Cada has written 100+ grant proposals across 30+ agencies, including NIH, NSF, NASA, and DoD.
If you are a founder on an O-1 or H-1B and someone told you your company is not SBIR eligible, they were probably half wrong. Two different rules get collapsed into that one sentence, and visa status only breaks one of them.
What are the SBIR ownership requirements? SBIR eligibility runs two separate tests. The ownership test requires more than 50% of your company's equity to be directly owned by US citizens or permanent residents. The Principal Investigator test requires one person primarily employed by your company. It does not require citizenship at NIH, NSF, NASA, or the Army.
Those two tests get collapsed constantly, including by lawyers and grant consultants. Before you decide you are locked out of $4 billion a year in non-dilutive funding, work out which test you are actually failing. Usually it is only one. Usually it is fixable.
This guide puts the ownership thresholds and PI rules for NIH, NSF, NASA, and DoD side by side, separates the eligibility problems that are curable from the ones that are not, and runs a worked example of an O-1 founder with a majority-foreign cap table through both tests.
Two tests founders collapse into one
Test A applies to your company. It is the cap table, measured in percentage of equity held by eligible owners.
Test B applies to a person, your Principal Investigator. It is how many hours a week that person works for you, and whether they are legally allowed to work for you at all.
Nothing in the federal rules connects them. A company can be 100% US-owned and still fail on the PI. A company can have a PI on a work visa and be perfectly eligible, provided the cap table holds.
The confusion is structural. Agency pages put both under one heading called "Eligibility," so a founder skimming for a yes or no reads two rules and takes away one verdict. Then an advisor says "you need to be 51% US-owned and your PI has to be a citizen," and the second half is wrong at four of the five agencies a seed-stage company is most likely to apply to.
What are the SBIR ownership requirements for US citizens and permanent residents?
The actual rule, from 13 CFR 121.702: more than 50% of the company's equity must be directly owned and controlled by one or more of:
- Individuals who are US citizens
- Individuals who are lawful permanent residents, meaning green card holders
- Other for-profit small businesses, each itself more than 50% directly owned and controlled by citizens or permanent residents
- Indian Tribes, Alaska Native Corporations, or Native Hawaiian Organizations, or their wholly owned subsidiaries
- Any combination of the above
For SBIR only, and only at agencies using the majority-VC authority in 15 U.S.C. 638(dd), multiple venture capital operating companies, hedge funds, or private equity firms may hold the majority, as long as no single one holds more than 50%.
One wording note. The CFR says "more than 50%." Most agency pages, including SBA's tutorial and NSF's, say "at least 51%." They mean the same thing in practice.
Who counts as a US owner for SBIR: US citizens and lawful permanent residents (green card holders) count toward the ownership majority. Work visa holders do not, including O-1, H-1B, L-1, and E-2. Green card status counts even with a foreign passport. How long you have lived here, paid taxes here, or run the company changes nothing.
That is the whole problem for most visa-status founders. If you are on an O-1 and own 60% of your company, the company fails on your equity alone, and your equity is the reason the company exists.
Ownership means equity, not board seats. A foreign investor with a board seat and 20% is not the issue. One with 51% is. Founders lose weeks worrying about a foreign board member who was never the problem, while the actual blocker sits in the shareholder ledger.
The eligible majority must be direct. You need one identifiable block of eligible owners clearing the threshold. You cannot assemble it through two layers of holding companies unless each intermediate entity independently qualifies as an eligible small business owner.
When is SBIR eligibility measured?
When you must meet SBIR ownership requirements: Eligibility is measured and certified at the time of award, not at the time of application. You may submit a proposal while your cap table is non-compliant, provided the company qualifies when the award is made. Every awardee signs a certification at award stating it meets the size, ownership, and other program requirements.
If eligibility were measured at submission, finding an ownership problem three weeks before a deadline would cost you the entire cycle. It binds at award instead, so your runway to fix it is the whole review period, not the days left before the deadline.
For NSF that is meaningful. NSF 26-510 lists deadlines of July 27, 2026, November 4, 2026, March 4, 2027, and July 7, 2027. Award decisions run months past each.
Two caveats. Some agencies ask for a certification at application stating you intend to meet all requirements at award. Signing that with no plan to restructure is not a gray area, and misrepresentation on these certifications carries criminal, civil, and administrative penalties.
And if you are applying under the majority-VC authority, that certification is due before you submit. That one binds early.
Can a non-US citizen be a PI on an SBIR?
Yes, at most agencies. There is no SBA-level citizenship requirement for Principal Investigators. The federal PI rule is about primary employment, not passports. NIH requires the PI to legally reside in the US. NSF requires a legal right to work for the company via citizenship, permanent residency, or an appropriate visa. NASA and the Army specify primary employment with no citizenship condition.
The rule that does exist is primary employment. More than 50% of the PI's total employed time must be with your small business, counting every concurrent employer, consulting arrangement, and self-employed hour.
NSF states it as "at least 51 percent employed by the small business," then makes it concrete: a full work week is 40 hours, and employment elsewhere of more than 19.6 hours per week is a conflict. NASA requires more than 50% of total employed time at award and throughout performance, and lets you explain in the proposal how you will meet it if you do not yet.
NSF also requires at least one calendar month of PI effort per six months of Phase I performance, and has no degree requirement, so the common belief that your PI needs a PhD is wrong too.
You will find published advice saying foreign nationals "can be co-investigators but not PI on an SBIR." Ignore it. It contradicts NIH's own eligibility guidance and NSF's own solicitation text, both of which explicitly contemplate a PI who is not a citizen.
Frankly, this is the most common piece of bad information in this area, and it costs visa-status founders entire funding cycles.
SBIR ownership and PI citizenship rules by agency
| Agency | Ownership threshold and who counts | Majority VC / PE / hedge fund allowed? | PI primary employment | PI work authorization |
|---|---|---|---|---|
| NIH | >50% by citizens or permanent residents, or eligible small businesses | Yes, at 638(dd) agencies | >50% of professional effort | Citizenship not required; PI must legally reside in the US |
| NSF | At least 51% by citizens or permanent residents, or businesses owned by them | No. Hard disqualifier. | At least 51%; >19.6 h/week elsewhere is a conflict | Legal right to work via citizenship, permanent residency, or an appropriate visa |
| NASA | >50% by citizens or permanent residents | Yes, at 638(dd) agencies | >50% of total employed time, at award and throughout performance | Citizenship not required; work authorization required |
| DoD / Army | >50% by citizens or permanent residents (STTR stated as at least 51%) | Yes, since May 2023 | >50% with the small business | None stated; foreign nationals must be disclosed |
| DoD components (DLA, AFWERX, DHA) | Same SBA baseline | Follows DoD | >50% | Components layer on extra restrictions. Read the component instructions, not just the BAA. |
All five measure ownership at time of award.
Two divergences there actually change decisions.
NSF will not fund a company majority-owned by VCs, hedge funds, or private equity firms. The Army will. If you raised a priced round where one fund or a group of funds took the majority, you did not lose SBIR access. You lost NSF. DoD is still open, explicitly since May 2023.
DoD requires affirmative foreign-national disclosure and treats omission as a proposal defect. The BAA asks you to identify every foreign national expected to work on the project as an employee, subcontractor, or consultant, with each person's country of origin, visa or work permit, and anticipated level of involvement. DoD's own guidance notes that companies routinely assume dual citizens and work-permit holders need not be reported, and that a proposal can be found nonresponsive if the information is missing.
That is the opposite of the instinct. At DoD, having foreign nationals on the team is a disclosure obligation. Hiding them is the disqualifying act.
STTR PI citizenship requirements: same ownership test, different PI rule
STTR uses the same ownership rule. If your cap table fails SBIR, it fails STTR. Switching programs does not fix an ownership problem, and we have watched founders lose a month believing it would.
What STTR changes is the PI. STTR requires a partnership with a nonprofit research institution and splits the work between you and them. Under the STTR rules, the PI may be primarily employed by either the small business or the partnering research institution. Agencies word this differently, so confirm it in the solicitation you are applying to.
That matters if your best technical lead is a professor who cannot leave 80% of their faculty appointment. Under SBIR they cannot be your PI. Under STTR they can. It does nothing for a cap-table problem. Different test.
Which SBIR eligibility problems can you fix?
Most "you are not eligible" verdicts are really "not eligible yet." Here is how the common cases sort.
| Situation | Test | Curable? | The fix | Who gates it |
|---|---|---|---|---|
| Founder on O-1/H-1B owns 55-70% | Ownership | Yes | Move equity to citizen or permanent-resident co-founders, add an eligible owner, or become a permanent resident | Board, counsel, USCIS |
| Foreign individual investors hold >49% | Ownership | Usually | Secondary sale, repurchase, or new issuance diluting the foreign block below 50% | Investors, board, fresh 409A |
| Majority owned by multiple VCs, hedge funds, or PE firms | Ownership, agency-dependent | Not a defect at DoD, NIH, or NASA. Blocking at NSF. | Retarget to a 638(dd) agency, or unwind the majority for NSF | Agency choice, then investors |
| Foreign parent owns the majority | Ownership | Yes, slowly | Real restructure. The eligible majority must be direct. | Counsel, tax, both boards |
| Company incorporated outside the US | Ownership and firm type | Yes, slowly | Delaware flip | Counsel, tax, investors |
| PI is a professor at 80% university effort | PI | Yes | Cut their outside effort, name a different PI, or elect STTR | The professor's institution |
| PI is on a valid work visa | PI | Not a defect at NIH, NSF, NASA, or Army | Nothing. Confirm the authorization covers employment by your company. | Nobody |
| Documented ties to a country of concern | Foreign-risk screening | Sometimes not | Terminate and document the relationship, or accept you are not competitive here | The agency |
On timelines, here is the straight answer: we do not have calibrated duration data across enough restructures to give you a number worth planning around, and anyone who quotes you one probably does not either. What we can give you is the mechanics.
A founder-to-cofounder equity move is a board action plus amended docs, fast when everyone agrees. A secondary purchase needs those investors to want to sell, which is the real bottleneck and is not a legal question. A Delaware flip with foreign shareholders is a months-long project. A green card runs on USCIS's schedule, so no grant strategy should depend on it.
Start with the fastest fix that clears the threshold, not the cleanest.
Most founders can place themselves on this table in about ten minutes. If your row is ambiguous, that usually means the cap table has a holding-company layer in it, and that is worth a second read before you plan a whole funding year around it.
The 2026 layer: foreign-risk screening after reauthorization
If your information on any of this is from 2024, it is out of date.
SBIR and STTR expired on September 30, 2025 and lapsed for roughly six months. Eleven agencies, including NIH, NSF, DoD, DOE, and NASA, could not issue new solicitations or select new awardees, and more than $4 billion in annual funding stopped moving.
Congress reauthorized both programs through the Small Business Innovation and Economic Security Act, S. 3971. The Senate passed it March 3, 2026, the House on March 17 by 345 to 41, and it was signed April 13, 2026 as Public Law 119-83. Both now run through September 30, 2031. The full reauthorization guide covers what else changed in that bill.
The reauthorization added a mandatory national-security review. Agencies must now examine whether an applicant, or any covered individual, owner, or key person, has foreign affiliations, investment ties, technology licensing or joint venture relationships, or other business relationships connecting them to a country of concern.
Read the scope again: owners and key personnel, not just the company. If you are a visa-status founder, you are both.
This is not the ownership test, and it does not make your visa a problem. It does mean disclosure quality is now part of how you are evaluated rather than paperwork you fill in at the end. If you want to pressure-test your own exposure before you write anything, the 20-question foreign ownership self-assessment walks through what agencies actually screen for.
Honest caveat: agency implementation guidance is still landing as of July 2026. Do not assume last cycle's disclosure format is this cycle's.
Worked example: an O-1 founder with a majority-foreign cap table
The company below is invented to illustrate the mechanics.
Meridian Foundry is a Delaware C-corp building enzymatic routes to specialty polymers. The CEO is a Danish citizen on an O-1 and owns 42%. Two Copenhagen angels hold 16% between them. A US-citizen co-founder holds 22%, a US option pool 12%, and a US seed fund 8%.
Run Test A. Eligible ownership is the co-founder's 22%, plus the seed fund's 8% if it qualifies as an eligible small business, plus whatever part of the option pool is issued to eligible individuals. Generously, roughly 42%. The CEO's 42% and the angels' 16% total 58% ineligible. Meridian fails the ownership test.
Run Test B. The CEO works full time for Meridian and holds a valid O-1 authorizing that employment. Primary employment: clear. Work authorization: clear. Meridian passes the PI test at NIH, NSF, NASA, and the Army. The CEO can be PI today.
So "not SBIR eligible" is half right, and the half that is right has nothing to do with who runs it.
Three candidate fixes. Shift equity from the CEO to the US co-founder, fastest mechanically but the founder who built the company ends up owning materially less of it. Buy back the angels' 16%, which leaves founder equity alone but depends on whether they will sell and at what price. Or raise the next round from US-eligible holders, diluting the ineligible block below 50% without anyone selling, which is slowest.
Because ownership binds at award, Meridian can start writing now. Pick the agency first, since NSF's VC/PE prohibition and DoD's disclosure regime lead to different answers, then run the cap-table fix in parallel with the proposal.
What Meridian should not do is spend the cycle asking whether the CEO can be PI. That was settled.
What to do in the next 30 days
- Build your eligible-ownership block on paper. Every holder, their immigration status, their fully diluted percentage. Sum only citizens, permanent residents, and qualifying small businesses. Above 50% and Test A is done.
- Name a PI and check one thing. Total employed hours across all employers. If more than half are yours and they are authorized to work for you, they clear it at NIH, NSF, NASA, and the Army.
- Pick the agency before you fix the cap table. If you are majority-VC-owned, DoD is open and NSF is closed. That changes whether you need a restructure at all.
- Register on SBIR.gov and refresh your record. You need a current Company Registry entry and its registration ID before you can submit, and agencies expect the record to be up to date at application. It is a 30-minute task people discover the week of a deadline.
- Write the foreign-national disclosure early. For every person touching the project: country of origin, visa or work permit type, anticipated level of involvement. At DoD, omission can sink the proposal.
- Get counsel involved before you draft. A restructure decision made in week one is cheap. The same decision after 60 hours of writing is expensive and rushed.
Get a straight answer on your own structure
If you are sitting on an "I think we might not be eligible," the next step is not more reading. It is putting your cap table next to the actual SBIR ownership requirements and finding out which of the two tests you fail, and at which agencies.
Cada runs a free eligibility structure review. Book 20 minutes and bring two things: your cap table with each holder's immigration status, and the person you would name as PI. You leave with three lists. The mechanisms you are eligible for today, the ones that open after a specific defined change, and the ones genuinely closed. Where a change is needed, we name the change, not a direction.
We do not need your technology, your financials, or your IP position to run this. Ownership percentages, immigration status, and one name are enough, and nothing you send goes anywhere else.
Sometimes the answer is that you were already eligible and someone told you otherwise. That answer takes one email.
No pitch, no obligation. You should know which test you fail before you spend 40 to 80 hours writing.
Sources
- 13 CFR 121.702, ownership and eligibility definitions
- 13 CFR 121.704(a), size and eligibility status determined at time of award
- SBA Guide to SBIR/STTR Program Eligibility
- SBA eligibility tutorial
- NSF 26-510 solicitation
- NSF America's Seed Fund eligibility
- NIH Grants Policy Statement 18.5.2
- NIH Seed eligibility criteria
- Army SBIR/STTR eligibility
- S. 3971, Public Law 119-83
- Crowell & Moring on the reauthorization
- Agency PI and ownership rules cross-checked against Cada's NIH, NSF, NASA, DLA, and AFWERX SBIR playbooks (internal Cada data, 100+ proposals across 30+ agencies)
Eligibility rules, thresholds, and disclosure requirements are set per solicitation and change between cycles. Verify against the solicitation you are applying to before you plan a restructure. All company examples here are fictional and used for illustration only.