AFWERX STRATFI and TACFI Explained: How to Unlock $15M+ in Follow-On Defense Funding

Defense Grant Writers · February 3, 2026

Most defense startups know about SBIR Phase I and Phase II. Far fewer understand the funding mechanisms that come after. AFWERX's Strategic Funding Increase (STRATFI) and Tactical Funding Increase (TACFI) programs are two of the most powerful follow-on funding tools available to SBIR awardees, and they are significantly underutilized.

Here is how they work, who qualifies, and how to position your company to access them.

What Is STRATFI?

STRATFI is a follow-on funding mechanism for AFWERX SBIR Phase II awardees. It combines SBIR Phase II funding with matching contributions from an Air Force or Space Force program office and private investment to create a single, larger contract that can exceed $15M in total value.

The structure works like a three-legged stool:

• SBIR Phase II funding: Up to $1.5M from the SBIR program
• Program office contribution: Matching funds from an Air Force or Space Force acquisition or requirements office
• Private capital: Matching investment from venture capital, strategic investors, or other private sources

The combined package can provide the funding needed to move a technology from prototype through production-ready status, bridging the "valley of death" that kills many defense startups between Phase II and Phase III.

What Is TACFI?

TACFI is a smaller version of STRATFI designed for earlier-stage or lower-cost transitions. TACFI deals typically involve smaller total values (often in the $1-3M range) and may have less complex matching requirements. TACFI is particularly useful for technologies that need a focused demonstration or integration effort rather than a full production ramp.

Who Qualifies?

To be eligible for STRATFI or TACFI, your company must:

• Hold a current or recently completed AFWERX SBIR Phase II award
• Have a technology that addresses a validated Air Force or Space Force requirement
• Have an identified program office champion willing to contribute matching funds
• Be able to demonstrate private investment or have a credible path to securing it

The most critical requirement is the program office champion. Without a government customer who is willing to put money on the table, STRATFI and TACFI deals do not happen. Building that relationship early, ideally during Phase I or Phase II, is essential.

How to Position Your Company

Start talking to program offices during Phase I. Do not wait until Phase II is almost over. The relationship with your government customer needs time to develop, and they need to see your technology progress through milestones before they will commit matching funds.

Build your investor pipeline in parallel. STRATFI requires private matching capital. If you have not started conversations with defense-focused VCs, strategic investors, or corporate partners, you are already behind. Investors who understand STRATFI see it as a powerful de-risking mechanism because the government is co-investing.

Frame your Phase II work around transition milestones. Your Phase II proposal and execution should be structured to demonstrate that your technology is moving toward production readiness. STRATFI program offices want to see TRL advancement, manufacturing readiness, and end-user feedback, not just research results.

Know the acquisition pathway. Which Program Element (PE) line would fund your technology in the POM? Which acquisition office has the authority to execute a Phase III contract? If you cannot answer these questions, you are not ready for STRATFI.

The New Strategic Breakthrough Award

The 2026 SBIR/STTR reauthorization created a new mechanism called the Strategic Breakthrough Award that shares some DNA with STRATFI. Under this new authority, agencies with extramural budgets over $100M can award up to $30M to companies with prior Phase II awards and 100% matching funds. For DoD, at least 20% of the match must come from non-SBIR DoD funding.

This effectively creates a statutory version of the STRATFI concept that applies across all DoD components, not just AFWERX. As agencies develop their implementation plans (expected in late 2026), companies that have already built program office relationships and investor pipelines will be best positioned to compete.

How We Help

Defense Grant Writers works with AFWERX Phase II awardees to develop STRATFI and TACFI capability packages, build program office engagement strategies, and prepare the documentation needed to secure follow-on funding. We also write the underlying Phase I and Phase II proposals that create the STRATFI/TACFI eligibility in the first place.

For NSF, NIH, and civilian agency SBIR/STTR proposals, visit sbirgrantwriters.com.