The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs face an uncertain future as Congressional authorization expired in September 2025 without renewal, according to Mike Carnes, vice president for emerging company development at the North Carolina Biotechnology Center. These federal funding programs, collectively known as “America’s Seed Fund,” provide critical capital to technology-focused small businesses nationwide, with billions of dollars in innovation support now hanging in the balance.
In North Carolina alone, the programs awarded 187 grants totaling $124.5 million to 124 small businesses across all industries in 2024, according to the latest available data. More than half of these funds supported life sciences companies, with 52 businesses receiving 76 National Institutes of Health awards totaling $59.7 million for developing healthcare technologies.
Why SBIR and STTR Programs Matter for Innovation
The programs provide essential non-dilutive funding to early-stage companies when technical risk often limits their ability to attract private investment, Carnes explained. Each year, the initiatives typically award over $4 billion to more than 4,000 small businesses throughout the United States. These competitive, merit-based grants enable companies to develop, test and refine new technologies on their path to commercialization.
Additionally, the programs have demonstrated remarkable success in generating follow-on investment. From 2020 to 2024, North Carolina companies that previously received SBIR or STTR funding raised $4.34 billion in follow-on capital, primarily from private sources. History shows that for every dollar received through these programs, companies raise multiple dollars in additional investment.
Impact on Life-Saving Technologies
The programs have funded vital advancements including the Mars Perseverance rover, lasers used in Lasik eye surgery, and mRNA technology used in COVID vaccines, according to the op-ed. A study by the National Institutes of Health found that over a 25-year period, 12 percent of approved pharmaceuticals and over 2,500 approved diagnostics were developed with SBIR/STTR funding support from NIH.
North Carolina success stories supported by these programs include Baebies Inc., which developed digital microfluidics technology for rapid diagnostic testing, and Humacyte, which created bioengineered blood vessels for trauma patients. Other beneficiaries include Lindy Biosciences, AskBio and Liquidia, all developing innovative therapeutic technologies.
Foreign Risk Concerns Complicate SBIR Program Reauthorization
The U.S. House passed a one-year extension of SBIR/STTR program funding in September 2025, but the Senate has not acted due to disagreements over program changes. One primary concern involves potential vulnerability to foreign adversaries seeking to steal proprietary research data from funded small businesses.
However, the North Carolina Biotechnology Center reports that nine state companies have been denied SBIR/STTR funding totaling approximately $15 million due to possible foreign risks, even after receiving fundable scores on their grant applications. The most perplexing aspect, according to Carnes, is that denied companies receive no explanation about what triggered the denials and have no opportunity to appeal or remedy alleged risks.
Economic Implications for Small Businesses
Meanwhile, the programs’ uncertain status is creating distress throughout the innovation ecosystem. North Carolina companies supported by these programs employ 698 jobs primarily focused on developing life-saving healthcare technologies. Loss of program funding could force companies to seek equity investments earlier than planned, abandon projects, reduce staff or potentially shut down operations.
In contrast to venture capital investors who typically avoid early proof-of-concept research due to high technical risk, SBIR and STTR programs fill a critical funding gap. Other federal agencies including the National Science Foundation, U.S. Department of Defense and U.S. Department of Agriculture also award grants to small businesses addressing challenges in agriculture and food systems, sectors vital to North Carolina’s economy.
After four months without reauthorization, advocates are urging Congress to restart the programs, extend authorization periods and establish adequate procedures to address foreign risk concerns and other issues. Authorities have not confirmed when the Senate might act on the extension, leaving the future of billions in innovation funding uncertain.
