Here is the question almost every first-time applicant eventually asks: I still have a job, or a faculty appointment, and I am the only person who can lead this work — can I be the principal investigator? Under SBIR the usual answer is that you can only if the small business becomes your primary employer during the award. That is a real constraint with real consequences for a founder who has not quit yet.

What primary employment means

The standard formulation is that more than half of the PI's working time must be spent with the applicant small business during the period of performance. It is a test about employment, measured across all of the individual's paid work, and it is deliberately blunt: the agency is trying to establish that the person leading a federally funded project actually belongs to the company receiving the money.

The exact wording, the way the fraction is measured, and whether any waiver exists all sit in the agency's solicitation, and they are not identical across agencies. Confirm the language you are actually bound by rather than relying on a threshold quoted second-hand.

Primary employment is not level of effort

Two numbers get confused constantly. Primary employment asks where the person works overall. Level of effort asks how much of their time goes to this project, and it is usually a much smaller share — a PI can be primarily employed by the company while committing a modest percentage of their time to one award. Meeting the effort minimum does not satisfy the employment test, and satisfying the employment test does not excuse you from the effort minimum.

They are also both separate from the ownership rules. Who owns the company and who is primarily employed by it are unrelated questions. A PI can hold no equity at all and be perfectly eligible; a majority owner who works elsewhere full time is not eligible to serve as PI simply because they own the business.

The realistic options for a moonlighting founder

If you cannot make the small business your primary employer by the time of award, you have four honest paths.

  • Name someone else as PI and stay on the project in another technical role.
  • Reduce the outside commitment so the company genuinely becomes primary employment, and be able to document it.
  • Apply under STTR instead, where the PI may be primarily employed by the small business or the partner research institution depending on the agency.
  • Ask the agency directly whether any exception applies to your situation before you write.

What you cannot do is describe an arrangement on paper that does not match reality. The employment representation is a certification, and the project's own reporting will contradict it if the PI is not really there. Founders weighing this against a salary should read it alongside developing a product while working full time and when it is right to leave the job. If the answer is STTR, start with the differences between the two programs.

This is general information, not legal or employment advice. The employment requirement is set by the funding agency in its current solicitation and has changed over time; anyone close to the line should confirm with the agency and their own counsel before investing months in a proposal.

Projects House provides the engineering bench a part-time founder does not have. Get in touch through the contact form.