Overview of the Small Business Innovation Research and Small Business Technology Transfer Programs (House Small Business Committee hearing, May 13, 2021)
Summary
The printed record of a House Committee on Small Business hearing, Small Business Committee Document Number 117-012, titled Overview of the Small Business Innovation Research and Small Business Technology Transfer Programs, held May 13, 2021 in the 117th Congress, with Chairwoman Nydia Velázquez presiding at 11:00 a.m. The witnesses are Dr. Joyce Tung of 23andMe, Inc., Pat Keady of Aerosol Devices Inc., Rebecca Todd of the Arkansas Small Business and Technology Development Center and Jere Glover of the Small Business Technology Council. The appendix holds their prepared statements, questions and answers for the record with Glover, and material from 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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“Overview of the Small Business Innovation Research and Small Business Technology Transfer Programs (House Small Business Committee hearing, May 13, 2021).”
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OVERVIEW OF THE SMALL BUSINESS INNOVATION
RESEARCH AND SMALL BUSINESS TECHNOLOGY
TRANSFER PROGRAMS
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
HEARING HELD
MAY 13, 2021
Small Business Committee Document Number 117–012
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
44–564 WASHINGTON : 2021
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELÁZQUEZ, 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
(II)
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CONTENTS
OPENING STATEMENTS
Hon. Nydia Velázquez ............................................................................................. 1
Hon. Blaine Luetkemeyer ....................................................................................... 3
WITNESSES
Dr. Joyce Tung, Vice President of Research, 23andMe, Inc., Sunnyvale, CA .... 5
Ms. Pat Keady, Founder, CEO, and President, Aerosol Devices Inc., Fort
Collins, CO ............................................................................................................ 6
Ms. Rebecca Todd, Innovation Consultant, Arkansas Small Business and
Technology Development Center, Little Rock, AR ............................................ 8
Mr. Jere Glover, Executive Director, Small Business Technology Council,
Washington, DC ................................................................................................... 9
APPENDIX
Prepared Statements:
Dr. Joyce Tung, Vice President of Research, 23andMe, Inc., Sunnyvale,
CA ................................................................................................................... 34
Ms. Pat Keady, Founder, CEO, and President, Aerosol Devices Inc., Fort
Collins, CO .................................................................................................... 43
Ms. Rebecca Todd, Innovation Consultant, Arkansas Small Business and
Technology Development Center, Little Rock, AR ..................................... 45
Mr. Jere Glover, Executive Director, Small Business Technology Council,
Washington, DC ............................................................................................ 55
Questions and Answers for the Record:
Question from Hon. Leutkemeyer to Mr. Jere Glover and Response by
Mr. Jere Glover ............................................................................................. 84
Question from Hon. Williams to Mr. Jere Glover and Response by Mr.
Jere Glover .................................................................................................... 85
Question from Hon. Davids to Mr. Jere Glover and Response by Mr.
Jere Glover .................................................................................................... 86
Question from Hon. Meuser to Mr. Jere Glover and Response by Mr.
Jere Glover .................................................................................................... 87
Question from Hon. Newman to Mr. Jere Glover and Response by Mr.
Jere Glover .................................................................................................... 88
Additional Material for the Record:
New England Innovation Alliance (NEIA) ..................................................... 89
(III)
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OVERVIEW OF THE SMALL BUSINESS
INNOVATION RESEARCH AND SMALL
BUSINESS TECHNOLOGY TRANSFER
PROGRAMS
THURSDAY, MAY 13, 2021
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia Velázquez
[chairwoman of the Committee] presiding.
Present: Representatives Velázquez, Crow, Davids, Mfume, Phil-
lips, Newman, Bourdeaux, Delgado, Houlahan, Mr. Kim of New
Jersey, Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney,
Garbarino, Ms. Young Kim of California, Van Duyne, Salazar, and
Fitzerald.
Also Present: Representative Schneider.
Chairwoman VELÁZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a recess at
any time.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during hybrid proceedings.
All Members are reminded that they are expected to adhere to
these 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, please remember to remain muted until you are recog-
nized to minimize background noise. If you 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 their questioning, I will move to the
next available Member of the same party and I will recognize that
Member at the next appropriate time slot provided they have re-
turned to the proceeding.
For those Members physically present in the Committee room
today, we will also be following the health and safety guidelines
issued by the attending physician. That includes social distancing
and especially the use of masks. Members and staff are expected
to wear masks while in the hearing. With that said, Members will
be allowed to briefly remove their masks when recognized by the
Chair for their statement and questions. Otherwise, masks are ex-
(1)
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pected to remain in place. I thank you in advance for your commit-
ment for a safe environment for all here today.
During my tenure on this Committee, I have seen countless ex-
amples of how small businesses drive innovation. Technology has
changed rapidly over the years thanks to pioneering entrepreneurs
leading the way. Congress has facilitated this innovation through
investments in federally funded research and development, also
known as R&D. As a result, federally funded R&D has produced
countless inventions and discoveries that have changed our country
for the better. From Doppler radar to computers to the first wind
energy turbines, government-funded research has a rich legacy of
helping launch ground-breaking inventions. For innovative small
businesses, it can often be a struggle to access early funding crit-
ical to building a new product.
To reduce risks of investment in small businesses and encourage
entrepreneurs to commercialize federal R&D innovations, SBA
launched the Small Business Innovation Research (SBIR) program
in 1982. Ten years later, the agency launched the Small Business
Technology Transfer (STTR) program to stimulate partnerships be-
tween small businesses and nonprofit research institutions. These
programs are funded through federal set-asides of government
agencies, and development funds. SBIR and STTR have an impact
on small businesses across a variety of different sectors every year.
In FISCAL YEAR 2020, agencies contributed $454 million for 1,030
awards to 744 small businesses. Not only do these figures rep-
resent an investment in our nation’s small firms, but they are also
funding our country’s future.
Over the course of the last 3 decades, SBIR/STTR have funded
small businesses that are now economic powerhouses. The pro-
grams provided companies like 23andMe, Qualcomm, Semantic,
and Da Vinci Surgical Systems with the early funding they needed
to develop new technologies and build their enterprises into what
they are today. These programs also have the potential to address
persistent barriers that hold back women and people of color oper-
ating in the STEM fields. Minorities often have a harder time ac-
cessing seed capital to pursue the creation of new technologies and
this program helps bridge that gap.
Women hold less than 20 percent of U.S. tech jobs and only 5
percent are in leadership positions at technology companies. Ac-
cording to a recent survey by Pugh Research, Asian Americans hold
13 percent of STEM jobs while African Americans hold 9 percent
and Latinos hold 8 percent. These numbers are staggering and
show we have a long way to go. And I may add, increasing the
number of women and minorities who participate in the SBIR/
STTR program is a top priority of mine.
Today, our country is at a crossroads when it comes to our inno-
vative capacity, just as we were when Congress created SBIR/
STTR. In the latest Bloomberg Innovation Index, the United States
dropped out of the top 10 entirely. Regaining our footing as one of
the world’s most innovative nations should be a bipartisan goal. If
we are to accomplish it, it is vital that we utilize the power of small
businesses.
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I hope that today’s discussion sheds light on the importance of
small business innovation, and I look forward to working with my
colleagues to improve these critical programs.
I now yield to the Ranking Member for his opening statement,
Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Madam Chair. And good
morning to all.
I thank all of you for being here as we examine the Small Busi-
ness Innovation Research and Small Business Technology Transfer
or SBIR and STTR programs. Innovation is the engine that drives
our economy. Technological breakthroughs and the entrepreneur-
ship it spurs build our economy and creates new jobs by finding
state-of-the-art solutions to difficult problems and capitalizing on
those new products. This correlation is particularly important in
the small business arena. Small businesses tend to be more nimble,
responding to the market changes more rapidly than their bigger
counterparts. They drive the innovation sector and make us more
agile in the world economy. In this area of globalization, making
it easier for small businesses to develop and commercialize new, in-
novative products is essential not only for America’s competitive-
ness but for its national security as well.
This is why programs like SBIR/STTR are very important. These
programs, envied and emulated around the world, were created
based on the premise that small technology-based firms tend to be
highly innovative and inventive and that this innovation should be
better harnessed by the Federal Government. Binding these new
developed technologies with other Federal R&D efforts was seen as
a natural extension to both boost small business participation in
Federal R&D activities and to solve agency institutional problems,
whether at the Department of Defense, National Institutes of
Health, or Department of Energy.
All too often, good ideas never materialize because of a myriad
of obstacles. It can be lack of funding, lack of understanding, or
perceived lack of a marketplace for the truly new and amazing
technology. The SBIR and STTR programs bridge the gap between
the fantastical and the practical, while building our economy and
improving the function of the Federal Government in the process.
The small businesses that participate in these programs are rap-
idly pushing the boundaries of what is possible in a variety of
fields. From supporting our warfighters, to battling cancer and
COVID, the SBIR and STTR programs are emboldening our small
firms to contribute mightily to the fight.
Current authorization for these programs is set to expire at the
end of the next fiscal year. Getting a jump on this process is essen-
tial and I am very happy the Chairwoman worked with me to
schedule this hearing and discuss our normal mutual problem here.
Thank you very much, Madam Chair.
Today, we have an excellent panel of witnesses to discuss these
programs and provide the Committee with suggestions to make
them better for small businesses and participating agencies alike.
I am looking forward to the hearing, hearing those ideas, and
working with my colleagues across the aisle and across the capital
to draft legislation we will all be proud of and support.
With that, Madam Chair, I yield back. Thank you very much.
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Chairwoman VELÁZQUEZ. Thank you, Mr. Luetkemeyer. The
gentleman yields back.
I would like to take a moment to explain how this 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 first witness.
Our first witness is Dr. Joyce Tung, the Vice President of re-
search for 23andMe in Sunnydale, California. Now considered a
startup unicorn worth approximately $4 billion, 23andMe received
its first SBIR grant from the National Institute of Health in 2020.
She joined 23andMe in 2007 and leads the research team which is
responsible for consumer health and ancestry R&D, academic and
industry collaborations, and new research strategies. She earned
her Ph.D. in genetics from the University of California, San Fran-
cisco, where she was a National Science Foundation graduate re-
search fellow. Welcome Dr. Tung.
Our second witness is Ms. Pat Keady, cofounder, CEO, and Presi-
dent of Aerosol Devices, Inc., in Fort Collins, Colorado. She is the
past President of the American Association for Aerosol Research.
Ms. Keady received her Master of Science degree in Mechanical
Engineering from the University of Minnesota and holds two pat-
ents from Aerosol Instrumentation with three more pending. Ear-
lier this month, she was awarded a Businesswoman of the Year
award by CEO Today. Congratulations and thank you for joining
us, Ms. Keady.
Our third witness is Ms. Rebecca Todd, the Innovation Consult-
ant for the Arkansas Small Business and Technology Development
Center located in Little Rock, Arkansas. Ms. Todd assists tech-
nology-based small businesses and university researchers through-
out Arkansas with navigating federal funding opportunities within
the SBIR and STTR programs that support innovation with high
commercial potential. She leads SBIR/STTR training events and
has strong working relationships with agency program managers
and state funding organizations. Welcome, Ms. Todd.
Now I yield to the Ranking Member to introduce our final wit-
ness.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Jerry Glover serves as executive director of the Small Business
Technology Council, SBTC, a trade association of small, high-tech
companies, most of whom are highly involved in the SBIR program.
Through the laws existence, she has been one of its most active
supporters. Mr. Glover has a unique blend of private and public
sector experience. A former CEO and attorney in private practice,
he has testified before Congress over 30 times and appeared in over
100 agency proceedings, including rulemakings, adjudications, en-
forcement proceedings predominantly within the SBIR and STTR
programs. He probably knows or would be able to know what our
questions are before we even ask him, Madam Chair. He obtained
his undergraduate law degrees from the University of Memphis
and a LLM in administrative law and economic regulation from
George Washington University. Mr. Glover, we welcome your par-
ticipation in today’s hearing and look forward to your testimony.
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I yield back.
Chairwoman VELÁZQUEZ. Thank you, Ranking Member. He
yields back.
Dr. Tung, you are now recognized for 5 minutes.
STATEMENTS OF DR. JOYCE TUNG, VICE PRESIDENT OF RE-
SEARCH, 23ANDME, INC.; PAT KEADY, FOUNDER, CEO, AND
PRESIDENT, AEROSOL DEVICES INC.; REBECCA TODD, INNO-
VATION CONSULTANT, ARKANSAS SMALL BUSINESS AND
TECHNOLOGY DEVELOPMENT CENTER; JERE GLOVER, EX-
ECUTIVE DIRECTOR, SMALL BUSINESS TECHNOLOGY COUN-
CIL
STATEMENT OF JOYCE TUNG
Ms. TUNG. Chairwoman Velázquez, Ranking Member Luetke-
meyer, and other members of the Committee, thank you for the op-
portunity to testify at today’s hearing and share our experience
with the Small Business Innovation Research Program.
23andMe is a leading consumer genetics and research company.
Founded in 2006, based exclusively in the U.S. with offices in Cali-
fornia and testing performed in North Carolina, the company’s mis-
sion is to help people access, understand, and benefit from the
human genome. 23andMe has pioneered direct access to genetic in-
formation as the only company with multiple FDA clearance for
over-the-counter genetic health information and has created the
world’s largest crowdsourced platform for genetic research.
In 2010, the year of our first grant application, we had fewer
than 50 employees and minimal revenue from our direct-to-con-
sumer genetics product. The business also had a goal to accelerate
scientific discovery by developing a highly scalable, consumer cen-
tric research platform. This platform needed a significant amount
of investment in order to develop the infrastructure, breadth, and
size needed to make it a scientifically valuable asset that would
meaningfully benefit the company. Because we were a small busi-
ness and because our mission was aligned with the mission of the
National Institutes of Health, we decided to apply to the SBIR pro-
gram. Over approximately 8 years, 23adMe applied for 10 SBIR
grants and received eight.
Reflecting back on our participation in the SBIR program, we be-
lieve that we saw four main benefits. First, our SBIR funded work
helped us establish our scientific credibility. In total, the work
funded by our SBIR grant produced at least 32 scientific presen-
tations and publications. This credibility allowed us to realize the
second benefit which was the development of a commercially viable
research platform.
By 2014, paid research partnerships with industry partners
made an important contribution to the company’s revenue. The
growth and development of the research platform also enabled the
establishment in 2015 of the Therapeutics development program at
23andMe.
Third, our SBIR grants helped us to make a substantial contribu-
tion to the scientific community. The scientific publications men-
tioned previously shared genetic insights on conditions ranging
from asthma and allergy to Parkinson’s disease. More than half of
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those publications were written in collaboration with academic re-
searchers at no cost to them. We have also used SBIR funding to
improve the ethnic diversity of data in a protected NIH data reposi-
tory for use by other researchers.
Lastly, the SBIR program has helped us develop our early career
scientists. The exercise of applying for and executing a grant builds
very useful skills for the investigator which benefits not only the
individual but also the company.
The main challenge we experienced was the administrative over-
head of running the grant, specifically, the challenge of adequately
meeting the accounting requirements. The accounting system re-
quirements, which include time tracking on an hourly basis and
audit preparation were very intimidating, and even with help from
our finance department, the team spent multiple hours every week
on time tracking. Given the cost of setting up the accounting pro-
gram, having a singular small grant was not really worth the ef-
fort. Thus, the dollar limit to the awards was also a disincentive
to applying.
Based on this experience, we have three recommendations. The
first is to reduce the administrative overhead for time tracking and
creating an accounting system.
The second is to consider increasing the max award. Given the
cost of setting themselves up to administer an SBIR award, some
small businesses may be more motivated to apply for the program
if the potential reward were greater.
Lastly, we recommend continuing to fund venture-backed compa-
nies. In our early days as a venture-backed company, most inves-
tors were interested in the development of our consumer product
rather than the research platform and there was skepticism about
our value as a research partner. Without SBIR support, it would
have been more difficult for us to build our program. We see ven-
ture funding and SBIR funding as complementary resources to
drive higher risk, higher award, technology innovation, and com-
mercialization.
SBIR grants supported our scientific innovation at a time when
we lacked the track record and credibility to get significant funding
from other sources for our research and development work. We be-
lieve research in industry, particularly in small startups, will play
an increasingly important role in innovation and that the SBIR
program can play a key role in nurturing that innovation.
Though we are now too large to be eligible for SBIR grants, we
appreciate the opportunity to express our support for this impor-
tant program. Thank you.
Chairwoman VELÁZQUEZ. Thank you, Dr. Tung.
Now we recognize Ms. Keady for 5 minutes. Welcome.
STATEMENT OF PAT KEADY
Ms. KEADY. I would like to thank Chairwoman Velázquez,
Ranking Member Mr. Luetkemeyer, and the entire Committee on
Small Business for inviting me to testify.
My name is Pat Keady. I am CEO and president of Aerosol De-
vices, Inc., a small woman-owned business incorporated in 2014 in
the state of Colorado. We develop advanced sampling and measure-
ment instruments sold primarily to scientists studying the chem-
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ical and biological properties of airborne particles. Our method of
gently collecting aerosolized viruses, including SARS-COV2, is con-
sidered by leading scientists to be the best approach for deter-
mining whether airborne viruses present, as well as the infectivity
or viability of such viruses.
In 2020, we had revenue of $2.17 million, approximately half in
product sales and half in grants. We have 11 employees, including
nine with science and engineering degrees. We have been named
by Biz West Magazine as one of the 50 fastest growing private
businesses in Northern Colorado 2 years in a row, ranking number
one in our size class in 2019.
Most people recognize that starting a company is no easy task
and often requires significant financial resources. This is especially
true when developing a physical product that requires design, pro-
totypes, testing, patents, regulatory approvals, tooling, and inven-
tory. Having a good idea for a product that customers will buy is
essential but is certainly not sufficient for achieving economic suc-
cess.
Ninety-six percent of the startup funding for our company came
from the personal assets of the two cofounders, including myself.
Our startup capital totaled $587,000. This amount covered the
commercial development of our first product but was insufficient
for product refinement, global marketing, or continuing new prod-
uct research and development.
This is the point in our company history where the SBIR/STTR
program came in with necessary financial assistance. Since our
first NSF STTR phase one grant was awarded in 2017, we have
been awarded six phase one, three phase two, and two subawards
for a total of $4.68 million. Nearly half of our grants were awarded
in just the past 12 months to address the COVID pandemic threat
and to provide early warning of a bioterrorist attack.
With an NSF grant awarded 1 year ago, we fast tracked develop-
ment of a compact, easy-to-use virus sampler that was launched
into the market last week. COVID-focused developments can also
be used for measurement of other respiratory pathogens, such as
seasonal influenza and tuberculosis. Our grant funding has come
from five different Federal agencies demonstrating the versatility
that our platform technology has for addressing a wide variety of
industry and societal needs.
Approximately half of the funding is a passthrough to our univer-
sity and industry collaborators. We have partnered with five public
universities and three companies, two of which are also small pri-
vate businesses. The university collaborations support graduate
students and help to build our Nation’s intellectual capital. Other
products at least partially funded by the grants include three pat-
ent applications, two publications and journals, and dozens of con-
ference presentations.
Our primary interest lies in developing commercial products, not
simply doing cool research projects. We look forward to the day
when we can fund our own internal research and development
without government support. Writing grant proposals and the re-
porting requirements and managing the projects is a considerable
effort for a small company. A weakness in the SBIR/STTR model
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is that there is no true funding to launch a product, what is called
commercialization.
Because of the shortfall, we are actively seeking an outside inves-
tor. But bringing on an investor has its own set of complications
and is not the right path for all businesses. Until we reach that
critical revenue milestone where we can truly self-fund, we are
grateful for the financial assistance of the SBIR/STTR programs.
Our goal is to offer an increasing number of good-paying jobs and
sell quality products to customers around the world. We aim to pro-
vide an exceptional return on the taxpayer investment.
The SBIR/STTR grants have been a lifeline for our small, early
stage company. I strongly encourage Congress to continue and
strengthen this vital program that provides essential funding for
America’s entrepreneurs and helps de-risk technology for potential
investors.
Thank you. I look forward to your questions.
Chairwoman VELÁZQUEZ. Thank you, Ms. Keady.
Ms. Todd, you are now recognized for 5 minutes.
STATEMENT OF REBECCA TODD
Ms. TODD. Good morning. My name is Rebecca Todd, innovation
specialist at the Arkansas Small Business and Technology Develop-
ment Center (ASBTDC) based at the University of Arkansas at Lit-
tle Rock. I am proud to be here to share some success that the Fed-
eral and State Technology (FAST) program has brought to innova-
tive Arkansas businesses. Hopefully, too, I can share some insight
on how I believe Congress could and should expand the success of
the FAST program.
The ASBTDC has competed for and successfully performed on
FAST grants, averaging 125,000 for 1-year projects that are
matched by the University of Arkansas at Little Rock and the state
in 2010. This program has made an important impact on our abil-
ity to provide the statewide average about the SBIR/STTR program
and related ASBTDC services.
From 2016 to 2020, ASBTDC assisted mentees with winning 52
SBIR/STTR awards totaling more than $23 million. The mentees
that we served through our FAST project are often too early stage
to attract private investment but as the largest source of non-
diluted funding for early stage research based companies, the
SBIR/STTR program critical to helping them successfully develop
and commercialize new products and services.
We continue to see sustained growth in our mentees’ success,
both in number of SBIR/STTR proposal submissions, and more im-
portantly, awards. Since our 2010 opening FAST project, ASBTDC
has seen a 467 percent increase in total number of SBIR/STTR
awards for our mentee clients. Our participation in the programs
has positioned us as the state’s leading resource in providing SBIR/
STTR proposal development services.
As a rural state, Arkansas has many areas that are underserved.
They lack the awareness of funding opportunities available through
the SBIR/STTR program. Our staff routinely travel the state and
utilize data conferencing to offer formal and informal educational
outreach specific to the SBIR/STTR program and related ASBTDC
service offerings. As a result of this outreach, two faculty members
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of this program engaged our services to submit SBIR applications
to the U.S. Department of Agriculture.
ASBTDC has used its participation in the FAST program to
reach strong statewide partners over the last decade. Referrals
from these partners and through mentees learn of our centers
SBIR/STTR services and expand the research of our program.
Mentees are often inspired by success stories. Women leaders in in-
novation often serve as speakers at our training events and their
SBIR/STTR successes are featured in our Lab Launch newsletter.
For example, GSS Group, woman-owned horticulture company,
GSS Group won USDA SBIR phase one awards on their first try
after engaging our center services. This company’s CEO has been
a strong champion for our center, leading to a number of new
mentee referrals from other AgTech companies. This success story
in our Lab Launch newsletter and in our YouTube SBIR success
stories video have attracted attention of other women researchers
across the state.
As the number of programs grows in Arkansas, particularly at
the university level, it has become increasingly important that
ASBTDC grow capacity to actively serve potential mentee base.
In essence, the FAST program has enabled us to establish a net-
work of support for small business innovation and provide access
for all small businesses that would not have existed without the
support of the FAST program.
While the funds supporting our efforts have been limited,
ASBTDC has still managed to help mentees, especially with SBIR
and FAST projects. We believe other underserved areas should
have the ability to access the FAST program funds to increase
SBIR programmatic outreach and services to their populations. The
FAST program [inaudible] greater value for grant participants if
the amount of the grants was expanded. This would support pro-
grammatic offers. If the FAST grant was extended to 3 years per
project, it would allow FAST awardees, like ASBTDC to expand ef-
forts, dedicate more time to existing and new programmatic offer-
ings.
The more that FAST awardees like ASBTDC can cultivate SBIR/
STTR success for small businesses across the country, the greater
the economic payoff in terms of growth and the number of new in-
novative companies, high-tech, high-paying jobs that will attract
more students willing to go to universities and new solutions for
technological challenge areas.
For every state that participates in FAST, as word continues to
spread about Arkansas’s success in growing innovative companies
and jobs around a founder’s scientific passions, the motivation for
companies to participate in the SBIR/STTR program will continue
to grow all across our state. This has been a successful model for
Arkansas, and we believe that it can and should be replicated.
Chairwoman VELÁZQUEZ. Thank you, Ms. Todd.
Now we recognize Mr. Glover for 5 minutes.
STATEMENT OF JERE GLOVER
Mr. GLOVER. Good morning. I am Jere Glover, executive direc-
tor of the Small Business Technology Council of the National Small
Business Association.
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I had the privilege 40 years ago of testifying before Congress in
support of the SBIR legislation. At that time, the U.S. was the
world leader, worldwide leader in innovation. We dominated the
technology capital world. We had the best education system and
the strongest patent system in the world, America’s small business,
the most innovative sector of the economy and a wellspring of en-
trepreneurial energy but received only 5 percent of Federal R&D
funding. Today, about half of venture capital investments are made
overseas. Eighty percent of all venture capital seed investments,
early stage investments go into just four industries and to a limited
number of states. Our patent system is severely weakened and
small business still receives a very small portion of the Federal
R&D dollars.
Small business, with the help of the SBIR program, is still the
most innovative sector in the U.S. The SBIR program provides seed
corn for innovation combining private enterprise with American in-
genuity to enable innovations and Federal R&D funding while
building on the new products and new businesses.
When it comes to worldwide competition, the United States, as
the Chairwoman has pointed out, has dropped from first to 11th,
not even the top 10. Basically, China is simply eating our lunch.
The Beijing Institute of Collaborative Innovation has funded 150
U.S. universities’ technologies. One hundred eight of those they
have commercialized. They have a venture fund now to develop
these U.S. technologies of $616 million. Europe, the European
Union is funding 20 percent of its R&D to small business. That is
at least twice what the U.S. does. France has created a $13 billion
disruptive technology fund.
The one important thing to remember about the SBIR from an
international competition point of view, it is the only U.S. program
that requires funding to U.S. companies owned by U.S. citizens and
the work be done in America. The SBIR program is working and
working well. After 20 National Academy of Sciences study, four
economic impact studies that look over half of the SBIR phase two
awards, we can clearly say that it is an engine that drives innova-
tion in America. The return on investment for the STTR/SBIR firm
program at the National Cancer Institute is 33 to 1. At DOD, it is
22 to 1. For every dollar invested, $3 of Federal, state, and local
taxes are generated.
In terms of success, I can guarantee you that at least three tech-
nologies you use on a regular basis were funded by SBIR. The GPS
on the chip, combining Wi-Fi and Bluetooth and the CMAS camera
technology, all of which are used in your cellphones. So you can
clearly see that this, among all the technologies, there is a list of
SBIR success stories in the back of my testimony.
The market actually loves the SBIR program. Seventeen coun-
tries have copied it. As I pointed out, China has done an excellent
job of copying it and taking it further. Ten percent or 3,000 SBIR
firms have VC inventions. Eight hundred twenty-nine SBIR firms
have gone public. Thirteen hundred have been acquired by other
companies. And 70 percent of all university licenses are going to
small business, which recognizes the importance of small business
to university commercialization.
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What is working with he SBIR program? One, job creation. Small
business created over 1.5 million jobs. And it is a state-by-state
analysis how many jobs are being created in each. Fifty to 70 per-
cent of all phase two SBIRs are commercialized.
GSA has done one billion dollars worth of phase three contracts
in the last 2 years. Likewise, the Air Force and Navy combined
have done over $2 million of phase three contracts. Agencies are
speeding up the contracting process but more needs to be done.
We need to encourage innovation and support small business in-
novation by, one, making SBIR permenant; two, doubling the SBIR/
STTR program and restoring the Rapid Innovation Fund funding.
We need to strengthen the patent system. We need to increase the
Federal R&D spending. We need to set a goal of 15 percent for Fed-
eral R&D for small businesses. And we need to continue stream-
lining and simplifying the contracting process. If we take these ac-
tions, you will unleash new technologies for America while
strengthening our economy, rejuvenating America’s leadership in
innovation. We can beat China and become number one in innova-
tion again if we effectively use the SBIR/STTR program.
SBIR is like printing money without inflationary effect. Three
dollars are generated for every dollar spent.
It is working well. Thank you.
Chairwoman VELÁZQUEZ. Thank you, Mr. Glover.
I will begin by recognizing myself for 5 minutes.
Dr. Tung, I would like to address my first question to you.
One of the goals of the SBIR/STTR program is to increase private
sector commercialization of innovations derived from federally
funded R&D. Dr. Tung, how did early seed funding from SBIR help
develop the genetic testing services available today?
Ms. TUNG. I can provide a few examples. In the early days of
23andMe, the genetic health information we provided to customers
was based solely on published research and the scientific literature.
Today, many of our new genetic health reports are based on sci-
entific results from our own research platform, the development of
which was partially supported by SBIR funding. In addition, we
have published 32 scientific papers supported by SBIR funding.
Those results may be used by others in the scientific community to
develop their own products and services.
Chairwoman VELÁZQUEZ. Thank you.
Ms. Tung, the SBIR and STTR programs share four goals and
one is to foster inclusion and diversification among innovative
firms. Yet, this continues to be a challenge. One of my top prior-
ities for the upcoming reauthorization is to improve participation
of minority and disadvantaged persons in the program. In your ex-
perience, what strategies have worked and what are the greatest
challenges to this effort?
Ms. TODD. So our primary areas of industry and regions where
large populations of these groups are based, it would helpful if
SBIR/STTR opportunities were presented in a way that highlighted
specific research interests that align with these industry types. For
example, SBIR/STTR research topics might be highlighted in re-
gions where agriculture is a prominent industry. Sharing success
stories of companies with team members who share demographic
features of the groups that you are targeting for increased SBIR/
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STTR program participation is always helpful. Videos and feature
articles in newsletters that have photos are a couple of ways to
communicate these inspirational stories. To encourage participation
from HBCUs, highlighting the partnership opportunity inherent in
both SBIRs and STTRs would be particularly helpful.
ASBTDC previously hosted an introductory SBIR/STTR work-
shop at an HBCU that featured SBIR awardees both from local
companies and their university subcontract leadership team.
Chairwoman VELÁZQUEZ. Thank you, Ms. Todd.
We hear time and again about the struggles that small busi-
nesses face in overcoming the ‘‘Valley of Death’’ where research is
derailed because of a lack of funding. This Committee is dedicated
to modernizing the program in such a way to better assist busi-
nesses in overcoming this stumbling block.
To the panel, what have you found to be the best mechanisms
to help businesses commercialize their products?
Mr. Glover, I would like to start with you.
Mr. GLOVER. I think Phase III of the SBIR program, which is
no Federal money and no SBIR money. It has been the single best.
That is why I wanted to highlight how many billions of dollars are
now going into Phase III. We are starting to see that happening.
It needs to happen a lot more. There are agencies that do virtually
nothing in that area and do not have a good record. Some are just
getting started. But phase three is an opportunity. The use of ven-
ture funding was the core for the first 20 years of the SBIR pro-
gram for Phase III. As VC moved on to later stage investments,
that VC investments of RAVC waned. I think phase three has got
to be the best way we can do that and make sure focus where it
is not SBIR dollars but it is private sector and non-SBIR
goverenment dollars.
Chairwoman VELÁZQUEZ. Thank you.
Ms. Keady, would you like to comment?
Ms. KEADY. Well, I would definitely agree that the phase three
commercialization grants would be extremely helpful. We have
never gotten one. The agencies where we have gotten our grants
do not offer money for this and so we have just had to do our own
bootstrapping in terms of paying for the commercialization. And be-
cause we have a global product, it is also quite expensive to ade-
quately market internationally. And so one of the things we are
looking at is trying to start a search for investing funding. Inves-
tors are very risk averse so the SBIR funding is good for helping
de-risk that. But so far we have been deemed too early for signifi-
cant investment in terms of attracting a lot of investment money.
But we are starting that path. But that is the biggest challenge I
would agree.
Chairwoman VELÁZQUEZ. Thank you, Ms. Keady.
My time has now expired. I will recognize the Ranking Member,
Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Mr. Glover, I would like to start with you. One of my biggest pri-
orities on the Committee is to root out and rectify the waste, fraud,
and abuse in every SBA administered program. Recent audits that
we have been told about here are very concerning with regards to
this. So my question basically is, how are these two programs
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faring with regards to waste, fraud and abuse in comparison to
other SBA programs?
Mr. GLOVER. In the history of the program, I think there have
been less than 20 waste, fraud, and abuse cases that have been
brought and that is .0001 percent of all of the SBIR program
awards. Because of the competitive nature, it is really tough to try
to engage in fraud there. You have got to first win a phase one,
then win a phase two, and it has been not fraud free but has been
very limited, and most of those cases involved university connection
with a small business where they crossed the line and did some-
thing——
Mr. LUETKEMEYER. So the competitiveness of the program
sort of minimizes the ability for fraud because it is not something
that if you qualify you automatically get the money. If you qualify
for it you compete for other people against that. Therefore, there
is sort of a bump in the road there to prevent that from happening.
Would that be a fair statement?
Mr. GLOVER. Absolutely, sir.
Mr. LUETKEMEYER. Okay. Thank you very much.
Ms. Todd, can you explain to me how the FAST program differs
from the original SBDC model of outreach in counseling, please?
Ms. TODD. I am not familiar with the original model. I can
speak to some of the offerings of our FAST program. Would that
be——
Mr. LUETKEMEYER. Well, the SBDC model is such that they
do have outreach. They do have counseling in it. And is that not
what a big part of the FAST program is?
Ms. TODD. Okay, yes. In addition to the standard services of-
fered through our center through the FAST program, we are able
to offer enhance outreach specific to our technology clients across
the state, including SBIR/STTR program exploration, proposal
planning guidance and review.
Mr. LUETKEMEYER. I wish you would answer me rather than
reading your answer. I understand what you are doing there but
I asked you a question with regards to the SBDC model. It is not
in your answer. Would you please answer that question? What is
the difference between the FAST program and the outreach and
counseling program of SBDCs?
Ms. TODD. The FAST program allows us to create programs and
other offerings of our own that we know will be tailored to address
the needs of our audiences here in the state. So we were able to
identify what the needs are among all the——
Mr. LUETKEMEYER. Okay. That is what the FAST program is.
You still have not answered my question.
So the problem here is that the FAST program for almost 2 dec-
ades, almost 20 years has not been appropriated. The annual ap-
propriation has not come through; yet, they have been able to get
the money for it. And my question I guess is why is it so essential
that somebody apparently in the Senate keeps putting money in
there in spite of the fact that it is not authorized? Do you have an
idea on that?
Ms. TODD. We have been able to achieve lots of success in the
state of Arkansas through the FAST program, so obviously they
have more capacity to serve companies and inspire companies
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across the state. Help them with the very competitive and chal-
lenging process of preparing and submitting these applications.
Mr. LUETKEMEYER. You are doing it better than——
Ms. TODD. So we have things——
Mr. LUETKEMEYER. So you are doing it better than what the
SBDC model can actually accommodate?
Ms. TODD. We are able to expand on that through the FAST
program to tailor it and make it our own. It is successful here in
the state of Arkansas.
Mr. LUETKEMEYER. Okay. Mr. Glover, you made a lot of com-
ments with regards to the phase three here stuff and I think Ms.
Keady may have misstated here when she indicated that it was
money that they need for this from the standpoint that it is actu-
ally not a grant. It is a contract that the government, if I am not
mistaken here, has with the individual or the company. To the first
two phases, money is granted, and to the third phase you are then
given a contract to provide this good or service to the government
or to whomever as the phase three. Is that not correct?
Mr. GLOVER. It is correct. The phase three money from the gov-
ernment would be in the case of the Defense Department, now $4
billion over the last couple of years buying SBIR technology and
putting it in the field for the warfighter or taking the technology
to a further level of readiness so that it is ready——
Mr. LUETKEMEYER. Okay, so you wanted to further dollars to
the government to be able to purchase whatever the innovation is
that is being paid for through the SBIR program; is that correct?
Is that what you are saying?
Mr. GLOVER. That is correct.
Mr. LUETKEMEYER. Very good. I see my time is up. Thank you
very much.
Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. Time has expired and now we recog-
nize the gentleman from Colorado, Mr. Crow, Chairman of the Sub-
committee on Innovation, Entrepreneurship, and Workforce Devel-
opment.
Mr. CROW. Thank you, Madam Chair.
Ms. Keady, last year you developed a product that helped re-
searchers confirm that COVID spreads through the air and your
technology likely saved lives by informing scientists and policy-
makers on how to prevent infection. And your case also dem-
onstrates why Federal investments in R&D are so important. In
your testimony, you mentioned that your grant funding came from
the National Science Foundation, the Department of Energy, the
NIH, Department of Defense, and Department of Homeland Secu-
rity. Can you just briefly explain the differences between each
agency’s administration of the SBIR and STTR programs?
Ms. KEADY. All of the agencies have very different policies, pro-
cedures, web portals for submitting grants. They have different
procedures for reviewing proposals and for funding. So each one of
them we have to treat as an entirely separate thing. It would very
helpful if there were common portals or common procedures but
that is not the case today. We have only recently gotten grants
from the DOD and DHS, so I am less familiar with what all of that
entails. We are just at the very, very beginning of those. I have the
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most experience with NSF and they have lots of opportunities for
learning. For example, we participated in an I-Corps program
which is about customer discovery. I think that was initiated by
NSF and some of the other agencies have taken that up. But they
are all very, very different. So we just really have to treat them all
as a separate customer if you will and learn what their particular
process is.
Mr. CROW. And you kind of got to my point by just talking
about how more complicated it is if you are having to review and
understand and learn all these different entities, different proc-
esses. Could you just paint a very short picture for us as to how,
if you had a common portal and a common process, how would that
impact you and what type of resources would be freed up for you
to do the R&D that you do so well?
Ms. KEADY. Thank you for that question.
I just think from an administrative point of view it would save
time in having to create the reports that are needed, submit the
reports. I just think it would streamline the administrative side.
The R&D, you know, is unique for each grant and so that does not
change but the administrative side would be much easier.
Mr. CROW. And then you mentioned that the SBIR/STTR has
limited support for the final stage of development in bringing a
product to market. What could be done in your view through these
programs or through other programs to help businesses find inves-
tors for that final stage that is obviously so critical to getting it
done?
Ms. KEADY. So I appreciate the comment earlier about that
there are phase three contracts but only certain agencies issue
those, and DOD being one of them. We have just started with them
so we have not gotten that far yet. NSF does not, and I do not be-
lieve NIH does, at least not for the programs that we have had.
Now, your question about how to help companies find investors,
I think we have been very successful at getting the grants. We
have so far not gotten an investor, although we are trying. And we
need to learn how to attract investors because they are looking for
different things. And I would just say that an investor is a long-
term commitment, just like a marriage. You are entering this rela-
tionship for the long term, at least until you have an exit. So you
have to be very careful about who your partner is and so the inves-
tor and the company’s goals are in alignment. And so that is what
we are seeking. We are confident we will find an investor. We just
have not yet.
Mr. CROW. Thanks, Ms. Keady. I know, you know, I hail from
your home state as well, from Colorado, and we are all very proud
of you in Colorado. And the picture behind you of the mountains
is making me anxious to head west. So I will be heading your way
shortly. Thank you for your testimony.
Madam Chair, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Texas, Mr. Williams, Vice
Ranking Member of the Committee for 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chair.
The Small Business Administration under President Biden has
had problems overseeing programs for the past few months. Just
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to name a few, there has been miscommunication between the In-
spector General and Administrator Guzman, fraud with the EIDL
program, and delays of implementing critical funding programs like
the Shuttered Venue operator grants. The SBIR and the STTR pro-
grams discussed today are carried out by several agencies that are
overseen by the SBA. And before we authorize these programs we
must ensure the proper guardrails are in place so that both are ful-
filling their intended purpose in helping small business grow.
So Mr. Glover, what recommendations can you give to the SBA
for these programs so that we can avoid some of the problems we
have seen out of the agency this year and some of those that I just
mentioned?
Mr. GLOVER. Well, the SBIR program relies extremely strongly
on competition. And it has been targeted for audits. They looked
at everything very carefully. And quite frankly, they found very lit-
tle. And I think it is because there is so much competition.
Quite frankly, it is tough to win an SBIR award. It is very hard
to do. And you do not find somebody who wants to commit fraud
having to spend that kind of energy putting it together. SBIR pro-
posals are reviewed primarily by scientists who are familiar with
the technology and familiar with the area. It is hard to con those
reviewers. So I think the SBIR program is fortunate in that regard
but I think that there is a problem with the agencies that could
be doing more Phase III. We have been talking to the Department
of Energy about their cost share. They have for follow-on grants
outside the SBIR program and even for Phase III cost sharing. You
have a million dollar award. You have to come up with $200,000
cost share. Small business just cannot do that. So basically, small
business is shut out of all DOE’s follow-on, non-SBIR funding. They
get less than 3 percent there. So it is a problem but it is a problem
that is diminished because of the way the program was carefully
structured at the very beginning when it first started and what we
maintained throughout its history.
Mr. CROW. Let me move on. Thank you.
Innovation drives economic growth and gives America a strong
presence in global markets. Many of these innovators start out as
small businesses with great ideas but maybe do not have the
knowledge on how to expand operations to get in the pipeline for
Federal contracts. Often there is excessive amounts of red tape, ad-
ministrative burdens that make it overwhelming for small busi-
nesses to attempt to do business with the Federal Government.
So Ms. Tung, you mentioned in your testimony that this can be
intimidating for scientists who are not familiar with this process.
So can you discuss personal challenges you experienced with the
application process for 23andMe and how we can cut red tape to
streamline proposals for SBIR and STTR programs?
Ms. TUNG. Sure. So I would say that our primary challenges
were not with the application process itself which I think was rel-
atively straightforward. I think we were more intimidated by the
rules that we saw afterwards for setting up an accounting system
and for tracking time because that is how we got reimbursement
for the funding that we received. So we were very fortunate in hav-
ing a colleague who had done some accounting and auditing work.
And so he helped us sort of understand and interpret the guide-
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lines. But I would say some of our scientists, of course, were also
scientists who had gotten grants in academia and those sorts of
RO1 grants did not have the same sort of accounting, auditing, and
time tracking requirements. So I think if you want to use those dol-
lars to allow the scientists to spend more time on the actual re-
search, you might consider reducing some of the auditing, account-
ing, and time tracking requirements.
Mr. WILLIAMS. All right. Thank you.
The SBIR program has had bipartisan support since it began
during the Reagan administration. Each reauthorization since then
has made significant changes from increasing award sizes to shift-
ing focus of the program to commercialization. Currently, it is set
to expire September 30th of 2021. As reauthorization conversations
continue, we should be looking to make sure we are getting the
maximum return on investment for these taxpayer dollars. So fi-
nally, Mr. Glover, can you explain the effects it would have on
small business if this program was not authorized?
Mr. GLOVER. Well, the first thing, there would be 7,000 individ-
uals and farms around the country that would not be getting
money to take their ideas, their technology, and even advanced in-
novations at all. Given the fact that venture capitalists only make
a couple thousand seed investments a year, that 7,000 SBIR is ab-
solutely critical to fund it. It should be a lot higher. When we look
at the rest of the world, we look at what China is doing, we look
at even what the European Union is doing, everybody else is doing
more. They far passed us. They have taken the SBIR program, cop-
ied it, and then made it bigger and better. So it would mean a lot
of companies would not have any chance at all to get their tech-
nology advanced at all.
Mr. WILLIAMS. Okay. Thank you. And I yield my time back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Kansas, Ms. Davids,
Chairwoman of the Subcommittee on Economic Growth, Tax, and
Capital Access for 5 minutes.
Ms. DAVIDS. Thank you, Chairwoman. And I am, of course, glad
we are holding this hearing to review the importance of the SBIR
and STTR programs. And how we can improve them as Congress
must reauthorize the programs this year.
As we have heard, these programs play an incredibly valuable
role in our entrepreneurial ecosystem by providing support to
innovators and entrepreneurs throughout their creation, develop-
ment, and commercialization stages of their products and busi-
nesses. And the Kansas 3rd Congressional District, of which I have
the privilege of representing, has some pretty amazing SBIR and
STTR funded centers and partners. Folks like the Mid-America
Manufacturing Technology Center, the Bio Science and Technology
Business Center at the University of Kansas Medical Center. You
know, these centers are invaluable resources to entrepreneurs and
innovators who are looking to develop and advance their small
businesses and to commercialize their products. But even with
these awesome resources that we have in my state, Kansas has his-
torically received a pretty low number of SBIR/STTR awards.
In 2019, I had the chance to hold a field hearing in Kansas City,
Kansas, to focus on what we like to call the Silicon Prairie in the
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technological entrepreneurship and innovation that is going there
in the heartland. And these programs are essential in expanding
and supporting the small businesses that we have got.
So I would like to start off with Ms. Todd. As an expert on bring-
ing these federally funded R&D products to the marketplace, I am
curious if you could talk to us a little bit about the programmatic
changes that would have the most impact on the types of busi-
nesses that you have been supporting.
Ms. TODD. Sure. Thank you.
So in terms of commercialization, many of the agencies have
adopted the Technical and Business Assistance Program, even in
phase one. And I have seen here in Arkansas, it has been a great
support for our companies as they are looking to expand on not just
the research and development projects but also to put into place
practices that would help them further down the road as they plan
their marketing sale strategies for successfully commercialized
products and services.
So I would say one thing that would help is to have all the re-
sources needed to help all the agencies, even if they wanted to offer
these TABA programs for awarded companies, so they can have
those resources to be successful in commercialization.
Also, many of the agencies offer programs that are on Customer
Discovery, the act four models. And I think that would be helpful
for all the agencies to offer. It is a key piece of successful commer-
cialization. They learn about the market need and limitations of
current solutions. So this is a great way for awardees to be able
to ensure that their final technology really aligns with what those
needs are which typically changes over time as well.
Ms. DAVIDS. Yeah. Well, I appreciate that.
And Mr. Glover, you know, I kind of want to take you back on
some of what you were bringing up earlier. I am curious if you
could maybe, if you have some recommendations about ways to
support businesses through phase three. You had mentioned that
in your previous response. Just curious if you have some rec-
ommendations for us.
Mr. GLOVER. Well, one, getting a Phase III from the govern-
ment is part of it, but getting Phase III from the private sector. We
were challenged with the ‘‘Valley of Death.’’ We may sometimes
make the ‘‘Valley of Death’’ wider but we do not make it any
shallower. And our venture capital, which had been the mainstay
of American ingenuity for 40 years. It came shortly before the SBIR
program really kicked in. It really has moved offshore and to later
stage investments, so it is really tough. Creating a program to help
there. Angel investors are there but they are not as busy as we
think they should be. They are not making as many investments.
So it really is a challenge. And what is scary is when you see other
countries doing a better job of this than we do. So creating funds
that will take technology to a next level, not necessarily SBIR
funds because we want to keep that program that has worked so
well pure but it is time for us to realize that we are at a competi-
tive disadvantage and we need to create new activities. This is the
only small business program for innovation out there. There should
be more.
Ms. DAVIDS. I appreciate that.
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Chairwoman VELÁZQUEZ. Thank you.
Ms. DAVIDS. Thank you. And I yield back, Madam Chair.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Meuser, for 5 minutes, who is the Ranking Member on the Sub-
committee on Economic Growth, Tax, and Capital Access.
Mr. MEUSER. Thank you, Madam, Chair. Thank you to our wit-
nesses. I appreciate your input and your information.
So Mr. Glover, in your testimony you say that the primary
strength of the SBIR program is invest in early innovation well be-
fore venture capital firms and such. Yet, many companies receive
the SBIR grant year after year. So is that common or is it usually
they receive it for 1 year, maybe 2, but not 8 to 10 years in a row?
Mr. GLOVER. Well, when we look at the government’s pattern
of buying things what we see is that if you are a large company,
we buy from them every year forever. If you are a large university
like Johns Hopkins with $2 billion a year of coming in, everybody
accepts that. For small business, we need more small businesses at
every level. Roughly 25 percent of all SBIR winners are brand new
to the program and that has been true for the whole history of the
program. The government actually buys SBIR research for tech-
nology for government purposes. So a big part, one of the core rea-
sons the SBIR program was founded in the congressional mandate
is to give the government research that it needs. So there are com-
panies, yes, that do year after year and they do it because they are
really good. It is a very competitive program. If they were not giv-
ing the government the research they wanted for their pro-
grammatic needs, they would not get follow-on awards. So you need
the mix of all.
Mr. MEUSER. I can appreciate that. I can appreciate that. I
have been a small businessperson for almost 25 years and I worked
with thousands of small businesses over time, some doing business
with the government, many with R&D budgets. I am not sure I
know of any that have actually received this. And our role here is
not to be critical but to provide oversight.
So when the companies do receive these investments, okay, the
taxpayer dollar investments, do you review their EBIDTA at the
end of the year? What sort of financial disclosures go into it? I
mean, if a company, you invest $200,000 and 2 years later their net
earnings are $10 million and their R&D budget is pretty substan-
tial as well, does that perhaps disqualify them or does that make
them more attractive because you are seeing a perceived return on
investment?
Mr. GLOVER. The criteria to be eligible for the SBIR program
is 500 employees. And if you are a very wealthy company and
doing very well, that is okay. It is perfectly legal under the pro-
gram and it happens.
Mr. MEUSER. But it is not necessary.
Mr. GLOVER. Many of our companies graduate. They get bigger.
They get acquired by new companies. I have in the back of my tes-
timony a list of 10 major DOD contractors that have acquired SBIR
firms through the years, a list of the first them have acquired. One
company I think has acquired 44 SBIR firms through the years.
Mr. MEUSER. Okay.
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Mr. GLOVER. So it is a career ladder. If you try to only seed
companies, you may get a few home runs. What we see in the pro-
gram is——
Mr. MEUSER. Do you do a real ROI estimate annually on the
taxpayer dollars that go in versus the company’s growth?
Mr. GLOVER. We do audits certainly for defense. Now, grants,
some agencies do grants and only grants for universities, for small
business, and for everybody else. Those grants are a little softer au-
dits. The DOD audits SBIR firms. DCAA is working on that. So
they do look at it. But what they are auditing for is to make sure
that there is no waste and fraud and that the money is properly
spent. The return on investment is what we have seen, the eco-
nomic impacts that it shows, and that is where you are getting 22
to 33 percent return on investment and the taxpayer is getting $3
of taxes for every dollar they invest in the SBIR program at the
National Cancer Institute and at DOD which is well over half the
program.
Mr. MEUSER. Okay. Well, I had a couple of questions for Ms.
Keady to see what her experience is but my time is about wrapped
up. So Ms. Keady, I may send those questions over to you if you
do not mind.
But I yield back, Madam Chair.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Maryland, Mr. Mfume,
Chairman of the Subcommittee on Contracting and Infrastructure
for 5 minutes.
Mr. MFUME. Madam Chair, thank you very much. And thank
you for what clearly is a very important hearing to look at seed
programs and other things that are available.
I would like to just, if I might, direct my question to Dr. Tung.
I was going through your testimony, Doctor, and you mentioned
that you had an 80 percent success rate with SBIR applications.
And I do not know if this question may have been previously
asked, but that just strikes me as an extraordinarily high number.
And so I wanted, for the sake of better understanding, to get you
to talk about what you think is directly attributable to that rate
and can it be or is it being replicated. So I would like to know
whether or not it is a matter of innovation, it is a matter of who
the innovator is, or if it is a matter of the nature of the research
so that I might better understand how we get up to and maintain,
I guess, an 80 percent figure, success rate.
Ms. TUNG. So, you know, of course I cannot speak to the grant
review Committees who are the ones who actually assess the grant
applications. I can say that what we were told by our program offi-
cer was that the comments they had gotten back was that the qual-
ity of the science that we were doing was very high. It was like
fairly unique and I think we also have a track record, to Mr. Glov-
er’s point, of actually executing on the things that we said that we
did and really getting the results out there into the scientific com-
munity because it is a competitive process. So I think that if we
had not continued to do that grant over grant, my guess is that we
probably would not have continued to receive them.
Mr. MFUME. And Mr. Glover, may I go back to the line of ques-
tioning of the gentleman before me with respect to the average
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number of years that a business can qualify and get funded with
follow-up rewards? And I am assuming, this is only my assump-
tion, that there is no limit to that, or is there?
Mr. GLOVER. There is no limit to that.
Mr. MFUME. Okay. Does anyone at your agency review their
earnings before interest, taxes, depreciation, and amortization, to
see whether or not these businesses are growing or not growing the
way they should be?
Mr. GLOVER. The agencies have had economic impact studies
done that do analysis of that and show how many follow-on re-
search dollars are given, how many follow-on jobs are created. They
have done a careful analysis of over half of all the SBIRs in the
last 10 years. And so they look at all of that. They do detailed re-
ports and provide those back to the public and to the agency and
to Congress.
Mr. MFUME. But are they also looking at the EBIDTA of each
one of those applicants that continue to get funded?
Mr. GLOVER. No. And quite frankly, I would urge you not to
have that happen because that is more paperwork and more chal-
lenge. This is a program that is primarily driven by science. The
science and innovation. And when we add different layers of re-
view, it slows down the process. It makes the scientists take time
away from doing the science and innovation and have to do paper-
work. And one of the common complaints we have now is that
there is already way too much paperwork involved in this process.
Mr. MFUME. I am sure the members of this Committee would
argue with you that there is too much paperwork that we are in-
volved in, but in order to assure taxpayers that there is not any
waste, not any fraud, not any abuse, I think that additional work
in that area is warranted. I think it is justified.
What I am really concerned about though is if I can get unlim-
ited awards year after year because of my innovation, who I am as
an innovator or the research or whatever, it seems to me that re-
duces the amount of money available for a larger pool of applicants
who want to get funded but the money is not there because if it
is 3 or 5 years, 6 or year 10, one particular business continues to
get awards. Could you just kind of speak to that?
Mr. GLOVER. This is basically the only program that gives small
business a clear window into the Federal R&D research funding.
And you have got giant corporations, you know, who get hundreds
of billions of dollars of Federal money. Small business needs this
window open and it has worked very successful. Remember, one of
the missions is to give the government research that it wants.
Without this program, small business is virtually shut out of the
Federal R&D research program. We need to open up more windows
for small business.
Mr. MFUME. I understand. It just seems that without any cap
on the number of years, Business A could get these awards for 15,
20 years, let’s say, and there are a ton of other small businesses
trying to get in because they have got clear needs for innovation
and research but there is a finite number of dollars available today.
And so if those dollars are eaten up because we do not try to get
people in and graduate them out, it just seems to me that we are
complicating the problem.
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But I will yield back, Madam Chair. Thank you for the oppor-
tunity to ask questions.
Chairwoman VELÁZQUEZ. Is he on? Mr. Garbarino, I think that
you are muted.
Mr. GARBARINO. Thank you very much, Chairwoman.
I just have a quick question. This is a lot of good testimony, a
lot of great answers so far about the SBIR program. But this is
really for anybody on the panel.
I know Mr. Crow asked about standardizing the template or
making things easier or standardizing some of the paperwork, but
based on the experiences with SBIR, do any of you have any spe-
cific recommendations? And I know some of you touched on it a lit-
tle bit in the testimony, about how to help improve the program to
make it even better?
And anybody can just jump right in.
Ms. KEADY. I have one thing I would like to mention that has
not been mentioned yet. There is a significant time gap between re-
ceiving a phase one and a phase two and that can be very chal-
lenging for a small company who is trying to keep their employees
on the payroll. Sometimes it is 4 months, it could be 12 months or
more gap, and so you want to continue the work but there is this
challenge of how to overcome that as well.
Mr. GARBARINO. So you would say making it more of a stand-
ardized time? I mean, a 4 month to a year delay, that is a big gap.
What would your recommendation be, just making it more stand-
ard or moving paperwork quicker?
Ms. KEADY. I have not thought about it in depth but some way
to streamline the reviews of going from a phase one to phase two
would be helpful. And we are also not guaranteed of getting a
phase two so there is that uncertainty as well, although the phase
twos have a higher success rate in general than the phase ones just
because it is a smaller pool of applicants and they are already suc-
cessful in having gotten the phase one. But that is something that
if there was a way that that could be shortened that period of time
for review and granting award would be shortened, that would be
extremely helpful as well.
Mr. GARBARINO. I appreciate that.
Mr. GLOVER. If I may comment, last year’s NDAA required
DOD to at least standardize, simplify, and expedite a contract
award. The GAO did a study a few years ago that shows it takes
2 years to get between phase one to phase two in many cases.
There should be oversight on that making sure that, in fact, hap-
pens. There ought to be a standard contract for phase one, a stand-
ard contract for phase two, and a standard contract for phase
three. And once a decision is made it should happen. And that
delay is costing valuable time, especially with innovation hap-
pening so fast and having such a short half-life. We have got to do
it quickly and the government is years behind in terms of that
area. You hit a very sensitive area. I would be happy to talk to you
more about that.
Mr. GARBARINO. I appreciate that. It seems like we get in our
own way sometimes. So I think we should look into addressing
that.
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From the other witnesses, is there anything else you would like
to add to that specifically or any other ideas that we should be
looking at? If not, I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Mr. Phillips,
Chairman of the Subcommittee on Oversight, Investigations, and
Regulations for 5 minutes.
Mr. PHILLIPS. Thank you, Madam Chair. And greetings to our
witnesses. Thank you for being with us.
I represent a district in Minnesota that is home to a number of
the world’s largest medical device firms, many of them founded and
cultivated right in the Twin Cities and started in garages. And
those are the great American success stories that we all love and
wish to nurture more of. I, like many of my colleagues on this Com-
mittee are dismayed by the fact we seem to be falling behind other
countries in the world.
My first question is on that subject to you, Mr. Glover. You had
mentioned in your earlier comments that China and the EU have
taken the SBIR model and made it ‘‘bigger and better.’’ I would
love for you to take a little time and share with our Committee
how they have done so with some specifics so that we might be able
to better understand how they have leveraged it and do better our-
selves.
Mr. GLOVER. Well, they have steadily increased the percentage
of their research dollars going to small business. And I footnote
that because most frankly most people do not believe it but it is
going on. A few years ago it was 16 percent. It is now up to 20 per-
cent. So they are putting more money there. Now, quite frankly,
Europe does not have the entrepreneurial spirit, the entrepre-
neurial drive that we have but they are putting more money into
it. So the main thing is more money.
I highlighted the one Chinese institute because they did 18 uni-
versities in China get together with dozens of universities in Amer-
ica to take U.S. research, collaborate with them, often, and I sus-
pect most times, the follow-on research and commercialization is
done in China. But they have taken 150 products and gotten 108
of them into commercialization. Now, SBIR is 50 to 70 percent com-
mercialization but there is $600 million the Chinese Government
has set up as an, in effect, venture fund to fund those technologies
that they are basically taking from the United States and devel-
oping over there. So it is heartbreaking. To be honest with you, I
mean, SBIR set out to be U.S. companies, U.S. ownership, and the
work done in the United States. Much government research can be
done elsewhere and seeing our technology go overseas is heart-
breaking. It should not happen.
Mr. PHILLIPS. Right. I could not agree more.
Dr. Tung, I would like to as you, too, about your testimony high-
lighting the importance of maintaining venture capital as a source
of outside cash flow for companies that are trying to secure other
forms of early stage capital. Can you elaborate a little bit on the
complementary relationship that you see between VC and the SBIR
program?
Ms. TUNG. Certainly. So I think for us, we have a model in
which our research platform is based upon a consumer research co-
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hort. About 80 percent of our customers consent to participate in
research. It is those people participating in research that allows us
to have this highly scalable platform. Now, the SBIR funding fund-
ed the research specifically, the collection of data, the analysis, the
publication. However, the development of the actual online plat-
form itself, all the design, all the product, all the engineering, all
of that was funded by venture funding. So we could not have done
what we did without the other part of the business having already
been funded. So really, those two pieces had to exist together or we
would not have been able to build what we did.
Mr. PHILLIPS. Okay, thank you. I appreciate.
With my remaining time, if any of you might chime in, I remem-
ber when I was a kid in elementary school, business day was per-
haps one of my greatest forces to have to think about. Starting a
little business, creating, generating revenues, identifying expenses,
selling stock, and marketing. And I just wonder if you see opportu-
nities in the United States to inspire younger generations still in
school about the possibilities of entrepreneurship and innovation
and are there any programs of which you are aware that we can
go a little further upstream so that programs like SBIR and others
will have an even wider universe to allocate resources to? Are you
familiar with any programs trying to teach entrepreneurship to
kids? Okay.
Ms. TUNG. Well, I actually do have one thing. This may sound
facetious but I actually do mean it seriously. There is a TV show
called Shark Tank in which people are allowed to bring their ideas
in front of a set of investors. But it is not uncommon that you actu-
ally see very young people, teens and sometimes younger than that,
who actually have been inspired by that show to bring their ideas
into businesses. So I think that sort of thing, making it relevant
and part of popular culture is I think inspiring for a large portion
of the community.
Mr. PHILLIPS. And I agree.
All right, well, I am running out of time. I thank you all. I appre-
ciate this conversation and your testimony. I yield back.
Chairwoman VELÁZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from California, Ms. Young
Kim, Ranking Member of the Subcommittee on Innovation, Entre-
preneurship, and Workforce Development.
Ms. YOUNG KIM. Thank you, Chairwoman. And I want to thank
all the witnesses for being with us today to discuss these important
programs. And thank you, Mr. Phillips, for asking the question,
and for Ms. Tung answering it. Shark Tank is one of the programs
I watch regularly, too.
Getting back to our discussion here, SBIR and STTR programs
are critical tools for small businesses to reach, develop, and com-
mercialize innovative technologies to create good paying jobs for in-
creasing our competitiveness abroad.
China and other nations are making concerted efforts to bridge
that innovation gap with the United States and put more resources
to commercialize their own technologies. So we must not relent our
country’s position as the world leader on innovation and the devel-
opment of new technologies.
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So keeping that in mind, I am concerned the Biden administra-
tion has yet to appoint an associate administrator in the SBA’s Of-
fice of Investment and Innovation. So I would like to pose this
question for all the witnesses. Considering SBA’s responsibilities
under the programs, including agency coordination, policy guidance
and data collection, how important do you think it is to have an
associate administrator appointed as soon as possible? I know this
could be a very simple yes or no question. Respond very quickly.
Mr. GLOVER. Yes. The Investment and Innovation Office should
report directly to the administrator. Yes.
Ms. YOUNG KIM. Thank you.
Other witnesses, your answer, yes or no, how important is it to
appoint an associate administrator right away? We need somebody
to coordinate these important programs. You agree; right? Okay.
Well, let me go to the next question.
The Small Business Act requires the SBA to report annually to
Congress on the SBIR and STTR programs but unfortunately, SBA
compliance with this requirement has been an ongoing issue. So if
we do not have the timely reports, it is difficult for Congress to leg-
islate and improve the programs. So in your view, what can Con-
gress do to ensure SBA’s meeting the statutory reporting require-
ments?
Mr. GLOVER. We mentioned in our detailed recommendations in
our testimony making the reports available as soon as the agency
does and put them on their website. In the old days you had to fil-
ter them through. DOD, for example, the services have to send it
to DOD which has to review it, which sends it to SBA which the
SBA has to send it to OMB to review. So there is a built-in process.
There is no reason all that information should not be put on the
web immediately. And so make those reports in a much shorter
timeframe but put it on their own website immediately.
Ms. YOUNG KIM. All right.
Do you currently, Mr. Glover, do you think that SBA has the on-
line web portal that makes it easier for different agencies to put
together their report, that way the SBA can put together an overall
report to Congress in a timely manner?
Mr. GLOVER. The review process makes it untimely. So let’s
eliminate the review process. Put it on the web, be done with it,
and move on. Right now, we have been working with DOE and we
are looking at inside DOD data. DOE data, we are looking at
things that they do not look at for years but were available—spend-
ing USA track down how many phase threes are being awarded.
What is happening? We did not know that 2 years ago but SBA
could do it as well.
Ms. YOUNG KIM. Thank you. I sense your frustration, sir.
Thank you very much.
Let me direct my last question to Ms. Pat Keady. With our expe-
rience of being women entrepreneurs, can you offer any advice to
other women entrepreneurs who would like to participate in the
SBIR program?
Ms. KEADY. I appreciate that question. And one of the things
that I wanted to mention is that there is a huge funding gap from
venture capital or investors in general for women-owned busi-
nesses. That needs to change. I do not know if that is government’s
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responsibility but that definitely needs to change. We start out
with a disadvantage. I do not know if it is a bias or whatnot but
there is definitely a gap.
I think when I started my career in the ‘80s, there were very few
women in aerosol science and now there are lines at the restroom
at the conferences so I think we have made huge gains in terms
of participation in STEM fields. I find that the field that I am in
is very respectful of women. It is a very comfortable place to be.
And so I feel that women should not hesitate. They just need to
jump in.
Ms. YOUNG KIM. Thank you. I know my time is up, so thank
you very much all the witnesses. I yield back.
Chairwoman VELÁZQUEZ. The gentlelady yields back.
Now we recognize the gentlelady from Illinois, Ms. Newman, for
5 minutes.
Ms. NEWMAN. Good morning, everyone, and thank you, Chair-
woman Velázquez and Ranking Member. Great conversation this
morning. Thank you to all our witnesses. Learned a lot and appre-
ciate our entrepreneurs so much. Having been one I am thrilled to
see progress like this.
And I will also just share a point with Ms. Keady. I agree. When
I was an entrepreneur, I pitched my idea to over 60 VC firms and
there was exactly one woman in the room. Exactly one across. And
that probably meant about 150 people. So we need more women in
entrepreneurial places but also in VC firms I will add, too.
Turning my attention to Mr. Glover, thank you so much for your
comments today, sir. And really appreciate your recommendations.
So if I heard you correctly, it sounds like, and I agree with this
because if you read the Wall Street Journal, it is clear that that
is the case, but it sounds like over 80 percent of current funding
goes to tech firms. Is that correct, sir, in the VC world and PE
probably, too?
Mr. GLOVER. Eighty percent goes to telecommunications, the
Internet, healthcare and Biotech. It is on my chart in the testi-
mony.
Ms. NEWMAN. Okay, sure. So primarily tech? Can we agree on
that?
Mr. GLOVER. Yes.
Ms. NEWMAN. Okay, good. And that is VC and PE funding
probably, too, overall.
So knowing that, is there a possibility that you would be com-
fortable recommending and adding to your recommendations that
we look at, on our side of the fence, meaning this government-
based program, balancing that out a bit and prioritizing things like
green technologies, green infrastructure, those in green building
substrates, anything in the space in the 21st economy, green econ-
omy. Do you think that there is an opportunity to recommend
maybe not fully prioritizing but adding some priority to green-
based technologies as well as women and people of color owned or-
ganizations?
Mr. GLOVER. There has always been a reluctance for the Fed-
eral Government to pick winners and losers when that was pre-
China and pre the rest of the world. When I look at the Beijing In-
stitute of Collaborative Technology, their focused areas are robot-
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ics, optoelectronics, structural and functional materials, energy
technology, water treatment, and biomedical engineering. They are
giving money in those areas so they are doing it, and the U.S., we
have got to get back in the game. I am sorry. My answer 20 years
ago was different. Today, they are doing it, we are not.
Ms. NEWMAN. Yes. And I agree 100 percent.
So I encourage you to put a little data behind that and suggest
how we can prioritize a few areas. And certainly green technologies
should be one of them but maybe it is robotics and others as well
to reassert our competitiveness in the international community.
Your initial comments, and I have certainly read it before, but star-
tling. We have got to assert our competitiveness again. I think the
best way to do it is to look at a 21st century economy and not look
backward, which would include green technologies and renewables
and robotics and other such things. So I encourage you to include
that in your recommendations. And I appreciate your work on this.
And I appreciate all our entrepreneurs today. And I yield back.
Ms. HOULAHAN. Thank you. The gentlewoman yields back.
The gentleman from Wisconsin, Mr. Scott Fitzgerald is now rec-
ognized for 5 minutes.
Mr. FITZGERALD. Thank you, Madam Chair. I know at this
point there might be some redundancy, so let me apologize for that
in the questions.
To Mr. Glover, you talked a little bit about streamlining or just
fully eliminating specific parts of the process. But so without sacri-
ficing and without putting into play waste, fraud, and abuse protec-
tions, the elimination of those, is there other things that, you know,
the paperwork burden for small businesses, as we move forward in
technology, we should be reviewing that on a regular basis and
making changes. Is that right or is this something that most of
these small businesses are able to keep up with on their own?
Mr. GLOVER. When the SBIR program first started, they limited
the proposals to 25 pages. There were virtually no other rules or
regulations. Now, the proposal and the solicitations that go out
have 100 pages of rules, regulations, and procedures. It has gotten
awfully complicated. Our guys do not like it. The small businesses,
especially the new companies that come into the program have to
spend a lot of time trying to understand it.
Having said that, they are willing to do it because that is the
only way to do it. But should it be simpler? Should we have an
automatic system? Yes. We need to go back to what was there
when we first started. You have got an idea. We will give you 25K.
You work hard on it. We will give you another quarter million dol-
lars if you come back and it seems like it is working. So yes, the
numbers are higher now because of inflation over time but yes, we
need simpler.
Mr. FITZGERALD. That is great. That is helpful. Thank you
very much. And I would yield back, Madam Chair.
Ms. HOULAHAN. The gentleman yields back.
The gentlewoman, Carolyn Bourdeaux from Georgia is now rec-
ognized for 5 minutes.
Ms. BOURDEAUX. Thank you very much.
Georgia is home to countless innovators and companies that are
on the cutting edge of new technologies. Georgia Tech’s Enterprise
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Innovation Institute provides some critical expertise to businesses
as they seek to bring technology and research-intensive products to
market. And we have many small business incubators and accel-
erators that work closely with Georgia Tech on a variety of dif-
ferent projects.
However, any product that relies on research and development of
innovative technology is likely to have significant concerns around
protecting intellectual property developed for these projects.
So one question for Mr. Glover is how do small businesses go
about protecting the IP that is developed through these SBIR and
STTR projects?
Mr. GLOVER. One of the beauties of the SBIR program in the
IP area is that they are given their rights to that technology. And
the government cannot disclose that. There are some things that
should be done to tighten that up because we run into battles and
fights on the fringes but the SBIR data rights is an important pro-
vision in there that helps us in many cases. But you are right. In
those cases where the government really wants it, they demand to
have, you give away your rights or we will not give you the con-
tract. And that happens often, even though it is in the law they
cannot do that. But they still do that and they do that frequently.
So data rights are critical.
Ms. BOURDEAUX. What would you recommend doing to tighten
that up?
Mr. GLOVER. We will get back to you on that with some spe-
cifics. It is becoming more of a problem recently. The Army espe-
cially seems to be really tough on that data rights now. But some
of the services are better than others but it is critical that you let
small business keep their rights so they can go commercialize it.
We know the government labs just do not do a real good job of com-
mercializing. And small business, at least if they have got it you
have got a chance.
Ms. BOURDEAUX. Thank you.
Do any of the other witnesses have any thoughts on this matter?
Okay.
Moving on to another question. Ms. Keady, did you have some-
thing?
Ms. KEADY. I was just going to say that, again, as an entre-
preneur, there is no free time in our lives. And so all of these
things take time and effort. And IP is extremely important. We
have patents pending right now. Again, it is helpful to have TABA
money to help support some of that funding but that is just one
more thing on our plate that we want to do right. And so any help
we can get is much appreciated. Thank you.
Ms. BOURDEAUX. Got it. I appreciate it.
I just want to follow up on one other issue that came up earlier
which was that after the venture capital phase launching to a larg-
er business often proves very challenging. But I know that there
are programs. There are tax credits. There are Federal programs
out there to help move into that next sort of midsized business
phase.
And I wanted to check with you, Mr. Glover. Do you have any
thoughts about those kinds of programs and whether there is any-
thing more we can do to enhance and help women-owned busi-
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nesses, minority-owned businesses, but just businesses in general
make that next leap?
Mr. GLOVER. The problem with R&D credits is that you have
to have a profit to be able to use it. To be honest, our guys do not
make profits for a long time. Sometimes never. And so those R&D
credits really do not help you. And the R&D credit, if you could sell
it or transfer it to somebody who has money and you get some cash
for it, some of the states have programs like that that work.
But, look, we have done so little to help entrepreneurs in the in-
novation space. There is a whole bunch of things that we should
have done and we certainly can do. And right now in the competi-
tive world we are in, we need to rethink everything we are doing.
We need to come up with brand new ideas knowing why are we
still giving less than 10 percent of Federal R&D dollars to the most
innovative sector of small business? Why is SBIR primarily the
only program that really focuses on helping small business? It is
outdated thinking. We are now in a situation where the world has
passed us and that is happening over and over again and we have
got to come up with new ideas and a new approach.
Ms. BOURDEAUX. Thank you very much. I agree.
I yield back the balance of my time.
Ms. HOULAHAN. The gentleman yields back.
The gentleman, Pete Stauber from Minnesota, is now recognized
for 5 minutes.
Mr. STAUBER. Thank you, Madam Chair.
As with every government program, finding success is not always
easy. When I first got to Congress, I assisted a small business ob-
tain feedback from the Air Force regarding an SBIR application de-
nial. They were never able to get a straight answer before my in-
volvement but I was certainly happy to get things cleared up.
I think this leads me to a question that any of our panelists can
feel free to answer. Do some agencies provide better feedback to
their applicants than others? Or more generally, do you feel that
certain agencies make it easier for participation than others? Any
of the panelists.
Ms. KEADY. I just want to say in particular I am thinking about
some of the NIH reviews. It is really a bit of a crap shoot as to who
your reviewers are as to what kind of scoring or feedback you get.
And so while I think it is really good to have outside experts re-
viewing these proposals, sometimes we get faulty information. I can
say one time where we submitted a proposal, it was not quite in
the pay line, and so we resubmitted addressing all of the reviewers’
concerns and we got a worse score the next time. So that was a
little bit frustrating.
Mr. STAUBER. To that point, tell me what we can do to elimi-
nate that issue. What is your solution?
Ms. KEADY. That is a great question and I will have to think
about that.
Mr. STAUBER. Okay.
Ms. KEADY. I do not have an innovative answer.
Mr. STAUBER. No, that is fine. It was not a trick question.
Those are some things that are important for us to hear to be able
to change the regulations or rules to have the ability to accommo-
date more so.
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And then I also have the question, do you think standardization
of paperwork requirements across agencies would help or increase
population of small businesses and make them more likely to suc-
ceed? So the standardization of paperwork and maybe the vast ma-
jority of the process? And this is for any of the panelists.
Mr. GLOVER. It would definitely help. The challenge for new
companies, to make a short, simple claim, you will get more people
participating in the program and you will have them spend more
time on the science and less time on the paperwork. So the more
you can standardize and simplify everything in the SBIR process,
go back to the way it was early on, you are right. Yes. It is critical.
It would be very helpful.
Mr. STAUBER. Okay. Any other panelists?
Ms. KEADY. Again, I am going to bring up a challenge, not nec-
essarily a solution, but I think the success in winning grants is
very much in a person’s ability, or a team’s ability to tell a good
story. And so there is a certain amount of skill in just writing the
grants. And this does not necessarily, you know, what about the
company who has a great idea but is not as skilled at writing or
telling the story? I would hope that there is a way for those compa-
nies to also get to participate.
Mr. STAUBER. That is an excellent point. We are seeing some
of the bigger companies hire grant writers and people that spe-
cialize in that which would give them obviously a better oppor-
tunity, and we are looking for that small business who may not
have the capital to hire an individual like that. So that is a great
point and we cannot forget that. These grants, we have to really
have them open and available for our small businesses. Thank you
for bringing that up.
Thank you to all the witnesses. And Madam Chair, I yield back.
Ms. HOULAHAN. The gentleman yields back.
And I now recognize myself for 5 minutes.
My community is just outside of the city of Philadelphia. I, as
well, am an entrepreneur with a technical background.
And my first question is for Ms. Keady. With your testimony,
and actually also with many of the other folks’ testimony, you have
spoken about hiring an outside investor to help with the cost of
commercialization for your business. In your experience, does the
SBA offer resources for business owners who seek commercializa-
tion? Did the SBA offer your business any assistance on how to en-
sure commercialization on your aerosol devices?
Ms. KEADY. I know that NIH and NSF have had programs
where they have a meet the investor kind of thing. But again, you
know, it takes time to write the executive summaries, the pitch
deck, to create the videos. And we have had no real strong connec-
tions. It is helpful in just honing our message and thinking about
what we would want to say to an investor. So I know they are try-
ing.
One of the things that we have found, and maybe it is our indus-
try, is that investors do not necessarily value grants. What they
want is traction in the market. And so it is that getting to market
and having real customers and having real success is what attracts
investors. Just having grants, you know, yay, good for us, but it is
not the magic bullet for getting an investor.
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Ms. HOULAHAN. Yeah. And if I could follow up on that, largely
what my role has been in all the entrepreneurial ventures that I
have participated in has been the operator, the person who does
operationalize the idea. And so I do recognize how important it is.
And in fact, that is why I introduced a bill with Mr. Balderson,
Rhett Balderson, and it is called the RAMP for Innovators Act. And
it takes exactly about all of the things that we have been talking
about this time around. Whether it is help with commercialization,
whether it is help with IP and patents, it is those things that are
the things that bog us down as entrepreneurs, that make us strug-
gle with the next level of investment.
And so I would love if I could ask you guys to share your experi-
ence. What worked and what did not? What would you share in
terms of legislative ways to ensure that the SBIR and STTR invest-
ments are leading to commercially-viable products or services and
that next level of investment?
So if I could, I would turn that back to you, Ms. Keady, and then
to anybody else who might have input in that.
Ms. KEADY. Well, I would have to say that we are early in our
journey in seeking an investor. And so I do not have a success story
yet. But I am very interested in learning what other people have
done.
Ms. HOULAHAN. Could I ask Dr. Tung if she might be able to
give us some ideas of what has worked and what has not worked
in the commercialization area and how we could be more helpful
here in this body?
Ms. TUNG. I think for us, to some of the comments earlier, bio-
medical research takes a long time. A lot of these grants have a
term of like a year, year and a half, and it is very easy for a re-
search project to last 3, 5 years. And so that is one of the reasons
why you do have to kind of look at trying to get grant funding over
a long period of time. And I think that was critical. It took us a
long time and a lot of proof of concept of what we were doing was
high quality before we got to a point where there were outside
groups who were willing to either pay us for our services or our
products or invest in that part of the business.
Ms. HOULAHAN. And Ms. Todd, do you have anything that you
would like to contribute here?
Ms. TODD. I would just say as a support organization for these
innovative small businesses, we always encourage scientists to be
able to articulate the value proposition of what they are bringing
to the marketplace as early as possible rather than focusing so
much on the technical aspects that maybe they are naturally more
comfortable with. So we definitely help them to think through
those processes, through our consulting services. Also, as part of
that we have market research that allows us to dig pretty deep into
potential in terms of long-term market potential, what the competi-
tion is looking like, demographics of their customers. I think all
that feeds into helping them tell a good story about the commer-
cialization opportunity when they fill out these applications.
Ms. HOULAHAN. I only have 15 seconds and I appreciate all of
your time. I guess my struggle is it is not about just the story; it
is actually about the execution on the story and actually
operationalizing things and actually getting patents and IP pro-
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tected our hard processes. And that is indeed what the RAMP Act
that we are trying to push forward is addressing.
I appreciate your time and I yield back.
And I think I am supposed to be recognizing Mr. Schneider. And
so the gentleman from Illinois, Mr. Schneider, is now recognized for
5 minutes.
Mr. SCHNEIDER. Thank you, Madam Chair. And I want to
thank the witnesses for sharing your perspectives today on this
critically important issue.
Small businesses are the engine of our economy. As you said a
moment ago, Mr. Glover, they are what drive innovation in our
economy and it is critical that we support them. And that is why
having this hearing is so important.
While the programs we talked about today have always been crit-
ical, they have special significance as we focus on the economic re-
covery post COVID-19. This has undoubtedly been a difficult year
for small businesses and for all Americans. With vaccines being
distributed throughout the country and restrictions being lifted, it
is time to look towards the future. Small business innovation will
be a key driver of economic recovery as we seek to tackle new eco-
nomic challenges, get people back into the workforce, and adapt to
the changes brought on by the crisis.
I have heard from businesses all over my district about the
lengths they have gone to just to stay afloat. These programs are
instrumental in giving small businesses necessary R&D capital to
innovate which they often lack prior to the pandemic but which for
many is totally out of reach now. Knowing how important SBIR
and STTR, I have advocated in the past for allowing firms more
flexibility in spending and for continued funding of these programs.
Ms. Keady, you talked about your recent experience as a busi-
ness owner, developing new technology using SBIR/STTR funds
and the limitations in using funds to launch the program. Can you
talk more about what you could do with a more flexible spending
structure, as well as how challenging the road to profitability was
under the current restrictions?
Ms. KEADY. Well, we were in the fortunate position of having
a product, albeit in a prototype stage, but having a product that
was immediately useful for addressing the COVID pandemic for re-
searchers in trying to determine whether or not the virus was air-
borne transmitted. And so we benefitted this past year in selling
to researchers. So for us the challenge in terms of flexibility of
spending is the SBIR programs by and large just fund R&D. And
so I think for us, having more flexibility, and especially some of the
phase one grants having higher overhead rates so that we could
hire help to do some of these other things. As entrepreneurs, we
end up doing everything ourselves most of the time because we just
do not have the staff. And so having more flexibility in how the
money is spent would be helpful.
Mr. SCHNEIDER. Great. Thank you.
I do not know if any of the other witnesses want to share your
perspective on that?
With the time that is left, and maybe I will start with Mr. Glov-
er, from experience, if you were to pick one, two, maybe three
things that we can do to have the biggest impact as we begin this
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recovery and get to the other side of the pandemic, what would you
have us do?
Mr. GLOVER. I think I would first set a goal for small business
R&D of the Federal R&D dollars. We are spending a lot of our
R&D dollars and have historically with other institutions, large
firms, labs, and universities, and small business is the innovator
and we send such a small share there. SBIR is primarily the ma-
jority of that money. So that would be the first thing.
I think when we talk about paperwork, we could set a rate of re-
turn for small business of say 15 percent. We go in and fight on
what the profit level is going to be on contracts and that wastes
time, 7, 8, 9 percent. But the regs say you can go up to 15. Just
automatically set that at 15. Eliminate some paperwork there. I
think that governing the SBIR program would mean twice as many
companies would be able to participate and fund their technology
and make it move forward.
I think the STTR program, the universities are challenged. Sev-
enty percent of their technology is licensed to small business. Less
than 1 percent does over a million bucks. STTR should work. Make
the STTR program as big as the SBIR program so that you get uni-
versities and have the labs participate and have a path to get their
technology out of the universities, out of the laboratories. Team
them up with a small business with a business plan that goes for-
ward.
I think those things would all be helpful. I am quite frankly con-
cerned with the elimination of capital gains. Taxes will remove an
incentive for entrepreneurship. I would focus it just on small busi-
ness, just on businesses in commerce, but capital gains for small
business, especially technology businesses should stay.
So those are some things off the top of my head that would be
meaningful.
Mr. SCHNEEIDER. I have gone over my time. Thank you. I am
sorry I could not get to the other witnesses. But to everybody,
thank you for sharing your time today. I very much appreciate it.
I yield back.
Ms. HOULAHAN. The gentleman’s time is expired and the gen-
tleman yields back.
Thank you again to our witnesses for joining us today. Your tes-
timony is proof positive of what small businesses can create when
they receive investment and support. Our country has a long way
to go when it comes to reclaiming our title as the world’s most in-
novative Nation. We must examine the programs that have driven
innovation in the past and work to empower them. The SBIR and
STTR program has decades of demonstrated positive return on in-
vestment and funding of groundbreaking technology.
And if there is no further business to come before the Committee,
we are adjourned.
[Whereupon, at 12:56 p.m., the Committee was adjourned.]
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APPENDIX
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77
SBD026 with DISTILLER Insert offset folio 77 here 44564.044
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78
SBD026 with DISTILLER Insert offset folio 78 here 44564.045
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79
SBD026 with DISTILLER Insert offset folio 79 here 44564.046
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80
SBD026 with DISTILLER Insert offset folio 80 here 44564.047
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81
SBD026 with DISTILLER Insert offset folio 81 here 44564.048
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82
SBD026 with DISTILLER Insert offset folio 82 here 44564.049
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83
SBD026 with DISTILLER Insert offset folio 83 here 44564.050
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84
SBD026 with DISTILLER Insert offset folio 84 here 44564.051
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85
SBD026 with DISTILLER Insert offset folio 85 here 44564.052
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86
SBD026 with DISTILLER Insert offset folio 86 here 44564.053
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87
SBD026 with DISTILLER Insert offset folio 87 here 44564.054
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88
SBD026 with DISTILLER Insert offset folio 88 here 44564.055
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89
SBD026 with DISTILLER Insert offset folio 89 here 44564.056
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90
SBD026 with DISTILLER Insert offset folio 90 here 44564.057
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91
Æ
SBD026 with DISTILLER Insert offset folio 91 here 44564.058
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File and source
- File
- CHRG-117hhrg44564.pdf
- Size
- 83,843,832 bytes
- SHA-256
- 31ca08776307adc149fdaa9bfb0e77a25b8a64a3c8221001a76adedab8064066
- Our copy
- CHRG-117hhrg44564.pdf
- Original
- www.govinfo.gov