NIH SBIR/STTR Grant Tracks Explained: Phase I, Phase II, Direct-to-Phase II & FastTrack, Which Is Right for You?

If you're developing a new biomedical or healthcare innovation, NIH SBIR/STTR grants can be a game-changer. These grants offer non-dilutive funding (meaning you keep your equity) to help startups move from research to commercialization, but choosing the right application track can be confusing.

In this guide, we'll break down the four NIH SBIR/STTR pathways - FastTrack, Direct to Phase II, Phase II, and Phase I - to help you decide which is best for your startup based on your current stage and goals.

Why NIH SBIR/STTR Funding Matters

Healthcare innovation is one of the most challenging sectors for startups. It's heavily regulated, extremely costly, and takes years (often decades) to commercialize. Traditional investors tend to stay away until you have proof-of-concept which can make it nearly impossible for early-stage founders to raise funding without giving away equity.

That's where NIH SBIR and STTR grants come in. With over $1.2 billion awarded annually, the NIH provides critical early-stage R&D support for startups tackling major medical, digital health, and life science problems, all without diluting ownership.

The Four Major NIH SBIR/STTR Tracks

Type	Purpose	Eligibility	Funding Range	Duration	Key Notes
Phase I	Establish technical and commercial feasibility of your innovation.	Early-stage startups with limited or no preliminary data.	Up to $296K	6–12 months	Used to validate proof-of-concept and build a prototype or MVP
Phase II	Continue R&D from Phase I to prepare for commercialization.	Must have completed and demonstrated success in Phase I.	Up to $1.97M	Up to 24 months	Focus on product development, scale-up, and regulatory/ commercial readiness
Direct to Phase II	Skip Phase I and move straight into commercialization R&D.	Must have strong preliminary data proving feasibility.	Up to $1-3M	Up to 24 months	Requires significant prior R&D evidence; not available for all NIH institutes
FastTrack	Submit both Phase I and II together for accelerated review.	Strong science, clear commercialization path, and robust planning.	Up to $296K (Phase I) + $1.97M (Phase II)	~36 months total	High workload, requires defined "go/no-go" metrics, can secure $3M+ total funding

**Type**: **Phase I**

**Purpose**: Establish technical and commercial feasibility of your innovation.

**Eligibility**: Early-stage startups with limited or no preliminary data.

**Funding Range**: Up to **$296K**

**Duration**: **6–12 months**

**Key Notes**: Used to validate proof-of-concept and build a prototype or MVP

**Type**: **Phase II**

**Purpose**: Continue R&D from Phase I to prepare for commercialization.

**Eligibility**: Must have completed and demonstrated success in Phase I.

**Funding Range**: Up to **$1.97M**

**Duration**: **Up to 24 months**

**Key Notes**: Focus on product development, scale-up, and regulatory/ commercial readiness

**Type**: **Direct to Phase II**

**Purpose**: Skip Phase I and move straight into commercialization R&D.

**Eligibility**: Must have strong preliminary data proving feasibility.

**Funding Range**: Up to **$1-3M**

**Duration**: **Up to 24 months**

**Key Notes**: Requires significant prior R&D evidence; not available for all NIH institutes

**Type**: **FastTrack**

**Purpose**: Submit both Phase I and II together for accelerated review.

**Eligibility**: Strong science, clear commercialization path, and robust planning.

**Funding Range**: Up to **$296K (Phase I)** + **$1.97M (Phase II)**

**Duration**: **~36 months total**

**Key Notes**: High workload, requires defined "go/no-go" metrics, can secure **$3M+** total funding

The Challenges of Innovating in Healthcare

Before diving deeper, it's worth acknowledging why SBIR funding is so valuable for founders in healthcare and biotech:

Regulatory Complexity: Navigating FDA or HIPAA requirements adds time and cost.
Long Timelines: Drug development averages 10–15 years from concept to market.
High Capital Requirements: Even early-stage proof-of-concept work can exceed $100K+.
Limited Early-Stage Funding: Most investors wait until technical feasibility is proven.

NIH SBIR/STTR funding bridges this "valley of death," allowing startups to conduct rigorous R&D while keeping full ownership.

Phase I: Establishing Feasibility

Goal: Validate technical feasibility and commercial potential.

Phase I funding helps early-stage companies test core hypotheses, build prototypes, and collect feasibility data. You don't need extensive preliminary data, but having some strengthens your case.

What Reviewers Look For:

Clear R&D plan with defined experiments
Justified technical methods
Realistic milestones and risk mitigation plans
Supporting references and rationale for approach

Funding: Up to $295,000 for a 6-12 month project.
Key Deliverable: Prototype or MVP validated against existing standards.

🧠 Pro Tip: Start preparing your application at least three months before submission. Strong Phase I proposals often require multiple rounds of review and revision.

Phase II: Moving Toward Commercialization

Goal: Build upon Phase I findings to develop a market-ready product or service.

Phase II funding supports continued R&D, often focused on scale-up, optimization, regulatory preparation, and commercial validation.

Typical Activities:

Prototype refinement
Animal studies or early-stage clinical work
Regulatory testing or manufacturing optimization
Partner or investor engagement

Funding: Up to $1.97M for a 24-month project.
Application Requirements:

12-page Research Strategy
12-page Commercialization Plan
Full set of supporting documents (budget, biosketches, facilities, etc.)

🚀 Phase II applications build directly on successful Phase I work. They're more complex but offer far greater funding potential.

Direct-to-Phase II: For Startups with Strong Data

Goal: Move straight into advanced R&D without completing Phase I first.

This track skips Phase I, but only if your startup has robust preliminary data that already proves feasibility. You must show that your innovation is ready for development and commercialization activities.

Best Fit For:

Startups with prior grant funding or private R&D investment
Founders who've already validated feasibility in-house or through academic research

Funding: Up to $1.97M for 24 months.

⚠️ Not all NIH institutes accept Direct-to-Phase II applications, so double-check the specific Funding Opportunity Announcement (FOA) before applying.

FastTrack: Combining Phase I and Phase II

Goal: Accelerate funding by applying for both phases together.

FastTrack applications allow founders to submit a combined proposal covering both feasibility (Phase I) and development (Phase II). If approved, you can move directly from Phase I to Phase II without a second application.

Advantages:

Faster path to large-scale funding
Single review process for both phases

Challenges:

Significantly more work up front (expect 5-6 months of prep)
Requires clear quantitative "go/no-go" metrics between phases

Funding: Up to $3M+ total over three years.
Documents Required:

12-page Research Strategy
12-page Commercialization Plan
Explicit Phase I success metrics

💬 If you're confident in your data and want to move quickly FastTrack offers the highest potential reward, but it's also the most competitive.

Key Takeaways

NIH SBIR/STTR grants are an incredible opportunity for healthcare innovators to secure millions in non-dilutive funding but success depends on choosing the right track for your stage and readiness.

Startup Stage	Recommended Track
Idea / Early R&D	Phase I
Proven Feasibility	Direct-to-Phase II
Ready for Commercialization	Phase II
Confident in Both Phases	FastTrack

**Startup Stage**: Idea / Early R&D

**Recommended Track**: Phase I

**Startup Stage**: Proven Feasibility

**Recommended Track**: Direct-to-Phase II

**Startup Stage**: Ready for Commercialization

**Recommended Track**: Phase II

**Startup Stage**: Confident in Both Phases

**Recommended Track**: FastTrack

Final Thoughts

NIH SBIR/STTR programs are more than funding opportunities, they're launchpads for healthcare innovation. Whether you're validating an idea or preparing for commercialization, the right grant pathway can accelerate your impact while helping you retain full ownership.

If you're not sure which NIH SBIR track best fits your startup, Scout can help you evaluate your readiness, align your proposal with NIH priorities, and build a winning strategy from concept to submission.