Winning DoD R&D Funding: SBIR, BAAs, OTAs, and the Opportunities Most Companies Miss
The Department of Defense invests billions of dollars in research and development each year ($141.2B in FY2025) – and a significant share of that flows directly to private industry. For companies with relevant technology, the DoD represents one of the most substantial and recurring sources of non-dilutive R&D funding available. Billions are accessible annually through multiple mechanisms, including SBIR contracts for small businesses, Broad Agency Announcements open to companies of all sizes, and Other Transaction Agreements that offer an accelerated path from prototype to program of record.
The Scale of Opportunity
Within that ecosystem, the DoD’s Small Business Innovation Research program alone allocates more than $2 billion annually – distributed across more than a dozen components, each with its own technology priorities and active solicitations. For a small business with the right technology, this program could represent multiple awards across successive phases and multiple components.
Larger companies can pursue parallel opportunities through BAAs and OTAs, where the funding ceilings are higher and the competitive landscape is different.
The common thread: the DoD is not a passive funder. It funds technology because it has operational needs – and it returns to the companies that deliver.
“Working with Akela Consulting has been a game-changer for our business. Their expertise, hands-on support, and willingness to go the extra mile have helped us secure nearly $3.5M in funding from federal agencies, including the U.S. Army, U.S. Air Force, and the Department of Transportation.
The expert team has been all-in on our success, driving our growth through non-dilutive funding, sharp business insights, rigorous analysis, and no-fluff business development. This partnership fast-tracked our U.S. go-to-market and laid the foundation for the necessary first step in growing our business into what it is today. Now, combined with Grant Engine we envision a broader and deeper collaboration to significantly fuel our mission.”
Stages of DoD Funding
The DoD SBIR program follows a structured phased approach designed to take a technology from early-stage research to a market-ready solution.
Phase I is a feasibility study, designed to establish the technical merit and commercial potential of a proposed R&D concept. Phase I awards typically range from $150,000 to $250,000 and cover a period of six months to a year. The goal is not to build a finished product. It is to demonstrate that the concept is worth pursuing further.
Phase II is where the core R&D work happens. Companies that successfully complete Phase I can apply for a Phase II award, which funds the development and demonstration of the technology. Phase II awards typically range from $750,000 to $2,000,000 and cover a period of up to two years. This is where prototypes are built, tested, and refined for potential deployment. It is worth noting that in some cases a Direct to Phase II (D2P2) award is available, allowing a company to skip Phase I entirely and move directly into full R&D funding. D2P2 awards are typically reserved for companies that can demonstrate sufficient prior work or relevant experience to justify bypassing the feasibility stage.
Phase III is the purpose of the SBIR program. It represents the commercialization of the technology developed under Phase I and II and is funded by non-SBIR sources including DoD procurement contracts, private investment, or other federal funding. The goal is straightforward: to turn your R&D project into a program of record with a large DoD customer. A Phase III award can be issued on a sole-source basis, meaning no further competition is required. For companies that have built strong relationships with a program office during Phase I and II, Phase III represents the highest-leverage outcome in the entire pathway.
In practice, many companies are not ready for Phase III commercialization at the end of a Phase II. The technology may need further development, or the right program office relationship may not yet be in place. In those cases, companies will often pursue an additional Phase II award or seek DoD bridge funding such as the new Department of War Strategic Breakthrough Funding programs or the Air Force’s STRATFI or its smaller counterpart TACFI. These programs are designed specifically to bridge the gap between Phase II and a funded program of record. (See more on this below)
It is important to note that the SBIR phased structure is not the only model. Larger DoD funding programs, including BAAs and OTAs, often operate on a different framework entirely. These programs may fund multi-year development efforts with budgets paid annually, quarterly, or according to a negotiated milestone schedule, without the need to transition between phases. The funding ceiling is also significantly higher, with some OTA prototype agreements reaching into the tens or hundreds of millions of dollars.
What all of these mechanisms share is a common purpose: to fund the research and development that turns a promising technology into a program of record.
Participating DoD Entities
The Department of Defense – recently rebranded as the Department of War – is not a single organization. It is a large and complex ecosystem of components, each with its own mission, technology priorities, and funding mechanisms. For dual-use companies, understanding which components are most relevant to their technology is one of the most important early steps in building a DoD funding strategy.
Which agencies participate in the DoD SBIR program?
The following components all participate in the DoD SBIR program, publishing solicitations exclusively for small businesses across multiple topic cycles per year:
- Department of Army (Army)
- Department of Navy (Navy)
- Department of Air Force (Air Force)
- Missile Defense Agency (MDA)
- Defense Advanced Research Projects Agency (DARPA)
- Defense Threat Reduction Agency (DTRA)
- Defense Health Agency (DHA)
- Special Operations Command (SOCOM)
- Defense Logistics Agency (DLA)
- Defense Microelectronics Agency (DMEA)
- Strategic Capabilities Office (SCO)
Do all DoD agencies publish BAAs and OTAs in addition to SBIR?
Most do. Beyond their SBIR allocations, many of these components also publish Other Transaction Agreements (OTAs) and Broad Agency Announcements (BAAs) that are open to companies of all sizes. For a dual-use company navigating this landscape, the question is rarely whether an opportunity exists. It is knowing where to look and which mechanism fits your technology, your stage, and your goals.
Not sure whether SBIR, OTA, or BAA is the right mechanism for your company?
Unique Programs
Beyond the standard SBIR participating agencies, the DoD operates a number of innovation programs that move faster, engage more directly with commercial technology, and often serve as an accelerated on-ramp into the broader defense ecosystem for dual-use companies.
- AFWERX / SpaceWERX — AFWERX and SpaceWERX are the Air Force and Space Force innovation arms and run the USAF SBIR program directly. They are designed to connect commercial and dual-use technology companies with Air Force and Space Force programs through streamlined SBIR topics, challenges, and OTAs.
. - xTech — An Army-run competition program tailored toward small businesses. xTech is not a SBIR program itself, but it is designed to connect small businesses directly with Army program offices – and for the right dual-use company, a strong xTech showing can be a direct path to SBIR funding.
. - Defense Innovation Unit (DIU) — A DoD-wide program focused exclusively on fielding commercial technology at speed across all branches. DIU operates primarily through OTAs, making it accessible to companies of all sizes and moving significantly faster than traditional defense procurement.
The Army is not DARPA. AFWERX is not SOCOM. Each DoD component brings a distinct set of priorities, evaluation criteria, and expectations. At Grant Engine, we tailor every engagement to the specific component we are targeting – and in every proposal we write, we maintain a deliberate focus on the warfighter or end-user who stands to benefit from the technology. Because that is ultimately what every DoD evaluator is asking: does this solve a real operational problem, and can this team deliver?
The DoD SBIR Schedule
How often does the DoD publish new SBIR opportunities? More often than most companies realize. The DoD SBIR program operates on a structured, predictable schedule that creates multiple entry points throughout the year:
- Three major release cycles per year – Three major release cycles per year
. - The DoD SBIR program historically publishes three broad solicitation cycles annually, each covering topics across multiple components and technology areas.
. - Monthly open topic releases – Monthly open topic releases
. - On the first Wednesday of every month, the DoD SBIR program publishes new open topic releases, creating additional entry points between the major cycles
. - Out-of-cycle opportunities – Out-of-cycle opportunities
. - Individual components can and do release opportunities outside of the standard schedule, meaning the calendar above represents a floor, not a ceiling.
And since the DoD SBIR program publishes opportunities throughout the year, there is almost always a relevant, active solicitation worth pursuing. The best way to stay current is to check the Defense SBIR/STTR Innovation Portal (DSIP) regularly, where all active and upcoming DoD SBIR solicitations are published in one place.
Do all DoD agencies publish BAAs and OTAs in addition to SBIR?
Most do. Beyond their SBIR allocations, many of these components also publish Other Transaction Agreements (OTAs) and Broad Agency Announcements (BAAs) that are open to companies of all sizes. For a dual-use company navigating this landscape, the question is rarely whether an opportunity exists. It is knowing where to look and which mechanism fits your technology, your stage, and your goals.
Not sure whether SBIR, OTA, or BAA is the right mechanism for your company?
Aligning DoD Federal Funding Programs to Technology Readiness Level
Not every DoD funding mechanism is appropriate for every stage of technology development. The DoD uses a Technology Readiness Level (TRL) scale from 1 to 9 to assess how mature a technology is, and the funding mechanisms available to a company shift significantly as that maturity increases.
At early stages (TRL 1 to 4), the focus is on feasibility. The relevant buyer is the research community and the primary mechanisms are SBIR Phase I, research BAAs, and early-stage lab partnerships. At the middle stages (TRL 5 to 7), the focus shifts to demonstration and prototype development. The relevant buyers are operators and program offices, and the mechanisms include SBIR Phase II and III, prototype OTAs, STRATFI and TACFI, and programs like DIU and the Army Applications Lab. At the highest stages (TRL 8 to 9), the technology is ready for procurement. The relevant buyers are Program Executive Offices, Combatant Commands, and prime contractors, and the vehicles include FAR contracts, production OTAs, and sole-source follow-on awards.
It is worth noting that TRL is not always a fixed designation. Where a technology sits on the scale depends in part on where the roadmap ends. A company that defines its near-term deliverable thoughtfully can position the same technology at different readiness levels for different agencies and different purposes. Knowing how to do this can meaningfully expand your funding options.
DoD Funding Can Unlock DoD Customers
Winning DoD R&D funding carries strategic value beyond the award itself. A DoD contract signals to investors that a rigorous, technically sophisticated evaluator has reviewed the technology and deemed it worth funding. It establishes credibility with customers and partners in a market where credibility is difficult to manufacture.
But the deeper opportunity is this: the DoD component that funds your research is often the same organization that would ultimately procure your product. DoD agencies fund R&D because they have an operational requirement they need met. When a program office awards a Phase II SBIR or a prototype OTA, they are not simply writing a check. They are identifying a technology they may one day need at scale. For the right company, that relationship could be the beginning of a path from R&D contract to direct procurement.
Not Just Funding. Customer Access.
Winning R&D funding from the Department of Defense puts your technology in front of one of the largest customers in the world.
The agency writing the check may also be the one writing the procurement contract.
At Grant Engine, we help our clients win non-dilutive funding that opens the door to that relationship. Grant Engine helps defense and dual-use companies navigate this ecosystem, identifying the right mechanism, the right component, and the right moment to pursue, and building the proposals that win.
Strategic Breakthrough Funding: DoD Bridge Funding of the Innovation Valley of Death
The DoD understands that the path from a successful Phase II to a procurement contract is rarely direct. For many companies, the technology is ready. The operational need is validated. The missing variable is not further development. It is capital. The gap between Phase II completion and a funded program of record has ended more promising defense technology companies than technical failure ever has.
That is why the Air Force created STRATFI. The Strategic Funding Increase program was designed specifically to bridge this gap, combining government SBIR funding with private matching capital to give high-potential companies the runway to reach procurement-ready status. Since its creation in 2019, STRATFI has proven the model works, with more than 65 awards averaging approximately $10 million each. Policymakers are now proposing to expand this approach across the entire DoD through a Strategic Breakthrough Funding program, with awards potentially reaching $30 million.
The valleys of death in defense are commercial, not technical. Phase II to Phase III fails without a program office already aware of the technology and with budget moving toward it. The work that closes that gap is customer development, not engineering.
In practice that means starting with operators who have urgent unmet need, whether SOCOM, JSOC, Marine Raiders, or others, and getting your technology in front of them early. Forward-deploying your MVP into exercises, tapping discretionary funding mechanisms to get paid quickly, and building operator advocacy that pulls you into a formal program of record, with congressional staffer engagement running in parallel to shape the political and military opportunity space.
From First Award to Program of Record: How Grant Engine Can Help
Grant Engine knows the full process. We specialize in putting defense and dual-use companies in position to unlock not just a single award, but long-term funding relationships and customer relationships with the DoD.
That starts with understanding that every DoD component is a different buyer with a different mission, a different culture, and a different definition of what a winning proposal looks like. The language that resonates with a DARPA program manager is not the language that wins with AFWERX or SOCOM. We tailor our approach to each sub-agency, ensuring that every proposal we build speaks directly to the priorities, evaluation criteria, and operational context of the specific organization reviewing it.
Equally important is understanding the end-user. A proposal that describes a technology in technical terms will always lose to one that explains what it does for the warfighter, the operator, or the program office trying to solve a specific problem in the field. We help our clients identify who that end-user is, what they care about, and how to frame the value of the technology in terms that create genuine interest and advocacy within the funding agency. From the first SBIR topic to a sole-source follow-on, we are with you at every stage of the journey.
Grant Engine helps defense and dual-use companies navigate this ecosystem, identifying the right mechanism, the right component, and the right moment to pursue, and building the proposals that win.
Grant Engine helps defense and dual-use companies navigate this ecosystem,
identifying the right mechanism, the right component, and the right moment to pursue, and building the proposals that win.
FAQ: DoD SBIR Funding for Defense and Dual-Use Companies
Which agencies participate in the DoD SBIR program?
The DoD SBIR program includes Army, Navy, Air Force, DARPA, MDA, DTRA, DHA, SOCOM, DLA, DMEA, NGA, and SCO. Each publishes its own topics, evaluates proposals independently, and has its own technology priorities. Understanding which component is the best fit for a given technology is one of the most valuable early decisions a company can make.
Do all DoD agencies publish BAAs and OTAs in addition to SBIR?
Most do. Many DoD components publish OTAs and BAAs alongside their SBIR programs, opening additional funding pathways to companies of all sizes. Not sure which mechanism is right for you? Talk to a Grant Engine funding strategist.
What is the difference between AFWERX / SpaceWERX and the standard Air Force SBIR program?
There is no separate Air Force SBIR program. AFWERX and SpaceWERX run the Air Force and Space Force SBIR programs directly. With a startup-friendly culture, streamlined processes, and a mandate to move faster than traditional defense procurement, they are often one of the most accessible entry points into DoD funding for dual-use companies.
What is xTech and does it lead to SBIR funding?
xTech is an Army-run competition program tailored toward small businesses. It is not a SBIR program itself, but it is designed to connect small businesses directly with Army program offices. Often the final prize is an invitation to apply to a tailored SBIR Phase I or Phase II, making xTech one of the more direct on-ramps to Army SBIR funding available to small businesses.
What is the Defense Innovation Unit and how is it different from SBIR?
DIU is a DoD-wide program focused exclusively on fielding commercial technology at speed across all branches. Unlike SBIR, DIU operates primarily through OTAs, making it accessible to companies of all sizes and moving significantly faster than traditional defense procurement.
How often does the DoD publish new SBIR opportunities?
More often than most companies realize. The DoD SBIR program runs three major release cycles per year, publishes new open topic releases on the first Wednesday of every month, and allows individual components to release out-of-cycle opportunities on an ongoing basis. For a company that understands the ecosystem, there is almost always an active opportunity worth pursuing.
When is the right time to apply to DoD SBIR programs?
Whenever the right opportunity presents itself, which given the cadence of the DoD SBIR calendar, may be more often than most companies expect. Pursuing DoD SBIR funding is not unlike pitching to a customer or an investor. The more relevant opportunities you pursue, the better your chances of securing funding. A company that applies once is taking a single shot. A company that understands the ecosystem and applies consistently across cycles and components is building a pipeline.
What is STRATFI and how does it relate to the Innovation Valley of Death?
STRATFI, the Strategic Funding Increase program, was created by the Air Force to bridge the gap between Phase II SBIR completion and a funded program of record. It combines government SBIR funding with private matching capital, with awards averaging approximately $10 million. Policymakers are now proposing to expand this model across the entire DoD through a Strategic Breakthrough Funding program, with awards potentially reaching $30 million. For companies with technology ready to scale, these programs represent a potentially transformative funding pathway.
Grant Engine helps defense and dual-use companies navigate this ecosystem, identifying the right mechanism, the right component, and the right moment to pursue, and building the proposals that win.