SBIR Direct to Phase II: When to Skip Phase I

Most SBIR applicants assume the path runs Phase I, then Phase II, then commercialization. But several agencies offer a shortcut that few first-time applicants know about: Direct to Phase II, which lets companies jump straight to a $750K-$1.75M award without ever holding a Phase I contract. The catch is that you need to prove you have already done the work that Phase I would have funded — and the proof requirements are not trivial.

Direct to Phase II (D2P2) is not a loophole. It is a deliberate program design that recognizes some companies arrive at the SBIR program with feasibility already demonstrated through private R&D, academic research, or corporate development work. Understanding when D2P2 makes strategic sense — and when it does not — can save months of effort and dramatically accelerate your funding timeline.

How Direct to Phase II Works

In a standard SBIR pathway, Phase I funds a six-to-twelve-month feasibility study. The company demonstrates that its technical approach is viable, then applies for Phase II to build a prototype. D2P2 collapses this timeline by allowing companies to submit Phase II proposals directly, provided they can document that they have already completed work equivalent to a Phase I effort.

The key phrase is "equivalent work." Agencies require a feasibility report that mirrors what a Phase I final report would contain: technical objectives, methodology, results, and conclusions demonstrating that the core concept works. This report must show that the work was funded through non-SBIR sources — the company's own capital, angel or venture investment, university research funds, or a non-SBIR government contract.

The feasibility documentation is submitted alongside the Phase II technical proposal and reviewed as a package. Reviewers assess both whether the prior work genuinely establishes feasibility and whether the proposed Phase II plan represents a logical next step.

For a detailed walkthrough of Phase I proposals and what reviewers expect from that stage, the SBIR Phase I Guide is a useful reference — even D2P2 applicants benefit from understanding the Phase I standard their feasibility report must meet.

Which Agencies Offer D2P2

The Department of Defense is the most active D2P2 participant. Each DoD component — Army, Navy, Air Force, DARPA, MDA, and others — issues D2P2 solicitations on its own timeline, often separate from the regular SBIR cycle. DoD D2P2 topics are published on the DoD SBIR/STTR Innovation Portal and typically have shorter submission windows than standard solicitations.

NASA offers D2P2 on a limited basis, usually tied to specific subtopics where the agency has identified an urgent technology need. Not all NASA SBIR subtopics accept D2P2 applications, so checking the solicitation language for each subtopic is essential.

NIH has experimented with D2P2 pathways but applies them inconsistently. Some NIH institutes accept D2P2 applications for specific funding opportunity announcements, while others do not. The NIH approach tends to be more restrictive, often requiring that the feasibility work was conducted under the applicant's direct supervision rather than licensed or acquired.

NSF, DOE, and most civilian agencies do not currently offer D2P2. Companies targeting those agencies must follow the standard Phase I to Phase II progression.

The Strategic Case for Skipping Phase I

D2P2 makes the most sense in three scenarios.

Companies with existing prototypes. If you have already built and tested a working prototype using your own funds, applying for Phase I to demonstrate feasibility you have already proven is a waste of six to twelve months. D2P2 lets you move directly to the larger award and the more advanced development work.

Academic spinouts with published research. University researchers who have demonstrated feasibility through peer-reviewed studies and lab experiments often have Phase I-equivalent results before they even form a company. D2P2 lets them access Phase II funding without replicating work that is already in the literature. The feasibility report can reference published papers, though it must frame the results in terms the SBIR reviewers expect.

Corporate R&D teams pivoting to government markets. Large companies spinning out small business subsidiaries to pursue SBIR, or startups whose technology was initially developed for commercial markets, often have extensive feasibility data from corporate R&D programs. D2P2 is the natural entry point when the underlying technology is mature but the government application is new.

Companies exploring SBIR opportunities across multiple agencies should evaluate D2P2 eligibility early in their planning process — it can reshape the entire proposal timeline.

The Risks and Drawbacks

D2P2 is not a shortcut for everyone, and applying when you are not ready carries real costs.

Higher competition. D2P2 applicants compete against companies that may have years of prior SBIR experience and extensive feasibility data. The bar for the feasibility report is high, and reviewers are comparing your privately funded work against Phase I final reports from experienced SBIR performers.

Heavier documentation burden. The feasibility report adds significant effort to the proposal. You must produce a document that reads like a Phase I final report — with experimental data, test results, and clear technical conclusions — in addition to the standard Phase II proposal package. For companies whose prior work was not documented with SBIR reporting standards in mind, creating this report can require substantial effort.

Narrower topic availability. Not every SBIR topic accepts D2P2 applications. At DoD, D2P2 topics are published separately and may not align with the topics available in the regular solicitation. This limits your options if your technology only maps to a few subtopics.

No Phase I relationship building. Phase I awards create a working relationship with the agency program manager that carries significant value into Phase II. D2P2 applicants skip this relationship-building period, which can make Phase III transition discussions more difficult.

For context on how success rates vary across agencies and pathways, the SBIR success rates analysis breaks down award data by agency and phase.

Preparing a Winning D2P2 Feasibility Report

The feasibility report is the make-or-break element of a D2P2 application. Treat it with the same rigor you would apply to a Phase I final report.

Structure the document around three sections: the technical objectives you set out to address, the methodology and experiments you conducted, and the results with clear data supporting your feasibility conclusions. Include figures, test data, and quantitative performance metrics. Reviewers want evidence, not narrative.

Explicitly state the funding source for the feasibility work and confirm that no SBIR or STTR funds were used. If the work was conducted at a university or corporate lab, clarify IP ownership and the small business's rights to the technology.

Finally, draw a clean line from the feasibility results to the Phase II work plan. The proposal should read as a natural continuation — the feasibility report answers "can it work?" and the Phase II plan answers "how do we build it?"

Related SBIR reading:

• SBIR Grant Guide 2026
• SBIR Phase I vs Phase II: Requirements and Strategy
• SBIR Commercialization Plan Examples

Building the right proposal structure around your existing R&D is where Granted helps companies move from feasibility evidence to a submission-ready Phase II package.