SBIR Phase I vs Phase II vs Phase III: Complete Funding Guide

Understanding the Three Phases of SBIR Funding

The SBIR program is structured into three distinct phases, each with its own purpose, funding level, and expectations. Understanding how these phases work together is essential for planning your funding strategy and building a successful path from research concept to commercial product.

One of the biggest advantages of SBIR funding is that it is completely non-dilutive, meaning you never give up equity or repay the funding.

Phase I: Feasibility and Proof of Concept

Phase I is the entry point for the SBIR program. The goal is to establish the scientific and technical feasibility of your proposed innovation.

Funding Amounts

• NIH: Up to $275,589 for direct costs
• NSF: Up to $275,000
• DoD: Typically $50,000 - $250,000 (varies by component)
• DOE: $200,000 - $250,000
• NASA: Up to $150,000

Duration

• Typically 6-12 months depending on the agency

What Is Expected

• Demonstrate that the proposed concept is scientifically and technically feasible
• Complete specific research objectives outlined in your proposal
• Produce preliminary data supporting further development
• Submit a final report documenting results
• Begin developing your commercialization plan

Phase I Tips

• Keep your scope focused and achievable within the budget and timeline
• Propose clear, measurable milestones that demonstrate feasibility
• Include preliminary data or modeling if available
• Avoid common mistakes that lead to Phase I rejection

Phase II: Research and Development

Phase II is where the real development happens. Only companies that have successfully completed Phase I are eligible for Phase II funding.

Funding Amounts

• NIH: Up to $1,842,264
• NSF: Up to $1,000,000
• DoD: $500,000 - $1,750,000
• DOE: Up to $1,600,000
• NASA: Up to $850,000

Duration

• Typically 24 months

What Is Expected

• Develop a working prototype or advanced system
• Conduct rigorous testing and evaluation
• Demonstrate significant progress toward commercialization
• Produce a detailed commercialization plan
• Identify customers, partners, and a path to market

Phase II Tips

• Your Phase I results are the foundation of your Phase II proposal
• Include letters of support from potential customers or partners
• Develop a strong budget that reflects the larger scope of work
• Show clear progress from Phase I and a realistic path to Phase III

Phase III: Commercialization

Phase III is the commercialization stage where your technology transitions from prototype to product. Importantly, Phase III does not use SBIR program funds.

Funding Sources

• Private investment (venture capital, angel investors)
• Revenue from product sales
• Non-SBIR federal contracts (particularly for DoD technologies)
• Strategic partnerships and licensing agreements

What Is Expected

• Transition the technology to commercial production
• Achieve product-market fit and generate revenue
• For DoD: Transition technology to military use through acquisition programs

Phase III Tips

• Start planning for Phase III during Phase I
• Build relationships with potential customers and investors early
• Understand that DoD has the strongest Phase III transition pathway
• Use your SBIR track record to attract private investment

Agency-Specific Phase Details

NIH Phases

NIH offers some unique Phase programs including Fast-Track (combined Phase I/II review) and Direct to Phase II for projects with existing Phase I-level data. See our complete NIH SBIR guide for details.

NSF Phases

NSF uses a Project Pitch system for Phase I that pre-screens proposals before full submission. Phase II includes supplemental funding opportunities. See our complete NSF SBIR guide for details.

DoD Phases

DoD components may offer Direct to Phase II opportunities and have the strongest Phase III transition programs through military acquisition. See our complete DoD SBIR guide for details.

How Long Does the SBIR Process Take?

From initial application to Phase I award, expect 6-12 months depending on the agency. The complete journey from Phase I through Phase III can span 5-10 years. Understanding the full SBIR timeline is essential for planning your business activities.

Strategic Considerations

Applying to Multiple Agencies

If your technology has applications across multiple agencies, you can apply to multiple SBIR programs simultaneously. This dramatically increases your chances of getting funded.

SBIR vs STTR

Understanding the differences between SBIR and STTR helps you choose the right program. STTR requires a research institution partner but offers flexibility in PI employment.

Getting Help

An experienced SBIR grant writer can significantly improve your chances across all phases. Make sure to review success rates by agency to target your applications strategically.

Prerequisites for Applying

Before submitting to any phase, ensure you have:

• Completed SAM.gov registration
• Verified your eligibility
• Prepared a compelling technical proposal and commercialization plan

Contact MJP Grant Consulting for a free consultation to discuss which phase and agency is the best fit for your technology.

Related Articles

• SBIR vs STTR Grants: Key Differences Explained
• 10 Common SBIR Application Mistakes to Avoid
• NIH SBIR Grants: Complete Guide for Biotech Startups
• How to Write an SBIR Budget That Gets Approved
• SBIR Grant Success Rates by Agency