SBIR and STTR for defense founders: how the phases actually work
Phase I, II, and III mechanics, open versus conventional topics, how AFWERX and SpaceWERX style pipelines run, and an honest look at timelines.
On this page
- The three phases
- Phase I: feasibility
- Phase II: development
- Phase III: commercialization
- Open topics versus conventional topics
- How AFWERX and SpaceWERX style pipelines run
- Defense and space programs in the directory
- FAQ
- Does taking SBIR or STTR money dilute my company?
- Do I need a Phase I award before I can get Phase II?
- What is the difference between SBIR and STTR again?
For defense and space founders, SBIR and STTRUS federal programs that fund small-company R&D with non-dilutive awards in phases. are often the first real money, and it is non-dilutiveMoney that does not take equity, such as grants, prizes, or credits. Your ownership is untouched., so it does not touch your cap table. The programs are powerful and slow, generous and bureaucratic. This guide explains the phases, the two kinds of topics, and how the well-known pipelines run, without pretending the timelines are faster than they are.
The three phases
SBIR and STTR both run in phases. STTR works the same way but additionally requires you to partner with a research institution such as a university or federal lab.
Phase I: feasibility
A small award to prove your idea is technically feasible. Think of it as being paid to write a serious answer to a narrow question, over a few months. It is the audition, not the run.
Phase II: development
A much larger award to build and mature the technology, usually over a couple of years. Most of the real money and real work lives here. You generally need a Phase I result, or a direct-to-Phase-II path where it exists, to get here.
Phase III: commercialization
The phase that uses non-program money. The government does not fund Phase III through SBIR itself. Instead, Phase III is the transition to a real contract or a commercial customer, funded from other budgets. This is where the earlier work is supposed to pay off.
These are illustrative ranges to show the shape of the funnel, not any specific program's current numbers. Actual amounts and durations are set by each agency's solicitation and change over time, so always read the live solicitation.
| Phase | What it funds | Rough shape |
|---|---|---|
| Phase I | Feasibility study | Tens of thousands to low six figures, over roughly 6 months |
| Phase II | Prototype and development | High six figures to low seven figures, over roughly 2 years |
| Phase III | Transition to a real contract | Funded outside SBIR, size depends on the customer |
The takeaway is the ratio, not the digits. Phase I is small and short. Phase II is where the weight is. Phase III is where it either becomes a business or does not.
Open topics versus conventional topics
There are two ways a solicitation frames the problem.
- A conventional topic is a specific problem the government has written down. You propose a solution to their stated need. Fit is narrow, and your proposal is judged against how well it answers that exact ask.
- An open topic lets you bring the problem. You propose both the need and your solution, and argue that a part of the government would want it. Fit is broader, but you carry the burden of showing there is a real customer.
Open topics widened the door for dual-use startups, because a company built for a commercial market can enter without contorting itself to a pre-written requirement.
How AFWERX and SpaceWERX style pipelines run
Organizations like AFWERX and SpaceWERX run SBIR and STTR solicitations with a startup-facing front door: open calls, pitch events, and a path toward follow-on work. Mechanically, the flow looks like this.
- A solicitation opens for a window. You submit a proposal against it.
- Selected teams receive a Phase I award and do the feasibility work.
- Strong Phase I results can compete for Phase II, sometimes with matching funds from a government customer who wants the capability.
- If a real user adopts it, the work transitions toward Phase III and a contract of record.
Defense and space programs in the directory
These are the verified defense and space programs we currently list. Terms, windows, and confidence badges are live, and each links to its full page.
Showing 1 of 1 programs
| Check size | Equity | Terms | Format | Next window | Signal | |||
|---|---|---|---|---|---|---|---|---|
| SpaceWERX (SBIR/STTR, STRATFI/TACFI, Accelerate)space technology for the U.S. Space Force | Not publishedInnovation arm of the U.S. Space Force; funds companies through non-dilutive SBIR/STTR contracts (Spark, Vector, Accelerate pathways incl. cohorts and STRATFI/TACFI scale-up funding). Award amounts were not stated on the fetched page, so investment_amount is null; equity null because contracts take no equity. Space PY26.2 TACFI accepts submissions on a rolling basis. | Not publishedInnovation arm of the U.S. Space Force; funds companies through non-dilutive SBIR/STTR contracts (Spark, Vector, Accelerate pathways incl. cohorts and STRATFI/TACFI scale-up funding). Award amounts were not stated on the fetched page, so investment_amount is null; equity null because contracts take no equity. Space PY26.2 TACFI accepts submissions on a rolling basis. | Non-dilutive | Not published | Remote | Jul 22, 2026 | Jul 21, 2026 | Verified |
Live from the directory. See the full Defense & Space listing.
FAQ
Does taking SBIR or STTR money dilute my company?
No. Both are non-dilutive, so they do not take equity. The cost is in reporting, compliance, and the calendar, not ownership.
Do I need a Phase I award before I can get Phase II?
Usually yes, though some agencies offer a direct-to-Phase-II route for technologies that can show prior maturity. Read the specific solicitation, because the rules differ by agency.
What is the difference between SBIR and STTR again?
They are structured the same way in phases. STTR additionally requires a formal partnership with a research institution and sets a minimum share of the work for that partner.
This is general education, not legal or investment advice. Read the actual documents and talk to a lawyer before you sign.
Programs mentioned in this guide
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