What if a federal program reached four fifths of K–12 students nationwide for just 70 cents each, yielded a 9-to-1 return, seed-funded over 100 entrepreneurial education technology startups, and introduced AI and other novel solutions in classrooms? Skeptics might rightly raise an eyebrow. Yet, remarkably, the Small Business Innovation Research (SBIR) program is exactly this kind of success story.
Today, we at The Study Group released “From Seed Funding to Scale,” the first-ever program impact analysis of the U.S. Department of Education and Institute of Education Sciences’ SBIR (ED/IES SBIR). Rooted in Reagan-era R & D sensibilities, eleven agencies collectively invest $4 billion annually through America’s Seed Fund. ED/IES competitively awards phased grants—$250k for Phase I, $1M for Phase II—to education innovators. Crucially, companies must meet rigorous milestones to receive continued funding, ensuring taxpayer dollars fuel results, not wishful thinking.
As policymakers consider how best to rebuild and reimagine IES, SBIR’s targeted, research-driven investments offer a valuable blueprint for leveraging entrepreneurial creativity to achieve substantial impact.
For context, ED/IES’s SBIR program provides critical early-stage capital to small businesses, taking on initial R & D risks to drive innovation and commercialization. Competitive Phase I and II awards allow innovators to pilot new products designed for eventual wide-scale adoption. This proven early-stage investment model is a predecessor to and complements the proposed National Center for Advanced Development in Education (NCADE)—an education-focused, DARPA-inspired center for scaling breakthroughs—creating aligned, complementary paths for innovation.
The program’s results speak for themselves. Our analysis confirmed that between 2012 and 2022, ED/IES SBIR supported research-based educational products that have now reached 130 million students and educators at a price-tag of just $0.70 per user. More impressive still, these modest grants catalyzed over $800 million in subsequent product sales, private investment, and acquisition value—a remarkable 9-to-1 return on the initial $91.1M investment. While self-reported, these findings clearly indicate substantial social and economic benefits.
Take, for instance, Learning Ovations, a firm that created a platform to commercialize an evidence-based literacy assessment that individualized instruction reached national scale after acquisition by publishing giant Scholastic. Another startup, Analytic Measures (now Caimber), developed Moby.Read—an AI-powered reading assessment tool so efficient and accurate that Google acquired it to bolster their own platforms. And codeSpark, which teaches computer science through playful stories that children create, was acquired by Homer Learning and now reaches 40 percent of all schools in the country. These acquisitions aren’t outliers. Eighteen percent of SBIR-funded firms were acquired, confirming clear market validation.
More examples include Core Curriculum by MidSchoolMath, which immerses students in tasks such as managing ancient economies and is used in thirty-eight states. The chemistry learning game Happy Atoms, developed by Schell Games, successfully transitioned from classrooms to mainstream retail shelves at Target. Presence created a platform which enabled the delivery of more than 7 million virtual teletherapy sessions to children. And KASI Learning by Alchemie, an accessible science program for all learners—specifically students who are blind or visually impaired—is distributed through publisher Wiley. SBIR companies nearly doubled their workforce, creating hundreds of private-sector jobs.
Moreover, SBIR doesn't impose rigid mandates or create bureaucracies. Instead, entrepreneurs partner with education researchers, and schools choose what works in their context.
Perhaps SBIR’s most strategic victory lies in its investments in artificial intelligence. Well before AI captured national attention, SBIR-funded companies were already developing widely adopted AI-driven educational tools. At a time when global competitors are pouring billions into educational AI with heavy-handed, top-down directives, SBIR strategically positioned schools early with homegrown AI. This nimble, entrepreneurial approach has the potential to ensure that the United States doesn’t have to match global competitors with mandates. We can out-innovate them instead.
This isn’t just good policy. It’s smart economics. SBIR demonstrates that targeted R & D investments can yield exponential returns. For fiscal conservatives, SBIR exemplifies discipline and accountability—delivering real results.
More generally, it’s a proven approach for education R & D that Congress and state policymakers should expand. In an era of tight budgets and fierce global AI competition, America cannot afford to leave wins like these on the table. By recommitting to this Reagan-era vision—small, strategic government investments catalyzing private-sector innovation—we can elevate student achievement, create jobs, and help ensure America leads in educational technology and innovation.
