INNOVATE Act

This bill updates two federal small‑business research programs. It creates a new “Phase 1A” starter award for first‑time applicants, using a short, 5‑page proposal worth up to $40,000. Agencies must set aside 1.5%–3% of SBIR funds for these awards and use broad “open‑topic” calls so small firms can pitch solutions to big problems. Winners can later apply for Phase II. It also limits how many proposals a company can send in, pushes agencies to use simpler fixed‑price contracts, and improves tracking of award types and follow‑on work .

It aims to widen access and guard against security risks. Agencies must do more outreach in rural communities within 90 days. The bill adds security checks for “foreign risk” ties and lets agencies block or claw back awards if award‑funded technology is sold to certain foreign actors within 5 or 10 years. It narrows eligibility so Phase I applicants have under $40 million in annual revenue, principal investigators submit only one proposal per solicitation, and firms with over $75 million in prior Phase I/II awards generally cannot get new ones unless a rare national‑security waiver applies. It also bars agencies from using race, gender, or ethnicity in award decisions or requiring diversity plans, and blocks awards to companies that have agreements with NewsGuard, the Global Disinformation Index, Internews, or similar groups that rate or demonetize publishers based on lawful speech. A new “strategic breakthrough” fund starting in fiscal year 2026 can speed Phase II projects to production with up to $30 million per company and dollar‑for‑dollar private matching, focusing on manufacturing, supply chains, and testing, with awards made within 90 days of a proposal .

• Who is affected: Small businesses seeking SBIR/STTR funding; federal agencies that run these programs; rural communities; and investors who work with awardees .
• New starter awards: “Phase 1A” for first‑time applicants, 5‑page proposals, up to $40,000; agencies must reserve 1.5%–3% of SBIR funds for these open‑topic awards; Phase 1A winners can later apply for Phase II .
• Less red tape: Limits on proposals per solicitation and per agency; more fixed‑price contracts; better tracking of award types and follow‑on contracts .
• Security and fairness rules: Stronger checks for foreign ties and clawbacks if award‑funded tech is sold to certain foreign actors; bars use of race, gender, or ethnicity in award choices or requiring diversity plans; blocks awards if a company has agreements with NewsGuard, GDI, Internews, or similar groups .
• When: Rural‑outreach rules updated within 90 days of enactment; “strategic breakthrough” set‑aside starts in FY2026; IP sale limits apply for 5 or 10 years after an award; some breakthrough awards must be made within 90 days of a proposal .