The claim sounds too good to be true. Like a late-night infomercial: "Tap into $2 billion in federal dollars for research and development. We fund high-risk projects at the earliest stages of technology development and work with you on the commercialization of your technology!"

This offer comes from no middle-of-the-night pitchman, it describes a pair of U.S. government programs: Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR).

Created in 1982 by the Small Business Innovation Development Act, the programs engage small businesses in federal efforts to develop new technology, apply existing technology to new problems and improve existing technology.

About 2,000 small businesses apply for SBIR/STTR grants each year, so competition is stiff, but not insurmountable. Since 1987, North Dakota businesses have received more than $13 million in SBIR/STTR grants. North Dakota has a high award ratio, with one in four North Dakota applications being funded, according to state SBIR records.

Dakota Technologies, Inc. of Fargo has received 18 SBIR Phase I grants and eight Phase II grants, accounting for more than 40 percent of all the SBIR funds granted in the state. DTI was co-founded in 1993 by former NDSU chemistry professor and department chair Greg Gillispie and Randy St. Germain, a research assistant in Gillispie's group.

Leveraging the resources of NDSU's Center for Nanoscale Science and Engineering towards commercialization activities is the focus of Doug Schulz's work at CNSE. Schulz, a CNSE senior research scientist, joined NDSU in December 2003. He brings with him considerable background in SBIR/STTR funding gained during four years at CeraMem Corp., a small business located on the high-technology beltway in Waltham, Mass.

A 1988 NDSU chemistry graduate from Casselton, N.D., in 1993 Schulz earned his doctorate at Northwestern University, Evanston, Ill. He first worked with SBIR/STTR-funded companies at the National Renewable Energy Laboratory in Golden, Colo. Just prior to joining NDSU, he worked at CeraMem.

CeraMem was founded in 1986 to commercialize novel concepts for ceramic membrane modules. Its mission is to effectively utilize federal funding to seed new business based on technology innovation. Schulz, a minority stockholder in CeraMem, remains active in the corporation as an SBIR consultant and promotes commercialization of electronic materials technologies developed under his guidance.

In both SBIR and STTR programs, small U.S. businesses must be the primary contractors. SBIR grants are earmarked for businesses, while STTR programs facilitate cooperative research and development between small businesses and research institutions. Federal agencies that make SBIR/STTR grants include the departments of defense, energy, agriculture, health and human services (including the National Institutes of Health), as well as the National Science Foundation.

Based on his experiences with the programs, Schulz has some advice for potential SBIR/STTR applicants.

Step one: Determine market need. "Many technologists suffer from 'technology push,' where they develop 'neat' science only to find there is no way to sell it," Schulz said. "Small businesses are more successful when they adopt a 'market pull' strategy." This strategy requires market definition prior to proposing a technology solution.

Step two: Develop a novel, innovative technology to address the market need and do your homework. Check U.S. and global patent literature to make sure your concept is novel. The commercial value of technology lies in intellectual property. "That's what you can sell," Schulz said. "If you don't have intellectual property, you really don't have anything." So, it's imperative to keep proper notebooks and file patents as the technology matures.

Step three: Establish technical feasibility of your product/technology. Here's where SBIR/STTR Phase I grants (typically $100,000) can help by providing funds needed to establish technical feasibility. North Dakota has a SBIR/STTR program, called Phase 0, which will fund preparation and submission of Phase I proposals. Phase 0 applications can be submitted at any time and are reviewed monthly; successful applications may be awarded up to $2,500.

Step four: Assuming you prove technical feasibility in the Phase I SBIR/STTR grant, the next step is product/process scaleup and commercialization. Funding for this can be obtained through a Phase II SBIR/STTR grant (awards can range from $500,000 to $750,000). "The Phase II proposal is like an early-stage business plan," Schulz said. The proposal contains two sections, (1) a technical research plan geared towards scaleup and (2) a commercialization plan.

Among other things, Schulz said the commercialization plan needs to: Describe the competition; address barriers to market; define sales, marketing and pricing structures; and outline potential follow-on scenarios, such as venture capital funding, strategic partnerships or joint ventures.

"The Phase II proposal also needs to show that you have made appropriate business contacts and there is a real-world interest in taking your technology to market," Schulz said. "For many agencies, a commercialization partnership must be identified, where a potential investor provides a letter of contingent commitment." In such a letter, an investor agrees to make a monetary investment in the technology, assuming various technical and strategic metrics are met. Many agencies now provide free commercialization assistance through third parties, such as Foresight (www.seaport.com) or Dawnbreaker (www.dawnbreaker.com).

Schulz said he's willing to provide advice and guidance to businesses or potential business owners on the SBIR/STTR application process. "I came to NDSU to engender a culture of commercialization within the university setting. We have tremendous technological capabilities at NDSU and strategic partnerships with several high-technology companies. My goal is to identify market needs related to these core strengths and relationships, develop novel solutions and NDSU intellectual property, and work with the NDSU Research Foundation towards successful technology transfer leading to new business formation near NDSU."

For more information, two good SBIR Web sites are www.sbirworld.com and www.zyn.com/sbir. These sites can be searched by topic and will help determine if your company is or could be doing a project that fits an agency's interest areas. For more information, contact Tony Grindberg, executive director, NDSU Research and Technology Park, tony@ndsuresearchpark.com or call (701) 231-7450.