Founders Left Behind: Why Re-authorizing the SBIR/STTR Program is the Path to Improving It
Once again, politics gets in the way of progress.
The federally funded SBIR/STTR program has been an economic engine for entrepreneurs and one of the few pathways for early funding as ideas are just beginning to sprout. This is especially true for founders typically left out of the VC pathway. The process is necessarily onerous and complex because it forces early entrepreneurs to think beyond their passion and concept.
A Model for Founders from Seed to Scale
As I speak about often, the program requires founders to build the stewardship and foundation of a strong company to underpin a potentially great idea. They must spell out how they will build their company, understand the market and customer, construct the organizational infrastructure required, and define the budget and financial model at an early stage, and in greater detail than most other funding opportunities.
The design of the program creates a stepwise process: start-ups must test feasibility in a modest Phase I grant before accessing a larger pool of Phase II funding. Phase II holds a much higher bar. This Phase requires detailed development and effectiveness testing, an essential step for founders navigating expensive regulatory pathways or selling into the healthcare system, where evidence-based products, treatments, and diagnostics should be the norm. It also requires a clear understanding of the market, competitors, and the plan for growing and scaling a business.
The program has provided critical seed funding that enables emerging entrepreneurs to build these essential foundations, learn critical business acumen, derisk private investment, and begin generating customer revenue. For solutions that must demonstrate evidence before being marketed as effective, this is not only good for the economy, it is good for public health. We have far too many examples of what happens when marketing precedes science, and the years and lives affected when that order is reversed.
Demonstrated Value and Need for Improvement Can Co-exist
The SBIR/STTR program is a national program, even when states may lack their own innovation funds. The program consistently obligates over $4 billion in awards to small businesses across all 50 states, the District of Columbia, and Puerto Rico. Economic impact studies of the program have demonstrated that it generates billions in economic development while creating and supporting job growth.
The SBIR/STTR program funds high-risk and high-impact innovation but it also drives employment, commercial scaling, and regional economic activity.
Like every federally and privately funded program, the SBIR/STTR program has challenges that require thoughtful improvements. Alongside strong evidence of economic and innovation impact, there is broad bipartisan acknowledgement that the program has areas that need attention. While funded in all 50 states, states with limited academic research centers remain disadvantaged, an area where additional effort is clearly needed. The ecosystem that supports repeat awards for companies that have outgrown the definition of “start-up” can create barriers for new entrants. Metrics to capture market traction should be strengthened throughout the process, especially during the Phase II and go-to-market cycle.
These are legitimate growth opportunities for the program, and there are many effective models as examples of how to evolve a successful program to keep it successful. There are well over 600 private healthcare and tech accelerators and incubators, not counting niche or targeted programs. Even if you combined the funding and in-kind value of the top 10 health tech accelerators, they do not come close to the annual impact of SBIR/STTR program. Yet, many of these programs, including TechStars, MedTech Innovator, and Rock Health, have well-established processes, practices, and metrics for vetting and supporting start-ups and have made modifications over the years as the entrepreneurial landscape has changed. And while every accelerator program faces challenges as they evolve, none have pulled the rug out from under their cohorts the way Congress is now doing under the pretense of “fixing” it, which is deeply troubling.
What is at Stake by Halting the Program
There is a middle ground, yet Congress seems unable to reach it. Millions of dollars, jobs, and entrepreneurial contributions hang in the balance. Halting the SBIR/STTR program under the guise of wanting to improve it is an example of how the public becomes the political football instead of the purpose. This is not about Rs or Ds, but about the unwillingness to compromise and find a path forward that meets the objectives of an improved program. The program needs to be reauthorized. There is simply too much at stake for our economy and our innovation pipeline.
I speak with founders every week in the US and globally who once viewed the US market as the unquestioned leader in innovation markets. Increasingly, they are turning to other regions that are showing up in far more substantive ways with access to science, funding and markets. Our scientific community is seeing its expertise valued elsewhere while being disregarded in the US. It may seem anecdotal or difficult to quantify, but the reality is clear: our healthcare technology and scientific innovation are being courted globally while one of the largest non-dilutive seed-funding programs built to support early innovation has gone dark.
I have worked with the SBIR/STTR program for over 20 years and have watched it grow, shift, and mature. The applications, the depth of science, the commercialization requirements, and the mix of reviewers have all evolved significantly. It must continue to do so. Innovation demands it. Disruptive technologies almost always begin at the margins initially appealing to only a small audience and changing dramatically as founders learn their market, ultimately reshaping industries. As new health technologies are developed by emerging entrepreneurs, they are testing the existing paradigm. They force pressure on traditional models and identify gaps in research, diagnoses, and treatment.
This is exactly why Congress should lead from the innovators perspective: federal policy should be supporting disruption by ensuring that innovation strengthens the national health infrastructure rather than risk allowing the US to fall behind as entrepreneurs move elsewhere to disrupt it.
This philosophy should guide future SBIR/STTR program improvements, but not in the manner Congress is pursuing. As the program languishes in legislative limbo, federal agencies are losing authority to set aside extramural R&D funds for entrepreneurs. This is halting new solicitations and awards and risks pushing founders out of the market, or out of the US entirely. A major consequence not being discussed is that agencies like HHS, DoD, and NSF can redirect R&D budgets back to internal programs or large contractors. This is the opposite of the stated goal to improve support for start-ups. It will, in effect, shift dollars to large businesses and eliminate one of the only viable pathways for early-stage innovation to take root. It also freezes products in the commercialization pipeline that could grow and scale. Halting the program slows technology adoption, weakens regional innovation ecosystems, and removes one of the only non-dilutive funding mechanisms available to high-risk/high-reward start-ups.
Leadership Requires Innovative Thinking
There is a solution. Reauthorize the program for another year so entrepreneurs currently developing critical technologies, diagnostics, or treatments can continue their work. Any business building its annual fiscal plan addresses strategic priorities, financial planning, a roadmap for the year, risk management, and performance. “Rip and replace” is not a strategy. Provide a one-year reauthorization that includes a strategic plan to make the improvements needed for the long-term health of the program.
Ironically, start-ups have to do this or they don’t survive. Founders can’t punt on a strategic plan or ignore actions and roadmaps if they are to navigate the market. The fact that congressional leadership cannot do the same between now and September 2026 is not a failure of the SBIR/STTR community to apply for and use the funds in ways that may be deemed appropriate. It is a failure of leadership by those who signed up for public service to develop a business plan for the program while continuing to run it.
Ultimately, the failure to reauthorize SBIR/STTR is a loss for entrepreneurs, for state economies, and for the competitiveness of the US innovation ecosystem at the hubris of those committed to public service, economic stability and sustainable employment.