Five Months and Counting: The SBIR/STTR Shutdown Is Starving Small Business Innovation

The federal government's single largest dedicated funding pipeline for small business innovation has been dead for five months, and the silence from Capitol Hill is deafening.

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs expired on September 30, 2025. Since then, 11 federal agencies — including NIH, NSF, DOD, DOE, and NASA — have been unable to issue new Phase I or Phase II solicitations or select new awardees. That's more than $4 billion in annual funding that simply stopped flowing to the startups, labs, and small R&D firms that depend on it.

This is the longest lapse in the programs' 42-year history.

What Expired Means in Practice

"Expired" doesn't mean the money disappeared. The set-aside requirement — agencies with extramural R&D budgets over $100 million must allocate 3.2% to SBIR and 0.45% to STTR — is written into each agency's appropriations. The dollars are there. But without authorization, agencies cannot create new solicitations, review new proposals, or make new awards.

Companies with existing Phase I, Phase II, or Phase III contracts continue to receive funding. The work goes on. But the front door is locked. No new topics from the Space Force. No new NIH SBIR grants for biotech startups. No new DOE solicitations for clean energy innovators. The pipeline that has historically funded early-stage companies like Qualcomm, Symantec, and iRobot is accepting zero new entrants.

For the thousands of small firms that time their R&D cycles around SBIR solicitation windows, five months of silence is not an inconvenience — it's an existential threat.

The Legislative Gridlock

The House acted relatively quickly. H.R. 5100, a clean one-year extension through FY2026, passed with bipartisan support. It would simply restart the programs while Congress works on a longer-term reauthorization.

The Senate is where things stalled. Senator Ed Markey introduced a compromise bill that would pair the extension with security reforms (aimed at preventing foreign government-linked firms from winning awards), commercialization benchmarks, and expanded Phase II+ awards for companies that demonstrate market traction. Senator Joni Ernst's camp has pushed for even stricter oversight provisions.

Neither bill has reached the Senate floor. The FY2026 spending package signed in late January did not include SBIR/STTR reauthorization language, despite lobbying from the Small Business Technology Council and hundreds of small firms. The next legislative vehicle — possibly a supplemental spending bill or the DHS funding resolution — could carry a rider, but there's no guarantee.

The Damage Is Already Done

Even if Congress reauthorizes tomorrow, the damage compounds with every passing week. SBIR awards aren't just checks — they're market signals. A Phase I award tells investors a technology has been vetted by federal technical reviewers. A Phase II signals commercial potential. Without those signals, small companies struggle to raise the private capital that typically follows federal validation.

The timing is especially painful. The FY2026 budget gave NIH a modest increase and preserved DOE's Office of Science funding. Agencies have money to spend on R&D. They just can't spend it through the programs specifically designed to get that money to small businesses.

Meanwhile, America's competitors are not waiting. China's technology transfer programs continue to accelerate. The EU's Horizon Europe program funds small enterprise R&D without interruption. Every month the SBIR/STTR programs remain dark is a month when the U.S. cedes its edge in translating federally funded research into commercial products.

What Small Businesses Should Do Now

The lapse is real, but it's not permanent. Here's how to stay positioned for the restart:

Keep your proposals current. When reauthorization passes — and it will, eventually — agencies will move fast to catch up on lost solicitation cycles. Companies with updated technical narratives, fresh commercialization plans, and current team bios will be first through the door. Use this downtime to strengthen your materials.

Phase III is still open. DHS issued explicit guidance clarifying that Phase III awards — which are follow-on production or services contracts, not new SBIR grants — can still proceed during the lapse. If you have an existing SBIR/STTR track record, pursue Phase III opportunities directly with contracting officers.

Explore alternative federal funding. DOE's ARPA-E received $350 million in FY2026. NSF's new Tech Labs initiative is offering $10-50 million awards to independent research teams. DARPA continues to fund small companies through BAAs. The SBIR pipeline may be frozen, but federal innovation dollars are still moving through other channels.

Watch the legislative calendar. The most likely near-term vehicles for reauthorization are the next continuing resolution, a supplemental appropriations bill, or standalone legislation if Senate leadership feels enough pressure. Track the Senate Small Business Committee for movement.

A Program Worth Fighting For

SBIR and STTR have generated over $70 billion in awards since 1982. They've launched thousands of companies, created hundreds of thousands of jobs, and produced technologies from GPS navigation to cancer diagnostics. The programs aren't controversial — they enjoy deep bipartisan support in both chambers.

The current lapse isn't about policy disagreement. It's about legislative scheduling and the friction of attaching security reforms to a must-pass reauthorization. That's a fixable problem, if someone decides to fix it.

Until then, Granted can help small businesses identify the federal and non-federal funding opportunities that remain open — because innovation doesn't wait for Congress.