Elizabeth Olson summarizes the federal government’s SBIR programs:

But for high-technology entrepreneurs, there is another source of financing that can be as generous as it is little known: grants from the federal government’s Small Business Innovative Research Program.
The biggest fund, by far, is run by the Defense Department, which parcels out some $1 billion a year to independent companies with fewer than 500 employees. The goal is to stimulate research into novel technologies that can benefit military operations, but with a twist. The department is not paying for exclusivity for the ideas it finances; rather, it wants those ideas to go commercial as quickly as possible to assure a stream of reliable and cost-effective suppliers.
Martin Klein is one of its emerging success stories – at least that is what he hopes. A chemical engineer by training, Mr. Klein has spent 40 years in the battery and fuel-cell business. In 1970, he founded the Energy Research Corporation, since renamed Fuel Cell Energy Inc., and later sold his stake in it. Today, it employs 500 people.
Then, in 1992, he founded Electro Energy Inc. to develop batteries for the military, and that same year submitted a proposal for a grant for research into what he calls a rechargeable bipolar nickel-metal-hydride battery. What sets it apart from traditional batteries, Mr. Klein says, is its design, which stacks thin flat wafer cells atop one another to improve the flow of current while taking up less space. His eventual aim, he says, is to produce a battery that is 30 percent smaller and cheaper than conventional batteries yet provides 50 percent more power.
The Defense Department, which is always on the prowl for better batteries, particularly for its communications equipment and aircraft, liked his idea. It awarded him $50,000.