Panel V
SBIR at the National Science Foundation

Moderator:

Jacques S. Gansler

University of Maryland

At the outset of the session, Dr. Gansler introduced the first speaker, Dr. Joseph Bordogna.

ACHIEVEMENTS, OPPORTUNITIES, AND CHALLENGES

Joseph Bordogna

National Science Foundation

Dr. Bordogna opened his talk with some frank praise for the SBIR: “We like being here because we like this program,” he said. “It’s an important program, because it’s a collective investment in the nation’s future, and it merits our most thoughtful attention and evaluation. The NSF welcomes the opportunity to join the other members of the SBIR team to provide an initial overview of the SBIR program.”

The SBIR as a Collaborative Process

He emphasized the importance of viewing the SBIR study as a collaborative exercise. Only as a team, he said, can “we do a really comprehensive evaluation of past achievements and future plans.” By “we” he referred to all of the agencies that fund the SBIR. “We have all worked long and hard to develop a seamless



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium Panel V SBIR at the National Science Foundation Moderator: Jacques S. Gansler University of Maryland At the outset of the session, Dr. Gansler introduced the first speaker, Dr. Joseph Bordogna. ACHIEVEMENTS, OPPORTUNITIES, AND CHALLENGES Joseph Bordogna National Science Foundation Dr. Bordogna opened his talk with some frank praise for the SBIR: “We like being here because we like this program,” he said. “It’s an important program, because it’s a collective investment in the nation’s future, and it merits our most thoughtful attention and evaluation. The NSF welcomes the opportunity to join the other members of the SBIR team to provide an initial overview of the SBIR program.” The SBIR as a Collaborative Process He emphasized the importance of viewing the SBIR study as a collaborative exercise. Only as a team, he said, can “we do a really comprehensive evaluation of past achievements and future plans.” By “we” he referred to all of the agencies that fund the SBIR. “We have all worked long and hard to develop a seamless

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium program that integrates and amplifies common aims. The result is a nationally integrated federal program that gets the job done efficiently and effectively.” The job of the SBIR, he said, was to foster technological innovation across a wide range of research areas that were important priorities for the nation. What set the SBIR program apart from many others was its focus on particular talent and the capabilities of the small business community to take innovation to the market. Turning technological advances into commercial products, processes, and services was essential to the SBIR program, and continuously brought “a new set of players onto the field.” The planned evaluation study was a splendid opportunity to look at the SBIR program in its full complexity, not just in its separate pieces. A comprehensive review, he said, would enable participants to make improvements in performance, fine-tune implementation, and help with planning. He noted that the seeds of the SBIR program had been planted nearly 25 years before, when NSF initiated a small business innovation pilot program. He introduced two of the pioneers of that effort, Roland Tibbets and Richard Coryell, who were among the participants. He said that the program had started as an idea, in a natural way, when grantees asked to do something and an agency program officer had the alertness to respond to that request. A Common Focus on Innovation He said that the goals of the SBIR program and the NSF dovetailed nicely, because both entities focused on innovation. He described the vision of the NSF as enabling the nation’s future through discovery, learning, and innovation. Ten years ago, he said, that vision emphasized discovery. Since then, three objectives had become steadily more important: learning; the integration of research and education; and innovation. The three strategic goals under this vision of research, education, and innovation were referred to simply as “people, ideas, and tools”—or, more fully expressed, to develop a world-class science and engineering workforce; to foster discovery at the frontiers of knowledge; and to develop the tools to get the job done. “People, ideas, and tools,” he said. “It’s as simple as that.” To accomplish each of those missions, he said, involved three strategic thrusts: building intellectual capital, integrating research and education, and promoting partnerships. How SBIR Fits NSF’s Strategic Vision He characterized the SBIR as an important partnership. He said, “It isn’t difficult to see that the SBIR fits NSF’s strategic vision to a ‘T’.” NSF invested approximately $85 million in the program each year, and the SBIR portfolio spanned nearly every directorate: engineering, bioscience, the physical and mathematical sciences, information and communication science, and even research and education itself. Because the SBIR team planned and coordinated the

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium program’s investments, the majority of these NSF grants met the needs of other agencies as well as the goals of NSF. He said that the SBIR filled a significant need that was not addressed by any other program. The NSF’s primary mission was to support basic studies at the frontier of knowledge, but at the same time, the agency was responsible for producing results that are useful to the taxpayers. The SBIR produced many practical outcomes for the agency, helping to broaden its mission toward results that were clearly visible in the marketplace. It also addressed the Government Performance and Results Act, which required all federal agencies to describe the output and outcomes of their investments. Understanding SBIR in the Context of Innovation He then said that while his colleagues had provided considerable detail, he now wanted to take a “long view of the SBIR program.” He said this would be a collective view, because he talked frequently with colleagues in other agencies about the program. In many ways, he said, the program’s distinctive role could be best understood in terms of large-scale transformations taking place in the nation’s research and innovation enterprise. These transformations had opened new frontiers of knowledge, changed the process of research and innovation, and increased the complexity of science, engineering, and technological development. The “tools” issue for NSF was one example of rising complexity: who is going to build the cyber-infrastructure that will be needed in the future? Research is being done differently, he said, and new techniques had opened up new frontiers of knowledge and technological development, with a big impact on SBIR. The pace of discovery and innovation had accelerated and competition had expanded, and to evaluate SBIR properly required understanding this rapidly evolving context. “This is not the stream we were swimming in the past,” he said. “It’s a new stream. And we hope as it’s being evaluated that we take this into account.” The SBIR study, he said, could be a “revolutionary chart of the new paths we will follow in the twenty-first century.” Over the past decade, change had transformed institutions and forced business, research, and education into new directions. One source of this transformation had been the extraordinary outpouring of new knowledge. New knowledge was the result of advances in science and engineering, and was now a key force driving technological innovation. Innovation in turn created new jobs and wealth, spawned new industries, and grew economies. The Transition from Labor to Knowledge He emphasized the importance of thinking about innovation during the study. The NSF distinguished between innovation and productivity, in the following sense. Productivity was using new knowledge and applying it to things we know how to do—i.e., doing more with less. Innovation was using new knowledge to

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium do things that are new and different, and creating new enterprises. The SBIR was one mechanism to create new enterprises, new jobs, and new wealth, all of which help to expand the economy. We once thought of productivity in terms of work or labor, he said, but now we must think of it increasingly in terms of knowledge and the activities of knowledge workers. Economists were only beginning to learn how to measure productivity in the “knowledge era.” Traditionally, we had used a 200-year-old construct to do this, and this was changing. This transition from labor to knowledge, he said, is an important part of the SBIR program. The development from knowledge to innovation to commercialization is happening at increasing speeds. “It’s no wonder,” he said, “that the capacity to create and use new knowledge is seen in both the private and public sectors as the best path to economic prosperity and a higher quality of life.” This process was once seen as a simple, though protracted, linear progression from research to development to market. That is no longer the case. Today, research and development can drive technological innovation, but it can also happen in the reverse direction. The high level of technological innovation under the SBIR program often drives research at the frontier. True innovation can spur the search for new knowledge, and create the context in which the next generation of research identifies new frontiers. Disciplinary Barriers Drop Away A driving force in these transformations, he said, had been the revolution in information and communication technology. Genomics and the biotechnology industry were one example; the budding field of nanotechnology was likely to be another, where for the first time scientists had the ability to investigate highly complex phenomena. Several decades previously the frontier of science and engineering was divided into disciplines, because there were no tools capable of crossing disciplinary boundaries. Today, researchers could not choose to stay within a single discipline; they were more or less compelled to work in an interdisciplinary fashion. Nor could they choose to work only in basic research or applied research; practical improvements in technologies from drug delivery systems to renewable energy sources were driving the acquisition of new knowledge in new directions. “There’s a new system evolving here,” he said. “It’s not theory versus practice, or basic versus applied. The government is spending an awful lot of money across a number of agencies, and we’ve got to do something big with it.” For example, new information and communication (ICT) tools had raised the bar of competition worldwide and accelerated the pace of change. The capacity to create and employ knowledge resided in an ever-growing, globally-linked community. New knowledge was accessible in more countries throughout the world, at nearly instantaneous speeds. The Massachusetts Institute of Technology, and other institutions, were making its courses available without cost on the Web. He described a conversation with the Minister of Science from New Zealand, who

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium wanted to sell more products to the United States. His country was planning to do so by training excellent scientists and forming an SBIR-like program to move products more effectively into the United States, the world’s largest market. The Need for Working in Partnership Such changes, said Dr. Bordogna, had contributed to a blossoming of partnerships designed to facilitate the innovation process. Multidisciplinary research had brought together teams of researchers, and competition had spurred new alliances among business enterprises. Most important, collaboration among universities, businesses, and governments was thriving. The federal government, partly through the SBIR program, had provided strong leadership. For well over a decade, it had advocated public-private partnerships in federal R&D, and had begun to see genuine working arrangements with significant results. It was understood that discovery and innovation rarely happens without partnerships, because they bring to the table participants with diverse expertise, resources, and perspectives. As products, processes, problems, and solutions increase in complexity, the need for a diversity of partners would grow as well. Partnerships would become more inclusive, as would the aims of the SBIR program. Collaboration among academia, business, labor, and industry is a powerful way to ensure a two-way road between the research laboratory, wherever it is located, and the world of commerce. Corporations and universities were having to reinvent themselves to remain innovative, and government partnerships had been reshaped as well. Reaping the Harvest of Technology The SBIR program, and its close cousin the STTR program, had also evolved. The SBIR program arose from a need to allow small businesses to develop their own capabilities for innovation and to speed commercialization of new technologies. Reaping the harvest of innovation is central to our future and a revolutionary idea. It was well understood that universities and their scientists and engineers are critical resources for the country. They were poised to contribute to economic development in the twenty-first century much as agriculture and early industries did in the twentieth century. The same was true of entrepreneurs and small businesses, which make critical contributions to economic development by bringing technology from risky innovations to the commercial market. The SBIR program had matured, he said, producing many successes and stimulating an unprecedented level of collaboration and important linkages. This maturation had required new levels of trust and collaboration between federal agencies and, in the end, led to a productive team that had turned the SBIR team into an integrated national program. Whether we welcomed it or not, he concluded, the outpouring of new knowledge and the pace of technological change were unlikely to lessen soon. “We

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium haven’t seen the end of the information revolution,” he said; “we are just beginning to feel the impact of the biological revolution. The biggest part of SBIR is to handle new technology yet unimagined. Part of building a continuum of success is to look at the SBIR comprehensively as a program that’s going to do the nation’s work.” DISCUSSANTS Gregory H. Olsen Sensors Unlimited Dr. Olsen opened his talk by saying he had been able to leverage SBIR awards into two successful companies, and had started a third SBIR company a week and a half previously. “The bottom line,” he said, “is that the SBIR system really works. I know of four companies in the Princeton, New Jersey area that are highly successful and used SBIR to leverage themselves. I love it and think it works as a venture capital system.” The Growth of an SBIR Company He said that his small-business career had begun in late 1983, when he was a research scientist at RCA Laboratories. He had an idea for forming a new company making fiber optic detectors, and with several colleagues and some venture capital was able to start the firm EPITAXX. In the mid-1980s the company won its first SBIR contract, from the National Science Foundation. By 1989 it had grown to 55 employees and was earning a profit on $5 million in revenues. In 1990, the Japanese firm Nippon Sheet Glass bought his company for $12 million, and in 1999 it was acquired by JDS Uniphase for $400 million, near the height of the telecom boom. In 1999 Dr. Olsen left EPITAXX and started Sensors Unlimited, which focused on infrared sensing (see Figure 6). The firm was self-financed and won several SBIR contracts, working closely with the Sarnoff laboratory and Princeton University. In the beginning, about 80 percent of the firm’s revenues came from R&D contracts; as business grew, the proportion of R&D revenues decreased to 30 percent by 1999. In 1998, with the rapid growth of the Internet, Lucent and other companies discovered they could use infrared sensors in their optical networks and the company grew rapidly. By mid-2000 Sensors Unlimited was able to earn a $5 million profit on $25 million in revenue. It was then acquired by Finisar for the price of about $700 million, which, Dr. Olsen recalled, “was kind of like hitting the lottery.” After that, the sales of Finisar, along with the rest of the telecom sector, plunged, and the employees bought back the original Sensors Unlimited company for $6.1 million in October 2002. “Now we have a company that is losing money,” he said, “and we are trying to get it going again.”

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium FIGURE 6 Sensors Unlimited, Inc. Paying Back the Investment He said that in his opinion, both companies were success stories. Over 90 percent of the revenues of EPITAXX came from commercial sales at the time it was sold; when Sensors Unlimited was sold, about 85 percent of revenues were commercial. In the larger context of the value of the SBIR program, it was significant that the sale of both companies generated capital gains and state taxes of “many millions of dollars” that effectively paid back “many times over” what the companies had received from the government. “That is a very satisfying thing to us,” said Dr. Olsen, “and a great sign to the SBIR system that it works extremely well.” He then offered a more detailed description of Sensors Unlimited, which started as an infrared camera company, using focal plane arrays. The camera can be used for such tasks as sensing ice on aircraft; NASA used it to monitor tanks of liquid oxygen, which tends to condense and freeze. The company was then attempting to shrink the sensor to a small enough size to fit directly on the wings of flight vehicles, and had applied for an SBIR grant to develop that ability. Motorola and Intel used the camera to locate defects on semiconductor wafers. It could also be used to locate minute changes in works of art. For example, it had detected

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium changes made by Renoir on his famous painting “Luncheon of the Boating Party,” now in the Phillips Collection in Washington. Finally, the camera had military applications, which was the company’s primary market during the telecommunications slump. It could distinguish camouflage clothing from vegetation, and provided more sensitive detection at night than night-vision goggles. SBIR Fosters Partnerships The SBIR system had also allowed the company to form partnerships with a variety of public and private entities, including Princeton University, Sarnoff Corporation, Rutgers University, New Jersey Institute of Technology, Rockwell International Science Center, and the New Jersey Technology Council (see Table 3). “I think one of the most valuable things you can do in this program is to network with other organizations,” he said, “and SBIR allows you to do that.” From the point of view of a small company, he called the SBIR a “great source of venture capital,” for several reasons. First, venture capital was much more difficult to find than it had been several years ago. Second, an SBIR grant allowed the company to preserve its capital instead of giving up equity. From the point of view of the nation, the tax revenues of a successful company pay the government back for its investment with a high return. Dr. Olsen described some of the pre-commercial work Sensors Unlimited had done for its SBIR sponsors: For NASA, the company made photo arrays and solar cells; For DARPA, it produced semiconductor chips for its infrared camera; For NSF, it made an avalanche photo diode, which is a detector with an amplifier; For DoD, it produced technology for three-dimensional night-vision imaging. The company had been able to take some of these technologies beyond the research stage and commercialize them. Some examples: TABLE 3 Sensor Unlimited’s Partnerships Partner Princeton University (Steve Forrest) Sarnoff Corporation Rutgers University New Jersey Institute of Technology (NJIT) Rockwell International Science Center New Jersey Technology Council (NJTC)

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium Research for NASA led to infrared sensing products for aerospace and defense companies. When the telecom boom gathered momentum in 1998, the company’s infrared sensing products were sold to Lucent, Nortel, JDS Uniphase, and other companies. Sales quickly doubled, then redoubled by 2000. Benefits to Education and the Economy Dr. Olsen said that the SBIR program had produced results beyond forming companies and making sales. In this case, he said he believed that his company had produced “the best technology in the world,” which would then be developed for additional uses of benefit to the country. In addition, the grant provided a good way to interact with universities. He was able to hire students from his alma mater, the University of Virginia, and share programs with the university. The acquisition by JDS Uniphase allowed him to donate money for a new materials science building on campus. He said that the buyback of Sensors Unlimited from Finisar had been amiable, and beneficial for both parties. Finisar was able to shed expenses, reduce size, and work toward profitability, while his company was able to focus on aerospace and military markets and move toward profitability more quickly. He concluded that “SBIR does work,” and said he hoped that his own case was “just one of many examples that prove that.” It is not just a one-way system, he said, but “a way to pay government back. It allows universities and companies to interact. It’s a great thing for the country.” Christina Gabriel Carnegie Mellon University Dr. Gabriel said she had spent about 5 years at the National Science Foundation engineering directorate, where the SBIR program is located, where she worked with the founders of the program, including symposium attendees Roland Tibbets and Richard Coryell. Her current job as Vice Provost at Carnegie Mellon University, in Pittsburgh, includes research, technology transfer, and regional economic development, the last of which was “what our region wants from us as a university.” Universities and Regional Development The city of Pittsburgh, she said, “was launched and built by the entrepreneurs of a hundred years ago, notably Andrew Carnegie.” But the collapse of the U.S. steel industry several decades previously had removed much of the city’s industrial base. Since then the city had become much more livable, with clean air and

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium water, but people worried about the source of future jobs. The USX Tower, once filled with U.S. Steel employees, then held almost no U.S. Steel employees. Instead, she said, everyone was looking to CMU, the strong technical center, and the University of Pittsburgh, the strong medical center, and other schools in the region to produce new businesses. “And that’s a role universities haven’t been accustomed to playing.” Nor, she said, was it a role anticipated when the SBIR program began. She referred to earlier discussions of disruptive technologies and creative destruction, and said that the SBIR program itself was a “disruptive innovation”—a different way of approaching program management. NSF had given Dr. Tibbets and others the flexibility to do this “relatively revolutionary thing.” Beyond the Linear Model She also continued the discussion of the “linear model” of R&D, which assumed that innovation proceeded in one direction, from research to development to manufacturing. She said that when she worked at Bell Laboratories, the management of the company implicitly believed in the linear model. “It was never considered very important 20 years ago for the researchers to talk to the rest of the company,” she said. “My personal opinion is that that’s why we don’t have Bell Labs and the original research labs any more. Those big companies never understood how to connect their research to the rest of the company in a productive way. So small businesses and Japanese companies and others outside the labs were the ones who commercialized almost all the innovations that came out of our labs.” However, she thought it was remarkable that the SBIR, even though it was founded on a faulty model of that era, continues to serve the nation in an effective way, “even though the entire world of technology has gone through six or seven revolutions since the program was started.” She suggested that even though the program was encumbered by many political and technical agendas, it was able to maintain “incredible flexibility.” Because it was a fairly small program, each agency could see how the SBIR promoted national objectives and, simultaneously, how the program could fit into the sponsoring agency’s particular mission. Questions for the Panel She suggested that the members of the study panel listen carefully to what the agencies had learned in the past 20 years and use that history to create useful results. She acknowledged that the steering committee, on which she served, was “really struggling to figure out how this program can contribute even better to the national innovation system,” especially as a program that required teamwork among all the agencies.

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium She closed with a series of related questions: Should the panel search for some new “creatively destructive program innovations,” or should they just seek to simplify the program operationally and leave as much of the original flexibility as possible in the system? How could the program be better linked to the national innovation system so as to help areas such as Pittsburgh promote regional economic development? Could regional clusters of small businesses, with particular technologies, be promoted by a federal program whose agenda concerned innovation in its broadest sense on a national scale? Finally, how could this program partner with other efforts so as to strengthen the country’s overall innovation system? Robin Gaster North Atlantic Research Dr. Gaster said that he had come to this meeting as a long-time researcher who had worked on many different projects, and yet he found this one “a difficult, complex, and intimidating one.” It was as difficult as asking “what is success,” he said, and how do you measure it. There were multiple dimensions to the answer that varied by agency, and measuring and finding the correct indicators “is a huge challenge.” Dr. Gaster said that as a researcher he felt “a magnetic attraction to big-think issues” such as this one, but conceded that “you can end up with little to show for your work.” Start by Talking to the Agencies The second alternative, he said, was to think about “how you can do the right research, and focus your project on the right level of analysis for the project.” He said he had heard today that the evaluation project had to be focused on finding answers needed by program managers, by Congress, and by program participants. He advised starting the analysis from an empirical perspective by talking to the agencies and the participants, and learning what questions were most significant for them. “Then we will know which of the ‘big-think’ issues to focus on. Not all the micro issues require macro thinking.” As an example, he recounted a conversation with John Williams of the U.S. Navy SBIR program. He asked him whether he would want to improve his SBIR program through “more singles, more home runs, or fewer strikeouts.” Mr. Williams had said he would want more “singles”—i.e., small successes. He said that another agency, perhaps the NSF, might want more “home runs”—big successes. Beyond this general impression, he said, was the desired frequency of success. An SBIR manager might decide that if 40 percent of the agency’s Phase II projects

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium were successful, the program was not taking enough risks. Another, with a longer time horizon like for NSF, might decide that a 10 percent success level was better. He said that the study panel should discuss such questions with the agencies. He ended his comments by noting that the study panel would need a lot of help to address the “huge field of interesting problems ahead of us.” He suggested that the place to start was “right at the bottom, with the people who are actually in the trenches.” David Goldston House Science Committee Dr. Goldston said that for the Congress, a fundamental question was whether the SBIR program could bring entities into the research program that would not otherwise be there. Two Fundamental Questions to Ask He noted Dr. Olsen’s comment that the SBIR has value as an alternative to a venture capital fund. But he said that “the basic question is how can we increase the pool we can draw from, and is that pool changing; are we getting different kinds of research as a result? If we are bringing in new entities, would their output be the same without the SBIR?” Even if research output is the same with the SBIR as without it, one might still want to encourage small companies, for the jobs they generate and the regional economic development they promote, he said. There are also narrower questions about the program, he said, such as steps taken to discourage companies that are “SBIR mills” and the issue of geographic distribution of awards. He noted, however, that these narrower questions should not obscure the larger questions about the overall impact of the SBIR program. Acknowledging the difficulty of the assessment, he nonetheless stressed the need for the review, observing that “those are the questions that we who look at the program every few years have to grapple with.” DISCUSSION Improving Program Administration John Williams of the U.S. Navy said that his own evaluations had shown that the SBIR program is successful for the Navy. To spend additional time to quantify that success with metrics whose value is uncertain might not be cost-effective, he suggested. The measurements would likely repeat the conclusion that it is a good program. However, he said, program managers such as himself did want to know many things that were not reflected in quantitative studies, such as the value of outreach

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium to the states. Some states were good at using the SBIR program, while others needed assistance. “What we really want to find out is how we can make the companies better,” he said. “What assistance do they need?” For example, his office used a commercialization program borrowed from the Department of Energy that coached firms during Phase II on good business practices—an area where many of them were weak. He said he would like to know how much value the program has, how his office could use it better, and what steps could be taken on a national level. The Navy also worked hard to “have the acquisition program lead the projects,” whereas the Army “does it more at the lab level. I’m not sure which one works better.” He said that a major benefit of the study would be to evaluate such different kinds of management and determine the advantages of each. The Impact of SBIR Richard Coryell noted that participants had named three overriding objectives of the SBIR program: (1) to serve agency missions, (2) to speed the commercialization of technology, and (3) to stimulate innovation and creativity. He asked Dr. Bordogna what the absence of the SBIR might mean for each of those three objectives. Dr. Bordogna first said he agreed with Dr. Goldston’s thesis that the study panel should first look at the “big picture.” The NSF’s thesis, he said, was that the panel’s goal should be to anticipate how the SBIR could best function in the future, not today. The SBIR must change along with changes in technology, ways of doing business, and ways of doing research. With regard to Mr. Coryell’s question about the effect of the SBIR on the three objectives, he answered, “If there were no SBIR, these things would probably be going on, but not in as robust a way.” He suggested that there was no “algorithmic way” of achieving all the objectives of SBIR and the NSF. But he said that the SBIR supported them all at the same time it built the science and technology capacity of the nation. He cited a Japanese philosophy of capacity building: “They don’t worry too much about succeeding in every program. Their philosophy is that even if we fail at something, we’ve built up the workforce to do the next thing.” The important task for the U.S. government, he said, was to invest in people’s capacity to “do the next thing. And the endpoint is growing the capacity of the country—strengthening the workforce.” SBIR and Venture Capital Steven Wallach of Penney and Edmonds revisited Dr. Goldston’s question about the extent to which the activities of the private sector could substitute for

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium the SBIR program. He asked the panel members why venture capitalists were not doing what SBIR was doing to support startup companies. David Goldston said that venture capital companies had both a positive and negative effect on startups. Three years ago, when the economy was booming, venture capitalists competed with one another to invest millions of dollars in high-technology businesses. Today, he said, the situation was reversed; venture capitalists felt saddled with once-booming small companies, and did not want to invest more money until the economy picked up. At such times, companies that needed financing were more likely to turn to the SBIR program. Steven Wallach followed up by asking Dr. Olsen about his own case, in which the return on the government investment in Sensors Unlimited was very high. Why would the venture capitalist of today not think that the chance of a high return justified the risk of an investment in similar companies? Gregory Olsen answered that one problem in matching small companies with venture capital funding is “deal size.” The average deal size for venture capitalists, he said, was now more than $7 million and rising. The SBIR program made grants of less than one million dollars, so that most companies are “way below the radar” of the venture capital firms. He said he had recently found that to be true when trying to raise funds for his own company, despite his good record. The University as a Nexus of Economic Growth Charles Wessner questioned Dr. Bordogna regarding Dr. Gabriel’s comments about the importance of the university as a nexus of economic growth. “Do you think the current configuration of the SBIR is well suited for bringing ideas out of the universities and into the marketplace?” he asked. “Do you think we should make some changes in the NSF SBIR program that might make it better suited to your mission?” Gregory Olsen answered first, saying that the SBIR had led him into intensive interaction with the university community. “I think that’s one of the great things about SBIR.” He said that he had often been asked for the names of people at a university to collaborate with. He had advised people not to “force it,” but simply to get to know the professor or student working on equipment or an area of common interest, and get to know them. “I’m not sure there’s anything more you need to do.” David Goldston pursued this topic further, asking Dr. Olsen how SBIR helped to facilitate interactions with university people. “Was it just in having money that you could bring to a professor’s project,” he asked, “or did the program bring a ‘good housekeeping seal of approval’?” Gregory Olsen said it had been “all of the above.” He had worked with Dr. Steven Forrest at Princeton University, whose field is optoelectronics. Dr. Forrest had arrived at Princeton around the same time Dr. Olsen started Sensors Unlimited. Dr. Forrest had equipment useful to both efforts, but no engineers to install it

OCR for page 123
SBIR Program Diversity and Assessment Challenges: Report of a Symposium or to train his students; Dr. Olsen had engineers but no equipment. So the two collaborated and “it was an opportunity made in heaven.” The collaboration was fueled also by the strong desire in universities to transfer their technology to the commercial market. The SBIR provides a vehicle to do that. Dr. Gabriel added the example of a CMU professor to whom the department gave a 49 percent leave of absence. The reason was that the professor had just won an SBIR grant that required him to spend at least 51 percent of his time at the company. He became the CEO of the company while holding a grant from a federal agency to continue working with his students, so he worked essentially half-time in both places. Dr. Bordogna agreed that any such arrangements that supported partnerships between academia, industry, and the federal government should be encouraged. Deal Size in Venture Capital Investments Carl Ray of the NASA SBIR program asked about the “deal size” as the limiting factor for the involvement of venture capital. He wanted to know whether venture capital firms might fund SBIR-type companies on a pool basis to reduce the risk. Michael Borrus of the Petkevich Group said that it was difficult to answer any question about trends because the changes in venture capital activities over the past 5 to 7 years had been so dramatic.