If you’ve been around the SBIR/STTR world for any length of time, you know how rare it is to see serious momentum behind structural reform. We’ve all heard the critiques, limited accessibility, poor commercialization outcomes, and the lingering issue of SBIR mills gaming the system. but meaningful fixes have been slow in coming. That’s what makes Senator Joni Ernst’s newly proposed INNOVATE Act worth paying attention to.
The bill, officially titled Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence, aims to reauthorize the SBIR and STTR programs while introducing some pretty ambitious changes. While we’re still waiting on the full text, the summary released by the Senate Small Business Committee outlines reforms that touch every corner of the program, from how new companies get in, to how long veteran firms can stay, and how agencies are expected to guard against foreign influence.
As someone who supports both emerging startups and established federal contractors through the maze of grant funding, I’ve been following this one closely. Here’s my take on what’s being proposed, and what it might actually mean in practice.
Taking Aim at SBIR Mills
Of all the provisions in the INNOVATE Act, this is the one that’s likely to get the most applause—and the most pushback. The bill proposes a $75 million lifetime cap on SBIR/STTR funding per company, alongside a commercialization benchmark for those that receive more than 25 awards: prove that you’re generating at least as much non-SBIR revenue as you’re receiving through the program.
These changes are a long time coming. There’s widespread agreement that too many companies have built their business models around perpetual SBIR funding, without moving toward the kind of commercial scaling the program was designed to support. If this provision goes through, it could shake up the field considerably.
Still, the implementation details will matter a lot. For example, it’s not yet clear whether revenue from other federal contracts will count toward that 1:1 ratio, or whether it has to be purely private revenue. Also up in the air is whether equity investment can be treated as a form of “commercialization success.” Many early-stage startups rely on investment to signal market interest, and excluding it from the equation could punish precisely the kinds of companies the program should be supporting.
Opening the Door Wider
One of the INNOVATE Act’s most interesting ideas is the creation of a new “Phase IA” funding mechanism. This would carve out a portion of SBIR dollars (2.5%, to be exact) for small, $40K awards open only to companies that haven’t previously received SBIR funding. The goal is clear: bring fresh blood into a program that can often feel like it’s recycling the same pool of winners year after year.
This isn’t the first time we’ve heard calls to improve access for new entrants, but the simplicity of this proposal is striking. A streamlined, two-page application. No past performance hurdles. And a fund specifically reserved for newcomers. For smaller firms, early-career PIs, or underrepresented entrepreneurs, this could be a real game-changer, provided the execution is handled well.
That said, I’m not convinced the $40K award amount will be sufficient across all industries. In agtech, for instance, it might go far. In biotech, it might not even get you through discovery. If the goal is to de-risk early innovation, agencies may need some flexibility to scale award sizes based on sector-specific needs. Otherwise, the program might unintentionally favor projects that are cheaper to start—not necessarily those with the most potential impact.
Trying to Fix the DoD ‘Valley of Death’
The infamous “valley of death,” the gap between promising R&D and actual acquisition, is nothing new. The INNOVATE Act takes a bold swing at this problem within the DoD by proposing high-value “Strategic Breakthrough Awards” of up to $30 million. These would be funded by repurposing underused STTR Phase II dollars and would support technologies that are both ready to scale and aligned with DoD needs.
It’s a compelling concept: use underleveraged funds to make big bets on technologies that already have buy-in from acquisition officials. But this approach also raises some questions. Chief among them is whether reallocating STTR funds is the right lever to pull. The STTR program already faces challenges with topic alignment and academic engagement—especially in defense. Gutting it to fund a different initiative could compound those problems unless a parallel effort is made to reform STTR in tandem.
There’s also the issue of the required 1:1 matching funds. That’s a high bar, especially for early-stage or non-VC-backed firms. Deep-tech companies with longer R&D timelines may struggle to secure private capital quickly enough to qualify. If the DoD is serious about these larger awards, it may also need to revisit how readiness is defined—and whether matching funds should be the only signal of commercial viability.
Tightening Research Security
In recent years, federal agencies have started cracking down on foreign influence in federally funded research, particularly from nations that pose national security risks. The INNOVATE Act formalizes that trend, requiring standardized due diligence across agencies and expanding their ability to claw back funds if security concerns emerge post-award.
This makes sense in principle. But as with any security measure, the challenge lies in balancing vigilance with fairness. Some agencies (NIH in particular) have been criticized for implementing these checks with little transparency, sometimes denying awards or terminating funding without giving applicants a clear explanation or a path to remediation. That kind of ambiguity undermines trust and creates a chilling effect, especially for immigrant-founded or globally connected firms that have done nothing wrong.
If Congress wants to tighten research security without stifling innovation, it will need to insist on clarity, consistency, and open lines of communication between agencies and awardees. Otherwise, we risk solving one problem by creating another.
A Big Swing, But Will It Connect?
At this point, it’s too early to say whether the INNOVATE Act will pass in its current form, or how much of its ambitious vision will survive the legislative process. But it’s already succeeded in surfacing long-standing issues that deserve more attention: how to make SBIR more inclusive, how to stop funding loops that lead nowhere, and how to align R&D incentives with both national needs and market realities.
If you’re a startup founder, university tech transfer officer, or grants professional trying to navigate these waters, keep an eye on this bill. For my part, I’ll be following this closely and sharing updates here as the policy picture becomes clearer. If the INNOVATE Act becomes law, we could be looking at a very different SBIR/STTR landscape in the next few years.