The National Science Foundation (NSF) has released the new 2024 SBIR Phase I and Phase II solicitations with higher award amounts. There are quite a few changes that will impact anyone submitting a proposal, including experienced proposing companies, so I have gathered up both my observations and comments from NSF program directors as they’ve spoken about the changes, some of them surprising, in the NSF process and the new solicitations.
The Phase I Pitch Process (from NSF Program Directors)
In 2023, the NSF received about 10k pitches last year, and invited about half of those to submit a proposal, about 5k. (280 Phase I awards expected to be granted each year).
Teams that aren’t invited to submit generally fail to describe the differentiated, risky technologies. In particular, the NSF PD says to:
Explain what new approach, new technology you are developing
1) unproven (high risk)
2) differentiated (meaningful)
3) of interest to customer (customer discovery)
Importantly the NSF program directors want a pitch to demonstrate that given enough time and money you (the proposing team) can make it work. NSF knows that private investors don’t want to fund that level of risks, which is the NSF’s “early” seed fund role in the US technology ecosystem.
BIG CHANGE: No letters of support are required in a Phase I. Importantly, the NSF is NOT LESS interesd in commercial elements. Instead, this is a policy issue. Either the NSF had to require them (in the past they were optional) or not permit them at all.
Note from comments by various PDs, this issue of no letters of support in a Phase I has been hotly debated!!
HOWEVER, as the team, you need to demonstrate that you know what customers want, as the PDs are saying that the NSF wants the customer discovery.
In your Phase I proposal, you MUST show how you’ve been able to start to learn about early customers. I-corps and customer discovery programs are HUGELY beneficial in developing your customer archetype and value proposition.
The NSF wants to know if the customer has needs that you can address with your proposed innovation. PDs acknowledged that there are open source tools to help you learn customer discovery, but their preference is that you join a program where you are taken by an instructor through the process.
If you want help with Customer Discovery training, reach out to us. The VentureWrench Launch! program is under contract to the State of Utah to deliver this training and we can do the same for you.
What Program Directors are Looking for (in their words!)
- Want to seee rigor, energy, commitment
- Want to see you’ve started to put together the company
- Do you understand the customer and value proposition
- Is the team coming together and focusing on customer issues
- Most common success model – first time entrepreneurs
- Want team to have assembled advisors and supporters – but often few employees.
Overview of Program Stats
Some stats about the program. The maximum total Phase I award amount has been increased from $275,000 to $305,000. This amount is inclusive of all direct and indirect costs as well as the small business fee, however this now includes TABA and I-corps expenses for customer discovery and go to market support, which had been potential supplements to past award amounts.
Estimated Number of Awards: 280 – approximately 230-235 awards for SBIR Phase I per year, pending the availability of funds and approximately 45-50 awards for STTR Phase I per year, pending the availability of funds with anticipated Funding Amount of $85,000,000
Phase II Changes
I’ve been going through the Phase II, wanting to flag some things that are high priority.
The total SBIR/STTR Phase II award amount has been increased from $1,000,000 to $1,250,000 (inclusive of direct and indirect costs, Technical and Business Assistance (TABA) funding, as well as the small business fee).
I’m sure you’ve seen the extra $250k! 🙂 SO, let’s make sure the team is strategic about how to spend that money. It does include TABA! (which I STRONGLY recommend you put in place).
Letters of Support!
A new surprise is that Letters of Support aren’t required for Phase I, but they ARE still required for Phase II with three being required, up to 5 permitted. See quote below.
“Letter(s) of Support (Required for Phase II). Three (3) Letters of Support from potential product/service users or customers are REQUIRED; Up to five (5) Letters of Support may be included. All Letters of Support should be uploaded in Research.gov in one PDF. ”
Effective Letters of Support should address market validation for the proposed innovation, market opportunity, or small business/team, and add significant credibility to the proposed effort. These Letters should ideally demonstrate that the company has developed partnerships and/or a meaningful dialog with relevant stakeholders (e.g., potential customers,strategic partners, or investors) for the proposed innovation and that a real business opportunity may exist. The Letters of Support must contain affiliation and contact information for the signatory stakeholder.
Security Issues added
Some big security items are part of the recent re-authorizations and these have shown up in this Phase II.
In particular “Malign Foreign Talent Recruitment Program”
Here is, for example, Cornell’s description of this issue. The team AOR will have to certify that NO ONE on the team has been contacted in this way.
New Documents Required for Key Personnel
A whole bunch of new documents are required about key personnel, and several of these have to be created in SCIENCV and this requires EACH key personnel to have their own account and create these documents. The FIRST TIME this can be quite time consuming.
TABA Matters – Make sure to include it in Phase I and Phase II
SBIR/STTR Technical and Business Assistance (TABA) NOTE- if you don’t have the provider(s) in place, you can do a placeholder and submit details later. The solicitation says: “If a proposer is not able to identify what commercial assistance may be required at the time of submission, the proposing small business may block up to $50,000 for TABA activities on Line G.6 (“Other”) with the understanding that prior to expending funds for these purposes, the recipient will be required to obtain approval from their cognizant NSF SBIR/STTR Program Officer.”
Post Recommendation Due Diligence
A huge change over the last few years is that once the Review Panel has recommended your proposal for funding, is the level of further due diligence being performed by the Program Directors. This includes at least, an interview (usually by video call), response to any questions either the panel or program director have.
The advice from the PDs is that there will be a lot of follow on diligence after the proposal – a lot of the team/commercialization plan is happening by the PD 1:1.
NOTE that cybersecurity issues may be part of the due diligence process (after panel recommends it’s worthy of funding), so be thinking about how that should be handled. (especially securing IP).
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