What is the INNOVATE Act?
The INNOVATE Act (Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence) is groundbreaking legislation introduced by Senator Joni Ernst, Chair of the Senate Committee on Small Business and Entrepreneurship. This bill will reauthorize and reform the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through 2028.
The legislation addresses several critical challenges in the current system while implementing substantial reforms to improve program efficiency and effectiveness for biotech startups and small businesses nationwide.
Revolutionary Phase 1A Program: Streamlined Entry for New Biotech Companies
Game-Changing Access for First-Time Applicants
The INNOVATE Act creates a revolutionary Phase 1A program specifically designed to lower barriers for biotech startups and first-time SBIR applicants:
Key Phase 1A Features:
$40,000 awards* through a simplified two-page application process
2.5% of total SBIR/STTR funding allocated specifically to this program
Streamlined review process for faster decision-making
Reduced administrative burden compared to traditional Phase I applications
This initiative directly targets new entrants to the SBIR ecosystem, making it significantly easier for innovative biotech companies to access federal funding for breakthrough research and development.
Strategic Breakthrough Awards: Accelerating Defense Innovation
Bridging the Valley of Death for Biotech Defense Applications
For biotech companies developing technologies with defense applications, the INNOVATE Act establishes transformative funding opportunities through Strategic Breakthrough Awards:
Strategic Breakthrough Award Details:
Up to $30 million available for promising Phase II awardees
Department of Defense administration focusing on technology transition
Matching funds requirement to demonstrate commercial viability and commitment
Accelerated pathway from development to deployment
These awards specifically target the notorious "valley of death" between successful research and practical implementation, providing biotech startups with unprecedented resources to scale their innovations for military and dual-use applications.
Performance Standards: Addressing SBIR Mill Concerns
New Accountability Measures for Established Companies
The INNOVATE Act tackles longstanding concerns about "SBIR mills" - companies that become overly dependent on these programs without achieving substantial commercial success:
Performance Metric Requirements:
Companies with 25+ Phase II awards must demonstrate substantial non-SBIR revenue or investment
Commercial success benchmarks required for continued program eligibility
Restrictions on future awards for companies failing to meet performance standards
Enhanced focus on commercialization rather than perpetual research funding
These measures ensure that SBIR STTR programs continue supporting genuine innovation while preventing program dependency that doesn't lead to market success.
Controversial STTR Program Restructuring
Significant Changes to University-Business Partnerships
The INNOVATE Act makes substantial modifications to the STTR program that have generated considerable debate:
Major STTR Changes:
Budget allocation reduced from 0.45% to 0.20% of agency extramural budgets
University participation minimum decreased from 30% to 20%
Small business participation increased to 50% requirement
Program purpose redefined away from traditional technology transfer focus
Impact on Biotech Collaborations:
Reduced funding available for university-industry partnerships
Shifted emphasis toward small business leadership in collaborations
Changed dynamics for academic-commercial biotech relationships
Potential challenges for research institutions dependent on STTR funding
Enhanced National Security Protections
Safeguarding Biotech Innovation from Foreign Influence
The INNOVATE Act significantly strengthens protections against foreign influence, particularly relevant for biotech companies developing sensitive technologies:
Foreign Influence Safeguards:
Enhanced due diligence requirements for applicants with international connections
Broader recovery authorities to reclaim taxpayer-funded intellectual property
Stricter oversight of collaborations with entities from countries of concern
Protection mechanisms for sensitive biotech research and development
Biotech-Specific Implications:
Increased scrutiny of international research partnerships
Enhanced IP protection for breakthrough medical technologies
Stricter compliance requirements for companies with foreign investors
National security considerations in funding decisions
Geographic Diversity and Outreach Reforms
Refocused Efforts on Emerging States and Rural Areas
The INNOVATE Act redefines diversity and outreach priorities with significant implications for biotech startup distribution:
New Geographic Focus:
"Emerging States" definition: 25 states with the fewest SBIR/STTR first-time recipients over the previous decade
Enhanced rural area outreach for underserved communities
Elimination of specialized programs for women and socially disadvantaged individuals
Redirected resources toward geographic rather than demographic diversity
Impact on Biotech Ecosystem:
Expanded opportunities in traditionally underserved states
Rural biotech development emphasis
Changed support structure for diverse entrepreneurs
Geographic distribution prioritized over demographic representation
Administrative Improvements and Efficiency Measures
Streamlined Processes for Better Program Management
The INNOVATE Act implements several administrative reforms to improve program efficiency:
Process Improvements:
Fixed-price contracting established as the default option
Enhanced data collection on award outcomes and commercial success
Streamlined application processes to reduce bureaucratic burden
Improved program management for faster decision-making
Benefits for Biotech Applicants:
Reduced administrative complexity in application and management
Clearer performance expectations and success metrics
Faster funding decisions through improved processes
Better program transparency through enhanced data collection
Industry Response and Stakeholder Reactions
Broad Support from Innovation Community
The INNOVATE Act has received a largely positive reception from key stakeholders:
Supporting Organizations:
The Technology Association of Iowa endorses the comprehensive reforms
America First Policy Institute supports national security provisions
Alliance for Commercial Technology in Government praises efficiency improvements
Various biotech industry groups welcome streamlined entry processes
Key Benefits Highlighted:
Reduced barriers for new applicants entering the system
Strengthened national security protections for sensitive technologies
Improved program efficiency through administrative reforms
Enhanced commercial focus driving real-world innovation
Critical Timeline and Implementation Considerations
Important Dates for Biotech Startups
Key Timeline Elements:
September 30, 2025: Current SBIR/STTR authorization expires
2025-2028: New authorization period under the INNOVATE Act
Phased implementation of new programs and requirements
Transition period for existing awardees and pending applications
Strategic Planning Implications:
Immediate preparation is needed for new application processes
Strategic positioning for Phase 1A opportunities
Compliance planning for enhanced security requirements
Commercial readiness assessment for performance standards
Strategic Implications for Biotech Startups
Adapting Your Funding Strategy for the New Landscape
The INNOVATE Act creates both opportunities and challenges that biotech startups must navigate strategically:
New Opportunities:
Simplified entry through the Phase 1A program for first-time applicants
Larger funding potential through Strategic Breakthrough Awards
Reduced competition in emerging states and rural areas
Clearer commercial expectations for long-term success
New Challenges:
Enhanced security scrutiny for international collaborations
Higher performance standards for continued program participation
Reduced STTR funding is affecting university partnerships
Changed outreach priorities affecting some demographic groups
Strategic Recommendations:
Assess eligibility for Phase 1A streamlined applications
Evaluate commercial readiness against new performance standards
Review international partnerships for compliance requirements
Consider geographic advantages in emerging states
Preparing for Success Under the INNOVATE Act
The INNOVATE Act represents a fundamental shift in how America supports small business innovation, with particular implications for the biotech sector. The legislation emphasizes commercial viability, national security protection, and streamlined access for new innovators while maintaining rigorous standards for continued participation.
Biotech startups that understand and adapt to these changes will be best positioned to leverage the enhanced opportunities while meeting the program's evolving requirements in an increasingly competitive global biotechnology landscape.
