Chronicles of a Would-Be Space Entrepreneur
Part 2: Kickstarting a Space Business

Many a start-up space company has had a great idea that just needed some seed money to develop into something ready for flight. These companies usually try to prove out the technology using their own funds or with cash from outside sources (e.g., banks, other lenders, venture capitalists.) Sometimes they’re able to fully finance the development and reap the rewards of their ingenuity. But oftentimes they’re not quite able to make it, and these great ideas languish for want of a few tens of thousands of dollars. The consequences? The innovators get discouraged; employees get laid-off; potential financiers lose faith in space enterprises; space project managers stick with “tried and true” methods of doing things; and nobody wins.

But what if there were a way to kickstart a small space business, initially with a small amount of funding to see if the company’s idea made sense, and then with somewhat more money to build hardware to see if the idea delivers on its promise?

Back in the early 1980s, several organizations in the government realized that most federal research and development (R&D) dollars were going to a few large companies and that most of what passed for “innovative ideas” from these firms were small improvements to existing technologies. Uncle Sam was spending a lot of money on R&D and not getting much out of it.

At the same time, the microcomputer revolution was booming and all of the major innovations seemed to be coming out of small, startup companies instead of the larger, established firms. These startups were able to do a great deal with a new idea and a little bit of cash. Many in the federal bureaucracy wondered why the same approach couldn’t be used to develop new technologies for possible use on government programs.

So in 1982, Congress established the Small Business Innovative Research (SBIR) program to channel a small percentage of the federal R&D dollars to small firms with new, innovative ideas. There are currently ten federal agencies that participate in the program with research and development budgets exceeding $100 million. These agencies must allocate 2.5% of their total R&D budgets to small companies. Each agency identifies areas where it believes technical innovations are needed to do its job and asks small firms to propose ideas for funding. These competing proposals are reviewed and funded based on feasibility, technical merit, and commercial potential.

The SBIR program is structured into three phases. Phase 1 is focused on establishing the feasibility and technical merit of an innovation and lasts six months. The maximum funding for a Phase 1 SBIR is $70,000.

Phase 2 is the major R&D effort and continues the most promising Phase 1 projects based on technical merit, expected value to the agency, and commercial potential. Phase 2 contracts usually last 24 months and can receive a maximum funding of $600,000.

Phase 3 is the implementation phase and looks at incorporating the technical innovation into existing government programs, marketing the innovation to other government agencies, or into the commercial marketplace. Funding levels for Phase 3 SBIR’s vary depending on the program and comes from a combination of government and private sources.

A number of different agencies fund SBIR work in the space arena, including NASA, the Air Force, the Defense Advanced Research Projects Agency, and the Missile Defense Agency, among others. One NASA SBIR solicitation topic of particular interest to those of us promoting space exploration and settlement is the Exploration Systems area. This area is strongly focused on the president’s Lunar/Mars Initiative and the agency is looking for innovative ideas in a number of different fields:

• Self-sufficient space systems
• Space utilities and power
• Habitation, bioastronautics, and EVA
• Space assembly, maintenance, and servicing
• Surface exploration and expeditions
• Space transportation
• Information and communication
• Systems integration, analysis, concepts, and modeling

Several small startups became serious players in the space field after winning SBIR contracts. These contracts gave the firms a “shot in the arm” in the form of new technology, technical and managerial expertise, and a reputation within the aerospace and financial communities.

So if you’re a would-be entrepreneur with a great idea to support space exploration and settlement, write an SBIR proposal and submit it. You and your firm could be on your way to the stars.

The Prequel was published in the March 2005 Odyssey. Part 1: Taking the Plunge, was published in the May 2005 edition. Find Part 3 in the September issue.

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