Blog · 2026-07-14 · 8 min read

Phase I to Phase II Conversion: What the Data Says About Your Odds by Agency

Phase II is where SBIR money actually lands. Here's how to read Phase I to Phase II conversion by agency — and how to check your own real odds.

A Phase I SBIR award is a foot in the door. It is small, short, and — on its own — rarely changes a company's trajectory. The money, the multi-year runway, and the path toward Phase III production all live in Phase II. So the question that should shape your bid strategy is not "can we win a Phase I?" It is "if we win Phase I here, how likely are we to convert it to Phase II?"

That is what the Phase I to Phase II conversion rate measures, and it varies enormously depending on which agency and topic family you are looking at. This piece explains how to read conversion data, why a single government-wide average is close to useless for a bid decision, and how to check your own real odds before you commit.

What conversion rate actually means

Conversion rate is the share of Phase I awards (in a given slice — agency, component, topic family, technology domain) that go on to receive a Phase II award. If an agency issued 100 Phase I awards in a domain and 40 of those firms later won Phase II on the same line of work, the conversion rate for that slice is 40%.

Two things make this number slippery, and you have to respect both:

• Timing. Phase II follows Phase I by months to well over a year. Recent Phase I cohorts have not had time to convert yet, so a naive calculation over the last 12 months understates true conversion. Honest measurement uses cohorts old enough to have had a fair shot at Phase II.
• Attribution. Matching a Phase II award back to the right Phase I requires linking by firm, agency, and topic lineage — not just counting Phase I and Phase II awards separately and dividing. Done sloppily, the number is meaningless.

Why the government-wide average will mislead you

You will see conversion figures quoted as if there is one number for "SBIR." There is not. Conversion at a DARPA-style research component behaves nothing like conversion at a component that uses Phase I largely as a screening round. Civilian agencies (NIH, DOE, NSF) run their programs differently again, with different Phase II structures and budgets.

An illustrative example, not a quoted statistic: imagine two components. Component A converts roughly 1 in 3 Phase I awards to Phase II because it treats Phase I as a serious down-select. Component B converts fewer because it funds many exploratory Phase I efforts it never intends to advance. If you only knew the blended "average" of the two, you would badly misjudge both. The lesson is not the specific figures — it is that you must look at the specific slice you are bidding. For authoritative program-wide reporting, consult the SBIR.gov program data and SBA and GAO analyses, which publish official figures with their methodology stated.

How to read conversion before you bid

When you are evaluating a specific open topic, conversion is a go/no-go input. Walk through it in this order:

1. Start at the topic, not the program. On each open opportunity page, SBIR Signal shows the competitive intel for that topic family — including the Phase I to Phase II conversion picture and the number of firms in the sample — derived from matched award records. That is the slice that actually predicts your odds.

2. Widen to the domain and agency. If a single topic family is too thin to draw conclusions, step out to the technology domain and agency. Browse recent awards by domain — AI & machine learning, autonomy & robotics, cybersecurity — and by agency profile to see how much Phase II money the buyer actually moves.

3. Weight it against sample size. A 50% conversion rate over four firms tells you almost nothing. A 30% rate over sixty firms is a real signal. Always read the rate and the count together — SBIR Signal shows both so you are not fooled by a small denominator.

What high vs. low conversion should do to your strategy

High-conversion slice. If the agency reliably advances Phase I winners in this domain, a Phase I win is a genuine on-ramp. It is worth bidding Phase I even with a lean team, because the follow-on is real. Your Phase I proposal should explicitly set up the Phase II story.

Low-conversion slice. If Phase I rarely converts here, treat a Phase I award as a paid pilot, not a runway. Either have a commercial or Phase III path that does not depend on Phase II, or redirect your bid energy to a component that converts. Winning a Phase I that leads nowhere is an expensive way to feel productive.

Conversion under the 2026 rules

The 2026 reauthorization matters here because it introduced per-firm proposal caps — annual limits on how many Phase I and Phase II proposals a firm may submit to an agency. When your number of bids is capped, each one is more precious, which makes conversion analysis more important, not less. You cannot afford to spend a capped Phase I slot on a slice that does not advance. Read the details in the 2026 SBIR/STTR reauthorization guide.

Turn conversion into a repeatable check

Make conversion a standing step in your bid review:

1. Pull the topic's competitive intel and note conversion + sample size.
2. If thin, widen to domain and agency and re-check.
3. Run a go/no-go readiness check that weighs conversion alongside fit and competition.
4. Track the deadline on the SBIR deadline calendar so a strong-conversion topic never slips past you.

The firms that build real Phase II portfolios are not the ones that bid the most Phase I. They are the ones that bid Phase I where the data says it leads somewhere. Check your real odds — by agency, by topic — before you write a word.