There is no doubt that 2025 brought immense changes to the federal R&D funding landscape. For decades, federal support for science and technology R&D has promoted U.S. leadership in innovation. Federal support coupled to an entrepreneurial environment created an ecosystem for rapid transfer of technology from the lab to the marketplace.
This past year has posed substantial changes and necessary pivots to this ecosystem. Federal grant awards were paused for months and millions in awards were canceled or clawed back. Hundreds of thousands of federal workers were laid off, many of these experienced scientific personnel responsible for overseeing hundreds of millions in federal funding. Proposed agency budgets were substantially cut with some federally funded programs canceled and funds diverted elsewhere.
A slew of issued Executive Orders were directed at remaking the federal grant-making process including:
- Infrastructure Investment and Jobs Act for renewable energy and electrification have been diverted to oil, natural gas, and mineral production
- Agencies were directed to cap indirect costs at 15%
- Political appointees were established at federal agencies to provide final decision making for grants
- Research funding must show a direct impact or application within the U.S.
What do we expect in 2026? The reductions in federal staff and agency budgets mean:
- Fewer funding programs
- Fewer grant awards
- Longer funding cycles
- Reduced extramural (peer) review
- Increased oversight of specific grant language
Receiving federal grant funding more than ever before requires strategic alignment with federal and program priorities and leveraging of relevant collaborations and partnerships.
Universities need to strengthen public-private partnerships and support technology transition to the public.
- Relax or remove Intellectual Property rules and oversight, allowing for flexible arrangements among faculty, research centers, and external reviewers to collaborate.
- Allow for collaborations with industry to support graduate trainees. Projects may be less academic, but interfacing with industry provides a pipeline for graduate talent that is not interested or destined to a future academic career.
- Improve marketing and accessibility of research infrastructure and shared services to external researchers. This can serve to offset losses from the 15% cap on indirect costs for research grants and allow these centers to become revenue generators.
- Actively seek companies and investment groups interested in licensing the technologies developed at the university. Provide attractive licensing options for companies seeking to further develop a technology to commercial scale.
- Consider leveraging university capabilities to pursue non-grant financial assistance including contracts, cooperative agreements, and other transactions.
Businesses need to consider multiple avenues for funding R&D.
- Consider partnerships with universities, research institutions, and federally funded research and development centers to provide initial technology de-risking.
- Consider teaming options with other companies to pursue federal financial assistance. Advertise your company’s capabilities on relevant Teaming Partner lists.
- Ensure employees and partners are not from countries specifically banned from receiving financial assistance in the Safe RESEARCH Act.
- Broaden the federal agencies you consider for funding; there can be considerable overlap in the funding priorities of different agencies.
- Focus on the most relevant financial opportunities, especially those offered through the SBIR/STTR program. The current fight in Congress regarding SBIR/STTR reauthorization demonstrates broad and bipartisan support for the program.
- Seek state-level economic incentives and prizes for pre-seed and seed funding.
- Investigate the resources available at your Small Business Center and at business accelerators and incubators.
2026 will begin a new federal funding landscape – careful strategic planning and the right resources will be needed to acquire future federal investment. Make sure you have the right knowledge and guidance to succeed!