Can Foreign-Owned Companies Apply for SBIR Grants?

SBIR Ownership Requirements Explained

The question of whether foreign-owned companies can apply for SBIR grants is critical for many technology startups, especially those with international founders or foreign investors. The short answer is that foreign-owned companies face significant restrictions, but there are pathways for companies with international connections to participate.

The 51% U.S. Ownership Rule

The fundamental eligibility requirement for SBIR is that the applicant company must be at least 51% owned and controlled by one or more U.S. citizens or permanent residents. This means:

A company that is majority-owned by foreign nationals is not eligible for SBIR funding
A company with a foreign founder who holds a green card (permanent resident) is eligible
A company with a U.S. citizen founder who holds majority ownership is eligible, even if minority shareholders are foreign nationals

Key Eligibility Criteria

Individual Ownership

For companies owned by individuals, the rules are straightforward:

U.S. Citizens: Fully eligible as owners
Permanent Residents (Green Card Holders): Fully eligible as owners
Visa Holders (H-1B, L-1, O-1, etc.): Not counted toward the 51% U.S. ownership requirement
Foreign Nationals Without U.S. Status: Not eligible as majority owners

Corporate or Venture Capital Ownership

The situation becomes more complex when the company is owned by other entities such as venture capital firms, corporations, or holding companies. Key rules include:

If a VC firm, hedge fund, or private equity firm owns more than 50% of the company, special rules apply
The company may still be eligible if it meets the SBA's affiliation rules for SBIR
Multiple VC-owned companies may qualify under the SBIR/STTR Reauthorization Act provisions

The Venture Capital Exception

Under certain conditions, companies majority-owned by venture capital operating companies (VCOCs), hedge funds, or private equity firms can participate in SBIR, but with limitations:

Only NIH, NSF, and DOE have opted in to allow VC-backed companies
These companies can receive no more than 25% of an agency's total SBIR awards
The company must still be a small business (500 or fewer employees)
Additional certifications and disclosures are required

Principal Investigator Requirements

Beyond ownership, SBIR has specific requirements for the Principal Investigator (PI):

SBIR: The PI must be primarily employed by the small business at the time of award (more than 50% of their time)
STTR: The PI can be employed by either the small business or the research institution partner. Learn more about SBIR vs STTR differences.
The PI does not need to be a U.S. citizen, but some agencies and topics may have additional requirements, particularly for defense-related research

Security Clearance and ITAR Considerations

For certain SBIR topics, particularly from DoD and other defense agencies:

Some topics require U.S. citizenship for all key personnel (not just the PI)
Topics involving classified information require security clearances, which are generally limited to U.S. citizens
ITAR (International Traffic in Arms Regulations) restrictions may limit participation by foreign nationals

Strategies for International Founders

If you are an international founder interested in SBIR funding, consider these approaches:

1. Obtain Permanent Residency

The most straightforward path. Once you have a green card, you count as a U.S. person for SBIR ownership purposes.

2. Structure Ownership Carefully

If you have U.S. citizen or permanent resident co-founders, structure the company so that U.S. persons hold at least 51% ownership and maintain control of the company.

3. Consider STTR

STTR allows the PI to be employed at the research institution, which may provide more flexibility for international researchers working at U.S. universities.

4. Explore Other Federal Funding

Some federal programs do not have the same ownership restrictions as SBIR. State-level programs may also have different eligibility criteria.

Compliance Is Critical

Misrepresenting ownership status or citizenship is a federal offense. All SBIR applicants must certify their eligibility at the time of application and maintain compliance throughout the award period. Provide accurate information and consult with a legal professional if you are unsure about your eligibility.

Next Steps for Eligible Companies

If you meet the ownership requirements, here is how to get started:

Complete your SAM.gov registration
Understand the SBIR phases and funding levels
Avoid common application mistakes
Build a strong commercialization plan and budget
Review success rates by agency to target the best opportunities
Consider applying to multiple agencies simultaneously

Remember, SBIR grants are non-dilutive funding that does not need to be repaid, making them an exceptional funding resource for eligible companies.

Get Expert Guidance on SBIR Eligibility

Navigating SBIR eligibility requirements can be complex, especially for companies with international connections. An experienced SBIR consultant can help you understand your eligibility and structure your applications correctly.

Contact MJP Grant Consulting for a free consultation to discuss your specific situation and explore your SBIR funding options.

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