The version of this that fits on an index card
A faculty member with a working method and no route to a customer has two ordinary options: write another paper, or find a company. The Small Business Technology Transfer program was built for the second one. It is the only federal research program whose statute reserves a floor of the work for a nonprofit research institution, and it is the only one where a full-time professor can be the principal investigator of record on a federal award held by somebody else. The small business has to be the applicant. The lab has to do at least thirty percent of the work. Nearly every piece of administrative burden between those two facts can sit on our side of the line, and in our partnerships it does.
STTR is authorized under 15 U.S.C. § 638 and administered through the SBA's SBIR/STTR Policy Directive, which every participating agency implements in its own solicitation. Five agencies run it, because the statute requires an STTR set-aside from every agency with more than $1 billion in extramural research obligations: the Department of Defense, the National Institutes of Health, the Department of Energy, NASA, and the National Science Foundation. The set-aside is 0.45 percent of extramural R&D, against 3.2 percent for SBIR. That makes STTR the smaller pot, and it also makes it the less crowded one at several components.
The 40/30 split, in plain terms
Three numbers govern the whole arrangement. The small business must perform at least 40 percent of the work. A single partnering research institution must perform at least 30 percent. The remaining 30 percent can go to either party, to a second research institution, or to an outside subcontractor or consultant. There is no requirement that the split land exactly on the floors, and in practice a lab-heavy project routinely runs 45/45 or 40/50.
Compare that to SBIR, where the small business must perform at least two-thirds of the work in Phase I and at least one-half in Phase II. Under SBIR, a university subaward is capped at a third of the effort and often ends up smaller. Under STTR, the same lab can hold anywhere from 30 to 60 percent of a federal award without argument. That single difference is what a research institution is actually buying when it says yes to an STTR rather than an SBIR consulting line.
One detail that catches teams late: agencies compute the percentages from the budget you file, not from anyone's sense of who did the hard part. The DoD submission portal derives the work split arithmetically from the cost volume line items. So the split is a budgeting decision made months before anyone touches an instrument, and getting it wrong is a compliance failure rather than a debate. Eligible partners are U.S. colleges and universities, domestic nonprofit research organizations, and federally funded research and development centers. One of them has to carry the 30 percent floor by itself; others can be added on top.
Share of the pre-award workload we carry in a typical STTR
Editorial weighting from how our team runs these partnerships. Illustrative of the division of labor, not a measured statistic.
The PI rule, which is the reason most faculty end up here
Under SBIR, the principal investigator must have primary employment with the small business, meaning more than half of working time. A tenured professor cannot satisfy that and stay on faculty. Under STTR, the requirement is removed: the PI may be primarily employed by either the small business or the research institution. A full-time professor can hold the PI role on a federal award while carrying a normal teaching load.
That is not a technicality. It changes who gets credit, who directs the science, and whose name appears on the award record. Several agencies also allow a multiple-PD/PI structure, which lets a faculty lead and a company-side technical lead share direction formally. The arrangement we run most often is a faculty PI who owns the research question and a senior engineer from our bench who owns the software, the data pipeline, the evaluation harness, and every deadline that ends in a portal upload.
Who does what
| Item | Precision Federal | The research institution |
|---|---|---|
| Applicant of record | Prime awardee, holds the contract or grant, signs every certification | Subawardee under a subcontract or subaward |
| Registrations | SAM.gov entity, UEI and CAGE, SBA Company Registry control ID, agency portal accounts | Existing institutional registrations only, which sponsored programs already holds |
| Proposal production | Technical volume, cost volume, compliance matrix, page-limit and format enforcement, upload | Research plan input, biosketch, letter of intent, budget justification |
| Budget | Full cost build under FAR Part 31 or 2 CFR Part 200, fee, direct and indirect rate math | Its own federally negotiated F&A rate applied to its portion |
| Agreements | Drafts the allocation-of-rights agreement and the subaward, absorbs the redline cycles | Office of sponsored programs and technology transfer review and sign |
| After award | Invoicing, progress and final reports, invention reporting, audit posture, commercialization | Research execution, student supervision, publication |
What we carry, specifically
The reason faculty walk away from STTR is almost never the science. It is the eight weeks of registrations and forms standing between an idea and a submitted proposal. That work is ours.
Registrations and portals. SAM.gov entity registration with an active UEI and CAGE code, the SBA Company Registry control ID that every STTR proposal must carry, and accounts in whichever system the agency uses: DSIP for the Department of Defense, eRA Commons plus Grants.gov for NIH, Research.gov for NSF, PAMS for the Department of Energy, NSPIRES for NASA. We hold an active SAM.gov registration, CAGE code 1AYQ0, and JCP / DD-2345 certification. There is nothing here for a lab to set up.
The cost volume. Contract awards price under the FAR Part 31 cost principles; grant awards under the 2 CFR Part 200 uniform requirements. Direct labor, fringe, indirect rates, materials, travel, and a reasonable fee all have to survive review, and the subaward line has to reflect the institution's negotiated F&A rate correctly or the whole volume gets flagged. This is also where the work split is proven, so the arithmetic and the narrative have to agree line for line.
Compliance. Every solicitation has its own page caps, mandated section order, font floors, and forms that must be used verbatim. Proposals get thrown out for these things before a reviewer ever reads a sentence of the science. Our team runs a compliance matrix against the solicitation on every submission and checks the rendered document, not the draft.
The commercialization plan. Phase II proposals are scored on it, and it is the section that most often exposes an academic team. It has to name customers, name the acquisition path, name the price, and name what happens to the technology after the federal money stops. We write it, and we own it after award.
The money, with real arithmetic
Phase I awards across the five STTR agencies commonly run from $150,000 to roughly $310,000 over six to twelve months. Phase II typically runs $1 million to $2 million over twenty-four months. There is no cost-share requirement in SBIR or STTR, which distinguishes it from a number of other federal research vehicles and matters to a department with no matching funds available.
Run the floor on a $300,000 Phase I. Thirty percent is $90,000 to the institution as total cost. At a 55 percent on-campus F&A rate, that is about $58,000 in direct costs: a graduate research assistant for the year, a slice of summer salary, and materials. Set the split at 45 percent instead and the lab sees $135,000 total, roughly $87,000 direct. On a $1.5 million Phase II at the 30 percent floor, the subaward is $450,000 over two years, which supports a student and a postdoc with room left for equipment. These are not R01 numbers. They are also decided in about three months at several components rather than nine, and they carry no preliminary-data expectation.
Phase III follows the awardee
Federal agencies may award Phase III work to an STTR awardee on a sole-source basis, without further competition, using the authority at FAR 6.302-5 traced to 15 U.S.C. § 638. That authority follows the small business that held the Phase I or Phase II award, not the research institution. If a lab wants a share of what happens after the research money ends, it has to be written into the allocation-of-rights agreement and the license terms up front, while everyone is still friendly and nothing is worth anything yet.
Intellectual property: Bayh-Dole, plus the one agreement STTR adds
The Bayh-Dole framework at 35 U.S.C. §§ 200 through 212, implemented at 37 CFR Part 401 and expressed in the standard patent rights clause at FAR 52.227-11, applies here the same way it applies to any other federally funded research. Each performing party may elect to retain title to subject inventions made by its own people. Inventions made jointly are owned jointly unless an agreement says otherwise. The clocks are the familiar ones: disclose a subject invention to the agency within two months of the inventor reporting it internally, elect title within two years of that disclosure, and file within one year of election. The government keeps a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention worldwide, plus march-in rights under 35 U.S.C. § 203 and the U.S. manufacturing preference at 35 U.S.C. § 204.
What STTR adds on top is a written allocation-of-rights agreement between the small business and the research institution. The SBA Policy Directive requires it, and agencies differ on when they want to see it: some ask for it with the proposal, others before award. It has to address ownership of subject inventions, follow-on research rights, and the terms on which the small business can commercialize what the lab produces. It is the single most consequential document in the partnership and the one most likely to sit untouched in a technology transfer queue while a deadline runs out.
Three provisions decide whether a technology transfer office signs quickly. First, publication rights, which universities will not trade away and should not be asked to. The workable form is a short review window, commonly thirty to ninety days, so a patent application can be filed before disclosure. That also protects the fundamental research exclusion at 15 CFR 734.8; an agreement that restricts publication outright can pull the work out of it and create export-control obligations nobody budgeted for. Second, a defined license: an option to negotiate an exclusive commercial license on the institution's subject inventions, on terms sketched in advance rather than argued about after a patent issues. Third, student protection, so theses, dissertations, and degree progress are never contingent on a company's filing schedule.
Separately, the data rights on everything generated under the award belong to the small business for a protection period of twenty years from award under the SBA Policy Directive, expressed for DoD contracts through DFARS 252.227-7018. Research institutions are sometimes surprised by this. It is worth understanding early, because it is the mechanism that keeps a competitor from obtaining the software and the data through a records request.
The honest time commitment for a PI
Faculty want a number before they say yes, and vague answers are why so many of these conversations end. Here is ours, for a Phase I where our team drives.
- First conversation. 45 minutes. We describe the program area and the technical wedge; the PI says whether the science is sound and what would actually be new.
- Research plan input. 2 to 4 hours across two weeks, usually as edits to a draft we send rather than blank-page writing.
- Institutional routing. 1 hour of PI time, but start it early. Most sponsored programs offices want the package 5 to 10 business days before the sponsor deadline.
- Biosketch, budget justification, letter. 1 to 2 hours, most of it reusing material the PI already has on file.
- Performance, Phase I. commonly 0.5 to 1 person-month of PI effort over six months, with a graduate student carrying the bench work.
- Reporting. a paragraph or two into a report we assemble, write, and file. Not a PI task.
Total pre-award PI time in a well-run partnership lands between six and ten hours. If a small business is asking a faculty member for forty, the small business is not doing its job.
Where these partnerships go wrong
Four failure modes account for most of it, and all four are avoidable if they are raised in the first call.
Starting too late. A sponsored programs office needs lead time, a technology transfer office needs longer, and neither will be rushed by a company's calendar. Six weeks before a close date is comfortable. Two weeks is a coin flip.
Silence on conflict of interest. If a faculty member holds equity, an officer title, or a management role in the small business, disclosure and a management plan are required. The PHS financial conflict-of-interest rules at 42 CFR Part 50 Subpart F govern NIH work, NSF imposes its own institutional requirement, and every university has an outside-activity policy that caps consulting time. Handled at the start it is a form. Discovered at award it is a crisis.
A work split that drifts. The percentages are fixed by the budget. If the lab ends up doing more than the cost volume says, the fix is a modification through the contracting officer, not an informal understanding.
No named path to a customer. STTR reviewers score commercialization and transition alongside the technical merit. A proposal with excellent science and a hand-wave at the market gets a respectful decline. That gap is ours to close, and it is most of the reason a lab wants a partner in the first place.
What we ask a PI to commit to
- The research question is genuinely yours, and you will say so on the record
- Your institution can carry at least 30 percent of the effort as a subawardee
- You will route the package through sponsored programs with real lead time
- You will disclose any financial interest in the company to your institution
- You can put 0.5 to 1 person-month into a six-month Phase I
- You want the work used, not only published
From first email to submitted proposal
How a partnership runs on our side
Why we are the partner for the software half
Our firm is an SBIR and STTR shop that builds production AI, ML, data, and cloud systems. Our team is led by a former professor in technology who ranks in the top 200 of more than 200,000 on Kaggle and holds seven cloud certifications, with twenty years of building production systems for federal agencies across five consulting firms, three of them federal. We keep a standing bench of named engineers, licensed professional engineers, and domain specialists across defense, health, energy, transportation, and public-sector data, which means the person who writes the evaluation suite in the proposal is the person who writes it after award.
For a lab, the practical translation is this. The method stays yours. The software, the data engineering, the deployment target, the security documentation, the cost volume, the deadlines, and the customer conversation are ours. Nobody asks a PI to learn a federal procurement portal.
Bottom line
STTR is a better instrument for a university lab than most faculty realize, because the 30 percent floor and the PI rule together let a professor lead federally funded work that ends in a fielded system instead of a filed paper. The administrative weight is real, and it is the whole reason the program pairs a lab with a company. Pick a partner who takes that weight, writes the commercialization story, and puts the intellectual property terms on the table in week one.
Frequently asked questions
Yes. STTR permits the PI to be primarily employed by either the small business or the research institution, which is the opposite of SBIR's requirement that the PI spend more than half of working time with the company. This is the single most useful difference between the two programs for faculty.
At least 30 percent, and up to 60 percent. The small business must perform at least 40 percent; the remaining 30 percent can go to either party or to a third party. The split is computed from the budget filed with the proposal, so it is set before work begins.
Bayh-Dole applies: each party may elect title to inventions made by its own employees, joint inventions are jointly owned by default, and the government retains a paid-up worldwide license. STTR additionally requires a written allocation-of-rights agreement between the small business and the institution covering follow-on research and commercialization rights.
No, and it should not. The standard arrangement is a short pre-publication review window, commonly thirty to ninety days, so a patent application can be filed first. Outright publication restrictions can also cost the work its fundamental research exclusion at 15 CFR 734.8, which creates export-control obligations nobody wants.
On a $300,000 Phase I at the 30 percent floor, about $90,000 in total cost to the institution, which is roughly $58,000 in direct costs at a 55 percent on-campus F&A rate. Raising the lab's share to 45 percent brings that to about $135,000 total. Phase II subawards commonly run $450,000 or more over two years.
Five: the Department of Defense, NIH, the Department of Energy, NASA, and the National Science Foundation. The STTR set-aside is 0.45 percent of extramural R&D against 3.2 percent for SBIR, so the pool is smaller and, at several components, less crowded.