHOULD, and are EXPECTED TO, lead to commercialized products or services in the medical and/or socials services markets. Winning these requires, or should require, convincing the application reviewers of the likely commercialization of the funded research. If one has no such intention, propensity or capability, then they clearly should not apply under these designations.

More generally at the heart of the matter, SBIR and its poorer cousin STTR, are not really “research “ programs but “economic development “ programs beginning with research which are intended to create jobs, wealth and tax revenues. If all one wishes to do is feed their research habit, but not form/expand and operate a business, then they really have no business “playing” with SBIR/STTR and should stick to R01, R21; and a few of the other designations available depending on their situation. To date, NIH still has not fully come to grips with this commercializtion issue, but is steadily moving toward embracing it properly. Thus, if you are a good researcher but not in possession of strong entrepreneurial tendencies, SBIR and STTR awards should be quite hard to win.

In recognition of the economic development goals of SBIR/STTR, the authorizing law imbues the awardees with many very valuable incentives, in the form of business advantages, to induce them to commercialize. Among these are the conferring of sole-source marketing advantages, in every corner (not just the awarding agency) of the federal government, for life, no dollar, time or size limits – ever. We even see SBIR downselect (sole source) awards in the hundreds of millions of dollars to SBIR firms years after their original SBIR work. Such advantages are available from no other pathway, not even 8(a) Service Disable Veterans, Woman-Owned enterprises and certainly not via R01/R21.

Further, SBIR offers more that $2 billion in awards annually via 11 federal agencies while STTR offers about $500 million at just 6 agencies. STTR requires significant collaboration with a non profit research institution, while SBIR merely allows such collaboration. These numbers are far in excess of those awarded via the R01/R21, but Phase I/II of SBIR/STTRs are limited to $150,000/$1,000,000 and 6/24 months per project (some exceptions apply), while R01/R21 have no such limitations (individual RFA’s may impose limits as NIH sees fit).

These are still not all of the differences between R01/R21 and SBIR/STTR but covers the major ones, from our perspective. I hope this helps you, not only at NIH, but with a better understanding of the larger SBIR/STTR programs in general. I would be happy to discuss additional information with you off-line at 410-315-8101 or [email protected].

* The SBIR Center has been America’s leading provider of business development (award capture) resources -- tools, training and personal services -- to the SBIR ans STTR communities since 1993. John Davis provides SBIR training seminars to hundreds of potential applicants via at least 25 seminars across America annually. The SBIR Center can be found at sbir.us on the Web.
Associate Vice President for Research and Economic Development, University of Maryland
written by Brian Darmody, May 19, 2010
I agree with John Davis on the fundamental differences between R01 and SBIR opportunities. It would be unusual for a principal investigator to be given a choice between filing for one or the other since they have very different missions.

However, one new pilot NIH program that might be relevant is the SHIFT (Small Businesses Helping Investigators to Fuel the Translation of Scientific Discoveries), which allows PIs to file for an SBIR and work through an existing company, and only transition to the for profit company upon SBIR award. SHIFT also increases the SBIR award amount. See this link for more details. Good luck.


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