[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
SBIR TURNS 40:
EVALUATING SUPPORT FOR
SMALL BUSINESS INNOVATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY
OF THE
COMMITTEE ON SCIENCE, SPACE,
AND TECHNOLOGY
OF THE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
APRIL 6, 2022
__________
Serial No. 117-52
__________
Printed for the use of the Committee on Science, Space, and Technology
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://science.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
47-331 PDF WASHINGTON : 2023
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. EDDIE BERNICE JOHNSON, Texas, Chairwoman
ZOE LOFGREN, California FRANK LUCAS, Oklahoma,
SUZANNE BONAMICI, Oregon Ranking Member
AMI BERA, California MO BROOKS, Alabama
HALEY STEVENS, Michigan, BILL POSEY, Florida
Vice Chair RANDY WEBER, Texas
MIKIE SHERRILL, New Jersey BRIAN BABIN, Texas
JAMAAL BOWMAN, New York ANTHONY GONZALEZ, Ohio
MELANIE A. STANSBURY, New Mexico MICHAEL WALTZ, Florida
BRAD SHERMAN, California JAMES R. BAIRD, Indiana
ED PERLMUTTER, Colorado DANIEL WEBSTER, Florida
JERRY McNERNEY, California MIKE GARCIA, California
PAUL TONKO, New York STEPHANIE I. BICE, Oklahoma
BILL FOSTER, Illinois YOUNG KIM, California
DONALD NORCROSS, New Jersey RANDY FEENSTRA, Iowa
DON BEYER, Virginia JAKE LaTURNER, Kansas
CHARLIE CRIST, Florida CARLOS A. GIMENEZ, Florida
SEAN CASTEN, Illinois JAY OBERNOLTE, California
CONOR LAMB, Pennsylvania PETER MEIJER, Michigan
DEBORAH ROSS, North Carolina JAKE ELLZEY, TEXAS
GWEN MOORE, Wisconsin MIKE CAREY, OHIO
DAN KILDEE, Michigan
SUSAN WILD, Pennsylvania
LIZZIE FLETCHER, Texas
------
Subcommittee on Research and Technology
HON. HALEY STEVENS, Michigan, Chairwoman
MELANIE A. STANSBURY, New Mexico RANDY FEENSTRA, Iowa,
PAUL TONKO, New York Ranking Member
GWEN MOORE, Wisconsin ANTHONY GONZALEZ, Ohio
SUSAN WILD, Pennsylvania JAMES R. BAIRD, Indiana
BILL FOSTER, Illinois JAKE LaTURNER, Kansas
CONOR LAMB, Pennsylvania PETER MEIJER, Michigan
DEBORAH ROSS, North Carolina JAKE ELLZEY, TEXAS
C O N T E N T S
April 6, 2022
Page
Hearing Charter.................................................. 2
Opening Statements
Statement by Representative Haley Stevens, Chairwoman,
Subcommittee on Research and Technology, Committee on Science,
Space, and Technology, U.S. House of Representatives........... 8
Written Statement............................................ 10
Statement by Representative Randy Feenstra, Ranking Member,
Subcommittee on Research and Technology, Committee on Science,
Space, and Technology, U.S. House of Representatives........... 11
Written Statement............................................ 12
Written statement by Representative Eddie Bernice Johnson,
Chairwoman, Committee on Science, Space, and Technology, U.S.
House of Representatives....................................... 13
Witnesses:
J. Stephen Binkley, Ph.D., Acting Director, Office of Science,
Department of Energy
Oral Statement............................................... 15
Written Statement............................................ 17
Dr. Ben Schrag, Program Director and Policy Liaison, SBIR/STTR
Program, Directorate for Technology, Innovation and
Partnerships, National Science Foundation
Oral Statement............................................... 22
Written Statement............................................ 24
Dr. Maryann Feldman, S.K. Heninger Distinguished Professor of
Public Policy, Department of Public Policy; Professor of
Finance, Kenan-Flagler Business School; Research Director,
Kenan Institute of Private Enterprise; The University of North
Carolina at Chapel Hill
Oral Statement............................................... 34
Written Statement............................................ 36
Mr. George Caravias, Chief Executive Officer, Geofabrica Inc.
Oral Statement............................................... 43
Written Statement............................................ 45
Dr. Nigel Reuel, Associate Professor, Jack R. and Carol A.
Johnson Faculty Fellow, Director of Graduate Education, Iowa
State University
Oral Statement............................................... 57
Written Statement............................................ 59
Discussion....................................................... 66
SBIR TURNS 40:
EVALUATING SUPPORT FOR
SMALL BUSINESS INNOVATION
----------
WEDNESDAY, APRIL 6, 2022
House of Representatives,
Subcommittee on Research and Technology,
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 10:18 a.m.,
2318 of the Rayburn House Office Building, Hon. Haley Stevens
[Chairwoman of the Subcommittee] presiding.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairwoman Stevens. This hearing will come to order.
Without objection, the Chair is authorized to declare recess at
any time.
Good morning. Thank you to our witnesses. Thank you to
Members for bearing with us. We are here in the Science
Committee room doing what was supposed to be a hybrid that has
now turned into a Zoom hearing due to technical difficulties of
the hybrid functionality which we have been successfully using
all term, but for some reason today the sound was out, so we
will be doing this hearing on Zoom.
People, Members should remember the conduct of a Zoom
hearing. You will be responsible for your own microphone. You
will need to mute at your own convenience when you're not
speaking. And Members should keep their video feed on as long
as they're present for the hearing. And of course if Members
have any documents they wish to submit for the record, please
email them to the Committee Clerk, whose address was circulated
prior to the hearing.
So, again, welcome to today's hearing of the Subcommittee
on Research and Technology to discuss the very important merits
and challenges of the Small Business Innovation Research, or
SBIR for short, and the Small Business Technology Transfer
(STTR) programs. Starting a little bit late, but so necessarily
given the importance of this hearing topic and for the overall
success of the U.S. economy for technology, research, and other
development enterprises.
We're going to welcome our distinguished panel of
witnesses. I want to thank them for joining remotely. I also
want to just mention a very special witness for--to me, Mr.
George Caravias, the Chief Executive Officer of Geofabrica
based in my home State of Michigan, based in my district
actually just around the corner and a place that I had a chance
to go visit.
And many of you know I do a program called Manufacturing
Monday. It's the fly out day, go visit a manufacturer on the
Monday of the fly out. I've had a chance to visit with Mr.
Caravias and his staff and just have a lot of fun geeking out
with their technologies and what they're producing. And this
Manufacturing Monday program really is just a showcase of the
innovation economy for Michigan. And so seeing them at the tail
end of last year was just a real treat, and obviously it's very
exciting to have him here with us today for this important
hearing. And we obviously look forward to hearing the comments
of everyone on SBIR and how this program can be strengthened to
provide opportunities to encourage small businesses take risks
and pursue innovative research for technology
commercialization.
So for what's bringing us here today, SBIR's impact on our
communities, it continues to be a very timely topic. It is in
alignment with the ongoing conversations about how to sustain
America's scientific and manufacturing leadership, the
manufacturing economy, which is so robust, exciting, and
engaging throughout our country and certainly in the hotbeds
across the Midwest.
We know about the America COMPETES Act, which contains
important provisions from this very Subcommittee seeking to
reinvest in America's future, supporting innovative small
companies and an essential part of our vision for America's
innovative future. The Small Business Innovation Research
program is a vehicle to take discoveries made in the lab and
explore how they can be transformed into a product. Many brand-
new businesses use the program to de-risk their ideas and
springboard them into private investment.
But not all SBIR recipients are startups. We know that. And
the program is also a tool for small manufacturers to de-risk
innovation and enter new markets or--it's also a tool for other
science-based companies to de-risk, science and technology-
based companies. So over the last 5 years the SBIR program has
awarded small businesses just as an example because this isn't
all about Michigan, although I would love for it to be all
about Michigan but just as an example of Michigan has been
awarded $348 million in funding for R&D (research and
development). Geofabrica, as I mentioned at the beginning, is
just one of so many stories in Michigan alone. And SBIR funding
to small companies in my home State has also led to the
development of handheld technology that enables farmers to
accurately detect nitrates in their own fields, saving farmers
money and protecting our freshwater systems from toxic algal
blooms and the testing of ligand for PET imaging of the brain
during clinical trials for new memory disorder drugs.
So, overall, 11 agencies support small business innovation
through the SBIR program. It's important to recognize the
diversity of missions and needs across those agencies when
considering reauthorization.
At the end of the spectrum is the National Science
Foundation (NSF), which uses the program to support innovation
and new businesses broadly. At the other is the Department of
Defense (DOD), which uses SBIR largely to generate mission-
critical technologies. So we got these 11 agencies, you got NSF
on one side and DOD on the other. We don't have a lot of these
interagency initiatives. This is one of them, and it's working
very well, we think. We're here to learn more, and we want to
foster improvements to the program while maintaining
flexibility. Flexibility is very key, especially in this COVID
age to meet each agency's requirements.
Despite its many strengths, the SBIR program has some, you
know, challenges, and here's where I believe Congress can help.
I'm hoping to hear ideas today about how we can better prepare
first-time entrepreneurs, how we can bring in and support more
women- and minority-owned small businesses. I've heard from
minority small--minority-owned small businesses in Michigan's
11th District, some who are tapping into SBIR and some who
would be greatly benefited to learn more about the opportunity
of SBIR and also for how agencies can be more responsive to the
needs of small businesses. In short, we want to ensure that all
communities and would-be entrepreneurs can participate in the
program and that businesses with great ideas are prepared to
succeed.
I was very proud to cosponsor a bipartisan bill last June
with Congressman Baird to further strengthen the SBIR and STTR
programs. H.R. 4033, the Small Business Innovation Research and
Small Business Technology Transfer Improvement Act of 2021.
What an honor to do this alongside my dear friend Congressman
Jim Baird. The bill seeks to address some of these programmatic
challenges. We must use all of the tools we have to tackle the
societal challenges of today and tomorrow, including the
challenge of creating safe, sustainable technologies of
environmental remediation, of creating revolutionary new
approaches to medicine, and much more. As an investment in a
vibrant entrepreneurial ecosystem in our country, the SBIR is a
premier and resounding tool.
[The prepared statement of Chairwoman Stevens follows:]
Good morning and welcome to today's hearing of the
Subcommittee on Research and Technology to discuss the merits
and challenges of the Small Business Innovation Research, or
SBIR for short, and Small Business Technology Transfer
programs. I'd also like to welcome our distinguished panel of
witnesses joining us remotely.
I would like to give a special warm welcome to Mr. George
Caravias, Chief Executive Officer of Geofabrica, based in my
home state of Michigan. Since I was elected to Congress, I
devote time every Monday to visit a manufacturer or business in
my district--Michigan's 11th District -that showcases
southeastern Michigan's innovation economy. In December, I had
the privilege of visiting the team at Geofabrica to hear from
Mr. Caravias of about his company's exciting DOD-funded SBIR
work. I am looking forward to hearing more from him on how the
SBIR program could be strengthened to provide opportunities
that encourage small businesses to take risks and pursue
innovative research for technology commercialization.
As for what bring us here today--SBIR's impact in our
communities -continues to be a very timely topic. It is in
alignment with the ongoing conversations about how to sustain
America's scientific and manufacturing leadership. The America
COMPETES Act, which contains important provisions from this
very subcommittee, seeks to reinvest in America's future.
Supporting innovative small companies is an essential part of
that vision of our innovation future.
The Small Business Innovation Research program is a vehicle
to take discoveries made in the lab and explore how they can be
transformed into a product. Many brand-new businesses use the
program to de-risk their ideas and springboard them to private
investment. But not all SBIR recipients are start-ups. The
program also is a tool for small manufacturers to de-risk
innovation and enter new markets.
Over the past five years, the SBIR program has awarded
small businesses in Michigan more than $348 million in funding
for R&D. Michigan's Geofabrica is just one of so many stories
in Michigan alone. SBIR funding to small companies in my state
have also led to the development of a hand-held technology that
enables farmers to accurately detect nitrates in their own
fields, saving farmers money and protecting our freshwater
systems from toxic algal blooms; and the testing of a new
ligand for PET imaging of the brain during clinical trials for
new memory disorder drugs.
Overall, eleven agencies support small business innovation
through the SBIR program. It's important to recognize the
diversity of missions and needs across those agencies when
considering reauthorization. At one end of the spectrum is the
National Science Foundation, which uses the program to support
innovation and new businesses broadly. At the other is the
Department of Defense, which uses it largely to generate
mission-critical technologies. We hope to foster improvements
to the program while maintaining the flexibility to meet each
agency's requirements.
Despite its many strengths, the SBIR program has some
ongoing challenges, and here's where I believe that Congress
can help. I'm hoping today to hear ideas for how we can better
prepare first-time entrepreneurs, how we can bring in and
support more woman- and minority-owned small businesses, and
for how agencies can be more responsive to the needs of small
businesses. In short, we want to ensure that all communities
and would-be entrepreneurs can participate in the program and
that businesses with great ideas are prepared to succeed.
I was proud to cosponsor a bipartisan bill last June with
Congressman Baird to further strengthen the SBIR and STTR
programs. H.R. 4033, The Small Business Innovation Research and
Small Business Technology Transfer Improvements Act of 2021.
This bill seeks to address some of these programmatic
challenges.
We must use all of the tools we have to tackle the societal
challenges of today and tomorrow, including the challenge of
creating safe, sustainable technologies, of environmental
remediation, of creating revolutionary new approaches to
medicine, and much more. As an investment in a vibrant
entrepreneurial ecosystem in our country, the SBIR program is
one such tool.
I want to thank the witnesses for being here today. I
greatly look forward to hearing your expertise, your
experiences, and your feedback on our legislation and any
additional ideas Congress should consider for improving the
SBIR Program.
Chairwoman Stevens. So we're going to hear from the
witnesses shortly. I believe that Ranking Member Feenstra is
with us on Zoom. We are now fully Zoom although I am in the
hearing room using the headphones. Mr. Feenstra, would you like
to give your opening remarks? OK. We're going to pause because
technology is not on our side today. So I'm going to move to
the intros and then--OK. That's--yes, I'm moving to the intros.
Is Mr. Feenstra here, Mr. Feenstra from Iowa, my good friend?
He's from a northern district in Iowa.
Mr. Feenstra. Yes, I am here.
Chairwoman Stevens. Here we go.
Mr. Feenstra. I'm here.
Chairwoman Stevens. OK. We can hear you. It's great. Thank
you, sir.
Mr. Feenstra. All right. Thank you, Chairman Stevens, and
thank you for our witnesses for joining us today to share your
expertise--expert testimony on Small Business Innovation and
Small Business Technology Transfer programs. SBIR and STTR are
the Federal Government's largest source of early stage
technology development and commercializing funding for small
businesses. Our witness panel today represents a variety of
perspectives which will be valuable to our Committee as we
think about SBIR, STTR, and reauthorization.
With the programs set to expire at the end of September, we
have to--work to do to ensure that we can continue to make
these investments in small businesses that can propel American
innovation moving forward. The programs provide an opportunity
for small businesses to be involved in Federal research and
development and to help transfer federally funded R&D into
innovative products and services.
It is for this reason that these programs are sometimes
referred to as America's seed fund, investing in research and
emerging tech ideas that are too risky to raise capital in
private--in the private sector. The programs are funded from
set-asides of the extramural research budgets at Federal
agencies, 3.2 percent from SBIR grants and just less than .05
percent from STTR. These set-asides sound small, but they add
up to about $3.3 billion for both of these programs.
The--this is a huge taxpayer investment, so it is important
for Congress to ensure that the programs are working
efficiently as we consider reauthorization. My esteemed
colleagues, Dr. Baird and Chairwoman Stevens, are leading a
bipartisan bill which would improve these programs by enhancing
accountability, providing agencies flexibility, and
prioritizing successful policies. This bill, H.R. 4033,
presents a path forward for both of these programs'
reauthorization, and I look forward to working with both Dr.
Baird and Ms. Stevens on this legislation.
If America wants to maintain its competitive edge in
technologies of the future, we must make sure that Federal
investments in R&D are made across the country, not just in
Silicon Valley. These programs provide a unique opportunity for
middle America small businesses to become more involved in
Federal R&D. States like Iowa have recognized the opportunity
for these programs and what they provide for our State
economies. Last year, Iowa received our most award year ever to
date for a total of $11 million federally invested in Iowa's
small business through these programs.
One of our witnesses today, Dr. Nigel Reuel, a professor
from Iowa State University located--is located in my district.
Iowa State is doing a great work to foster the entrepreneurial
spirit on campus. This hard work is paying off. The Princeton
Review recently ranked Iowa State 11th in the Nation for
student entrepreneurship. I am thrilled to have Dr. Reuel with
us today to discuss Iowa State's work and to share his own SBIR
stories.
I'm also looking forward to hearing from Dr. Binkley and
how the Department of Energy's (DOE's) national labs like Ames
Laboratory are utilizing both of these programs. Investing in
both of these--investing in these basic research help NSF, DOE,
and NASA (National Aeronautics and Space Administration) and
other agencies to create scientific breakthroughs, and
investments like SBIR and STTR are key to supporting jobs and
retaining talent and leveraging State and private funding in
America's heartland.
I am proud to work with my colleagues to encourage
innovation and to give our businesses the resources they need
to thrive. We must take every opportunity to strengthen
investment in R&D so we can continue breaking boundaries and
moving forward in our economy.
Thank you, Madam Chair, for hosting this event, and I yield
back.
[The prepared statement of Mr. Feenstra follows:]
Thank you, Chairwoman Stevens, and thank you to our
witnesses for joining us today to share your expert testimony
on the Small Business Innovation Research and Small Business
Technology Transfer programs.
SBIR and STTR are the Federal Government's largest source
of early-stage technology development and commercializing
funding for small businesses. Our witness panel today
represents a variety of perspectives which will be valuable to
our Committee as we think about SBIR and STTR reauthorization.
With the programs set to expire at the end of September, we
have work to do to ensure they can continue to make investments
in small businesses that can propel American innovation
forward.
The SBIR and STTR programs provide an opportunity for small
businesses to be involved in federal research and development,
and to help transfer federally funded R&D into innovative
products and services. It is for this reason that these
programs are sometimes referred to as America's seed fund,
investing in research and emerging tech ideas that are too
risky to raise capital in the private sector.
The SBIR and STTR programs are funded from set-asides of
the extramural research budgets at federal agencies--3.2% for
SBIR grants and just less than half a percent for STTR. These
set asides sound small, but they added up to around $3.3
billion for SBIR and $429 million for STTR in 2019. This is a
huge taxpayer investment, so it is important for Congress to
ensure the programs are working efficiently as we consider
reauthorization.
My esteemed colleagues, Dr. Baird and Charwoman Stevens,
are leading a bipartisan bill which would improve these
programs by enhancing accountability, providing agencies
flexibility, and prioritizing successful policies. This bill,
H.R. 4033, presents a path forward for SBIR and STTR
reauthorization, and I look forward to working with both Dr.
Baird & Ms. Stevens on the legislation.
If America wants to maintain its competitive edge in the
technologies of the future, we must make sure federal
investments in R&D are made across the country, not just in
Silicon Valley. These programs provide a unique opportunity for
middle America small businesses to become more involved in
federal R&D.
States like Iowa have recognized the opportunity SBIR and
STTR provide to their state economies. Last year, Iowa received
our most awards year to date for a total of around $11 million
federally invested in Iowa small businesses through these
programs.
One of our witnesses today is Dr. Nigel Reuel, a professor
from Iowa State University located in my district. Iowa State
is doing great work to foster the entrepreneurial spirit on
campus. This hard work is paying off--the Princeton Review
recently ranked Iowa State 11th in the nation for student
entrepreneurship. I am thrilled to have Dr. Reuel with us today
to discuss Iowa State's work and to share his own SBIR story.
I'm also looking forward to hearing from Dr. Binkley about
how the Department of Energy's National Labs, like Ames
Laboratory, are utilizing the SBIR and STTR programs.
Investing in basic research at NSF, DOE, NASA and other
agencies has led to key scientific breakthroughs. And
investments like SBIR and STTR are key to supporting jobs,
retaining talent, and leveraging state and private funding in
America's heartland. I am proud to work with my colleagues to
encourage innovation and give our businesses the resources they
need to thrive.
We must take every opportunity to strengthen investment in
R&D so we can continue breaking boundaries and moving our
economy forward.
Thank you, again, Madam Chair for hosting this hearing. I
look forward to hearing from our witnesses and I yield back the
balance of my time.
Chairwoman Stevens. Great. If there are other Members who
wish to submit additional opening statements, your statements
are going to be added to the record at this point.
[The prepared statement of Chairwoman Johnson follows:]
I want to thank Chairwoman Stevens and Ranking Member
Feenstra for holding this hearing on the SBIR and STTR
programs. I would also like to welcome our witnesses to today's
hearing and thank them for sharing their expertise with us on
these important programs.
Even as the United States faces increasing global
competition in science and technology, we remain the envy of
the world for our culture of discovery and innovation. That
culture begins with our nation's talent, including the
entrepreneurs who move scientific advances along the
challenging path from lab to market. But as brilliant as they
may be, these entrepreneurs cannot achieve their goals without
financial and other kinds of support.
Private sector investors are risk averse. They want to see
clear proof-of-concept and market viability before they invest.
That is where the Federal government, and specifically the SBIR
program, comes in. Just a modest amount of early stage support
for new ideas can propel them forward and open the door to
significant private sector investment and commercial success.
The SBIR program authorization expires at the end of this
fiscal year, after having been extended 5 years without a
comprehensive review of policy. The America COMPETES Act has a
provision to extend the program again for 5 years, without any
policy changes. It is my intention to keep that provision on
the table for conference as a backstop. However, it is
Congress's responsibility to take up a full reauthorization
with due consideration given to all potential program
improvements, and I am hopeful we can do that this year, in
collaboration with our colleagues on the Small Business
Committees.
To that end, a few years ago, the Science, Space, and
Technology Committee developed bipartisan legislation to
reauthorize the SBIR program. I want to thank Rep. Baird and
Rep. Stevens for reintroducing that legislation this Congress
as H.R.4033, the ``Small Business Innovation Research and Small
Business Technology Transfer Improvements Act of 2021.'' H.R.
4033 reflects long-standing priorities of this committee,
including flexibility for the agencies to meet their respective
missions, efforts to diversify the applicants and awardees, and
support for various pilot programs that were developed over
time and have proven their value.
Specifically, H.R. 4033 would support making the 3 percent
administrative fee a permanent feature of the program, and it
would also extend Phase 0 and Direct to Phase II authority to
all relevant program agencies. In general, we support the
agencies continuing to experiment with evidence-based
approaches to improve the outcomes of the program and want to
ensure the authorizing statute gives them such flexibility.
Through hearings such as this and other forms of oversight, we
can track how agencies are doing and to what extent their
efforts are strengthening the program.
I look forward to an informative hearing, and I appreciate
the witnesses being with us to share their insights and
legislative recommendations.
Thank you, and I yield the balance of my time.
Chairwoman Stevens. I now would like to introduce our
phenomenal witnesses, and thank you so much again for being
with us this morning and for slightly bearing with us as we
conduct this hearing now on Zoom platform.
Our first witness is Dr. J. Stephen Binkley. Dr. Binkley is
the Acting Director and Principal Deputy Director in the Office
of Science at the U.S. Department of Energy. In this capacity,
Dr. Binkley is the senior career science official in the Office
of Science, which is the third-largest sponsor of basic
research in the United States of America. Prior to his
experience in various leadership positions in the Department of
Energy, Dr. Binkley has held senior positions at the Department
of Energy's Sandia National Laboratories, a favorite of this
Committee, and the Department of Homeland Security.
Our next witness is Dr. Ben Schrag. Dr. Schrag is an SBIR/
STTR Program Director and Policy Liaison at the National
Science Foundation. He joined NSF as a Program Director in
2009, leading the advanced materials and instrumentation
portfolios. Prior to NSF, he was the Director of Research and
Development at Micro Magnetics and served as a visiting
scientist at Brown University.
Our third witness is Dr. Maryann Feldman. Dr. Feldman is
the Heninger Distinguished Professor in the Department of
Public Policy and Professor of Finance at the Kenan-Flagler
Business School at the University of North Carolina. We see
that Congresswoman Ross is clapping vehemently, hailing from
North Carolina herself. From 2014 to 2017 she held the joint
appointment at the National Science Foundation as the Science
of--the Science of Science and Innovation Policy Program
Director. Dr. Feldman co-chaired the National Academies of
Sciences, Engineering, and Medicine's recent assessment of the
SBIR/STTR programs at DOE and the NIH (National Institutes of
Health).
Our next witness is Mr. George Caravias. He is the Chief
Executive Officer of Geofabrica, Inc., in Michigan. Mr.
Caravias is an experienced Chief Executive with an almost 40-
year career in engineering and applied technology. He must've
started as a child. He began his career developing computer-
aided manufacturing/computer-aided design systems in the
defense industry and successfully managed multiyear,
multimillion dollar projects for manufacturing in information
technology applications. Prior to establishing his current
business, Geofabrica, Mr. Caravias founded and helped to lead
two technology ventures, one which grew to over $200 million in
sales.
Our final witness is Dr. Nigel Reuel, and I would like to
recognize my colleague Congresswoman Feenstra to introduce Dr.
Reuel.
Mr. Feenstra. Thank you, so much, Madam Chair. I am very
pleased to welcome Dr. Nigel Reuel, Associate Professor of
Chemical and Biological Engineering at Iowa State University to
testify before our Subcommittee today. In addition to being a
professor, Dr. Reuel is also a Jack R. and Carol A. Johnson
Faculty Fellow and Director of Graduate Education at the
College of Engineering Entrepreneurial Fellow. In his time at
Iowa State, Dr. Reuel has been involved in the national I-Corps
program and also participated in three separate Iowa State I-
Corps site cohorts. Additionally, Dr. Reuel has contributed to
several successful IBR, SBIR, and STTR award applications. One
of these successful awards helped ensure the realization of a
startup called Skroot Laboratory established in 2018 and
initially incubated in Iowa State's Roy J. Carver Co-Lab on the
north side of the campus. Additionally, Dr. Reuel has been
involved with SBIR-awarded small businesses--a small business
that was recently acquired through the Biotechnology, Inc. He
maintains that the progress and ability to connect to this
acquisition partner was made possible through SBIR funds. I
want to thank Dr. Reuel for taking the time out of his busy
schedule to join us today, and we are looking forward his
testimony. I yield back the balance of my time.
Chairwoman Stevens. Great. And as our witnesses should
know, you're each going to have 5 minutes for your spoken
testimony. We can't wait to hear it. Your written testimony is
included in the record for the hearing as well. And then when
you've completed your spoken testimonies, we'll begin with
questions, and each Member is going to have 5 minutes to
question the panel.
We will start with Dr. Binkley.
TESTIMONY OF J. STEPHEN BINKLEY, PH.D.,
ACTING DIRECTOR, OFFICE OF SCIENCE,
DEPARTMENT OF ENERGY
Dr. Binkley. Thank you, Chairwoman Stevens, Ranking Member
Feenstra, and Members of the Subcommittee. I am pleased to join
you today to discuss the Department of Energy's programs for
Small Business Innovation Research and Small Business
Technology Transfer and how legislation like the proposed Small
Business Innovation Research and Small Business Technology
Transfer and Improvements Act of 2021 can contribute to the
Department's innovation and technology transition goals.
The SBIR/STTR programs are an important Federal
contribution of our Nation's innovation enterprise. They
address a critical stage of technology development where
innovations may stall because of a lack of access to funding,
particularly for those where commercialization times can be
long. SBIR/STTR funding enables small businesses to prove
feasibility and demonstrate successful working prototypes after
undergoing scientific peer review.
The programs help to catalyze relationships. Small
businesses build with research institutions, larger businesses,
and the investment community. DOE uses its SBIR/STTR program to
address innovation opportunities in its mission areas such as
clean energy and scientific instrumentation to support
discovery science.
Within DOE, the Office of Science has managed the SBIR/STTR
program since they were first authorized in 1992. The programs
work collaboratively with research and development program
offices throughout the Department to leverage their technical
expertise and identify opportunities for small business
innovation that are aligned with the DOE missions. ARPA-E
(Advanced Research Projects Agency--Energy) independently
manages its own SBIR/STTR programs.
In Fiscal Year 2021, DOE obligated $353 million for SBIR
and STTR programs, issued 465 phase I awards, 229 phase II
awards, and the awards were made to small businesses across 44
States and the District of Columbia.
Over the last 10 years, Congress has made important changes
to SBIR/STTR programs that have allowed DOE to improve
commercialization outcomes of its awardees, including the
introduction of second phase II awards authorized in 2012 and
third phase II awards enabled by the Commercialization
Assistance Pilot Program authorized in 2019. In addition, the
2019 expansion of technical and business assistance (TABA)
provided more funds and greater flexibility in using these
funds to support commercialization. Finally, the Administrative
Funding Pilot Program has enabled DOE to offer Energy I-Corps
training to its phase I awardees.
Past evaluation of the programs by the National Academy of
Science, Engineering, and Medicine have found the DOE does--
needs to do more to improve participation by underrepresented
groups. Our first major initiative in this area was the
introduction in 2014 of our phase 0 application assistance
program targeted at underrepresented groups, women-owned small
businesses, socially and economically disadvantaged small
businesses, and small businesses from underrepresented States.
We have since expanded this program to include all first-time
applicants, but 2/3 of the participants in this program
continue to come from underrepresented groups.
The programs have focused attention on underrepresented
groups during the award selection process in Fiscal Year 2021
and implemented diversity promoting policy factors in Fiscal
Year 2022, leading to consistent improvement in the percentage
of awards going to underrepresented groups. In Fiscal Year
2021, women-owned small businesses and socially and
economically disadvantaged small businesses each made up more
than 10 percent of our phase I awardees up from close to 5
percent in 2013. We recognize--with all that said, we recognize
that we need to do much more to encourage women and socially
and economically disadvantaged individuals to explore
entrepreneurial STEM careers.
From a broad policy perspective, we note that the strength
of SBIR/STTR programs has been the flexibility provided to
agencies to adapt the programs to serve their respective
missions, and we encourage Congress to continue to provide
agencies with such flexibility.
Chairwoman Stevens, Ranking Member Feenstra, and Members of
the Subcommittee, thank you again for the opportunity to speak
about DOE's SBIR/STTR program and for your continued efforts to
enhance the Nation's ability to apply innovative discoveries to
Federal agency missions. I look forward to discussing the
program further.
[The prepared statement of Dr. Binkley follows:]
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Chairwoman Stevens. Excellent. With that, we're going to
move to Dr. Schrag, please.
TESTIMONY OF DR. BEN SCHRAG,
PROGRAM DIRECTOR AND POLICY LIAISON,
SBIR/STTR PROGRAM,
DIRECTORATE FOR TECHNOLOGY,
INNOVATION AND PARTNERSHIPS,
NATIONAL SCIENCE FOUNDATION
Dr. Schrag. Chairwoman Stevens, Ranking Member Feenstra,
and Members of the Subcommittee, thank you for this opportunity
to testify on the Small Business Innovation Research and Small
Business Technology Transfer programs at the National Science
Foundation. My name is Ben Schrag, and I'm a Program Director
and Policy Liaison with NSF's SBIR/STTR program.
NSF has funded research and researchers, innovations and
innovators, and infrastructure that have provided incredible
benefits to the Nation. The internet, Google, Qualcomm, 3-D
printing, the economic theory underpinning spectrum auctioning
and kidney exchanges, and even the discovery of the enzymes at
the heart of the polymerase chain reaction, the chemical
reaction that enables COVID-19 tests that have been critical in
the fight against the pandemic. NSF investments have been
foundational to all of these.
NSF's mission is to support fundamental research across all
fields of science, technology, engineering, and mathematics and
all levels of STEM education. Given this unique role in
supporting innovators, the agency recognized early on the
potential for greater and faster commercialization of NSF-
funded research. That is why in the late 1970's NSF created the
SBIR program. The program is an integral part of the NSF
strategy to stimulate innovation and address societal needs
through the commercialization of the results of fundamental
research.
Our strategy for the SBIR and STTR programs is to focus
primarily on supporting early stage startup companies and
especially firms new to government funding. We seek to support
these firms long before private investors or customers are
ready to provide financial support. This approach allows our
funding to have maximum impact on each awardee and also allows
our funding to impact the community of innovators and
entrepreneurs as broadly as possible.
In recent years, the large majority of our phase I awardees
are firms with fewer than 10 employees and that were founded in
the preceding 5 years. In Fiscal Year 2021, over 85 percent of
our phase I SBIR and STTR awards represented the first ever
award received by the applicant's small business from any
Federal agency.
We have used multiple strategies to encourage new
applicants to participate and to help maximize their chances of
success. For example, our project pitch is a short pre-
application review covering key aspects of a potential project,
giving every new applicant an accessible and fast way to get
feedback on whether their proposed project is a good fit for
the program. We have also changed the administrative and
compliance-checking processes for phase I proposals to allow
proposers to fix most administrative mistakes in their
proposals. This has lowered the percentage of phase I proposals
that are not considered from about 15 percent, which was
typical a decade ago, to about 2 to 3 percent in recent years.
NSF has also designed several supplemental funding
opportunities to spur the commercial success of its SBIR
companies. The flagship amongst these is the phase IIB
supplements, which provides up to an additional $500,000 on top
of the $1 million phase II award for a firm generating
marketplace traction for the first time.
In addition to providing funding, NSF uses experiential
education to help researchers gain valuable insight into
starting a business or industry requirements and challenges.
For example, just under 2,100 NSF SBIR and STTR phase I awardee
companies have participated in a condensed version of NSF's
Innovation Corps program called the Beat the Odds Boot Camp.
Although our focus is on the earliest and riskiest
projects, our portfolio of awardees has had strong
commercialization success in recent years. Over the past 6
years, we have seen about 200 confirmed exits where our awardee
organization has had an initial public offering or undergoes a
successful merger or acquisition and about $14 billion in
follow-on private funding.
For over 40 years, NSF has helped startups and small
businesses across the country transform their ideas into
marketable products and services through our SBIR and STTR
programs. NSF is always assessing its performance against the
broad goals of the SBIR and STTR programs, and this process has
led to new supplements, new outreach, and enhancements to other
NSF programs. NSF is focused on helping these startups address
all the potential risks, whether technical, market, team, or
financial, that they may face in their commercial journey.
On behalf of the National Science Foundation, the SBIR/STTR
programs, and our awardees, I want to thank you for your
support of NSF and for this opportunity to highlight programs
that provide startups and small businesses with the means to
keep America on the forefront of the technological innovation.
I would be pleased to answer your questions.
[The prepared statement of Dr. Schrag follows:]
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Chairwoman Stevens. Great. With that, we're going to hear
from Dr. Feldman. We've got to unmute you. There we go.
TESTIMONY OF DR. MARYANN FELDMAN,
S.K. HENINGER DISTINGUISHED PROFESSOR
OF PUBLIC POLICY, DEPARTMENT OF PUBLIC POLICY;
PROFESSOR OF FINANCE,
KENAN-FLAGLER BUSINESS SCHOOL;
RESEARCH DIRECTOR, KENAN INSTITUTE
OF PRIVATE ENTERPRISE;
THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL
Dr. Feldman. Great, very good. Well, thank you for inviting
me to address the Committee today. I'm honored to have this
opportunity to talk about my research. I realize I've spent my
career studying innovation, and the SBIR/STTR programs have
been very important to the American system of innovation. It
has been my pleasure to serve as the Co-Chair for the National
Academies' assessment of the programs, and we've organized a
dream team of scholars to look at this program. And overall, we
find that the programs are effective public-private
partnerships, and they play an important role in the
commercialization of science and in sparking the American
innovation economy. The programs have been successful on a
variety of different measures, and they deserve your continued
support.
Now, these programs are so important to local innovative
ecosystems that virtually every State has initiated programs to
help win SBIR awards, and half of U.S. States provide matching
funds that top off the SBIR award. But this program does much
more than simply provide money. They also provide the context
for developing cutting-edge technology for connecting small
firms to one another, connecting them to universities, and to
Federal agencies and labs.
In each of our reports, we found that the programs are
effective in stimulating small business research and
experimentation and innovation. For DOE, our committee found
that SBIR contributes to the agencies' R&D needs and advances
the national energy system. But, importantly, we found that
these awards have significant technological spillovers, and
that means that firms that are located in the same State
actually benefit greatly when an award is given to one firm. So
these are very extensive benefits.
For NIH, we've found that the program really is conducting
such rigorous and commercially relevant research that
contributes to U.S. leadership in the life sciences. And so in
fact from 1996 to 2020, 12 percent of new drug approvals and 18
percent of orphan drug approvals were associated with SBIR/STTR
awardees.
But each of our reports recommends ways the programs might
be improved to improve commercialization, and I want to
highlight some of these. For NIH, there's a need to reduce the
timeframes used for reviewing and selecting awardees while
emphasizing more on the commercial potential. And here's where
Congress could act to remove the requirement that applicants
are subject to the same identical scientific review as the more
basic projects.
We also would encourage DOE to allow their technical and
business assistance, that is TABA funding, to be used to hire
in-house experts. What we've found is that DOE firms are
staffed with managers with technological expertise, but they
lack management expertise that allow them to pursue and grow
their companies strategically.
As far as participation by women and socially/economic
disadvantaged people, what we find is that the programs could
be improved, and this is specifically greater outreach to
minority-serving institutions. DOE has a pipeline problem as
there are fewer women and minorities in technical fields. For
NIH, there are a large number of women and minorities, but
their participation has not improved over time. And for both
programs, you could work with the HBCUs. (historically Black
colleges and universities) They're an untapped resource.
Collaborations between HBCUs and small businesses are rare, and
their faculty are not selected as reviewers. Now, there's also
the time lags associated with getting an award, which more
adversely affect women and minorities because they're less
likely to get money from the private sector.
I want to address this question of mills. And so while we
have many proposals to limit the amount of awards, let me just
say that complex innovation requires multiple and reinforcing
awards. And I've done research with my students looking at this
multiple-award-recipient problem. And the firms are very
actively engaged in patenting. I would caution you in trying to
ferret out waste, fraud, and abuse, that we don't want to
adversely affect incentives and distort the overall functioning
of the innovation system.
You know, periodic evaluations that we do are great, and
they can improve the operations of the program, but here's
where we could use your help to ensure that the appropriate
data are collected and available. For example, in the NIH
assessment by the National Academies there are rigorous
evaluations of the proposals, but this information is not
available in all our congressionally mandated studies.
I've been trying to talk more like a New Yorker and less
like a Southerner, but let me just conclude by saying over the
past 40 years these programs have played a critical role in
advancing the U.S. innovative ecosystem, and they have really
helped small businesses contribute to U.S. competitiveness.
Thank you for this opportunity.
[The prepared statement of Dr. Feldman follows:]
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Chairwoman Stevens. Nice. That's great, thank you.
And with that, we'll hear from Mr. Caravias. We've got to
unmute you. There we go.
TESTIMONY OF MR. GEORGE CARAVIAS,
CHIEF EXECUTIVE OFFICER, GEOFABRICA INC.
Mr. Caravias. Well, there we go. OK. Thank you, Chairwoman
Stevens, Ranking Member Feenstra, and Members of the
Subcommittee on Research and Technology. It is an honor and a
privilege to join you today to testify on the SBIR and STTR
programs. My name is George Caravias. I am the Chief Executive
Officer of Geofabrica, Inc., a small technology business based
in Michigan that develops and builds manufacturing systems.
Before I begin, allow me to tell you how highly I regard
the SBIR and STTR programs. They are gems among government
programs for small businesses. I appreciate all that you do to
make them possible. So on behalf of Geofabrica and the many
other SBIR/STTR awardees, I thank you.
Geofabrica is known for its work in additive manufacturing,
otherwise known as 3-D printing. We're currently pursuing two
major efforts. One is the development of an expeditionary
manufacturing systems, transportable 3-D printers that can
operate at forward operating bases, at disaster sites, and on
ships and trucks. We're also pioneering large-scale additive
manufacturing. That involves making 3-D printers to build parts
that are as large or larger than the chairs and desks that you
are sitting at today. We've performed many phase I and phase II
SBIRs and are in the midst of completing a phase III SBIR
funded by one of the suppliers to the DOD.
The following is an abbreviated list of my recommendations
for these programs. First, I suggest creating incentives to buy
and use the prototypes resulting from the R&D. I suggest that
SBIR/STTR programs create incentives for Federal agencies, DOD
program offices, and large corporations to buy and use the beta
prototypes resulting from phase II efforts. Built-in beta users
would go a long way to helping firms overcome the valley of
death at the end of an SBIR or STTR.
Two, accelerate the pace of SBIR/STTR project development.
These projects take 4 to 6 years from conception to
commercialization. Six years is an eternity in terms of
technology lifecycles. Six years is too long to wait for a
solution. In 6 years, too many market opportunities have
vanished.
Three, opportunities should be expanded for open-topic
calls. The Air Force and the NSF have increasingly solicited
very open or very broad topic calls. I believe this is a good
trend that should be encouraged across all agencies.
Four, expand access to companies owned by women and
socially or economically disadvantaged persons. I applaud the
efforts of this Committee to foster SBIR/STTR participation by
women and socially or economically disadvantaged persons.
And fifth, I encourage innovation in manufacturing. I
strongly support the act's language encouraging manufacturing
innovation and prioritization of manufacturing in the United
States. Support for manufacturing innovation should be expanded
across all agencies. Federal funding should give high
priorities to companies demonstrating a commitment to building
products in the United States.
Small businesses are at the heart of our economy and are
vital participants in our rich culture of innovation. Small
companies are nimble, innovative, and willing to make bold
moves to commercialize new technologies. The SBIR/STTR programs
are one of the better ways of supporting small business
technologists across a range of geography, demographics, and
experience levels. I thank you again for your work and for your
continued support of the SBIR and STTR programs. I will be
pleased to answer any questions you may have.
[The prepared statement of Mr. Caravias follows:]
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Chairwoman Stevens. Excellent. With that, we'll hear from
Dr. Reuel.
TESTIMONY OF DR. NIGEL REUEL, ASSOCIATE PROFESSOR,
JACK R. AND CAROL A. JOHNSON FACULTY FELLOW,
DIRECTOR OF GRADUATE EDUCATION,
IOWA STATE UNIVERSITY
Dr. Reuel. Great. I appreciate this opportunity to speak to
you today. I wear an interesting little hat here in this role
of both as an academic member at Iowa State University where my
graduate students and I develop the initial seeds of these
technologies and then seek for supportive SBIR funds to take
them out of the lab.
Today, I've helped over the last 3 years three separate
entities start, and each of their start's initial funding was
SBIR funds. And in some cases they've moved very quickly, one
just last month [inaudible] is done with these funds.
So I want to take my oral testimony just to highlight some
of the things that I've detailed further in my written
testimony, and it's mainly riffing off of this analogy of a
seed. So coming from Iowa, it's an apt image of things that
grow, and building things in my academic laboratory. It is a
young tender seed that needs a lot of support in order to make
it, survive the drought and winds that occur when it leaves the
controlled environment of a lab.
And there are three specific aspects of the SBIR program
that I want to highlight, and namely--and these have already
been highlighted today but I'll further reinforce. So first,
you need purposeful training. Dr. Schrag mentioned aspects of
that at NSF. Second is funding to test feasibility, which is
unique. Private funds are very scared of touching that, and so
SBIR provides a critical role in supporting that. And then
third is this validation to external State--stakeholders.
So first with purposeful training it's already been
mentioned that some programs think about this very intently, so
we've had the privilege of working through the National Science
Foundation and multiple boot camps where the team are trained
in customer discovery and in some cases, for example, Frugi
Biotechnology, Inc., they started with an idea in mind of their
technology of what market need it would fill, and when they
went out and did customer discovery, they found actually that
need wasn't as apparent but there was another burning need. And
so they pivoted due to this training that the National Science
Foundation had them go through through the SBIR program. And
that pivot turned them to drug discovery customers, and that
eventually was the company out in San Francisco that acquired
Frugi. And so that was all done through customer discovery.
In addition to that, they get training on their
commercialization plan that's very data-driven. They have
consultants that meet weekly to provide insight, training on IP
(intellectual property), all those aspects that give resilience
to this young tender seed to grow.
And so then going to the next one, the funding to test
feasibility, that, again, is something that I've seen with my
companies. I, out of graduate school, had my very first startup
attempt, went to a premier business incubator out in Boston and
quickly found that my needs as a science-minded entrepreneur
were very different. I needed more than a desk and a phone. I
needed more than just a mockup, a cardboard model. I needed to
test feasibility, and that takes sufficient funding and
required capital in order to do that. And so with SBIR funds
for my three companies that have--are growing and employing 11
individuals today, all of that funding goes to that testing and
feasibility. And that allows them to get that critical data to
then stand before a private investor and provide a convincing
pitch of what they can do. So that's very important.
And last is this validation to external stakeholders. So
it's a stamp of approval that you've gone through a scientific
review, you're found meritorious, and it allows you to again
strengthen that recommendation to seek fundraising.
So last, I do just want to echo my gratitude to Members of
the Subcommittee and for not only the long-standing support of
SBIR but also communicating it your constituents, that it's
very important to have this innovation ecosystem. Also wearing
my academic hat, I want to thank for fundamental tests--
fundamental funding, which incubates those seeds. And I think
we need to strive as we grow this pot and continue to expand to
keep that parity of providing fundamental research to keep the
pipeline of seeds alive to then incubate into businesses, to
expand diversity in order to have better regional
representation, as well as amongst people. So, with that, I
look forward to questions.
[The prepared statement of Dr. Reuel follows:]
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Chairwoman Stevens. OK. That's great. We're now going to
move to 5 minutes of questions, and I'm--the Chair is going to
recognize herself for 5 minutes.
Dr. Schrag, you were--in your testimony you're talking
about accessibility, and I'm just wondering, could you shed
some light on how people find out about SBIR/STTR
opportunities?
Dr. Schrag. Thank you for that question, Chairwoman. Yes,
the NSF portfolio we found that there's a number of different
routes. We obviously--the NSF has a very high name brand among
scientists and engineers, and a lot of times those folks are
involved in inventing the technology and so they may know about
our programs. But more recently we have tried to really create
new routes to visibility for our program, and that includes a
pretty coordinated digital marketing campaign, especially to
underrepresented entrepreneurs and innovators and a lot of
outreach events. Our program directors are full-time dedicated
to this program and they attend and present at well over 100
outreach events per year, especially to again target
communities where maybe our visibility is not as high. So we've
tried to really create multiple different ways that people can
find out about us.
The other thing I would say is that our portfolio companies
are great ambassadors, and so if we give them the good
experience, if they find that they're supported and the NSF is
adding value to their company, they are the best referrals that
we can get----
Chairwoman Stevens. Oh, sure.
Dr. Schrag [continuing]. Because they can talk to
entrepreneurs in their network and get the word out that way.
Chairwoman Stevens. Yes, those ecosystems are really
important. And the--we have TechTown in Detroit, for instance,
and that's sort of an accelerator because what happens--you
know, we got a lot of university people here, and those are
great hotbeds, but then people leave the university and they're
years into their career and they're tinkering around in the
garage or the basement and then they forget all about these
opportunities like SBIR/STTR. And this is why frankly as
Members of Congress, you know, we share these opportunities, we
look to unearth this.
And, Dr. Feldman, I want to get at--your testimony was just
fantastic. And you're talking about this linkage about what's
going on at the HBCUs and SBIRs. And obviously there's some
challenges to nontraditional and underrepresented firms, which
we've talked about. But could you just--could you just shed a
little bit more light on exactly what you shared in your
testimony about why HBCUs tend to not be as plugged into
technology transfer or SBIR/STTR opportunities?
Dr. Feldman. I want to say that it is just an artifact of
the data and so, we don't know are they applying and then not
getting the funding, right? We are just observing who received
the funding. And so our recommendation, our committee
recommendation, we see all the HBCUs have engineering schools.
Many of them have medical schools. And their faculty, graduate
students also--because many times we see that companies are
started, academic companies are started by postdocs or Ph.D.
students. And so an important way that people learn about the
program and also what makes a high-quality proposal is in
participating in a review panel.
Chairwoman Stevens. Yes.
Dr. Feldman. And so that is something we need to do. We
need to do scientific review anyway. And by sort of broadening
the list of participants, more people would know about the
program and would know what a good proposal looks like.
And I also love the idea of involving more small businesses
in the evaluation of these proposals. Now, specifically at NIH
it's an issue because NIH's SBIR and STTR awards go through the
same evaluation as an R01 award. And so that is being evaluated
on its scientific merit.
Chairwoman Stevens. Yes, and we have a--there's a lot with
the evaluation component. And, you know, I'm just wondering,
Dr. Schrag, have you spent time going to these HBCUs with the
NSF yet, I mean, you personally or anyone in your shop? Because
I'm wondering if we should do something like that if you--I
mean, I know it's been 2 years of a pandemic, but do you--have
you spent time over there?
Dr. Schrag. So we've actually approached those communities
in multiple ways. The main focus of our outreach has actually
been through organizations that support critical masses of
underrepresented innovators and entrepreneurs like the National
Society for Black Engineers and SACNAS (Society for Advancement
of Chicanos/Hispanics and Native Americans in Science) and----
Chairwoman Stevens. Yes.
Dr. Schrag [continuing]. A number of organizations. And so
we find that's--those have a little bit of a greater scale
nationally where we can get kind of in front of more folks at
one time.
Chairwoman Stevens. Yes.
Dr. Schrag. But I think it's absolutely a great thing to
explore. I think it's a great idea.
Chairwoman Stevens. Yes, I was over at Groves High School
sending off a group of 125 students. It was a Black empowerment
education tour to about a half a dozen HBCUs, and, you know,
I'm just thinking about how, you know, we go and visit the
national labs as Members of Congress, and our Chairwoman,
Congresswoman Eddie Bernice Johnson, has been involved with
this MSI STEM Achievement Act, which passed the House as part
of COMPETES, and I think that would further assist, too.
We're going to move to the next questioner, but I do want
to put a pin in Dr. Feldman's great points on data collection
and how we manage that. That's come up with our AmeriCorps
program as well. And if we could do a second round, maybe we
can get into that.
But with that, why don't I yield back and get to Mr.
Feenstra for 5 minutes of questions.
Mr. Feenstra. Well, thank you so much, Madam Chair. And I
want to thank everyone for their testimony.
As I mentioned in my opening statement, one of the great
aspects of SBIR and STTR programs are the ability to spark
innovation in middle America not just on the coast. Dr. Reuel,
your story provides a great model for entrepreneurs. Can you
further expand upon the advantage of building a startup in a
State like Iowa, and then also how has Iowa State supported and
helped to foster this entrepreneurial spirit on campus in Ames
and across the State?
Dr. Reuel. Thanks, Representative Feenstra, happy to. So,
yes, my first startup experience was in a much more expensive
climate on one of the coasts where funding did not go as far.
One of the benefits I've found in Iowa, especially with the
entrepreneurship ecosystem that's being built here at Iowa
State University, there are many incubators that are not only
available and provide functional space but they come at a cost
point that is very affordable in terms of usage of SBIR funds.
So we can use those funds to lease space, to get the personnel
that we need. And being close to a university is also--gives us
great access to talented people. And a shout-out to the
Midwest. It's nice in the fact that people love it here and
they want to stay here, so in terms of employee retainment,
that's been a nice thing as well. They don't drift off and go
to different companies.
Mr. Feenstra. Well, that's great to hear. I mean, I'm just
so impressed with what you do. I've got a further question for
you, Dr. Reuel. As Congress is considering reauthorization of
the SBIR and the STTR programs, the I-Corps program model is
one that we have been looking at closely as a method to
encourage SBIR success. What has been your experience with the
I-Corps program, and do you think it's worthwhile for all SBIR
and STTR applicants to be involved in this program? And would
you consider any improvements that would be beneficial?
Dr. Reuel. Thank you again for that question. Yes,
definitely. It provides critical feedback when you need it at
the very beginning of your journey. So often the founding team
is very much in love with their technology and they think they
know what its prime application can be. However, this forced
training, this experiential training makes you put it aside for
a bit and go out and talk to others and not talk about your
technology but talk about their needs. And then that allows you
to really match where those funds are going to go so now you're
not burning them toward a destination that doesn't make sense
but you're using them to really bring your product to a market
that has a need that can be met.
Mr. Feenstra. Yes, thank you. I greatly appreciate those
thoughts and ideas.
Dr. Binkley, I'm very proud to have Ames National Lab
located in my district, and I want to ask you about the
important facet of DOE's SBIR program partnerships with
national labs. Can you discuss how the SBIR partnership with a
national lab generally works? And then how does DOE utilize
these partnerships to further capitalize on R&D in its mission
areas?
Dr. Binkley. Thank you, Representative Feenstra, for those
questions, very, very good questions. We use a significant
fraction of our SBIR funds in a mode that helps us advance
instrumentation and experimental capabilities that can directly
be folded back into our science programs. And Ames Lab is an
example of one of the places where we do this. And we find that
that approach to advancing instrumentation and other features
related to the scientific mission of the Department is really
important. I'll stop there.
Mr. Feenstra. Well, I appreciate, you know, those comments,
and what you do. I mean, I think of all the witnesses that we
have, I mean, we're making great strides in these different
areas, and I appreciate all your comments and thoughts. And
with that, Chairman Stevens, I yield back.
Chairwoman Stevens. OK, that's great. And we'll turn to Dr.
Bill Foster for 5 minutes of questioning now. Thanks.
Mr. Foster. Well, thank you, Chairwoman Stevens and Ranking
Member Feenstra and all the witnesses for joining us here
today. I'd like to actually give you a little more chance to
brag about some of the successes of the SBIR programs.
Specifically there's a company called ClearFlame Engine
Technologies that's based out of Geneva, Illinois, just outside
my district which has widely succeeded in developing diesel
engines which work with full thermodynamic efficiency on
everything from corn ethanol to methanol from hydrogen hubs.
And it's actually led by former researchers from Argonne
National Lab and Stanford, and ClearFlame received funding from
the SBIR and other sources, including everything from the corn
growers in nearby States to significant assistance from the
national lab and the SBIR programs. In fact, they just were
able to raise $17 million from a combination of John Deere and
I think Breakthrough Energy Ventures, so they've clearly
vaulted across the valley of death.
And so, Dr. Binkley, how does the Office of Science mass
produce successes like ClearFlame and advance translational
breakthroughs in other areas?
Dr. Binkley. Thank you, Representative Foster. That's a
very, very good question. Thank you for the opportunity for me
to answer that. So the way we arrive at SBIR topics in the
Department is we have a network of Federal program managers
spanning the Office of Science and the applied energy programs
and even parts of NNSA (National Nuclear Security
Administration). And they are always on the lookout for topics
that can advance the clean energy and national security
missions of the Department. And it's through that network of
Federal program managers that we identify topics that are
folded into our funding opportunity announcements (FOAs) for
phase I and phase II SBIR and STTR activities. And it's through
that process that we are able to get proposals in across a
very, very diverse set of activities. And it's essentially, you
know, go--for the broad community input through the FOA process
and, you know, there are a number of outstanding successes over
time.
Mr. Foster. And so what I was struck with while reading
through the history of ClearFlame is how it started as a bright
idea at a university. The technology was essentially proven at
a small scale at Argonne National Lab, and then it is now--it's
now to the point where I think they had a semitruck driving
around the National Mall powered by corn ethanol. And I didn't
mention actually one of the neatest things about it is that the
pollutants coming out the back end of the diesel engine that
they've developed are much, much smaller, so you don't have to
worry about soot and the other things that actually cost a lot
of money to try to mitigate in standard diesel engines.
And so--but the pipeline from the bright ideas collected
from both laboratory researchers and universities and then
having some technical assistance trying to sort of get to the
proof-of-principle stage and then launching into the point
where venture capital will grab it or established companies
like John Deere. How is that pipeline set up, and what are the
opportunities to just have the Department of Energy do more of
this? Is it--yes.
Dr. Binkley. Well, so the success at Argonne, I think, at
least in my opinion, derived from the fact that there's close
cooperation between the basic and applied programs at Argonne.
So fundamental advances coming out of the chemistry and
materials areas and then close coupling of those activities
with the funded activities--activities at the lab funded by the
applied energy offices. And I think that's a key strength in
developing ideas that can be commercialized the way you
described.
Mr. Foster. OK. In my sort of last 30 seconds here, I'd
like to point out what is a real concern with me. When I look
at in the Office of Science you have many ongoing construction
projects at any time, and essentially all of the construction
projects have just been clobbered by a combination of COVID and
supply chain difficulties and, you know, the--actually the very
rapid rate of wage inflation for technical personnel. And so
they've ended up, you know, not making their initial budget,
you know, estimates. As a result, in order to hold to the
original budgets, they've cut scope, important scientific scope
from these projects. And I'd like you to consider if you would
and get back to us with a rough estimate of what would be
involved in restoring the original scientific scope that was
planned and appropriate levels of project contingency really to
correct for what is, we all hope, a one-time big body punch to
these--all these ongoing projects? Because that's the sort of
thing I think that putting in in the startup funding for the
COMPETES and other appropriations things I think would do a lot
of good to making sure we get the scientific output that was
planned on these very important construction projects. So if
you could get back to us with some information on that, I'd
appreciate it.
Dr. Binkley. Yes, Representative Foster, we'd be very happy
to get back to you with that information. We've tracked that
very closely over the lifetime of the pandemic and have a
really solid financial understanding of what the impacts are
and the scope impacts to the projects.
Mr. Foster. Yes, OK. Well, thank you. I appreciate it and I
yield back.
Chairwoman Stevens. Great. And now we're going to move to
Dr. Baird for 5 minutes of questioning. Thank you so much for
your patience.
Mr. Baird. Thank you, Madam Chair. And I really appreciate
you holding this session about SBIR and STTR. And I always
enjoy the kind of information we get from these sessions. It
really is beneficial to us making decisions on these
committees.
But I was also very pleased to have you join as we
introduced H.R. 4033, you know, the SBIR and the STTR
Information Transfer Improvements Act during this Congress. So
I want to thank you for that.
And you know America's leadership in science and technology
is critical to our economic and national security, basic
research supported with taxpayer dollars to the National
Science Foundation, NASA, NIH, and DOD and even other Federal
agencies has led to key scientific discoveries that are very
crucial in today's world such as the internet, wireless
communication, lifesaving medicine, lasers, and many more. So
this basic research produces the scientific fuel for
innovation. Risk-taking small businesses are the engines for
converting this kind of knowledge into new products and
services. So small businesses are the catalyst for economic
growth and producing good-paying jobs in our communities.
And with that, I want to move to Dr. Schrag. And in your
testimony you mentioned that H.R. 4033. So while the
Administration has not really taken a position on the bill, can
you expand on your comments and explain how the bill would be
most directly effective for the NSF?
Dr. Schrag. Thank you, Representative. Yes, thank you,
Representative, for that question. Yes, I don't know if there
is a specific aspect of the legislation. I don't want to run
you out of time but there's a number of different sections. Is
there a particular area you'd like me to comment?
Mr. Baird. Yes.
Dr. Schrag. We appreciate it. I think I would refer you to
my written testimony. Obviously, some of the things that stand
out to us are any ability for Congress to help create a little
more stability around the program as a whole and also around
some of the pilot programs, which NSF uses many of to great
effect, I believe, so that's all--that's all I think extremely
positive. Beyond that, I'd be happy to answer any specific
questions around any sections of the bill that are of interest.
Mr. Baird. Do any of the other witnesses care to address
that issue, how effective this transfer for SBIR and STTR?
If not, Madam Chair, I yield back.
Chairwoman Stevens. OK. That's great. Thank you. And with
that, we'll move to Congresswoman Ross for 5 minutes of
questioning.
Ms. Ross. Thank you very much, Chairwoman Stevens and
Ranking Member Feenstra, for holding this very important
hearing. I also want to thank them for their efforts to improve
SBIR and the STTR through their legislation introduced last
year. These programs play an important role, as we've heard, in
helping small companies take the initial steps to advance
research and development and begin commercialization of
exciting new discoveries. As this Committee reflects on the
programs' 40 years, we should use the testimonies given today
to inform how we can make improvements to ensure that we're
optimizing success of Federal dollars in the small business
innovation space.
And, Dr. Feldman, it is a pleasure to have you here from
the University of North Carolina. For many years, the National
Academies surveyed SBIR award winners in an effort to track
program outcomes. But it was always a challenging task. And now
your committee is taking a different approach to measuring
program outcomes. Can you talk about both the challenges of
surveys and how you're now trying to measure SBIR program
outcomes? What are the relative advantages and disadvantages of
the different approaches?
Dr. Feldman. Representative Ross, thank you so much for
this question. So I can just talk about this all day. And
really with the survey we worry about response bias. That is
who is filling out the survey and giving us information. And
prior studies were only sending their questionnaire to people
who received the funding.
What we've been able to do is to match from different data
sources, so using patent data, looking at new product
announcements, looking at follow-on funding, trying to track
employment, and really triangulating across different data
sources so the that we get a full picture of what's going on in
the company.
And so what we find is that the programs have significant
impact. For NIH we were able to look at new drug approval, new
device approvals, and so on, that is using publicly validated
sources to provide evidence about the program.
Let me mention one of the most exciting things that we're
doing, and currently we are working on an evaluation for the
National Science Foundation that is in progress. But we realize
that firms get the award, but it is individual researchers who
are doing the work, who have the ideas, and so we have also
started looking at the individual researchers so that the firm
is a way of providing resources for individual PIs (principal
investigators) who actually are the inventors and have the
creative ideas to move forward.
And so what are the sort of limitations? Well, I would like
to know everything about a firm through its entire lifecycle.
What we see is firms change their names, and so sometimes it's
hard to track firms in a consistent basis. The question of are
they merged or acquired, if they have an IPO, which is the gold
standard, there's a lot of news about that, mergers and
acquisitions less so and especially when they are publicly held
companies. And so our data are only as good as all the
underlying data.
Let me mention for NIH we did have the applicants who were
not awarded, and so that allowed us to again have a fuller
picture. But, you know, it would be great if we could trace
intellectual property because even when firms do go bankrupt,
those principal investigators who got the SBIR funding move on
to other companies, taking their ideas and their experience
with them. I wish we could do better on that front. But I do
believe that we have done what is a state-of-the-art assessment
of the programs.
Ms. Ross. Wonderful. I know I only have a few seconds left,
but I wanted Dr. Binkley to maybe briefly comment on the
importance of matching programs. We have one in North Carolina
in aiding with diversity of applicants.
Dr. Binkley. Thank you, Representative Ross. That's a great
question. You know, we've been working very, very hard across
our entire research portfolio on diversity issues, not just on
the SBIR/STTR area. And so, you know, it's important to have
good outreach to minority-serving institutions, HBCUs and so
on.
And then the other tool that we've been using very
aggressively over the last year is if you look at the Code of
Federal Regulations (CFR) that govern how we do processing of
grant applications, we are allowed by the CFR to have program
policy factors that allow us to focus more attention on, for
example, minority-serving institutions, HBCUs, EPSCoR
(Established Program to Stimulate Competitive Research) States,
et cetera. And so we've been using those tools in our funding
opportunity announcement process overall and, you know, we'll
see how this works over the next couple of years.
Ms. Ross. Thank you very much. And thank you to the Chair
for your indulgence. I yield back.
Chairwoman Stevens. The women from North Carolina unite,
and with that, we will pass it over to Congressman Meijer for 5
minutes of questioning.
Mr. Meijer. Well, thank you, Chairwoman Stevens. Can you
hear me? OK, thank you. And thank you to all our--and to
Ranking Member Feenstra and to all of our panelists who are
here today. I think you are hearing broad and bipartisan
enthusiasm and excitement for what the SBIR and STTR programs
have been able to do.
I want to just--we discussed a little bit on the
underrepresented communities, and I wanted to shift that a
little bit to ask to Dr. Schrag and Dr. Binkley specifically
around the veterans community, how have the SBIR and STTR
programs engaged the veterans community, and what obstacles
have you encountered if any in working to fulfill the mission
to foster and encourage participation from this population?
Dr. Schrag. I guess I can start, Dr. Binkley, if that's OK.
Thanks for the question, Representative Meijer. I appreciate
that. This is a very important issue and a focus of ours. One
thing I would say is that NSF does have a specific request for
supplemental funding, so an opportunity for our phase II
awardees to actually request additional funding specifically to
bring in and pay a veteran participant in their phase II
research. And that gives the opportunity for that veteran to
get kind of a boots-on-the-ground experience in deep technology
startup research projects. But that's called the Veterans
Research Supplement, VRS, and that's something that we've
continued to offer. I think it's also been expanded throughout
other parts of NSF subsequently. So that's been a great
opportunity.
The broader question about outreach to veterans, that does,
I think, parallel some of the other really important issues we
talked about with respect to underrepresented communities and
geographies with less activity. And so I think our approach
really has been to really double down on doing outreach, to
have our digital marketing campaign tailored to try to target
these communities, including veterans.
And then the other thing is that, again, we've tried to
really just create a program that is more approachable. And
this is something that we hope helps everybody but specifically
people who don't have as much experience with grant proposals
and government funding. And part of that is the project pitch
process that I mentioned, which allows folks to get immediate
feedback and immediate dialog with our program directors,
having a compliance that's flexible and forgiving so folks
don't feel like the door is slammed in their face for
bureaucratic issues, and having our program directors who are--
all of us program directors at NSF are both technical experts
in our fields and also have startup experience as startup
founders or investors. And so for those folks, I think we have
a little bit more ability to have empathy and understand where
these folks are coming from and to kind of meet them where they
live. So that's the kind of broader approach that we've taken
to outreach to that community.
Dr. Binkley. OK. So, Representative Meijer, thank you for
that question. I have to confess that in the Department of
Energy we're not as far along as the National Science
Foundation is in reaching veterans through our SBIR/STTR
programs. We do have significant activities at a number of our
national labs, and I think there are lessons that we can learn
from NSF on how to do this in the SBIR/STTR area.
Mr. Meijer. Dr. Binkley, I appreciate your candor there.
And Dr. Schrag, I thank you for that response. I think, you
know, before I came to Congress I was the Chairman of the Board
of Student Veterans of America, and so for the post-9/11 G.I.
Bill and what that has done for veterans' higher education, you
know, that cohort is by and large--you know, what we saw in the
immediate post-9/11 era, that cohort is now, you know, shifting
from concentration on undergrad to a concentration in graduate
programs, and so I think we're at a very opportune time to be
targeting efforts, and so I appreciate that outreach as being
very concentrated and that there is work to make the program
more approachable. But I--you know, I think the time is right
for this to be an expanded area of focus.
And just Dr. Schrag, real quickly, you know, I know in the
GAO (Government Accountability Office) report it mentioned the
flexibility to issue SBIR awards to companies that were venture
capital or hedge fund or private equity funded and that there
had been some not as rapid adoption or that there--some of the
agencies had not used their full authority. Could you speak to
that at all and anything we can do to encourage, you know, SBIR
awards to be going to appropriate companies and not having any
discrepancies in terms of their funding source?
Dr. Schrag. Yes, thank you for that question,
Representative Meijer. Yes, so you're correct that the
authority to issue SBIR awards to majority venture-backed
companies is something NSF has not requested. As I mentioned,
our focus is really on very early, very small companies.
Typically speaking, companies will not become venture-backed
until two or three rounds of private funding, and so those
companies would tend to be later than the types of companies we
look for.
And in general, again, our approach is to try to provide
funding where there is the biggest gap in the private--the
valley of death, right, in the private sector. And typically a
company that's already half-owned by venture capitalists would
already have had access to the private sector, and so we're
less likely to fund those.
I will say though that venture capital is a very common
graduation of our companies when they move out of the program
to the next source of funding. Venture capital is almost always
part of that path. It just happens to be that we go first and
then venture capital tends to come a little later.
Mr. Meijer. Thank you, Dr. Schrag. I appreciate that color.
And, Madam Chair, my time is expired, so I yield back.
Chairwoman Stevens. Great. And with that we're going to
hear from Congresswoman Wild for 5 minutes of questioning.
Ms. Wild. Thank you, Madam Chair. I'm proud that this
Committee has paid so much attention to the innovation
challenges and opportunities for our country and economy in
this Congress, approving a number of bills on a bipartisan
basis, including my legislation, the bipartisan Regional
Innovation Act, which passed the House as part of the America
COMPETES Act, which would invest in regional innovation
strategy development and implementation for communities across
the country. I think there's just as much potential in my
district, the greater Lehigh Valley, as there is in the Silicon
Valley, and the entrepreneurs and innovators there need a fair
shot at that.
And I'm pleased to say that the Small Business Innovation
Research program, or SBIR, is already supporting some of this
work by local innovators in my district, Pennsylvania's 7th.
[inaudible] a very proud tradition of manufacturing. It helps
build the infrastructure and economic engine [inaudible]
through the 20th century. And today's entrepreneurs are
continuing that legacy by developing the next generation of
technologies and by making them here in America.
For example, last year, one constituent's small business
Amorphic Tech in Allentown, Pennsylvania, received a phase II
SBIR award from the Department of Energy to build on research
and pursue solutions for a device that will reduce energy use
up to 40 percent from personal desalinators to municipal water
treatment plants.
And another business in my district, Vaxform in Nazareth,
Pennsylvania, received a phase I SBIR award from the Department
of HHS (Health and Human Services) to pursue a vaccine against
group A strep. These types of investments and visionary
innovators will help lead my community and our entire country
into a 21st century economy, ready to tackle issues like global
climate change, economic opportunity, and American
manufacturing leadership.
But a common refrain from aspiring SBIR awardees and
entrepreneurs is that the process can be so complicated that it
requires its own expertise to master. So, Dr. Schrag and Dr.
Binkley, how have the Department of Energy and NSF taken the
challenge of improving first-time applicants' success? And
either one of you can start.
Dr. Schrag. Thanks for the question, Representative Wild.
I'll start and try to be brief. In addition to the measures
that I mentioned regarding the project pitch and the
administrative compliance aspects in my opening statement,
again, we have tried to change our process and our proposal
format to really align more with the natural language of
entrepreneurs, right? Our goal is to make SBIR not a separate
offshoot of the startup and entrepreneurial process but to have
it be aligned with it so that the things you're going to be
doing to prepare a proposal to NSF SBIR are the same things you
need to be doing anyway to build your business and your
business model and your understanding of your customers, so
really trying to have the commercialization focus in our format
and in our review criteria, and then, again, the
commercialization experience of our program directors.
The other thing I would say is that we do bring in, as was
mentioned before, a number of commercial reviewers at both
phase I and phase II, and those are typically entrepreneurs and
investors where, again, there's an empathy between the folks
who are reviewing the proposal, providing feedback, and the
folks who are applying. And I think that creates more comfort
in the process and makes folks more willing to go through what
is a lengthy review timeline.
Ms. Wild. Thank you. Let's switch over then to Dr. Binkley
if we could on that question.
Dr. Binkley. OK. Thank you, Representative Wild. That's
really a great question also. And in addition to reviewing our
overall proposal process and trying to simplify it, you know,
we have introduced I think some streamlining there.
But then more importantly we've created an application
assistance program that targets first-time SBIR/STTR
applicants. And we did--we actually did that in 2014, and we've
been using it since then. And the focus of this application
assistance program is not solely on steering small businesses
through the application process in a timely fashion but similar
to what my NSF colleague mentioned, it also provides critical
reviews to proposers to ensure that a high-quality application
can be developed and submitted.
Ms. Wild. Thank you so much. I just think it's very
important that we always keep in mind that small businesses
have tight operation margins, and investing the time to write a
competitive application is a large investment, and we want to
do everything that we can to make sure that we are assisting
these small businesses.
With that, Madam Chairman--Chairwoman, I yield back. Thank
you.
Chairwoman Stevens. Yes, that's great. Thank you. Look,
we're going to do a very brief round of second questions with
yours truly in part because of where we were on data
questioning, so that's the question I just want to get in for
the record here. We've seen that critical tools in grantmaking
oversight is the ability to measure the impact of the funding
toward an intended goal, and the past data challenges have
limited the ability for agencies to track commercialization
benchmarks. But agencies were also able to identify the
barriers and address those issues.
You know, I've been an NSF applicant in a previous life. I
know people who've gotten SBIRs. We heard from Dr. Feldman very
extensively and to great appreciation on some of this data and
surveying benchmarking.
But I want to get our private sector voices in here. And I
was just wondering, Mr. Caravias, if we could just start with
you about how you have participated in surveys as an NSF
applicant. And, by the way, congratulations on getting to phase
III here. That's a really--I've looked at those phases, and
that's really just tremendous to see your technology through
that process. But any inputs you could make on surveying for us
here?
Mr. Caravias. Well, thank you, Madam Chair. I appreciate
that. We have participated--we have not participated in surveys
at all. We have participated--I guess we have one or I have
one, an acquired company and NSF proposal, and we were very
appreciative of that of phase I, which did not go to a phase
II.
I'm not sure how else--is there something specifically that
I could answer about surveys, you know, not having done any
myself or possibly something about----
Chairwoman Stevens. Well, look--yes, I just think in terms
of what--when you're being surveyed, I know you've obviously
been funded SBIR through the DOD, but are--do you feel like
you're getting the right questions asked, you know, that are
contributing to these overall data benchmarks that Dr. Feldman
mentioned?
Mr. Caravias. Not having participated in the surveys, I
think it's very difficult for me to comment on that, Madam
Chair. I do----
Chairwoman Stevens. OK. Well, has Mr.--has Dr. Reuel done a
survey? Like who else here has been part of the surveys from
the--I mean, obviously Dr. Schrag is sending them out, but, you
know, who's been doing them?
Dr. Reuel. So I can chime in, yes. So I think surveys are
often neglected. So the NSF has a much more clever tactic. So
before you can get the last amount of money from your grant,
you have to provide considerable feedback in a project report.
And they do that on purpose so that way they can get some of
these metrics in place to figure out where you are on your
journey and where the funds were spent.
Dr. Schrag. Chairwoman, if you--do you mind if I chime in
here?
Chairwoman Stevens. Yes, that's great.
Dr. Schrag. OK.
Chairwoman Stevens. Yes, we need to hear from the agencies,
too.
Dr. Schrag. OK, no, I think this is a great, important
question, and we have actually spent a lot of time trying to
figure out how best to assess outcomes. There's a lot of
challenges in this, as Maryann had referred to. You know, one
of the main things is that when our companies become
successful, it can be a decade or more, right? We had a company
called Ginkgo Bioworks that was a company that went public last
year for $16 billion. NSF funded them in 2007. And so the
ability to kind of survey a company that you funded that long
ago is difficult. You have to--you've lost contact with them in
many cases and you have to find them.
And so the approach that we have taken more recently--you
know, we have in the past used surveys, but more recently the
approach that we've taken to tracking our companies--and again,
this is focused on private sector commercialization as the
outcome, so it may differ. But we use third-party tools as a
primary way to do that. There are services out there like
PitchBook and CB Insights that track the financial status and
health of private companies. And so we can actually put a--make
a list of all the companies we funded and put them in these
systems and they automatically give us updates on the
transactions those companies are going through, if they're
acquired, if they're raising money. We get that information for
free in real time without having to go and survey the company.
In addition, I do think surveys have potentially a place.
We don't typically do them right now, but I think the small
percentage of the companies that--you know, the big success
stories which can be identified using these third-party tools,
you can then go and do a deeper dive into--you know, into what
makes them tick or how they've done with surveys. But obviously
since we've funded 3,000 different small businesses over the
last decade, doing surveys to all of them is a little bit
difficult for us to manage.
Chairwoman Stevens. Right. OK. Because--well, Dr. Feldman
in her testimony said waste, fraud, and abuse, and I'm just
trying to get at what she's talking about here. Is there a
concern for this? Because it seems to me--I mean, even with Mr.
Caravias, I mean, he's going through the DOD, and I have worked
with DOD funding before. We've seen it. It's very strict. So is
there a concern for this, or is there something we're missing
on the surveys here or----
Dr. Feldman. May I say that I was really talking about
proposals to limit the number of awards that a company can
apply for or can receive. And so we've heard that this is a
concern, and I think it would be a bad idea in that because
it's difficult to write proposals, there are economies of scale
of having firms with a lot of PIs who are writing projects. And
so I think that we should not limit the amount, and that's why
I mentioned it----
Chairwoman Stevens. OK.
Dr. Feldman [continuing]. Because I think if we want to
encourage innovation, we just want to let there be as much
experimentation and as many applications as possible.
Chairwoman Stevens. Yes, because if you're limited, what
happens? You know, what, do you start a new company or--you
know.
Dr. Feldman. Right.
Chairwoman Stevens. Yes, you know, or you're stopped in
your tracks. I mean, I--just a couple weeks ago, I--we spent
some time reviewing all these phases and the ways in which you
get an SBIR, and it's--it is not easy, and yet it's--it really
is serving a very unique purpose.
OK. So I'm over the 5 minutes for the second round of
questions. We don't have any other Member who wants to do a
second round of questions, so we're going to move to close.
And obviously, a huge thank you to our witnesses. Thanks
for your patience at the beginning of this hearing as we moved
from hybrid to all in Zoom. We did have the Zoom hybrid working
yesterday, and I'll tell you the Science Committee here under
my Chairmanship last term was one of the first Subcommittees to
continue with Committee activity in March and April of 2020
because we know--although pandemics are long oftentimes, the
work of innovation does not stop, the work of entrepreneurs and
makers and dreamers and doers.
And, you know, we're really excited to have had today's
kind of fact-based hearing on SBIR/STTR programs. Your
expertise and your knowledge, this was very, very insightful.
And I know that the colleagues who participated and who will
participate following the conclusion of the hearing and the 2-
week question for the record period have really appreciated
your time and obviously the trajectory as we move forward with
the reauthorization legislation that Dr. Baird and I
introduced.
So with that, again, the record is going to remain open for
2 weeks, and the witnesses will be excused, and the hearing is
now adjourned.
[Whereupon, at 11:49 a.m., the Subcommittee was adjourned.]