The recently introduced INNOVATE Act (Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence) represents the most significant overhaul of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs in years. Introduced by Senator Joni Ernst, Chair of the Senate Committee on Small Business and Entrepreneurship, the bill aims to reauthorize these critical innovation programs through 2028 while implementing substantial reforms.
The legislation addresses several key challenges in the current system. For new entrants, it creates a streamlined Phase 1A program offering $40,000 awards through a simplified two-page application process. This approach specifically targets first-time applicants, with agencies required to allocate 2.5% of their SBIR/STTR funding to this initiative.
For defense innovation, the Act establishes "Strategic Breakthrough Awards" - a significant development allowing the Department of Defense to provide up to $30 million to promising SBIR Phase II awardees to accelerate technology transition. These awards require matching funds and are designed to bridge the notorious "valley of death" between development and deployment.
The bill also tackles concerns about "SBIR mills" - companies overly dependent on these programs. New performance metrics require companies with more than 25 Phase II awards to demonstrate substantial non-SBIR revenue or investment. Companies failing to meet these benchmarks will face restrictions on future awards until they achieve greater commercial success.
Perhaps most controversially, the Act significantly reduces the STTR program, cutting its budget allocation from 0.45% to 0.20% while redefining its purpose away from technology transfer. The minimum university participation level drops from 30% to 20%, while small business participation increases to 50%.
The legislation also strengthens protections against foreign influence, particularly from countries of concern. Enhanced due diligence requirements and broader recovery authorities aim to prevent intellectual property developed with taxpayer funding from benefiting adversarial nations.
Geographic diversity receives attention through a new focus on "Emerging States" - defined as the 25 states with the fewest SBIR/STTR first-time recipients over the previous decade. However, the bill eliminates specialized outreach for women and socially disadvantaged individuals, redirecting these efforts toward rural areas and emerging states.
Additional administrative improvements include fixed-price contracting as the default, improved data collection on award outcomes, and streamlined application processes to reduce bureaucratic burden.
Industry reaction has been largely positive, with organizations like the Technology Association of Iowa, America First Policy Institute, and the Alliance for Commercial Technology in Government praising the reforms. Supporters highlight the bill's potential to reduce barriers for new applicants, strengthen national security protections, and improve program efficiency.
As the September 30, 2025 expiration date approaches for current SBIR/STTR authorization, this legislation represents a significant opportunity to reshape how America supports small business innovation in an increasingly competitive global landscape.
