US government’s expiring ‘seed fund’ sends millions to Pittsburgh startups — but Congress may change that

Two federal programs known as “America’s seed fund” are set to expire this September, threatening a key source of early-stage capital for startups in Pittsburgh and other mid-size tech hubs. 

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding are US government programs that invest in startups and small businesses to spur technological innovation. They could face major changes under Congress’s plans to reauthorize them.

Since the creation of these programs, Pittsburgh companies have received almost $427 million for innovation research and new technology development, according to data available through the Small Business Administration (SBA). Innovations such as new medical devices and aerospace technology have come from the grants, allowing Pittsburgh to compete with larger cities that have more private capital, stakeholders say. 

“Early-stage, non-dilutive funding such as SBIR or STTR has been very important in getting companies off the ground,” Kevin Dowling, managing director of the startup accelerator initiative the Robotics Factory, told Technical.ly. 

Now, the ongoing reliability of SBIR and STTR funding has recently come into question after years of substantial innovation from the programs — and Pittsburgh orgs are reflecting on how much the grants have boosted economic growth. 

What are SBIR and STTR funds?

SBIR and STTR grants are awarded to companies that apply through government agencies, like the Department of Defense (DOD) or the Department of Health and Human Services (HHS). The funds go to projects that fulfill the research and development needs of the federal government across various fields, including defense, health, energy, space and more.

President Donald Trump’s administration has attempted to freeze federal funding, which could include these programs run by several federal agencies. As of this month, multiple judges have blocked the order, but uncertainty over the future of this funding remains. 

Either way, Congress will be required to reauthorize the funding by the end of September. A bill to extend funding into 2028, called the Innovation Act, was introduced by Senator Joni Ernst from Iowa (R) earlier this month. 

While the bill would increase the SBIR budget, it proposes cuts to the STTR program, the end of diversity tracking of grant recipients and stricter limits on SBIR participation to reduce over-reliance on the program. 

‘Extraordinary boon for small, nascent companies’

Since the first SBIR award was given to a Pittsburgh company in 1983, federal funding flowing to the city has steadily increased.

A majority of the funding to Pittsburgh companies has come from the Department of Defense, with the other top agencies offering assistance to the region being HHS, NASA, the Department of Energy and the National Science Foundation. 

“Just consider the defense-related companies in the region that all began with SBIRs and STTRs and later progressed to programs of record,” Dowling said. “Neya, Near Earth, RE2 before they were acquired, Carnegie Robotics, ProtoInnovations and more.” 

One of those companies alone, software startup Neya Systems, has received over $10 million in federal funds from these programs to develop autonomous software that protects soldiers serving on the front lines. 

The programs have been an “extraordinary boon for small, nascent companies,” Dowling said. 

The funds have also contributed to the growth of companies emerging from academia, he added, like Carnegie Robotics, a Carnegie Mellon University spinout that’s received over $3.5 million in awards from the DOD. 

SBIR and STTR fund the space race, startup accelerators and more

Pittsburgh-based companies have received a total of 1,117 awards from the SBIR and STTR since the programs’ inception, helping them develop a range of new technologies. 

For example, Pittsburgh-based aerospace company Astrobotic is one of the largest recipients of these funds in the city, with over 45 awards totaling approximately $23 million to the company since it was founded nearly two decades ago.  

“SBIR and STTR funding has been instrumental in providing Astrobotic early seed funding to develop key technologies that have since enabled our flagship lunar lander, rover, and power grid services,” said Alivia Chapla, director of marketing and communications for Astrobotic. “This funding has enabled us to design, prototype and bring to market new space technologies.” 

A great example, Chapla said, is Astrobotic’s Terrain Relative Navigation (TRN) sensor. The TRN sensor, which uses cameras and onboard maps to land a spacecraft on the moon precisely, was developed with SBIR funding. 

The TRN sensor technology did not previously exist for lunar missions and was developed because the moon’s environment blocks GPS signals. The technology could potentially be used in a future mission to Mars, according to NASA. 

These programs also support organizations that provide accelerator programs or other technical assistance to local startups, like the Robotics Factory, an initiative to support robotics startups in Pittsburgh under the nonprofit Innovation Works. Innovation Works was a 2021 Growth Accelerator Fund Competition partner, meaning it targeted its assistance to STEM and research and development entrepreneurs from underrepresented groups. 

An unparalleled opportunity for startups to take risks  

What makes SBIR/STTR funding unique among startup financing options is that it’s equity free, meaning founders do not have to trade any ownership for the funding. 

Venture capital funding, however, is often dilutive. Other forms of equity-free funding could include loans or funds awarded through competitions, but it can be hard to find large amounts of funding like the federal grants are able to provide. 

This type of funding “largely does not have an equal elsewhere in the capital investment markets,” Chapla said. 

Plus, it opens up opportunities to take risks — especially amid underrepresented groups. One of the original objectives set by Congress for SBIR funding when it was crafted in 1982 was “to foster and encourage participation by minority and disadvantaged persons in technological innovation.” 

Around 3% of awards to Pittsburgh-based companies have gone to HUBZone-owned businesses. To qualify as HUBZone-owned, a business must be majority-owned by a U.S. citizen, located in an economically distressed area designated as a HUBZone by the SBA, and have at least 35% of its employees residing in a HUBZone.

Approximately 5% of awards have been granted to businesses that are majority-owned by women or individuals who are considered socially and economically disadvantaged.  

Efforts prioritizing underrepresented groups have faced more scrutiny under the current president. The Trump administration has worked to eliminate initiatives focused on promoting diversity, equity, and inclusion (DEI) within the federal government.

Soon after returning to the Oval Office for a second term in January, Trump signed executive orders rescinding President Joe Biden’s efforts to incorporate DEI initiatives into federal institutions and end “illegal DEI” preferencing in federal contracting. 

Fewer funding opportunities could be damaging for cities like Pittsburgh. The intersection of robotics, aerospace and AI is fueling economic growth in the city, but Pittsburgh often struggles to get local, late-stage funding, so SBIR and STTR funds have been a major catalyst for growth, according to Chapla. 

“For Pittsburgh, this levels the playing field,” Chapla said. “Other cities may have larger sums of private capital more readily available on their home turf, but any company in America can access, compete and win SBIRs to launch their next great idea.”