Transitioning from SBIR Phase I to Phase II in 2026

Securing an SBIR Phase I award is a genuine accomplishment. It validates your technology concept, puts federal dollars in your hands, and opens the door to a much larger opportunity. But Phase I is, by design, a proof-of-concept stage. The real funding — and the real challenge — lies in Phase II.

The gap between the two phases is where many promising small businesses lose momentum. Understanding what agencies are actually looking for in a Phase II application, and preparing accordingly from day one of your Phase I work, can be the difference between moving forward and starting over.

What Changes Between Phase I and Phase II

Phase I grants typically range from $150,000 to $300,000 and give your team roughly six to twelve months to demonstrate technical feasibility. Phase II awards are a different category entirely — commonly reaching $1 million to $2 million or more, with performance periods stretching one to two years. The evaluation criteria shift accordingly.

In Phase I, agencies want to see that your idea has scientific or technical merit and that you can execute. In Phase II, the bar rises substantially. Agencies now expect evidence that your solution works, a credible path to commercialization, and demonstrated capacity to bring the technology to market. The research is no longer the destination — it becomes the foundation for something larger.

This shift in expectations catches many applicants off guard. Teams that spent Phase I heads-down on their technical work sometimes arrive at the Phase II application stage without the documentation, partnerships, or market data needed to make a compelling case. Avoiding that outcome requires deliberate planning.

Building Your Phase II Case During Phase I

The most effective Phase II applications are not written after Phase I ends. They are built continuously throughout the Phase I period. Here is what that looks like in practice.

• Document everything. Keep detailed technical records of your experiments, findings, and pivots. Agencies want to see a rigorous research process, and your Phase II application will be far stronger if you can point to specific milestones and outcomes rather than general summaries.

• Pursue letters of support early. Third-party validation carries significant weight in Phase II evaluations. Start conversations with potential customers, industry partners, and end users during Phase I, not after. A letter from a defense contractor, hospital system, or commercial partner expressing interest in your technology tells reviewers that real demand exists beyond the federal lab.

• Develop a commercialization narrative. Agencies — particularly DoD and NIH — have invested heavily in improving the commercialization rates of their SBIR portfolios. They want to fund technology that reaches users, not technology that sits in a final report. Use Phase I to research your market, identify your target customers, and develop realistic projections for revenue or adoption.

• Track your spending carefully. Phase II applications often require a breakdown of how Phase I funds were used. Clean financial records signal organizational competence to reviewers.

Crafting a Phase II Application That Stands Out

Once Phase I concludes, the application itself demands serious attention. Several elements consistently separate strong Phase II proposals from weak ones.

The Technical Objectives Section

Your Phase II objectives should flow naturally from your Phase I results while clearly articulating what remains to be done. Reviewers understand that some aspects of the research will have evolved — what they want to see is that you have a clear, logical plan for the work ahead. Vague objectives or objectives that seem disconnected from your Phase I findings raise red flags.

The Commercialization Plan

This section deserves as much attention as your technical approach. A strong commercialization plan identifies a specific target market, estimates market size with sources, names potential customers or partners, describes your route to market, and explains your intellectual property strategy. Generic language about large markets does not impress reviewers. Specificity does.

If you have already engaged potential customers during Phase I, name them if possible and reference the letters of support you have gathered. If you have a licensing agreement in progress, mention it. Concrete evidence of commercial interest is worth more than well-written projections.

Principal Investigator Qualifications

Do not underestimate the importance of the PI section. Phase II reviewers are evaluating your team's capacity to execute a larger, more complex program. If your team has grown since Phase I, highlight the new expertise you have brought in. If you are working with a university partner or a subject matter expert from industry, make that visible in the application.

Understanding Agency-Specific Requirements

SBIR programs are administered across eleven federal agencies, and each has its own culture, priorities, and evaluation processes. What works in a DoD Phase II application may not translate directly to an NIH or Department of Energy proposal.

Spend time reading agency-specific guidance documents and solicitations before you write a single word. Many agencies publish example Phase II applications or detailed scoring rubrics. NIH, for example, provides extensive guidance on its innovation and significance criteria. DoD components often emphasize transition partners and dual-use potential. The EPA and USDA have their own priorities around environmental outcomes and rural communities.

Talking to a program officer before submitting is one of the most underutilized strategies in the SBIR world. Program officers can tell you whether your proposed Phase II work aligns with agency priorities, flag potential weaknesses in your approach, and sometimes offer informal feedback on your Phase I performance. These conversations are not just allowed — they are encouraged.

After Submission: What Comes Next

Phase II review timelines vary by agency, but most applicants can expect a wait of several months between submission and notification. Use this time productively. Continue refining your commercialization strategy, maintain momentum on your technology development if resources allow, and explore bridge funding options to avoid a gap in your research program.

Some agencies offer Phase II enhancements or supplemental funding mechanisms — sometimes called Phase II-E or Phase IIB programs — that can extend your runway if you secure matching private investment. Understanding these options before you need them positions you to move quickly when the timing is right.

If your Phase II application is not selected, request a review summary. Most agencies provide written feedback, and even a declined application contains information you can use to strengthen a resubmission or redirect your approach.

Let FundFly Help You Find the Right Opportunities

Navigating the SBIR landscape — from identifying the right solicitations to aligning your technology with agency priorities — takes significant time and expertise. FundFly uses AI to match your research profile to relevant funding opportunities across more than one million live grants, including SBIR and STTR programs from all participating federal agencies.

Instead of spending hours searching solicitations and cross-referencing agency priorities, you can let FundFly surface the opportunities most likely to fit your work — and get to the actual writing faster. Whether you are preparing your first Phase II application or managing a multi-award SBIR portfolio, FundFly is built to support the process from discovery through submission.

Explore what FundFly can find for your organization today.