INNOVATE Act: A Bold Overhaul To Supercharge American Innovation

Senator Joni Ernst’s newly introduced INNOVATE Act—short for “Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence”—proposes the most sweeping reform of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs in decades. The bill seeks to realign these programs with their original mission: to support promising, early-stage startups in developing and commercializing breakthrough technologies vital to U.S. national and economic security.

At its core, the INNOVATE Act tackles the "valley of death" problem that has long plagued federally funded innovation—where many promising prototypes fail to scale due to procurement delays or lack of sustained investment. To bridge this gap, the bill establishes a new “Strategic Breakthrough Award” of up to $30 million to help the most promising small firms manufacture, test, and transition technology into defense acquisition pipelines. To qualify, recipients must secure private or non-SBIR matching funds and gain buy-in from Department of Defense acquisition officials, ensuring accountability and alignment with mission-critical needs.

A second pillar of the legislation focuses on democratizing access to SBIR/STTR funding. The bill mandates that 2.5% of SBIR dollars be set aside for new Phase 1A awards—$40,000 microgrants with a streamlined application process open only to first-time applicants. This aims to seed thousands of new companies annually and reduce the dominance of so-called “SBIR mills”—a small group of repeat contractors who have soaked up billions in grants with low commercialization rates. To curb this abuse, the bill caps lifetime SBIR/STTR awards at $75 million per firm and institutes strict commercialization benchmarks for continued eligibility.

Importantly, the INNOVATE Act also strengthens national security by tightening restrictions on foreign ties and adversarial influence. It establishes a standardized definition of “foreign risk” and mandates denials for companies tied to entities on U.S. sanctions or export control lists. Agencies are also given clawback authority to recover funds if awardees engage in unauthorized technology transfers or IP sales to non-allied nations. These reforms come in direct response to concerns that SBIR-funded technologies have been targeted by foreign adversaries for exploitation.

Finally, the bill extends the SBIR/STTR programs through 2028 and includes commonsense administrative reforms—such as fixed-price contracting, proposal limits to curb AI-generated spam, and clearer definitions for “open topic” solicitations—to reduce bureaucratic friction and promote a true merit-based competition.

In an era where technological supremacy is both an economic and strategic imperative, the INNOVATE Act offers a targeted, forward-looking legislative blueprint. By expanding access, enforcing accountability, and protecting research security, this bill positions the U.S. innovation ecosystem to better harness its most valuable resource: the ingenuity of American entrepreneurs.