Prioritizing Small Underserved and Rural Businesses in the SBIR/STTR Programs
Summary
The printed record of a House Committee on Small Business subcommittee hearing on underserved and rural participation in the SBIR and STTR programs, on June 23, 2021 and published as Small Business Committee Document Number 117-020, with Chairman Jared Golden presiding. Chairman Golden says women-owned and disadvantaged businesses win about the same share of awards as nearly a decade ago, and that rural states are underrepresented in the programs. Ranking Member Jim Hagedorn urges reauthorization before the programs' September 2022 expiration and cites Department of Defense and National Cancer Institute studies showing returns of $15 to $23 for every dollar spent. The witnesses come from GO Lab, Inc., ecoLong for the Clean Energy Business Network, MEMStim LLC and Physical Sciences Inc. for the New England Innovation Alliance.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
PRIORITIZING SMALL UNDERSERVED AND RURAL
BUSINESSES IN THE SBIR/STTR PROGRAMS
HEARING
BEFORE THE
SUBCOMMITTEE ON UNDERSERVED,
AGRICULTURAL, AND RURAL
DEVELOPMENT
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JUNE 23, 2021
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-020
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
44-849 WASHINGTON : 2021
-----------------------------------------------------------------------------------
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Jared Golden................................................ 1
Hon. Jim Hagedorn................................................ 3
WITNESSES
Dr. Joshua A. Henry, President and Founder, GO Lab, Inc.,
Madison, ME.................................................... 5
Ms. Nancy Min, Founder, ecoLong, Albany, NY, testifying on behalf
of the Clean Energy Business Network (CEBN).................... 7
Dr. Angelique Johnson, Founder and Chief Executive Officer,
MEMStim LLC, Louisville, KY.................................... 9
Dr. David Green, Chief Executive Officer, Physical Sciences Inc.,
Andover, MA, testifying on behalf of the New England Innovation
Alliance (NEIA)................................................ 11
APPENDIX
Prepared Statements:
Dr. Joshua A. Henry, President and Founder, GO Lab, Inc.,
Madison, ME................................................ 25
Ms. Nancy Min, Founder, ecoLong, Albany, NY, testifying on
behalf of the Clean Energy Business Network (CEBN)......... 27
Dr. Angelique Johnson, Founder and Chief Executive Officer,
MEMStim LLC, Louisville, KY................................ 42
Dr. David Green, Chief Executive Officer, Physical Sciences
Inc., Andover, MA, testifying on behalf of the New England
Innovation Alliance (NEIA)................................. 46
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Invent Together.............................................. 51
PRIORITIZING SMALL UNDERSERVED AND RURAL BUSINESSES IN THE SBIR/STTR
PROGRAMS
----------
WEDNESDAY, JUNE 23, 2021
House of Representatives,
Committee on Small Business,
Subcommittee on Underserved, Agricultural,
and Rural Business Development,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:40 p.m., in
Room 2360, Rayburn House Office Building, Hon. Jared Golden
[chairman of the Subcommittee] presiding.
Present: Representatives Golden, Delgado, Williams,
Hagedorn, Stauber, and Tenney.
Chairman GOLDEN. Good afternoon. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I apologize to those joining us to testify today for the
late start, but we have been voting down on the House floor. I
think we should be good now. But I will just quickly note it is
possible there could be a series of votes on the floor during
this hearing, in which case we will stand in recess while we go
vote. But I think we are going to be good. So I appreciate your
patience.
Let me first say that standing House and Committee rules
and practice continue to apply during hybrid proceedings. All
members are reminded that they are expected to adhere to
standing rules, including decorum.
House regulations require members to be visible through a
video connection throughout the proceeding, so please keep your
cameras on. Also remember to remain muted until recognized to
minimize background noise. If you have to participate in
another proceeding, please exit this one and log back in later.
In the event a member encounters technical issues that
prevent them from being recognized for questioning, we will
move to the next available member of the same party and later
recognize that member at an appropriate time slot provided they
have returned to the proceeding.
For those members and staff physically present in the
Committee room today, we will continue to follow the most
recent guidance. Masks are no longer required in our meeting
space for members and staff who are vaccinated. Members and
staff who have not been fully vaccinated are asked to wear a
mask and to socially distance. And we sincerely hope we can all
do our part to protect each other, but most importantly our
staff.
Thank you for joining us for the hearing today.
In a world dominated by technology and innovation, the
science, technology, engineering, and math field, otherwise
known as STEM, is more vital than ever to our national
interest.
STEM helps drive our economy forward. It creates life-
improving innovations. And it allows us to keep pace with
global technological transformation.
It also provides Americans with good jobs and the
opportunity to contribute to our Nation's technological
development.
In 2019, over 19 million employees were working in STEM,
and job growth in the sector continues to outpace non-STEM
jobs. But for many workers the barriers to entry into STEM are
steep, and certain groups are chronically underrepresented in
the field.
With STEM research and development clustered around major
research institutions, often in urban commercial centers, it
can be difficult for rural small businesses to fully
participate in the innovation economy.
This is borne out by the overwhelmingly rural character of
underrepresented States in the SBA's Small Business Innovation
Research, or SBIR, and Small Business Technology Transfer, or
STTR, programs, including Maine.
Compounded with the capital access challenges facing rural
small businesses, this underrepresentation risks stifling rural
economic development and also deprives Federal agencies of
worthy products and services.
Additionally, Black and Hispanic workers make up just a
tiny percentage of STEM workers compared to their percentage of
workers across all occupations. Further, women hold less than
20 percent of U.S. tech jobs, and only 5 percent are in
leadership positions at technology companies.
From urban population centers to rural areas, like Maine's
Second Congressional District, too many entrepreneurs are being
kept out of our innovation ecosystem.
As technology continues to develop, STEM jobs will continue
to grow in importance. We can't allow certain groups to lag as
our economy moves forward. And it is in our interest to ensure
the 21st century economy is as diverse and inclusive as
possible.
That is why we should elevate the current Federal programs
that are driving diversification in the STEM field, including
initiatives like SBIR and STTR.
SBIR was created in 1982 to reduce risk of investment in
small businesses and encourage entrepreneurs to commercialize
Federal R&D innovations.
Ten years later, Congress created the STTR program to drive
cooperation between small firms and research institutions.
The Federal Government funds these programs through set-
asides of government agencies' extramural research and
development funds.
These two programs play a substantial role in supporting
innovative small businesses and contribute tens of millions of
dollars to small firms annually. Both share the stated goal of
fostering inclusion and diversification by encouraging program
participation by socially and economically disadvantaged firms.
By working to improve the reach and effectiveness of these
programs, Congress can help make the STEM field more accessible
and ensure that more Americans benefit from our Nation's
technological development.
We will hear today from a diverse range of businesses
during today's hearing about the challenges that they face
operating in the STEM field and their experiences with the SBIR
and STTR programs.
Although statutorily required, participating agencies have
struggled to increase participation of rural business owners,
women-owned small businesses, socially disadvantaged
businesses, and businesses in underrepresented States.
Program statistics show that women-owned small businesses
and disadvantaged businesses make up approximately the same
share of awards as they did nearly a decade ago.
This lack of progress is concerning, and we must examine
efforts within the program for diversification.
We also must evaluate how the SBA research agencies and
institutions are spreading program awareness. Small businesses
can't take advantage of these programs if they aren't aware of
the offerings.
Once aware, many small businesses depend on outside
resources to complete the onerous application.
Once they have won an award, small businesses rely on
program-specific technical and business assistance providers to
maximize the impact of their technology.
I hope that today's hearing gives us the chance to examine
how SBA and Federal research agencies can better promote these
initiatives and reach entrepreneurs in underserved communities.
The two programs have a proven track record of providing a
return on investment in funding groundbreaking technologies
that can improve Americans' lives, but high barriers to entry
limit the reach and impact of the program.
By increasing diversity in the STEM field, we can create a
better future for many Americans and regain our footing as one
of the world's most innovative nations.
I will now yield to the Ranking Member, Mr. Hagedorn, for
his opening statement.
Mr. HAGEDORN. Chairman, thank you for holding the hearing.
It is good to see you today. And I appreciate our shared
commitment to rural development and small businesses in the
rural communities.
Today, we will discuss two vital programs to our Nation's
industrial base, the Small Business Innovation Research, or
SBIR, and the Small Business Technology Transfer, or STTR,
programs.
These two initiatives play pivotal roles in the development
of new technology to enable Federal agencies to meet program
and project goals while sparking significant job creation
amongst American small businesses.
These programs have positioned thousands of small
businesses to create new technologies, commercialize products,
and generate high-wage jobs.
We must continue to facilitate success while ensuring that
taxpayer dollars are utilized appropriately and efficiently.
Given the success and popularity of the SBIR and STTR
programs, I believe our Small Business Committee should move
swiftly and pass reauthorizing legislation far before their
September 2022 expiration.
I appreciate, Chairman, that you are holding this hearing
and you are working closely with members on both the majority
and the minority so we can keep moving this issue along.
Without any additional cost to taxpayers, the Federal
agencies utilize SBIR and STTR programs to contract with small
businesses, to procure unique solutions to improved service to
the American people, and solve public sector challenges.
Success stories include development of a new, longer-
lasting and lighter Lithium battery to enhance the Air Force's
F-22; a new National Cancer Institute treatment that has the
potential of saving thousands of lives; and a new piece of
technology that enhances safety for astronauts on the
International Space Station.
These programs are delivering strong returns on investment.
For example, SBIR and STTR economic impact studies from the
Department of Defense and the National Cancer Institute have
shown economic returns in excess of $15 to $23 for every dollar
spent.
That is in addition to improved military strength and
capability, significant cost savings, expanded sales of new
products and services for our small businesses, life-saving
medical techniques and products, and added sales and profits in
our economy.
When administered appropriately, the SBIR and STTR are a,
quote/unquote, ``win'' for U.S. taxpayers, Federal agencies,
and small businesses.
To state it again, these are successful government programs
that deliver real results. I hope we can continue to encourage
the acquisition of technology and solutions to meet the Federal
Government's needs while ensuring that small companies have
equal access to these programs and guarantee that taxpayer
dollars are being spent efficiently and effectively.
Thanks again, Mr. Chairman. I yield back.
Chairman GOLDEN. Thank you, Mr. Hagedorn.
I would like to take a quick moment to explain how the
hearing will proceed.
Each witness will have 5 minutes to provide a statement,
and each Committee member will have 5 minutes for questions.
Please ensure that your microphone is on when you begin
speaking and that you return to mute when finished.
With that, I would like to introduce our witnesses.
Our first witness is Mr. Joshua Henry, president and
founder of GO Lab, Inc., located in Belfast, Maine. GO Lab was
founded in 2017 to develop and manufacture wood fiber
insulation for the residential and light commercial
construction markets.
In 2018, GO Lab won a Phase 1 SBIR award from the EPA to
further develop their technology.
In 2022, GO Lab will become the first company to make wood
fiber insulation in North America at its new manufacturing
facility in Madison, Maine.
Thank you, Dr. Henry, for sharing your story with us today.
Our second witness is Ms. Nancy Min. She is the founder of
ecoLong, located in Buffalo, New York. EcoLong is currently
working on Phase 2 of their project, advanced peer-to-peer
transactive energy platform with predictive optimization
awarded by the Department of Energy. Their technology aims to
reduce the cost of solar power and increase adoption of
distributed energy resources.
Thank you, Ms. Min.
Our third witness is Dr. Angelique Johnson, founder and
chief executive officer--you will have to correct me if I am
wrong, I am sorry--of MEMStim, LLC, located in Louisville,
Kentucky.
Dr. Johnson has used three SBIR grants from the National
Institutes of Health to develop her 3D printing methods used to
manufacture parts for cochlear implants.
In addition to her work in the lab, she is the CEO/founder
of Visionarium, an organization that promotes, trains, and
equips underrepresented entrepreneurs.
We greatly appreciate her expertise on today's topic.
The Ranking Member, Mr. Hagedorn, will introduce his
witness.
Mr. HAGEDORN. I am honored to introduce our final witness.
Dr. David Green is the chief executive officer of Physical
Sciences, Inc., or PSI, headquartered in Andover,
Massachusetts. PSI's mission is to translate science into
solutions that solve mission-critical needs for their
customers.
Andover has been the headquarters and backbone of PSI since
1989. It is the largest and most extensive of the several
locations, hosting 68,000 square feet of office and laboratory
space.
In addition to their technical capabilities, the site is
also home to their accounting, contracts, and technical
publications departments, as well as their prototype
manufacturing facility.
Dr. Green has participated in the growth of the PSI for 45
years, emphasizing technical excellence in program performance
and focusing on aggressive technology maturation to enable its
rapid successful transition to fulfill the needs of their
government and commercial customers.
Dr. Green, we welcome you today, and we look forward to
your testimony.
Chairman GOLDEN. Thank you.
We will now move to our witness testimony.
And, Dr. Henry, you are recognized for 5 minutes.
STATEMENTS OF DR. JOSHUA A. HENRY, PRESIDENT AND FOUNDER, GO
LAB, INC., MADISON, ME; MS. NANCY MIN, FOUNDER, ECOLONG,
ALBANY, NY, TESTIFYING ON BEHALF OF THE CLEAN ENERGY BUSINESS
NETWORK (CEBN); DR. ANGELIQUE JOHNSON, FOUNDER AND CHIEF
EXECUTIVE OFFICER, MEMSTIM, LLC, LOUISVILLE, KY; AND DR. DAVID
GREEN, CHIEF EXECUTIVE OFFICER, PHYSICAL SCIENCES INC.,
ANDOVER, MA, TESTIFYING ON BEHALF OF THE NEW ENGLAND INNOVATION
ALLIANCE (NEIA)
STATEMENT OF JOSHUA A. HENRY
Mr. HENRY. Thank you, Chairman Golden, Ranking Member
Hagedorn, and members of the Subcommittee on Underserved,
Agricultural, and Rural Business Development.
Good afternoon. My name is Joshua Henry. I am the president
of GO Lab, a Maine-based building materials company.
I am grateful for the opportunity to talk to you today
about the Small Business Innovation Research program, the vital
support it gave our company at its inception, and some of the
ways we believe SBIR can be strengthened.
Next year, at our production facility inside the former
paper mill, GO Lab will become the first company to manufacture
wood fiber insulation made in America.
Our products, marketed under the brand name TimberHP, will
include batt insulation for stud wall cavities, continuous
exterior insulation boards, and a blown-in loose fill, designed
to work as one comprehensive, above-grade system for the entire
building envelope, or as affordable, healthier drop-in
replacements for foam, mineral wool, cellulose, and other
traditional insulations targeting the residential and
commercial construction market.
While SBIR grants are modest monetarily speaking, they are
nonetheless critically important to early stage companies. The
program gives small businesses and entrepreneurs the freedom to
research and develop new technologies, often in partnership
with local universities, that are years away from
commercialization.
When we founded GO Lab in 2017, insulation made from
softwood chips had already been a successful product in
European markets for over 20 years. Our SBIR grant allowed us
to partner with researchers at the University of Maine's
Advanced Structures and Composite Center.
Using the center's advanced machinery and equipment, we
were able to determine that we could make a more renewable,
cost-competitive, and higher-performing form of wood fiber
insulation in America by using alternative binding agents in
the insulation manufacturing process.
Too often, these sorts of research and design partnerships
with major universities and access to their highly specialized
equipment are more easily accessible in urban centers than in
remote rural communities, like the one where GO Lab's
production facility is based.
Our SBIR grant, though small, helped validate the entire
concept at the heart of our business plan. We were able to use
this hard, verified data to begin the long process of raising
private equity and other financing to move our vision of wood
fiber insulation, made in America, towards reality.
And, by the end of the summer, we will have financed this
project with over $40 million of private equity and $85 million
of private bond equity into the project.
Expanding funding and partnership opportunities under the
SBIR program is critical if we hope to empower the kind of
entrepreneurship in rural communities that makes it easier for
new industries to take hold, hire local people, and thrive.
I would like to end my remarks with two suggestions for
improving SBIR based on our experience.
The program, as valuable as it is, could be made even
stronger by simplifying the application process. As a former
college professor with a Ph.D. in materials chemistry, I have
applied for many grants over the years.
Nonetheless, a colleague, also an experienced grant writer,
and I found the application process far more bureaucratic and
complicated than it needed to be.
To complete our proposal, we ended up needing extensive
help from consultants and SBIR specialists hired by the State
of Maine. It still took many weeks to complete our application.
Simplifying the application process would be an important
step in the right direction.
Additionally, as a business launching in a community
qualifying for the New Markets Tax Credit program and within an
Opportunity Zone, I strongly believe, as I noted earlier, that
more incentives are needed to ensure that a program as valuable
as SBIR is able to make more investments in underresourced
rural areas where public research and development resources are
limited.
I think, potentially, if there could be incentives or bonus
points, if you will, for SBIR applications from these areas,
that could be an advantage and could serve as a stimulus for
more companies from these areas to take advantage of the
program.
Thank you for your time, and I would be happy to answer any
of the Committee's questions.
Chairman GOLDEN. Thank you very much for the testimony.
We will now recognize Ms. Min for 5 minutes.
STATEMENT OF NANCY MIN
Ms. MIN. Chairman Golden, Ranking Member Hagedorn, and
members of the Subcommittee, thank you for the opportunity to
testify today on the topic of prioritizing small, underserved,
and rural businesses in the SBIR/STTR program. It is an honor
to be here.
My name is Nancy Min, and I am the founder and CEO of
ecoLong, based in Albany, New York. Our mission is to build
interconnected and resilient communities.
This mission is at the heart of everything we do, including
developing a blockchain based energy marketplace that provides
communities equitable access to clean energy.
We are fortunate beneficiaries of the SBIR/STTR program,
having received U.S. Department of Energy SBIR Phase 1 and
Phase 2 from the Solar Energy Technologies Office to build out
the platform. The DOE SBIR funding provides critical support
that is positioning us for growth.
Our path to the SBIR/STTR program wasn't easy. It took a
lot of trial and error.
My entrepreneurial interests began in college when I first
heard of a new technology called blockchain technology that was
the underlying technology to this new thing called Bitcoin. The
technology and its application have evolved significantly since
then. We now use blockchain technology to decentralize and
democratize the energy market.
All small business owners will tell you starting a company
is hard. But knowing what is next is harder.
Hearing about and participating in the National Science
Foundation Innovation Corp, or NSF I-Corp program, was a
pivotal moment for us. The NSF I-Corp program taught me how to
articulate my business idea and forced me to ``get out of the
building'' to validate that our technology was commercially
viable.
However, the closest site that the NSF I-Corp program was
administered was in New York City. That meant we had to travel
3 hours from Albany to New York City, or 6 hours round trip, to
attend classes.
The first time writing a SBIR proposal is daunting.
Thankfully, the U.S. Department of Energy has a Phase 0 program
that provides a variety of proposal support services for the
first-time applicant. All of these programs helped us to get
the DOE SBIR awards.
In addition to the financial support of the SBIR, the
program managers of the DOE Solar Energy Technologies Office
provided integral support at every step of our development and
commercialization process.
The support of these communities continues even to this day
with the support that we get from business networks, such as
the Clean Energy Business Network, or CEBN, that plays a key
role in advocating for clean energy research, promoting
business partnerships across the Nation, and nurturing small
businesses like ecoLong for growth.
Today, my testimony is about the power of communities and
its role in accelerating small, underserved, and rural
businesses in innovation-driven programs such as the SBIR/STTR
program.
The first point I will talk to is improving awareness and
accessibility to Federal innovation programs.
The NSF I-Corp program addresses the knowledge gap with
transformation of research into business ventures. However,
awareness and accessibility of this program is often limited to
innovators that are integrated with educational or research
institutions or located in urban areas.
Writing a proposal takes a lot of effort. Increasing the
visibility and accessibility of the DOE Phase 0 program or
research for all applicants is very beneficial for innovative
firms, particularly for underserved and rural businesses.
Community-based organizations are vital for innovators to
extend their business network. For example, CEBN has been
enhancing the accessibility of the SBIR's funding solicitation
across their network and beyond.
More support for regional or national support organizations
that serve as community hubs on the ground would help small
underserved businesses and rural businesses get the support
that they need to be competitive in the SBIR/STTR programs.
The second point is promoting open collaboration and open
source to reduce the barriers to access technological
innovation.
The barriers to small business innovation are not limited
to access to entrepreneurship programs. The development of
technology innovations often requires extensive technical
community support and resources.
A great example is open source technology. Businesses can
significantly reduce the expenses and time to develop a product
from scratch and focus their efforts on high-impact uniqueness
and innovation.
As the Chair of the Linux Foundation Hyperledger Social
Impact Special Interest Group, I have seen firsthand small
businesses rising from the open source community.
For example, the Department of Energy has encouraged and
supported various open source projects, including Pacific
Northwest National Laboratory developed VOLTTRON, an open
source distributed sensing and control software platform
technology that joined the Eclipse Foundation.
Researchers at Brookhaven National Laboratory developed
world leading privacy preserving artificial intelligence and
will be contributing it to the open source PyTorch community.
At the end of the day, the mission of the SBIR/STTR program
is to support scientific excellence and technological
innovation to build a strong national economy. This requires
innovation on both the technical and business or commercial
end.
By improving the awareness and access to Federal
entrepreneurship programs, small businesses will have the tools
to build successful business ventures. By promoting open
collaboration and open source, small underserved and rural
businesses across the Nation will have a launch pad to catapult
their technological innovation to do their part in building a
strong national economy.
Thank you again for the opportunity to testify. I look
forward to answering the Committee's questions.
Chairman GOLDEN. Thank you.
The Committee will now recognize Dr. Johnson for 5 minutes.
STATEMENT OF ANGELIQUE JOHNSON
Ms. JOHNSON. Thank you so much.
I want to thank Chairman Golden and Ranking Member Hagedorn
for the opportunity to come and talk and testify to the
Committee on Small Business and the Subcommittee on
Underserved, Agricultural, and Rural Business Development
during this hearing, which is titled ``Prioritizing Small
Underserved and Rural Businesses in the SBIR/STTR Programs.''
My name is Dr. Angelique Johnson, as you have already
heard, and I testify today not only as CEO and founder of
MEMStim, but also as a leader in several STEM organizations,
both at the NSF and the NIH, as well as locally in the State.
Some of those organizations include the NSF Council on
Engineering Research Visioning Alliance, the Kentucky Statewide
EPSCOR Committee, the National Institute of Biomedical Imaging
and Bioengineering at the NIH, the NSF NNCI External Advisory
Board, and Medtech Color.
I have also given my opinions to several other Federal
organizations and actual global international organizations,
such as the Eighth District of the Federal Reserve, the Royal
Academy of Science International Trust, the International
Chamber of Commerce, and the United Nations Assembly on Women
and Girls in Science.
And I say all that to say that I represent not only my own
opinion, but also the opinions I have heard from countless
members of the African-American community in the STEM field and
innovation, as well as countless members of women innovators in
the field.
While getting my Ph.D. in electrical engineering from the
University of Michigan, I founded MEMStim, and MEMStim is a
company that is developed to create advanced manufacturing
practices for neurostimulator devices for conditions such as
hearing loss, heart failure, chronic pain, Parkinson's tremors,
and much more.
Now, that is a lot. That is a mouthful. But if we think
about the human body, everything we think, say, and do is
controlled by nerves and neurons. And when there is any sort of
problem in the human body, in many cases it can be tied back to
a nervous system issue. And so the technology we are creating
is very critical.
But we are not only just creating this technology. We are
making it cheaper, more affordable, to lower the healthcare
costs in this Nation, and we are innovating the technology so
that we can increase the performance.
At MEMStim we use 3D printing, as opposed to hand assembly,
to be able to make these devices, which not only will decrease
healthcare costs nationwide here in the U.S., but also allow us
to increase access to countries globally and export our
technology.
Now, today I wanted to talk about my experience a little
bit having received SBIRs, and one thing I wanted to make very
clear is that my company would not have been able to be as
innovative and have done as much great work as we have done
without funding from the SBIR program.
However, the reasoning for this is because there is such a
lack of funding in venture capital, particularly for African-
American females and Black business founders. Less than 1
percent of venture capital goes to those founders, and less
than 0.27 percent actually goes to African-American female
founders.
Now, the SBIR program is a wonderful example of a program
that can come in and fill this gap, but, unfortunately, it also
suffers from these less than 1 percent funding going to
African-American founders and even seeing worse numbers when
you talk about African-American female founders.
So some suggestions that I want to highlight are really
these four ones.
A, I think that we need to have an increase of
representation on the review committees, and that
representation needs to be paid.
I know that there is a lot of recruitment for diverse
representation, particularly Black faculty members,
researchers, and innovators, but they do have lower wages that
they are receiving and much more discriminatory things in terms
of seed funding outside of the SBIR program. So pay should be
included in that.
I also think that we should create a special fund to help
Black businesses acquire consultants and trainers in writing to
help to prepare the grants and the applications.
And then, also, I think we should have a special fund, an
actual award supplement, that would be a subcontract line of
funding to Black businesses that would not only provide an
entry into the SBIR program, but also provide monitoring and
assistance as they continue to contribute to the innovation
economy through the SBIR program.
And the last thing that I will say is I concur with some of
what the other speakers said in that we need to expand the
reach beyond academia.
It is no mystery that there is very poor representation of
African Americans, Hispanic, Latino faculty members in STEM,
and that is not due to those populations' account. It is due
to, unfortunately, the low rates of achieving tenure and other
systemic injustices.
So we need to be looking beyond academia for PIs to submit
to SBIR programs and providing training programs to help those
individuals submit to it.
Thank you.
Chairman GOLDEN. Thank you.
And we will now recognize Dr. Green for 5 minutes.
STATEMENT OF DAVID GREEN
Mr. GREEN. Good afternoon, Chairman Golden, Ranking Member
Hagedorn, members of this Subcommittee and the House Small
Business Committee.
Thank you for the opportunity to speak today. It is an
honor to testify on behalf of the New England Innovation
Alliance, a coalition of small high-technology companies across
the New England area.
NEIA members, including Physical Sciences, Inc., have
demonstrated the benefits that small businesses can provide the
Federal Government and America's economy throughout the
program's nearly 40-year history.
As mentioned, studies have shown that the SBIR program
generates post-award revenues 15 to 23 times greater than the
initial investment. The program more than pays for itself.
I appreciate that this Committee is holding these hearings
to ramp up efforts to reauthorize these good programs.
SBIR is a flagship American innovation program that other
countries seek to emulate. The formula for its success lies at
its core: competitive and merit based.
Innovative small business entrepreneurs from across the
country propose concepts addressing national priorities and
commercial needs.
There are many more ideas than awards. Selection at each
phase is based on the best concepts, best performance, and,
above all else, the best science.
This competitive, merit-based process leads to a very high
success rate for transition and commercial success. The best
science produces the best technology that is essential if the
United States is to remain a global leader.
Those best ideas can come from anywhere in the country.
Using the publicly available SBIR.gov website, I conducted an
analysis into SBIR awards by geographic location.
This analysis confirmed that citizens in each part of our
country have priorities and are motivated to improve what
matters to them in their daily lives. The analysis found that
different parts of our Nation pursue technology innovation in
different areas.
To this point, the State of Maine wins over four times the
national average per capita in Department of Agriculture SBIR
awards and three times the national average in Commerce
Department awards. Kansas and Wisconsin far exceed the national
average in agriculture awards. Minnesota wins nearly three
times the national average in Department of Education awards
and well above the national average per capita in health,
agriculture, and awards from NSF. New York exceeds the national
average in education awards.
Innovators in those States are motivated to address
problems that affect their daily lives. And with insight based
on firsthand knowledge, they achieve a high award rate.
Great SBIR ideas and compelling solutions arise from the
trained scientific and engineering minds, wherever those
researchers reside. The SBIR program does not compel those
minds to live in a certain State.
What SBIR can do is give woman- and minority-owned and
disadvantaged businesses a fair chance to compete, win, and see
their innovation succeed.
The current 3 percent administrative allocation that allows
participating agencies to promote outreach and diversity within
the program should continue.
A large community of support organizations exists to help
with all aspects of creating a winning proposal, from
preparation to identifying commercial applications. First-time
proposal writers can readily find the support they need to
submit their great idea.
The NEIA is an informal group of companies, often
competitors, that share best practices to make each company
stronger. This mentoring for the common good brings benefit to
all. NEIA has helped establish similar alliances in other parts
of our country.
We encourage the Committee to consider this model, a
network of competitive performers, to improve proposals.
Many NEIA members are employee-owned companies where every
employee owns a portion of the company and all employees share
in the success: women, minorities, service-disabled veterans,
no matter their ethnicity or sexual orientation.
In closing, NEIA respectfully urges the Committee to pass
an SBIR/STTR reauthorization bill this year affirming its core
principles. The program should be permanently reauthorized in
its current form to provide stability. The permanent
reauthorization should strengthen the commitment to a
competitive, merit-based participation and award structure.
The existing pilot programs, including the use of 3 percent
of the funds for administrative costs, permitting outreach to
increase participation by underrepresented communities, should
be made permanent.
The reauthorization should include a quantitative
assessment of the merits of changes in a publicly available
report to Congress.
NEIA commends this Subcommittee for holding this hearing.
SBIR has proven its value many times over. Please make it
permanent.
Thank you again. I look forward to answering your
questions.
Chairman GOLDEN. Thank you.
And, with that, we will move to questions, and I will
recognize myself first for 5 minutes.
I think I will start--probably no surprise to folks--with
our panelist from Maine.
Mr. Henry, I am just curious. Could you remind us of the
degree that you hold?
Mr. HENRY. I have a Ph.D. in physical and materials
chemistry from Cornell University.
Chairman GOLDEN. And you have also, I think--do I remember
correctly, you have been a professor?
Mr. HENRY. Yes. I was a professor in the chemistry
department at the University of Maine when we started this
company.
Chairman GOLDEN. So I think it is fair to say you have a
lot of training and background in things that have helped you
with some pretty complex stuff, as well as experience helping
other people understand very complex issues that probably most
of us here in Congress don't understand ourselves.
And, yet, you found the bureaucratic and complicated
application process for the SBIR program that GO Lab competed
for and ultimately did win to be pretty tough.
Can you just talk more about that experience? And do you
have any specific examples or recommendations about what we
could do to ease that process?
Mr. HENRY. Yeah. I mean, I am very curious to hear what the
other panelists have to say about their application experience.
We have full-time employees of about 15 at this point. When we
were doing the SBIR, it was only four or five of us at that
point.
But another colleague of mine had about 20 years of
experience in government relations and grant writing, and we
found the SBIR application to be the hardest of the Federal
grants to apply because of the detailed nature of the
application.
There are just so many--it varies from agency to agency,
but we found across agencies that there were numerous addendums
to every part of the application, so much so that the State of
Maine basically has full-time consultants working with the
Maine Technology Institute, which is an industry advocate and
funder of advanced technology companies.
They hire consultants to just help those companies through
the SBIR application process, help them with their budget, help
them with just submitting the application and making sure every
box is checked.
And I think the hard thing for small companies and
companies that are struggling with funding is the question--
most grant proposals are not successful, as Dr. Green pointed
out.
To dedicate that much time to a proposal with the chance of
it being knocked out for some small sort of box not checked in
the application can be devastating for a company to spend that
much time and yield absolutely nothing from it, including no
feedback from reviewers. That can be tragic for a small
company, and I think it is not necessary.
And I am curious from the people who institute SBIRs why
this--I would be curious if I were a Committee member--your
Committee members to find out from the people who have
instituted SBIR over the years why they find it necessary for
all of these various forms and things that need to be committed
and that they don't see this as a problem of the program that a
State like Maine would need to hire consultants in order to get
people through the program.
I also think, being from a rural area, I can tell you that
most of the people where we are in the town of Madison have no
idea what SBIR is, let alone the idea that they would reach out
to--that they would know that there are consultants there to be
able to help them through the process.
Of course I know about it, but I was a professor at the
University of Maine. But most business owners in the State of
Maine, I am sure, don't have an understanding of SBIR, and
certainly couldn't get through the application process, in my
mind.
Chairman GOLDEN. Thank you. That is a very helpful start to
the conversation. I have a lot more questions for you, but also
for the other panelists.
But I am just going to go ahead and cede my 10 seconds
remaining here and recognize Mr. Hagedorn next. We will come
back later.
Mr. HAGEDORN. Thank you, Chairman.
I appreciate all the witnesses for being here. Very good
discussion so far.
Dr. Green, you seem to have some success with these
programs and have made some gains for Federal agencies along
with your own company.
Can you explain kind of in a nutshell how you are doing so
well and how you have utilized this and how it helps the
taxpayers and the government?
Mr. GREEN. We, from the outset at the proposal stage, focus
on the application and direct the program to achieve what the
customer has as his goal. At each step of the way, we define
milestones, reducing the greatest risks first, and then move
the project forward.
We have had many successes. And, through those successes,
we have learned that it is essential to address all aspects of
the problem, as well as to decide on the best path to market.
That best path does not necessarily mean that your company
develops new skills along each step of the way. As various
people have noted, not just in proposal writing, but even when
a technology is successful, there are many stages after that--
the production, the marketing, the market presence, the
distribution. All of these require additional skills.
What we decide is the best path to market. That often
involves partnering, and partnering with other small businesses
which are already active in that technology field, where we can
transfer that technology to them, and they already have in
place the know-how and other skills.
That allows our innovators to go back and to solve the next
problem for the government.
Mr. HAGEDORN. Sounds like it is not a direct line and you
have learned some things over the years and probably had
consultants and other help helping you with that, and maybe
just building a better mousetrap when it comes to how to do
this.
You talked about maintaining the 3 percent allocation and
reauthorizing. You feel strongly about that. We should, the
Committee should move forward and reauthorize and make this
permanent?
Mr. GREEN. Yes. I think that is essential.
First of all, the 3 percent each of the other speakers
today has addressed that. And I think it is important, because,
as has been noted, there is a barrier, and we need to work to
overcome that barrier. And that can either be done by reducing
the paperwork or standardizing it in some manner, or by the
additional help that is provided by the agencies and by the
private sector.
The benefit of making it permanent is both to the
government and to the small businesses. During the
reauthorization period in 2008 through 2011, there were 14
continuing resolutions to keep the program alive. During that
time, awards were put on hold. Small businesses, who had
started with ideas, actually went out of business waiting for
decisions to be made.
From the Federal side, it allows there to be a defined
program budget that they can then plan and allow technology to
be developed through Phases 1, 2, and 3. It also creates good
career paths for Federal employees to become deeply
knowledgeable and become good advisers in each agency to guide
the program to help the small businesses.
Mr. HAGEDORN. Thank you.
Real quickly. Mr. Henry, you were talking about the
complicated application process. And my understanding is these
aren't really grants, they are awards. And, having worked at
the Treasury Department, I kind of have some background in how
government agencies have to justify for Congress and others
their expenditures and moneys that go out the door. So maybe
that is some reason why it is a little more complicated.
But you mentioned that you don't receive feedback if you
are on the losing end, if you want to put it that, for one of
these awards. Help us understand that a little bit more. And do
you think it would be important for agencies to have to follow
up?
Mr. HENRY. Well, I want to clarify that if you are on the
losing end, if your application is accepted and it goes through
the process and it is rejected, then you would receive some
feedback, although we have not always received feedback from
every agency, which they are supposed to provide but do not
always, at least not in our experience.
But if you were to not be able to submit on a technicality
and the application was rejected before that process, then that
is correct, you would not get any feedback. It would not be--
the application simply would not be reviewed.
Mr. HAGEDORN. Okay. Thanks. I think that clears it up.
Chairman, I will yield back.
Chairman GOLDEN. Thank you.
Next, we will recognize Rep Pete Stauber from Minnesota 8.
Mr. STAUBER. Okay. Thank you very much.
Thank you to the witnesses for being here today.
Early in my time in Congress, I became familiar with the
Small Business Innovation Research program and the good work it
can do for our small businesses.
Lake Assault Boats in Duluth, Minnesota, which builds
custom fire and rescue patrol boats, applied for Phase 1
funding from the Air Force's SBIR program. Lake Assault
intended to use the funds to undertake a trial to improve
improve patrol boat technology, ultimately reducing energy
inefficiencies.
As Mr. Green noted in his testimony, it is fascinating to
see how the different parts of the Nation are inspired to
pursue technology innovation.
With our many lakes in Minnesota, it makes sense that my
constituents would look for technology that improves the
technology of our patrol boats while keeping our lakes pristine
for future generations.
Mr. Green, as we look toward reauthorization, what would
you caution Congress from adding or removing from a
reauthorization bill that might actually impede or harm the
program?
Mr. GREEN. I would argue that we certainly don't want to
add more barriers and make it more difficult to submit to the
program. The program has already made great strides in moving
more quickly, to make decisions quickly, and that allows the
small business to have continuity.
So I would urge the Congress to continue to make sure that
award decisions are made in a timely manner so that the small
business can make business decisions and move forward.
I think what is essential is that the program remain merit
based, because there are always many suggested solutions to any
problem, but we, as Americans, have to have the best solution
so that we can continue to remain the world technology leader.
If we settle for less than optimum solutions, that will result
in us losing our leadership.
Thank you.
Mr. STAUBER. [Inaudible].
Chairman GOLDEN. Thank you.
We will now recognize Representative Claudia Tenney from
New York 22.
Ms. TENNEY. Thank you, Chairman Golden and Ranking Member
Hagedorn, for taking the time.
And thank you to the witnesses for being here.
I represent New York's 22nd Congressional District, which
stretches from the shores of Lake Ontario to the border of
Pennsylvania. We have a diverse collection of cities, rural
area and suburban areas. But we are also the home to a lot of
innovation heritage, including IBM was founded in my district.
The Air Force Research Lab Directorate is part of the former
Griffiss Air Force Base. So we do have quite a bit of
innovation.
But I wanted to focus, Mr. Green, you said--and I thought
your testimony was interesting, just to kind of piggyback on
what Mr. Stauber had to say--you indicated that the State of
Maine and Kansas and others have twice the grants.
What can we do in New York to revitalize our innovation and
be able to have access to some of these tech grants and also
innovation transfer grants? How would you create a model that
we could get more innovation in New York and more resources to
New York that emulates the success of other countries? And how
could we make that a permanent issue, then something we could
support in reauthorizing this bill?
Mr. GREEN. Well, if I may, I think the government has
already put in place--through this 3 percent allocation--
factors to provide support. And as I have mentioned, there is a
private sector community to provide support.
But because I am speaking today on behalf of the New
England Innovation Alliance, I think it is essential for small
businesses who are competitors, are peers, to get together and
share best practices.
That doesn't have to be just winning an SBIR grant. It can
be HR. It can be benefits. It can be hiring. All of these
things are challenges that every small business entrepreneur
faces.
And so by having this collective, open discussion with your
competitors, you end up building a better company and you end
up developing a philosophy of how to respond and win grants.
And so we have helped create organizations in Ohio as well
as California that follow this model. And I think, beside
Federal involvement, private sector and peer involvement is a
great way for each company to improve its knowledge base.
Thank you.
Ms. TENNEY. Yeah. Thank you, Mr. Green.
Could I just add a quick anecdote to that? Do you think
that the fact that maybe some of our State regulations and the
operation of our State business community or the way that
States handle innovation and supporting these businesses has an
impact?
For example, New York versus Maine, and, as you indicated,
Kansas as well has even more grants than we do. Is that
something that is a factor in your experience?
Mr. GREEN. If I may clarify, that was more grants per
capita.
Ms. TENNEY. Per capita. Okay.
Mr. GREEN. Yes. I mean, you can't expect Wyoming to have as
many grants as California. There are a few more people in
California.
New York----
Ms. TENNEY. New York is huge.
Mr. GREEN. And New York has a fair amount of people, and
they also, as a State, make significant investments. I am aware
of NYSERDA and other such State-funded organizations that help
create, and stimulate commercial opportunities that complement
the SBIR program.
Ms. TENNEY. Thank you.
Mr. GREEN. So I think the State should, in addition, try to
complement and benefit the companies within their States, and
that will help attract people to those States to address
problems in technology areas that are important for the
citizens of that State.
Ms. TENNEY. Thank you. I appreciate that.
Just one quick question for Ms. Min.
In your testimony, you pointed out that many of these
businesses, especially the Small Business Innovation Research
experience, finds that a lot of these businesses have a tough
time getting through some of the technical and bureaucratic
process.
Would you recommend that we either fund or provide
technical resources to businesses that are applying for these
grants so that they can use these funds and this assistance
more effectively?
Ms. MIN. Thank you, Congresswoman.
Ms. TENNEY. [Inaudible.]
Ms. MIN. Oh, absolutely.
I think an example of a resource that we have taken
advantage of is the DOE Phase 0 program, which provides
critical proposal support services. And other things that you
can select from a kind of a la carte menu is technical support
services as you are developing out your proposal.
Ms. TENNEY. Let me ask a quick question.
So we have a huge interest and need in the broadband
industry. Would that be somewhere where we could actually get
the technical assistance to help with trying to incentivize
people to move into that industry and that business? Quickly.
Ms. MIN. Absolutely. Yes. Absolutely.
Ms. TENNEY. Thanks so much. We appreciate it.
I yield back.
Chairman GOLDEN. Thank you.
We will now recognize Representative Roger Williams, the
Vice Ranking Member of the Committee.
Mr. WILLIAMS. Successful entrepreneurs will recognize needs
in their daily lives and work towards bringing solutions to the
marketplace.
Something I think is beneficial about the SBIR program is
that it does not take on a one-size-fits-all Federal approach
and runs through different Federal agencies. This allows
innovators in different States to be able to access the
resources to best address their needs in their own communities.
So, Dr. Green, as someone who represents numerous SBIR
grantees across the Northeast, is there any agency that
administers this program the best? And how can the other
agencies adopt these best practices to better help
entrepreneurs?
Mr. GREEN. Again, a complex question, and I appreciate it.
I think many of the members of NEIA have interacted with
the Department of Defense, and I think they have a program that
is very effective because it ties the topics of the SBIR book
to agency needs. And, with that, they have a plan that they
will award so many Phase 1s, down select more than one Phase 2.
And then, if a project meets the metrics as put forth in
the book, the SBIR call, they promise that they will place some
core program funds against that topic to see that the
technology is inserted into the agency's program.
I commend the National Institutes of Health. They have very
deep peer review, very thoughtful pee review councils, as does
Department of Energy. Oftentimes we will submit a proposal and
get six reviews on a single proposal. So I commend them all for
the care they take in trying to make a good selection.
Mr. WILLIAMS. Thank you.
Mr. GREEN. Thank you.
Mr. WILLIAMS. Several of you stressed the need to simplify
the SBIR application process. We don't want to see small
business being deterred from commercializing their products and
advancing American technology because of too much bureaucratic
red tape.
So, Dr. Henry, you mention in our testimony that you had to
hire outside consultants to help with your application and that
it still took weeks to complete. So could you elaborate on what
specific changes could be made to streamline the application
process without compromising fraud and abuse protections in the
SBIR?
Mr. HENRY. Well, I think, just to clarify, as Dr. Min said,
that we utilized basically the Phase 0 program as well as
consultants that were hired by the State of Maine. We didn't
have to hire those. I also pointed out that we had a colleague
who was skilled in grant writing and participated in that
process.
I was pointing that out just to show the level of depth of
experience that we had in order to be successful. And I think
that, in my experience, there are a lot of innovative companies
here in the State of Maine that don't have the benefit of
people with grant-writing experience that would be able to
access these programs.
Dr. Green, for example, represents an organization that is
successful because they have a number of Ph.D. scientists that
are experienced with the grant-writing process. And once you
have the experience of getting through it once, it is quite a
bit easier than the second and third and fourth time. It is
that initial barrier to get over it that I think is a problem.
I can't really speak to the fraud issue. I don't know why
the process is so complicated. And looking at other Federal
programs--for example, we won a Wood Innovations Grant from the
USDA that was for more money than the EPA SBIR that we were
funded for, and the entire proposal was all of five pages.
And I do think that that is not always possible for
something like SBIR. And I am not advocating simplifying the
actual writing of the proposal. The proposal should be
extremely detailed, as Dr. Green mentioned. It should lay out
all of the aspects that need to be laid out in order to verify
the scientific veracity, engineering veracity of the problem
they are trying to solve and the market.
But the bureaucratic aspect of it seems to me somewhat
unnecessary. There is a lot in there that a layperson or a
person who has never approached an SBIR program would not be
able to get through or understand.
And I am telling you that based on over a decade of
experience of winning grants from the National Science
Foundation, from the Department of Energy, from the Department
of Transportation. This was an unnecessarily complicated
process relative to other programs.
Mr. WILLIAMS. Thank you for that testimony.
I yield my time back.
Chairman GOLDEN. Thank you very much.
Assuming that we don't have Representative Salazar on
remote anymore, we are going to move on to a second round. And
I am going to recognize myself.
I did want to just quickly, Mr. Green, PSI, it looks like,
has gotten about 1,400 SBIR or STTR awards since 1983. I am
assuming that is when the company was started, but perhaps not.
Maybe that is just the first time.
So you are in Andover, Massachusetts. I think Mass has
gotten about 385 awards, I think, last year. But I think in the
last 3 years you have got over 100 contracts, 66 million, and
220 employees.
These are good things. So congratulations on that, and I
know that the company has been very successful.
But how did you start out? I mean, were you a smaller
company then? How do you compare to, let's say, a startup
company today when you were just getting started back in the
1980s?
Mr. GREEN. Our company Physical Sciences began in 1973
during the aerospace crunch after we had put man on the Moon.
And so we existed for a decade before there was an SBIR
program, supporting the government through research and
development contracts.
In the early days of SBIR, the discretionary funds that had
funded many companies were taken away and used for SBIRs. So
initially SBIRs, in addition to serving the dual purpose of
commercialization, also continued to support national needs.
I think the reason that our company is successful is that
we have many people who are trained, as Dr. Henry has pointed
out, trained at writing grants. We have people that are rounded
entrepreneurs.
But also, PSI has realized that we are good at the research
and development. And so we, as I mentioned earlier, we make a
decision that oftentimes it is better not for us to develop the
production, the marketing, sales, distribution, market
presence, brand, it is better for us to transfer and partner
with another company who has an existing technology, but this
allows them a next-generation technology.
And that allows the technology to get to the market
efficiently because there is a probability that a good idea
could die at every step in that process.
It is efficient. It is quicker. And, as a result, it
produces a greater return for the SBIR program. And then our
serial entrepreneurs can take their expanded skill sets and try
and address the next problem.
Chairman GOLDEN. All right. Thank you.
Some people were, I think, a little confused with some of
the earlier statistics when we were talking about per capita.
Maine got six awards, I think, most recently. If we could
stack that up against 800 in California, 258 in Massachusetts,
I think like 150-something in New York, Kentucky, where Ms.
Johnson is from, 16.
So per capita sounds impressive, but there are some pretty
big gaps there.
I am curious, Dr. Johnson, how would you propose that SBIR/
STTR outreach activities could be better designed to reach
targeted populations? I think Dr. Henry made the point that
people in a place like Madison, Maine, wouldn't even know this
program exists unless there is someone there to help lead them
to it.
Ms. JOHNSON. Yeah, I think that marketing of the program
needs to go beyond the academic campus. I know historically
that is where much of the PIs that apply for SBIRs come from.
Even presently there is a huge concentration there.
But marketing really needs to go beyond that to be
[inaudible]. I mean, that really is where most of the
businesses are being generated if you really think about
today's, the startup community or the small business community,
not actually coming from academic institutions anymore.
So that would be my highest recommendation, that they need
to partner with startup ecosystems, provide training events,
workshops in those startup ecosystems, as well as small
business development centers, and the like.
Chairman GOLDEN. Thank you. I appreciate that.
I have got about 30 seconds left, so I am going to reserve
further questions. And at this time, I will yield back and
recognize Mr. Hagedorn.
Mr. HAGEDORN. Thank you, Chairman. I appreciate that.
Both Dr. Green and Dr. Johnson, you kind of waded into an
area about reauthorization.
And, Dr. Green, you were pretty explicit that in the
future, if these programs are going to work properly, that the
best science needs to win out, this needs to be a merit-based,
totally competitive process.
And, Dr. Johnson, you talked a little bit about how there
maybe needs to be more outreach so folks who are new into the
process or don't have as much experience are aware of the
programs and maybe have some additional expertise provided to
them as far as going through the application and that type of
thing.
What I would be concerned about as we look at
reauthorization is any concept that the actual awards be given
based upon preference of identity or race.
Recently, with the Small Business Administration's
Administrator, I have spoken with her in one of our hearings
and asked about the Restaurant Revitalization Fund. I didn't
think that that was quite fair. I thought it was discriminatory
that we had a priority list.
And now we have basically everybody who wasn't on the
priority list is not getting any money for their restaurants,
and they happen to be, in this case, White men.
And then you had the Biden administration put out an
executive order saying that SBA needed to change its programs
and make them conform with equity standards, whatever that
means. I have asked her for an explanation of that, haven't
received anything quite yet, although we just sent that letter.
Do you have any comments, Drs. Green and Johnson, as to
whether or not this should continue to be a competitive process
based upon merit, and also that maybe we still need to do some
more in order to help people understand what is out there for
them?
Ms. JOHNSON. Yes. So I think absolutely it needs to stay
merit based. I am not suggesting anything other than that.
When we think about merit, Dr. Green, I agree with some of
his comments and things like that. But we need to understand
that these are not research grants. These are Small Business
Innovation Research grants.
And so, unfortunately, if you look at the statistics, many
of the companies that come out of universities are not the ones
creating economic impact in the United States of America.
So when we talk about merit, it is not merit based off of
how sexy the innovation idea is, it is merit based off of can
you translate that innovation's impact for the United States in
terms of innovation, impact in the economy, impact in
healthcare, impact in the environment. And then also, can you
translate that into a commercial company.
And so, unfortunately, academic institutions have not shown
a stellar track record in comparison to other ecosystems, like
the startup ecosystem, small development ecosystem.
So I think it needs to be merit based. And my suggestion
would not be to change the merit or even the review per se of
the grants, but more so provide more assistance on the front
end.
For example, if you are looking at the academic institution
or even in the startup ecosystem, a lot of times minority
business enterprises don't have seed funding to actually do the
early stage research necessary.
So I would propose that we add to the Phase 0 programs that
we see for grant writing an actual Phase 0 program that
provides pre-seed funding so that people can produce minimally
viable prototypes for pre-early stage research so they could
have a much more competitive Phase 1 application.
So I think it definitely needs to stay merit based, but we
need to make sure that the metrics for merit are based off of
economic impact and innovation and not just pure basic science
research.
Mr. HAGEDORN. Thank you.
I think I understand what you said. I am not sure that I
completely agree with the last part of that.
Mr. Green?
Mr. GREEN. May I add?
So I agree with the fact that, of course, it should be
merit based, and I also agree that there should be additional
assistance.
I believe that the 3 percent administrative funds now
really are adequate to address this problem. But what I would
suggest is we take a study to decide how they can best be
deployed.
I understand that the SBIR road show has toured all the
States, and we should assess the benefit of that versus
targeting particular entities that could benefit more.
So we agree with reauthorizing the pilot programs, and I
think the Phase 0 and the I-Corp are part of those pilot
programs. If they are not already permanent, they should be
made permanent. And I think that the agency should look how to
optimize the benefit of their administrative allowance.
Thank you.
Mr. HAGEDORN. Thank you. I appreciate it.
I yield back.
Chairman GOLDEN. Thank you.
I do want to kind of dig a little bit further into the
merit versus economic benefit discussion. I am interested in
that.
Mr. Henry, maybe I will give a little bit of time to you on
this, but I can also share a little bit of your story.
In my district, Madison, Maine, was a paper mill town; the
mill closed just a few short years back. And I think it is fair
to say, without those jobs, without that industry, the town was
pretty much on a path to being decimated. That look was not
good at all.
The decision by GO Lab to not only choose Madison but also
move into that old mill space and redevelop it I think almost--
it is hard to gauge the impact there in bringing back. I think
you are on a path to probably something in the realm of, what,
a hundred jobs or more. Of course, this remains to be seen how
successful you will be.
But hard to, I think, gauge the benefit just dollar for
dollar comparing an SBIR award in a place, let's say, like
Massachusetts, versus Madison, Maine, that there has got to be
a way to gauge how meaningful that economic benefit is to,
let's say, rural Maine, rural America.
And as a result, spurring jobs, creating jobs in
disadvantaged communities, I would say it is pretty important
from the perspective of taxpayers. Certainly if you are a
taxpayer in rural Maine, it has almost definitely got to be the
perspective.
But could you, any one of you, talk a little bit about how
you might approach some kind of analysis, a way of adding
weight in the application process to the award that takes it
into the dynamics that I just discussed?
Mr. HENRY. Sure, yeah. I am not an economist, and so there
are economists that do studies on the impact of various
businesses on their community. I know in the forest products
industry, we have an impact factor of something like 16, that
is a combination of forest products and manufacturing. That is
a huge impact on employment and on a community compared to most
other industries.
But I can't really--it is really hard to say definitively
anything really valuable to that end.
I feel compelled to comment on Dr. Green's comment that 3
percent is adequate. A lot of facts have been thrown around. A
lot of numbers have been thrown around. But what proof do we
have that 3 percent is adequate on funding these kind of
programs?
I can't see things changing significantly in terms of how
we distribute funds for research and development and innovation
throughout underrepresented areas, throughout underrepresented
communities.
I think, to Representative Hagedorn's point, merit based is
really--people will throw that around and want it to be some
concrete thing. But my mom was a professor in an Ivy League
institution for over 40 years. She graduated more African-
American Ph.D.s than any professor in the United States in her
tenure, and she graduated four.
So representation is an issue for many communities because
those various communities value different things. Rural areas
value different things than urban areas. And if the people who
are reviewing the applications are primarily from academic
institutions, as Dr. Johnson mentioned, they are going to value
scientific merit. They are not going to value economic merit.
Our company was rejected for most of our SBIRs because of
our scientific merit. They didn't view there to be significant
scientific merit. But the impact of our future investment of
$150 million on a town like Madison is immeasurably larger than
most, the impact that it has on----
Chairman GOLDEN. Quickly, sir. Dr. Henry, if I could--I
have only got 30 seconds left there.
But that is a great point, talking about that perspective
right there, which is the economic merit versus just purely the
scientific, not just--the product that you are bringing is
going to benefit, There is going to be an economic merit across
the country in regards to lower home heating prices and other
things. So I think that is also something that could
potentially be worked into a process such as this.
But, Mr. Hagedorn, any other questions on your end?
Mr. HAGEDORN. No.
Chairman GOLDEN. I will just give Dr. Johnson or Dr. Min,
Dr. Green, the opportunity to weigh in on this if you want. You
don't have to.
And I think with that, we are----
Ms. JOHNSON. I would like to just comment.
I know that we use this term ``merit,'' and we are trying
to figure out what to evaluate. I actually serve on one of the
review committees for one of the agencies that distribute SBIR
and STTR. And I don't want to get lost in this discussion of
merit that when it comes to the committees, there is no
consideration whatsoever for the applicant coming from a rural
area, being Black, White, Hispanic, Latino. There is no--none
of that is applied into the review process.
And so I think really what we are talking about is how do
we get applicants, a more diverse pool of applicants, doing
more diverse innovation of higher quality into the program. And
that starts with equipping and enabling more individuals from
diverse backgrounds that are currently underserved to be able
to do that.
So when we talk merit, yeah, when it gets down to brass
tacks, when you act in that review committee, we don't see
anything but the application in front of us. But we really need
to make sure that everybody is given the opportunity to put the
best application in front of us, not just in the way that they
write it but also in the content, which is more so what we care
about.
Chairman GOLDEN. Thank you.
Anyone else have any other thoughts on this particular
issue?
Very good. Well, I want to thank you all for joining us for
the hearing today. I certainly appreciate your taking the time
and your patience, again, as we started a little bit late. The
testimony is very helpful, and I think that the Q&A was
productive as well.
As we have heard today, not all small businesses have the
chance to succeed in the STEM sector, from rural technology
companies to women-run startups. In our metropolitan centers, a
broad range of entrepreneurs are at a disadvantage in the
field.
SBIR and STTR offer good opportunities for developing
technology and growing small firms, but we should work to make
them extend to a broader range of business owners.
Today's witnesses provided us with critical insights, very
helpful insights into improving these programs and fostering
greater diversification.
I look forward to working with members of this Subcommittee
to implement these improvements and ensure that these critical
programs are reaching as many small businesses as possible.
And with that, I would ask unanimous consent the members
have 5 legislative days to submit statements and supporting
materials for the record.
Without objection, so ordered.
If there is no further business to come before the
Committee, we are adjourned.
Thank you.
[Whereupon, at 3:57 p.m. the Subcommittee adjourned.]
A P P E N D I X
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