Recipients of the U.S. Department of Education’s Small Business Innovation Research grants are raising concerns about the future of the program following mass layoffs at the agency.
A dozen current SBIR awardees signed an open letter to Congress last week expressing concerns about staff reductions at the Institute for Education Sciences, which oversees the program.
The cuts will affect the “continuation of our approved and allocated remaining funds, jeopardizing our ability to complete the development of innovative educational technology products that are poised to benefit millions of students and families across the nation,” the letter reads.
At the Education Department, SBIR awards have supported an array of emerging technologies in schools, including game-based learning, artificial intelligence-supported tutors, data dashboards, and virtual and augmented reality.
An email sent by National Center for Education Research Commissioner Elizabeth Albro to SBIR awardees late last week acknowledged the IES was “deeply impacted” by the reduction in force and that three staff members who managed its small business innovation research team were included in the wave of agency layoffs.
The email directed awardees to a new point of contact, and said the agency is assured the awardees that the department was still “working on processing” pending invoices.
Albro, who did not respond to a request for comment, also urged awardees “to please continue to do all the good work that you are doing,” and said the SBIR portfolio is one they are “immensely proud of.”
The layoffs at SBIR come amid a far-reaching shakeup at the Education Department. Hundreds of employees at the agency were laid off last week, reducing its total headcount from about 4,100 to 2,200 employees. That leaves the department at just over half the size it was in January, when President Donald Trump took office.
Trump has spoken in favor of eliminating the agency entirely. An effort to do away with the department would face significant legal hurdles, but attorneys and policy experts have anticipated the administration could still shift large portions of the department’s operations and responsibilities to other federal agencies.
The Department of Education did not return a request for comment.
Proving ‘Private Market Viability’
SBIR grants are used by a range of federal agencies to support early-stage development of products.
The programs are seen as avenues to drive innovation and the commercialization of academic research in industries like technology, education, and defense. One of the core goals is to fund R&D that private sector operators and investors might not be able to financially support on their own.
The awards also follow a tightly prescribed process that’s designed to evaluate a project’s effectiveness, and are aimed at bringing evidence-based developments to market.
While SBIR funding in other departments has been affected by cuts conducted by the Department of Government Efficiency, or DOGE, the program has had support among Republican policymakers.
Project 2025, the right-leaning policy document that lays out plans for overhauling the federal government, touts SBIR awards in its section focused on the U.S. Small Business Association, saying that across federal agencies, the program “consistently demonstrated its ability to fund advanced technologies through to private-market viability and invests more in America’s heartland than venture capital invests.”
The document further suggests the SBIR programs should be continued “as they successfully fund the next wave of technological innovation to compete with Big Tech,” and urges Congress to “expand the amount that other agencies are required to set aside from their general R&D budgets for the SBIR program.”
Companies that receive SBIR awards from the Department of Education receive a total award of $1.25 million spread across two phases. The first phase offers $250,000 across an eight-month period to support the rapid development of a prototype and evaluations for it. The second phase provides awardees with $1 million to back the full-scale development of the product and additional evaluation, according to the department’s website.
Awardees don’t receive the phase funding awards in one installment. Instead, they file quarterly reports and invoices that are reviewed and approved by Department of Education staff members.
With those staff members being among the hundreds laid off at the department following a massive reduction in force, the grant awardees said in the letter that they’re concerned that the process for receiving the funding may be disrupted – or they may not receive the money at all.
Research Halted
Dfusion, Inc., an early-stage startup developing a platform to use fantasy sports to teach math concepts, is currently in phase two of its work, said Senior Program Manager BA Laris, and the company is updating its prototype based on findings from phase one.
The company began its phase two program this past fall – testing it during football season in after-school and tutoring programs across the country.
Laris said the plan moving forward was to conduct a randomized control trial this fall, but those plans are on hold while the SBIR funding remains uncertain.
The company, based in Scotts Valley, Calif., has also received notice that other federal grants and contracts were being frozen or cancelled by the new administration, she said.
As a result of the cuts and SBIR disruption, nine of dfusion’s 12 staff members were laid off, leaving it with a skeleton staff of three: Laris, CEO Tamara Kuhn, and a part-time employee.
“What we are scrambling to do now is still commercialize it, but we want it do more,” said Laris. There are “many more things we wanted to add.”
One of Laris’ broader concerns — shared by other researchers, in describing the scope of cuts to the education agency — is that as more parents are being tasked with making decisions for their children’s education, the loss of evidence-backed research on education products will make their work harder.
“That’s going to be a hole in the landscape at a time when parents are going to be looking for more of their own supplemental resources,” she said.
The email from Albro to SBIR awardees does partially alleviate some concerns, said Matt Miller, one of the signatories of the open letter and the co-founder and CEO of OKO Labs, an AI-powered game-based learning platform aimed at supporting small group instruction in elementary classrooms.
“At this point I’m concerned, although I think there’s some hope that there will be continuity,” he said.
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Miller, a former chief technology officer at Amplify who co-founded the startup with Amplify’s former chief product officer Laurence Holt, said that the company is in the midst of its phase-two SBIR implementation, a step that includes arranging a randomized control trial of the product in partnership with research firm WestEd.
He is assessing whether the company needs to make any changes to the trial, including pausing preparations for it, while the uncertainty at the Education Department unfolds.
“I can’t have [WestEd] doing work that I will need to compensate them for without clarity around how those dollars are going to flow,” he said.
Cutting Off Private Capital
The SBIR program isn’t just important because it helps ed-tech companies develop products, overall, Miller said. It also specifically encourages them to cultivate platforms and tools that are evidence-based and proven to be effective — and that type of funding is not available anywhere in the ed-tech ecosystem.
Without SBIR, his company would “not have had sufficient funding to take a truly evidence-based approach,” Miller said. “We’ve been able to do research in schools and look at the efficacy early on in the development of our product, which is all too often brushed to the side for many ed-tech entrepreneurs.”
OKO has also used the program’s initial funding to open doors to raising add-on capital and philanthropic funding to expand the product’s reach. Other backers include the Gates Foundation, Silicon Schools Fund, and the New Schools Venture Fund.
Other awardees through SBIR are in more precarious positions, he said.
“For some of them, [a disruption in funding is] fatal, because they’re not at a point of being in the market and commercialized. They don’t have revenues, and it’s a very hard time to raise private capital,” he said.
Leslie Babinski, founder of early-stage startup FigStar Learning, is in the midst of her phase one trials, which focus on evaluating the impact of its Bridging English Language Learning and Academics, or BELLA, professional development program.
Even if the program continues to fund its work through June, when the current phase is set to end, the loss of the SBIR staff, their institutional knowledge, and support and feedback when developing projects will be difficult for awardees to overcome well, she said.
Having a contact person is very helpful — but I’m sure that person’s overwhelmed, and all the infrastructure of the institute has been destroyed.
Leslie Babinski, Founder, FigStar Learning
“Having a contact person is very helpful — but I’m sure that person’s overwhelmed, and all the infrastructure of the institute has been destroyed,” Babinski said.
Babinski was planning on conducting a research study in the next year and has been trying to recruit a district to participate, offering them free use of the product as an incentive.
“It’s really hard to be able to say with any certainty what we’re able to offer to districts, who need to do their planning as well,” the company official said. “There’s just a ripple effect on all this work.”
She’s also holding off on making hiring decisions until she understands what happens with federal funding.
Undermining SBIR would amount to a loss for states, districts, schools, and individual teachers, she said. But it would also pose challenges for students and parents trying to figure out which products are effective in helping students learn.
“When I think ahead to all of the opportunities and challenges that are coming with AI in schools,” she said, “we really need this kind of a program.”
In a LinkedIn post, former SBIR Program Manager Edward Metz described a number of the ways the entity’s work had an impact on the education market, including that tens of millions of students had used more than the 80 ed-tech products supported by the program.
In addition, 18 ed-tech companies that previously received SBIR funding went on to be acquired by other companies in the space. Dozens others scaled their operations through add-on capital and philanthropic and venture capital funding, as well, he said.
The SBIR program also helped drive the industry’s focus on research and evidence-backed products, he added.
“ED/IES SBIR was the first funding program that systematically moved industry toward research — every project since 2005 was required to have a dedicated education researcher on the team to conduct iterative and pilot research,” Metz wrote.
“It sounds crazy now, but research was not a standard practice two decades ago.