STTR is SBIR’s lesser-known sibling, and for AI companies whose work touches university research, it can be the better fit. The defining difference is a required partnership. Here’s how it works in 2026, cited to official sources. (dgm builds AI; the academic partnership and proposal are separate — see the end.)

What STTR is

STTR — the Small Business Technology Transfer program — funds small-business R&D with commercialization potential, just like SBIR. The crucial difference is that STTR requires the small business to formally partner with a nonprofit research institution, typically a university or qualifying research center. The program exists specifically to move innovation out of academic labs and into commercial products.

The work-split rule

STTR sets a formal division of labor that SBIR doesn’t: the small business must perform at least 40% of the work, and the partnering research institution at least 30%. That leaves room for the remainder to be allocated as the project requires, but the core point is that both parties must do substantial work — this isn’t a token affiliation with a university.

Award amounts

STTR awards match SBIR: a Phase I award up to about $323,090 and a Phase II award up to about $2,153,927, following the same SBA caps and inflation indexing. As always, verify the current figures on sbir.gov before relying on them in a budget.

SBIR or STTR — which fits your AI work?

The choice usually comes down to where your innovation lives:

  • Choose STTR if your AI builds on university research, you need academic expertise or facilities you don’t have in-house, or you already have a research collaborator. The partnership becomes an asset, not just a checkbox.
  • Choose SBIR if your team can perform the R&D itself and you’d rather not coordinate an institutional partnership and its work-split and IP terms.

Both fund genuine R&D, both are competitive, and both are administered per-agency — so the application path depends on which agency’s mission your AI fits.

Eligibility and how to apply

You must be a US for-profit small business with 500 or fewer employees, partnered with a US nonprofit research institution. Because participating agencies run their own solicitations, you apply to a specific agency — start at sbir.gov to find open STTR topics and the partnership and IP rules, which vary.

A realistic expectation

STTR rewards genuine innovation done in collaboration with researchers — not the adoption of existing AI. If your goal is to deploy off-the-shelf AI internally, this is the wrong program, and the R&D tax credit or an SBA loan will serve you better.

How dgm helps

dgm implements osFoundry and builds AI for US businesses. We help develop the commercial AI technology behind an STTR project — but the required research partner must be a nonprofit institution, and the proposal is a specialty of its own. Think of dgm as the team that helps turn the research into a working product.