In addition to capital from venture and angel investors, government funding may be an attractive option for device companies seeking funding. Approximately $2.5 billion dollars are allocated in the federal budget each fiscal year for grants to American small businesses. These grants are offered by numerous federal agencies under two programs: Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR). Each federal agency has specific programs designed to promote innovative research and development relevant to the respective agency's mission. Both programs require that the business must be majority owned by American individuals or organizations and that the company must have 500 or less employees.

Small Business Innovation Research (SBIR)
The SBIR program is designed to facilitate research and development with the potential for commercialization. Under this program, small businesses can partner with academic institutions, but the business must perform the majority of the research. Additionally, the principal investigator must be primarily employed by the business. They cannot, for instance, be employed as a consultant to the business while retaining a professorship at a university.

2011 SBIR and STTR Programs
In 2011, Phase I and Phase II SBIR and STTR grants have increased substantially.

Small Business Technology Transfer (STTR)
The STTR program is designed to facilitate the transfer of technology that has a strong potential for commercialization between academic institutions and small businesses. In contrast to the SBIR program, the STTR program requires small businesses to have academic partners. Additionally, under this program the small business need only perform 40% of the research, and there are no stipulations regarding the employment of the principal investigator.

$2 Billion in Available Funding
Many federal agencies provide grants including the National Institutes of Health (NIH) that had a grant budget in 2008 of $580M for SBIR grants and $70M for STTR, slated for biomedical innovation. The Department of Defense also allocates $1.3 billion for grants, though the majority is dedicated toward non-medical research.

Most agencies limit grant applications to a response to specific research request. Links that include the latest research requests are listed below. In contrast, while the National Institutes of Health also publishes research solicitations, they also accept 'unsolicited' funding requests, so long as the research is healthcare-related.

Two Phases of Applications
There are two phases of applications for SBIR and STTR grants, and businesses have the option of applying for either or both. Phase 1 is designed to assess feasibility and provides a maximum award of $100 - $150K over a period of 6 or 12 months, depending on the program. In 2008, 3062 NIH Phase 1 SBIR grants were submitted and 739 (24.1%) were approved.




Phase 2, awarded only to Phase 1 recipients who have met certain milestones, is designed for in-depth research and development and provides a maximum award of $750K - $1 million over two years. , In 2008, 596 Phase 2 were submitted and 288 (48.3%) were approved. It is important to note that the application process for each phase can be involved and often takes about one year from application date before funds are accessible. To mitigate this issue, certain agencies such as NIH have a 'fast-track' program that allows for simultaneous application for both Phases 1 and 2. Funding approval rates for this program are roughly equivalent to those of Phase 1.

Who Owns the Intellectual Property When You Get a Federal Grant?
The intellectual property rights remain with the inventors, and do not belong to the Agency that provides the funding. Device companies seeking total confidentiality in their research, however, should note that a scientific review board examines both the application and results of any federally-funded research.

The following links will provide additional valuable information about these federal grants:

SBIR/STTR General Information:
http://www.sbir.gov
NIH SBIR/STTR Main Page:
http://grants.nih.gov/grants/funding/sbir.htm
NIH Special Requests:
http://grants.nih.gov/grants/
funding/sbir_announcements.htm
NIH Research Roadmap:
http://nihroadmap.nih.gov/grants/sbir-sttr.asp
DOD SBIR/STTR Main Page:
http://www.acq.osd.mil/osbp/sbir/
overview/index.htm
NSF SBIR/STTR Main Page:
http://www.nsf.gov/eng/iip/sbir/