Executive Summary

The recent Federal News Network op-ed, "Want to out-innovate China? Give SBIR program managers the tools to grow the next Anduril," offers a deeply flawed view of both the Small Business Innovation Research (SBIR) program and the challenges facing America's defense innovation ecosystem.

The author misrepresents SBIR's statutory mission, misunderstands how contracting and awards are actually managed, and promotes a vision of the program that would divert taxpayer dollars away from mission-critical defense needs and into the hands of venture capital interests. His core claims—that repeat award winners are blocking other companies, that commercialization should be the primary measure of success, and that the INNOVATE Act (S.853) will fix systemic problems—are factually incorrect and strategically dangerous.

This rebuttal will take apart his argument piece by piece, using SBIR's legal foundation, operational realities, and current data to show:

  1. SBIR was never designed to be a commercialization engine. Commercialization is the fourth and last statutory objective—deliberately positioned as a tertiary benefit, not a benchmark for success.
  2. High-performing SBIR companies are not blocking competition. The award process is open and competitive, and repeat winners succeed because they deliver secure, classified technologies that few others can.
  3. The INNOVATE Act would dismantle SBIR, not modernize it. By imposing arbitrary lifetime caps and shifting focus toward venture-style funding, the Act would destroy proven companies, weaken the Defense Industrial Base, and create pathways for foreign influence.

At a time when China is rapidly advancing its defense capabilities, weakening SBIR would be a catastrophic mistake. This document will methodically debunk each claim in the op-ed and make the case for strengthening SBIR, preserving its mission focus, and keeping commercialization in its proper, limited role.

In short: SBIR works. The reforms proposed in the op-ed—and embodied in the INNOVATE Act—would break it.

Table of Contents

1. Introduction – The Stakes for America's Innovation Base

The Small Business Innovation Research (SBIR) program is one of the most important national security innovation tools the United States possesses. Established by Congress in 1982, SBIR leverages small business ingenuity to deliver cutting-edge technologies for defense and other federal missions—securely, efficiently, and at speed.

Key Point

The op-ed's central premise—that SBIR must be reshaped into a commercialization pipeline modeled after venture capital—is dangerously misguided. The author misunderstands both the intent of SBIR and the operational realities of defense R&D.

This rebuttal will demonstrate why the INNOVATE Act is not reform, but dismantlement in disguise, and why protecting SBIR is critical to U.S. national security.

2. Understanding SBIR's True Mission

2.1 The Statutory Foundation of SBIR

SBIR's four explicit, ranked objectives as set by Congress are:

  1. Stimulate technological innovation.
  2. Use small businesses to meet federal R&D needs.
  3. Foster participation by socially and economically disadvantaged businesses and individuals.
  4. Increase private-sector commercialization of innovations derived from federal R&D.

Critical Understanding

Commercialization is fourth and last, intentionally positioned as a tertiary benefit—not the program's primary purpose. SBIR's core role is to meet national security needs, not to chase consumer markets.

2.2 Why SBIR Exists: A Secure, Mission-Driven Pipeline

SBIR firms deliver classified, mission-specific innovations with agility that large primes and universities cannot match. Key advantages include:

  • Speed: Phase I awards typically made within 3–6 months.
  • Security: Controlled environments to prevent technology leakage.
  • Specialization: Unique expertise in niche, high-value components.

SBIR represents just 1% of total DoD R&D, yet consistently delivers critical technologies to the warfighter.

3. The Myth of Commercialization as the Core Metric

3.1 Statutory Placement of Commercialization

Commercialization is clearly defined as last-ranked in SBIR's statutory hierarchy. It is a bonus, not a mandate.

3.2 Why Commercialization Was Never Intended as a Benchmark

Commercialization:

  • Is not the principal objective.
  • Is not the secondary objective.
  • Is deliberately tertiary, exactly where Congress placed it.

Making commercialization the primary benchmark fundamentally misinterprets the program and undermines national security.

3.3 Phase III and the Natural Limits of Commercial Markets

Phase III commercialization is explicitly unfunded by SBIR and pursued only when organically viable. Most SBIR technologies are highly specialized or classified, with limited production runs—far below the scale venture capital requires.

3.4 Anduril: An Outlier, Not a Model

Reality Check

Anduril's success reflects unique circumstances—massive private funding and a commercially appealing field (AI-driven defense). Most SBIR firms operate in areas with no commercial pathway, making Anduril the exception, not the rule.

4. Addressing the 'Major Award Winner' Myth

4.1 High-Performing Firms Do Not Block Participation

SBIR competitions are open and merit-based. Repeat winners represent only 6% of firms but deliver mission-critical, secure innovations others cannot.

Category # of Firms % of Total Awards
Repeat Winners (10+ awards) 65–70 ~6%
All Other Firms 1,000+ ~94%

4.2 The Real Issue: Allocation of Funding, Not Competition

To broaden participation, Congress can increase SBIR funding. The problem isn't competition—it's the small scale of the program relative to total DoD R&D.

4.3 Why Arbitrary Caps Would Harm National Security

The INNOVATE Act's $75M lifetime cap would:

  • Eliminate 65–70 experienced firms.
  • Displace thousands of skilled workers.
  • Weaken America's Defense Industrial Base.

5. Venture Capital vs. SBIR: Misaligned Incentives

5.1 Why Venture Capital Avoids Specialized Defense Markets

Many SBIR technologies will never interest VC firms, as the markets are too small or classified.

5.2 The Risk of Foreign Influence Through Venture Capital

Pushing firms toward VC funding opens doors to foreign investors, including adversarial nations like China.

National Security Risk

According to PitchBook data, Chinese biotech companies have acted as limited partners in 178 U.S.-based VC and private equity funds since 2020, primarily in healthcare and biotech sectors.

5.3 Why SBIR Should Not Become Free VC Seed Money

SBIR funds are for national defense—not to subsidize private venture portfolios.

6. Security and Technology Transfer Risks

6.1 University Labs vs. SBIR Firms: A Security Comparison

  • University labs: Open, collegial, and vulnerable to foreign access.
  • SBIR firms: Controlled, compliant, and among the most secure small businesses globally.

6.2 Harmonization of Security Standards Across DoD

Recent reforms standardized security requirements, further strengthening SBIR's secure role.

7. The INNOVATE Act: A Flawed, Dangerous Proposal

7.1 Flawed Policy Design and Lack of Understanding

The Act misreads SBIR's statutory intent, prioritizing commercialization over mission needs.

7.2 How the Act Would Weaken America's Industrial Base

Eliminating top performers would delay delivery of critical technologies and cripple secure innovation pipelines.

7.3 Possible Beneficiaries and Hidden Motives

Beneficiaries include:

  • Proposal-writing consultants profiting from new, inexperienced firms.
  • VCs seeking risk-free seed capital.
  • Foreign entities gaining indirect access to U.S. defense technologies.

7.4 Administrative Funding Changes Won't Solve the Valley of Death

Increasing administrative caps won't fix procurement delays—the real cause of Phase II-to-production gaps.

8. The Real Path Forward: Strengthen, Don't Sabotage, SBIR

8.1 Increase Program Funding to Expand Participation

Raising SBIR's budget allows more firms to compete without dismantling proven companies.

8.2 Focus on Mission Delivery and Secure Innovation

SBIR's success should be measured by warfighter impact and security, not commercialization metrics.

8.3 SBIR's Proven Speed in Delivering Innovation

Speed Advantage

Phase I awards occur in 3–6 months, significantly faster than traditional DoD processes.

8.4 Maintain Commercialization as a Tertiary Benefit

Commercialization should remain fourth and last, just as Congress intended.

9. Conclusion – Protecting the Warfighter and the Nation

9.1 SBIR as a Bipartisan Success Story

SBIR has been renewed under every administration since Reagan, proving its bipartisan value. The INNOVATE Act would undo decades of success at a time when America's technological edge cannot afford to falter.

Congress must:

  • Reauthorize SBIR cleanly.
  • Increase funding.
  • Preserve its focus on secure, mission-driven innovation.

SBIR works. The reforms proposed in the Federal News Network op-ed—and embodied in the INNOVATE Act—would break a program that has successfully served America's national security interests for over four decades.

At a time when our nation faces unprecedented technological competition from adversaries like China, we cannot afford to dismantle one of our most effective innovation tools. SBIR must be strengthened, not sabotaged.