SBIR Series: Commercialization That Converts: Real Paths to Phase II/III
Too many Phase I SBIR proposals end with the same vague promise: “We’ll figure out commercialization later.” But kicking the can down the road doesn’t cut it anymore, not with more agencies pushing for measurable transition plans and defendable Phase III pathways. If you’re serious about moving from prototype to purchase order, you need a commercialization approach that converts.
This post walks you through building a go-to-market and transition plan that actually works, with inputs you can define now, during Phase I, and outputs that set you up for follow-on funding, partnerships, and sole-source lanes.
Let’s break it down.
Who Buys It vs. Who Uses It: Customer Discovery That Matters
Don’t confuse the warfighter with the one holding the wallet. Whether you’re targeting DoD, NASA, HHS, or DOE, every successful Phase II/III transition starts with knowing three things:
End-user: Who experiences the pain point? Who needs your tech to do their job better?
Technical champion: Who will push for your solution internally?
Buyer: Who controls the budget or acquisition mechanism?
Your goal in Phase I is to start mapping these roles, and identifying where your value shows up on their P&L. Does your innovation save hours of labor? Reduce rework? Cut failure rates? Enable new mission capabilities? These are the metrics that matter when convincing buyers and primes.
Use tools like our Commercialization Storyboard to track each persona’s pain points, metrics, and incentives. This feeds directly into your transition case.
Market Sizing You Can Defend in 10 Lines
Agencies and investors alike are tired of hockey-stick projections and hand-wavy TAM numbers. What they want is:
How many potential units, sites, or end-users exist within the target program or agency?
What’s the realistic per-unit pricing?
What’s the procurement cycle (e.g. annual, multi-year, IDIQ, etc.)?
A credible bottom-up estimate could be as simple as:
27 Navy installations using legacy X system
Each system costs $280K to replace
Replacement rate is ~6/year (funding-limited)Prime contractor Y holds the integration contract
That’s it. 10 lines, not 10 pages. If you’re not there yet, your Phase I customer discovery should aim to fill in those blanks.
Channels and Partners: Know When to Lock in the LOI
You can’t go to market alone. The trick is knowing which players to bring in, and when.
Primes/integrators → For tech that folds into a larger system (e.g. C5ISR, logistics, AI for maintenance).
OEMs/VARs → When your innovation is a bolt-on or enhancement to existing gear.
SBIR transition brokers →
Navy: Leverage the Navy SBIR Transition Program (STP) to match with PEOs, PMs, and primes
Air Force: Use AFWERX Open Topic in Phase I/II and STRATFI/TACFI to accelerate transition
Army: xTech works with SBIR and PEOs/PMs to identify transition partners
During Phase I, start soft-sounding interest. By the Phase II proposal, you’ll want letters of interest or MOUs that show intent to evaluate or purchase. Secure letters/MOUs only where the agency allows them. Many DoD components permit or encourage them. For example, NSF Phase I prohibits Letters of Support.
Use our Partner/Prime Mapping Sheet to track who’s who, what they need, and what kind of teaming document makes sense.
Protecting Your Edge: SBIR/STTR Data Rights and IP Strategy
You don’t need to file a patent to protect your innovation, but you do need to understand how SBIR/STTR Data Rights work:
SBIR/STTR Data Rights: The Government must protect properly marked SBIR/STTR data for at least 20 years from the date of award.
Mark your deliverables: If you don’t label your work properly, you lose protection.
Transition-friendly IP stance: Prime contractors want to know they can field your tech without a legal fight. Be clear on what’s licensable, and what’s not.
Download our SBIR Data Rights Quick Guide to make sure your IP is an asset, not a barrier.
Phase III: Where the Real Money Is
Here’s the gold standard: Phase III awards use non-SBIR funds, are generally non-competitive (prior Phase I/II competition satisfies requirements), and have no limit on number, duration, type, or dollar value.
Each agency has its own transition programs:
Navy: TPOC + PM support, NAVSEA/PEO-specific pathways
Air Force: Open Topic via AFWERX with STRATFI/TACFI as transition accelerants
Army: xTech + SBIR Phase III often flows through PEOs
Civilian (NIH, DOE, etc.): Partnering or licensing often leads the way; less sole-source, more cooperative agreements or CRADAs
Start identifying the Phase III pathway during Phase I. Even a notional sketch shows reviewers you’re thinking ahead.
Your Deliverable: The Commercialization & Transition One-Pager
Your goal by the end of Phase I should be a tight one-pager that captures:
Ideal Customer Profile (ICP)
Use cases and mission fit
Pricing logic
Target channels and/or primes
Evidence needed for purchase (e.g., TRL, certifications, trials)
Phase III mechanism
IP stance and SBIR data rights plan
This becomes the backbone of your Phase II commercialization plan, and a cheat sheet for pitching partners or transition sponsors.
Need help assembling it? We’ve got templates ready.
What Comes Next
Once your transition story is real, not just wishful thinking, you’re ready to price it, compliantly budget it, and build a clean submission. That’s where we’re headed next.
In the final post of this series, we’ll walk through how to turn this one-pager into a proposal-ready commercial plan with real numbers, clear compliance, and everything you need for a compelling Phase II application.
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