The House fails us again!

Well, folks, SBIR is still on life support. Despite the valiant efforts of the leadership of the Senate Committee on Small Businesses and Entrepreneurship (in Sens. Snowe & Landrieu), and the unanimous consent of the U.S. Senate in passing S.4053 yesterday, the House failed once again miserably to do something good for the country.

Despite apparent willingness by outgoing Speaker Nancy Pelosi and Steny Hoyer, the intervention of the House Shafting Businesses Committee, namely in the personages of outgoing Chair Nydia Velazquez (D-NY), and incoming Chair Sam Graves (R-MO), who both opposed "unanimous consent" as a mechanism for voting on the bill, the bill was never considered. It does look distinctly like, despite the musical chairs of the committee leadership, the House SBC will continue to shaft small businesses at will. Will incoming Speaker John Boehner have the courage to do what's right?

Remarkably, an unprecedented alignment of forces supported S.4053. It was endorsed not only by small business organizations, but also by both the National Venture Capital Association and the Biotechnology Industry Organization who have been heretofore the major opponents of any compromise short of redefining small business to the point of meaninglessness.

Yet, there are indications that misguided or insidious elements in the academic community (including the White House Office of Science and Technology Policy) are working to defeat any continuation or expansion of R&D involvement by the small business community. I can't say it better than Rick Shindell, so I'll let his words make the case:

Some university organizations are claiming that these greedy SBIR small businesses are trying to steal R&D funds away from them by raising the SBIR allocation from 2.5% to 3.5%. In an emergency letter (Dec 22, 2010) to the House leadership, The Federation of American Societies for Experimental Biology cried out "This bill would increase the SBIR set-aside by 40 percent…"

What these groups won't tell you is that well over 1/3 (closer to 38%) of all the scientists and engineers in the US work for, or own small high tech businesses but these businesses get only about 4.3% of the government's research dollars, and that's inclusive of the 2.5% SBIR allocation!

In actuality, universities and SBIR small businesses are helping each other more than ever before. Each entity has its strengths and they can leverage each other's assets to improve chances for success.

This is not about greed; this is not a scramble for diminishing crumbs. This is about propelling the US and the world forward, out of this mess of a recession, toward a better and brighter future. This is not a zero-sum game. The more innovation, the better our lives, all of our lives, will be.

What is the best way that we as a society can support innovation? SBIR is right there at the top. And as a boon, it creates jobs and excitement along the way. Seed funding for innovative startups; and for the startup of innovative ideas, transforming those ideas into commercial products, from start to finish. That's what SBIR is all about.

Let's get this taken care of in the new Congress, without prevarication and without delays. Is there leadership enough to get this renewed for 8 years before the current Continuing Resolution expires on January 31? Let us hope!

S. 4053: Will SBIR finally be reauthorized?

Word is that Senator Tom Coburn (R-OK) this morning released his hold on legislation, allowing the Senate to vote on and pass S. 4053, which includes a compromise reauthorization of SBIR.

• Passage of this compromise legislation is supported and urged by many innovative, job creating small businesses across the country.
• Please urge the current Speaker of the House Nancy Pelosi to take up and vote on S. 4053 in the House of Representatives.
• Please urge your Representative in Congress to vote FOR this legislation.

House Democratic Leadership Snubs Small Businesses

No telling whether Sam Graves (R-OH) will emerge as Committee Chair a stronger leader for small businesses than he has proven to be as Ranking Member, but one thing is for sure, the House Democratic leadership continues to snub small businesses in not giving Nydia Velazquez (D-NY) the boot. Having proven herself completely without regard for the interests of small businesses, she yet remains the highest ranking Democrat on the House Small Business Committee, swapping places with her heretofore side-kick Sam Graves. She steps down to Ranking Member just as he steps up to Chair.

It's hard to imagine that Graves could do a worse job than Velazquez. Where in all the concern over a dismal economy, and confronted with the evidence that small businesses, especially the newest among them, are the true drivers of job growth, is there leadership enough to stand up for entrepreneurs?

It is high time that we make a shift from an economy dependent upon large corporations (and their periodic bailing out) toward an economy of self-reliant, independent, innovative, doers. It is high time that we cease embracing the ideas of an old economy, and start looking towards a new one, where college graduates consider themselves as likely to start their own firms, or join a startup, as they are to send around a dozen (or a hundred) resumes to name-brand firms with roots generations old.

There is balance to be regained: not in seeking to destroy those corporations, but simply in levelling the playing field so all companies compete on their merits, regardless of age or size. There are too many inequities in today's system, that stifle creativity, innovation, and job growth, that won't be fixed simply by bending the president's ear to the claims, and requests, and demands of corporate behemoths.

Tomorrow belongs to the entrepreneurs! Today is time enough to realize that.

Angels or Demons

Following up on my recent post regarding Angels' reduced appetite for seed and startup investing, the October 2, 2010 print edition of The Economist presents a brief article entitled "Venture Capital: Angels or demons?", which argues the opposite point, describing a category of creature it dubs super angels "who run funds that invest in deals considered too small to be of interest to traditional venture-capital firms.":

Established firms have rediscovered their appetite for seed funding: Greylock Partners, a well-known venture firm, this week said it had launched a $20m seed fund.

So, the question is, which is it? Well, obviously it can be both. One problem we face is what I term the Depth-of-Field Problem. The concept of depth of field derives the world of photography and describes the range of clarity that surrounds a point of focus. The greater our distance from a point of focus, the more things look alike. The closer we are, the greater variety we can distinguish.

This often leads us to stereotype and cluster that which we have the least experience with, as the title of the above cited article implies: angels or demons? Despite entrepreneurs' and investors' possibly differing motivations, it is possible to find common ground. From my vantage, the greatest need in our economy is for seed and startup funds, which often provide the spark to an entrepreneur's kindling. Anyone interested in providing it is an angel in my book.

***Edited to add:
Here's a link to the Greylock Discover Fund, cited above, which anticipates investments from $25k -$500k.

Angels Decreased Appetite for Seed and Startup Investing

Posted on Entrepreneurship.org: Angels Decreased Appetite for Seed and Startup.

Here's the alarming statistic:

Angels’ seed and start-up stage investing declined to its lowest level in several years...

The question remains: who will pick up the slack? Will SBIR be renewed at a moment in the economy when seed capital is most crucial?

More importantly, will the politicians elected to office in Washington (on both sides of the aisle) finally find the will and inspiration to alter the face of our economy, by shifting the focus from protecting jobs at large corporations to encouraging business creation?

We need more small businesses, that create jobs, and grow into large businesses. We need a new economy. We need innovation, and rejuvenation. Entrepreneurs do that. Let's mow down the weeds, and let entrepreneurs compete and thrive!

What's so free about the market?

In case any of you had any lingering suspicions that there actually exists anything close to a free market in the United States, that produces anything even resembling a level playing field for all participants (Giants and Lilliputians alike) think again. Here's a little excerpt from the Wall Street Journal article about General Motors that link goes to:

Now it turns out, according to documents filed with federal regulators, the revamping left the car maker with another boost as it prepares to return to the stock market. It won't have to pay $45.4 billion in taxes on future profits.

The tax benefit stems from so-called tax-loss carry-forwards and other provisions, which allow companies to use losses in prior years and costs related to pensions and other expenses to shield profits from U.S. taxes for up to 20 years. In GM's case, the losses stem from years prior to when GM entered bankruptcy.

Whether or not a "free market" could produce ideal circumstances for supply and demand to determine fair pricing on all things from wages to food (a suspect and highly debatable point even in the abstract), we may never know. Ideology, rage, and protest aside (all of which are in the ascension these days), there is no free market extant. Unless we work to mitigate the inequities in the system, meaning in clear language, remove the barriers to competition on the merits of a company's technology or services, rather than any number of pre-existing advantages, there is no high ground on either side of the debate.

I wonder if any of the changes in Washington will allow leaders to step up to the plate, swing, and crack the ball high and over the fence. Only time shall tell.

After 31 years, the "-Man" takes a hike

Sony will discontinue production of its Cassette Walkman in Japan, 31 years and 400 million sales after its 1979 debut. So much has happened technologically in the past three decades! And here's the latest speculation: Will Apple Buy Sony? - Douglas A. McIntyre - Business - The Atlantic

An Entrepreneur as Chief Economic Adviser

Today's Wall Street Journal (15 Oct 2010) prints an article by Elizabeth Williamson ("Obama Backs Away from CEO Search") on the pending replacement of Larry Summers as Director of the National Economic Council to the White House . There's been buzz lately that his replacement should be a corporate CEO, to smooth relations between the White House and the Business Community.

Here's my take: what we need is a successful (preferably bootstrap) entrepreneur, to advise the nation on how to lead our way to an entrepreneurial economy. Everyone is talking about jobs these days. We don't need jobs so much as we need businesses. Businesses start, and grow, and produce profuse amounts of jobs because entrepreneurs take advantage of opportunities.

They create far more jobs than all of those corporate behemoths combined. If the government has a role in this, it's simply to ease the path to those opportunities, it's to remove the corporate welfare that has created an unlevel playing field.

Let's stop holding on to the past; instead let's allow the failings of that old thinking to provide the opportunities for innovation!

Is VC a Degenerative Disease?

Here's a pithy quote from a recent WSJ Venture Capital Dispatch blog post:

Venture firms have now gone a full decade without collectively returning a dime, causing their investors like pension funds and university endowments to question whether the venture capital model even works.

Is there any reason that an entrepreneur with a cart full of ideas, excitement, passion, and motivation should pause, gesticulate, and faun over VCs to gain their attention and hope for their largess?

For my part, I'll stick to developing the winning ideas, figuring out a way to make it from napkin to market to profits, with or without the suits to back me up.

What do your taxes pay for?

Here's a great idea from Third Way: provide an accounting to taxpayers just what their taxes are paying for. It would put plain and in the open the debates going on about taxes and spending. The issue is not how high or how low taxes are, but what we as consumers get in exchange for our investment.

If I go to the corner bakery and plunk down $3.18 for a bagel and pint of O.J., I know exactly what I'm paying for. I recall years ago, wondering about the mysterious "Kuver" on my restaurant bill in Slovakia. I had ordered a bowl of soup with bread for lunch. I was informed that Kuver covered the cost of all the condiments on the table (of which I had used none). In my eyes, it was an extra tax that I had not been aware of when I ordered. At a fast food joint in Germany, you'll likely be charged for a packet of ketchup, whereas in the States you'll find six stuffed into your carry out bag, when two would suffice. Do they charge more for the hamburger in Ohio than in Hamburg, to cover the cost of condiments? Surely, the consumer is paying for them one way or the other. Which is the fairer model: pay as you go, for what you use, or pay anyway for what you're given?

If I am to subsidize others, shouldn't I be aware of that in advance? There are good reasons to spread expenses around: what I don't need today, I may have need for tomorrow. If I pay to help my neighbor now, perhaps she'll pay to help me in the future. That's the whole point of insurance. But knowing what things cost, and aligning spending with priorities is key. If we think of taxes as an everyday expense for services or goods rendered, we'll be much better off in determining whether or not we're paying for something we wish to, and better informed to decide who should be stewards of that money.

Another Continuing Resolution

Nydia Velazquez' continuing war against the interests of small businesses notwithstanding, we've got yet another reprieve for SBIR and other SBA programs (number nine in a long series of continuing irresolutions, for those keeping count). Why is she still chairwoman of the House Small Business Committee?

via thomas.loc.gov

S.3839
Title: A bill to provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act of 1958, and for other purposes.

Sponsor: Sen Landrieu, Mary L. [LA] (introduced 9/24/2010) Cosponsors (1)
Related Bills: H.R.3614, H.R.4508, H.R.5849, S.1513, S.1929, S.3253
Latest Major Action: 9/28/2010 Cleared for White House.
--------------------------------------------------------------------------------
MAJOR ACTIONS:
9/24/2010 Introduced in Senate
9/24/2010 Passed/agreed to in Senate: Introduced in the Senate, read twice, considered, read the third time, and passed without amendment by Unanimous Consent.
9/28/2010 Passed/agreed to in House: On motion to suspend the rules and pass the bill Agreed to by voice vote.
9/28/2010 Cleared for White House.

Thanks to Rick Shindell and all the SBIR advocates out there who overflowed Speaker Pelosi's voice mail, and contacted their own Representatives. Now let's get some real resolution in the form of reauthorization.

Repeal the New 1099 Requirements Now!

Embedded with the recent healthcare legislation was a misdirected effort to raise $17B in revenues over ten years by burdening small businesses with an onerous reporting requirement that according to the National Small Busines Association (NSBA) would increase the average number of required 1099s a small firm would need to file from 10 to 86! The new rules, set to go into effect for 2012 purchases, would require a 1099 report for "any purchase from a vendor of goods or services worth $600 or more during the calendar year".

The Senate recently failed to repeal this requirement. Several new efforts in both the House and Senate are directed at redressing this matter. Of particular note:

Rep. Dan Lungren (R-CA) is sponsoring the Small Business Paperwork Mandate Elimination Act (H.R. 5141), that would fully repeal the reporting requirement, but does not offset the lost revenue.

Sen. Mary Landrieu (D-LA), Chair of the Senate Committee on Small Business and Entrepreneurship, is sponsoring the Information Reporting Modernization Act of 2010 (S. 3783), which would raise the threshold for businesses to file information reports to $5,000 from its current level of $600 and would index the threshold to inflation after 2012. Unlike a similar recently failed amendment to the small business bill (S. Amdt. 4595 to H.R. 5297), offered by Sen. Bill Nelson (D-FL), Landrieu's proposal would not exempt businesses with fewer than 25 employees and does not include an offset to pay for the change.

Perhaps it's too much to ask, but it'd sure be nice if we could put aside campaign posturing for just a moment and focus on actually taking care of the business of governing! The proposals are out there. How many other politicians will step up to the plate and just swing?

Innovation vs. Old School Short-Sightedness

Today's Financial Times, includes a news analysis quoting the former U.S. Auto Czar Steven Rattner comparing allowing the auto inustry to fail with "dropping the economic equivalent of an atomic bomb on the Midwest."

Dramatic, huh? The question is... what would constitute "allowing the auto industry to fail." See, to my mind, encouraging transformative technological advances with the potential not only to retain old jobs but create new ones is a viable alternative to injecting good cash into bad businesses.

Try this on for size: rather than propping up the behemoth auto makers, why not create a pool of cash, say $100 million (small change to what they threw at the giants) to finance a handful of awards for projects that would push the envelope, creating, developing, and commercializing innovative automotive technologies, and a whole bunch of jobs with them. It'd be a cross between SBIR and public venture capital.

Why does it have to rest on private initiative, like the Automotive X-Prize to support these sorts of projects? Rather than arguing that allowing some particular old firms to fade is the equivalent of letting the automotive industry fail, perhaps government officials would do better to think outside the box. If we're going to spend taxpayer dollars on supporting business, why not do it in a way that supports society and job creation as well?

Problem is: if you hire people like Steven Rattner, former private equity executive, to run a bail-out scheme, you're likely to get results in line with old school short-sighted thinking. Perhaps it's time to be bold!

Taxes & Small Businesses

Arguing that the sunset of the previous administration's tax cuts for those earning more than $250k net will hurt small businesses & job creation seems a bit of a stretch. Here's a post on the subject on Growthology. Be sure to read the comments, in particular note the following remark: "Wouldn't the fact that pass through profits are taxed at a high rate encourage reinvestment? If we want businesses to hire then pulling money OUT of the business should be discouraged."

And here is a letter to the editor of the Wall Street Journal from this morning:

Your Sept. 3 op-ed "The Small Business Tax Hike and the 97% Fallacy" by Kevin A. Hassett and Alan D. Viard makes a misleading argument about small businesses in order to justify borrowing $700 billion to finance the extension of the Bush tax cuts for the wealthiest 2% of Americans.

Messrs. Hassett and Viard concede that 97% of small businesses will pay nothing more in taxes under the president's plan to allow the Bush high-income tax cuts to expire on schedule. Yet they argue that even if only 3% of small-business owners would be affected, this small fraction reports a large amount of what they term "small business" income.

The problem with their argument, however, is that it counts any type of partnership income, sole proprietor income, or S corporation income as small-business income. Thus, they count as small-business income profits that go to a partner at a major law firm or hedge fund. Our analysis indicates that small-business owners under this definition, who would be affected by allowing the top two rates to increase as scheduled, have an average gross income of over $1 million. Keeping the Bush tax cuts in place for these taxpayers would not likely result in additional job creation, and it would add significantly to federal budget deficits and debt.

The experience of tax policy over recent decades clearly demonstrates, and the Congressional Budget Office has confirmed, that tax cuts for the highest-income Americans—regardless of whether their earnings are classified as ordinary or small-business income—are not an efficient way to stimulate the economy or create jobs.

Michael F. Mundaca
Assistant Secretary of Treasury for Tax Policy
Treasury Department
Washington

Winslow Sargent, Chief Counsel of Advocacy, Small Business Administration

President Obama has taken the August recess of Congress as an opportunity to issue a Recess Appointment to Winslow Sargent to be the Chief Counsel of Advocacy of the Small Business Administration. While some objections have come from those in the small business community because of Sargent's connections with a small Wisconsin Venture Capital firm, there is good reason to believe his appointment will benefit small innovative businesses and the Small Business Innovation Research (SBIR) program. His nomination, held up for months by neglect and political posturing, was supported by the Small Business Technology Council (SBTC) of the National Small Business Association (NSBA) . Here is the NSBA commentary on the appointment.

Below is the relevant section from the White House Press Release:

Winslow Sargeant, Nominee for Chief Counsel of Advocacy, Small Business Administration
Winslow Sargeant is currently a Managing Director in the technology practice at Venture Investors, where he works with entrepreneurs to create innovative companies in underserved communities. From 2001 to 2005, he was the program manager for the Small Business Innovations Research (SBIR) Program in Electronics, a new office in the National Science Foundation's (NSF) Engineering Directorate. Previously, Sargeant co-founded Aanetcom, a fabless semiconductor chip startup company with seed funding from Cisco systems which was acquired by PMC-Sierra. Prior to Aanetcom, he held senior engineering positions at Lucent, AT&T Bell Labs and IBM. Sargeant currently serves on the Boards of Silatronix and Pattern Insight. He serves as a Director of the University of Wisconsin Foundation and was the Vice Chairman ofthe UW-Madison Astronomy Board of Visitors. He is a member of the Boards of Directors of WiCell, WiSys and the Waisman Center. Sargeant is a Trustee for theWisconsin Alumni Research Foundation (WARF) and also serves on Purdue UniversityDiscovery Center's Research Board of Visitors. Sargeant received the inaugural2002 University of Wisconsin Distinguished Young Alumni Award and was a 2003Outstanding Engineering Alumni Awardee from Northeastern University. He receiveda B.S. from Northeastern University, an M.S. from Iowa State University and hisPh.D. from the University of Wisconsin-Madison, all in Electrical Engineering.He is a member of the society of Kauffman Fellows, Class 11.

Re-election Posturing Sticks it to Small Businesses

I have difficulty understanding how some politicians consider political maneuvering that damages small businesses, which has a deleterious effect on job creation and economic growth is somehow in the best interest of getting themselves re-elected. [SIGH]

via NSBA news:
Small Business Jobs Bill Stalemate in the Senate
1099 Reporting Repeal Defeated by House Politics

Proposed Tax Credit for Investors in SBIR firms

Proposed Tax Credit for Investors via The Pursuit.

Now all we need is some tax incentives for the entrepreneurs and small businesses themselves, to reward bootstraps as much as those who take outside investment:

• Allow the self-employed to fully deduct the cost of health insurance premiums, just like the rest of the employed population.
• Provide all employers (regardless of size) with tax breaks for creating net new jobs. Let's create a level playing field that actually rewards job creation.

Support the Small Business Jobs Act

Scott Hauge's Small Business California blog posts the press release for Sen. Mary Landrieu and Sen. Max Baucus' recently released Small Business Jobs Act. I encourage you give voice to your comments and support by contacting Caroline Bruckner in Sen. Landrieu's office.

When are we going to contain health care costs?

Like most small business owners, I'd like to take care of my employees as best as I am able. In part, that means providing reasonable health care coverage. Unfortunately, reasonable is not often used in conjunction with health care and small business. Like in so many other areas, small businesses are squeezed by unreasonable forces. Why is it that the cost of insurance for an employee at a firm with a handful of employees is 2-3 times what that same employee's cost would be at a firm with 5000 employees?

It's the same individual, with the same risk factors, and the same dispositions and predelictions. No more no less than if they were employed at a larger firm. But for some reason, health insurance companies are allowed to charge substantial more of small businesses than is reasonable. It would be like offering a discount card at the coffee shop only to employees of companies of a certain size, and charging a premium to anyone from a smaller firm.

Many of you can't even begin to imagine how expensive it is for a small company like mine (six, soon-to-be-seven, employees) to provide coverage for our workers, which I would relinquish only under severe duress, because I'd like to treat them at least as well as I would like to be treated.

To give you a sense of it: current total premiums for my employees account for 26.6% over payroll. The company covers most of employee's premiums and a lesser portion of their dependents'. In real terms, that means on average for every $100 an employee earns, the insurance company receives $26.60, of which the company pays $15.35. Put another way, health insurance costs the company about twice as much as payroll taxes. Yes, I believe everyone deserves coverage. But unless we contain costs, this is as unsustainable as the housing bubble was.

When will the bickerers in Washington get it?: we don't care what party you're from, whether you're an incumbent or an outsider, what labels you assign to others or they assign to you. We care about you getting the job done. CONTAIN HEALTH CARE COSTS so we can get on with doing what small businesses do best: innovating and creating jobs!

$1m, 3.5 years, 7 jobs

The SBTC is looking to make the case in support of investment in small R&D businesses as a means for driving innovation and creating high-quality sustainable jobs. Here's the rundown on my firm:

• April 2008: Unemployed PhD attends SBDC seminar on starting a Technology Business; First knowledge of SBIR.
• May 2008: Company founded.
• June 2008: First SBIR proposal submitted.
• August 2008: DoD SBIR Phase I awarded ($80k).
• June 2009: DoD Phase I Option exercised ($70k); part-time assistant hired.
• October 2009: Moved to larger office; second part-time employee hired (Master's degree).
• February 2010: Second DoD SBIR Phase I award ($70k).
• March 2010: DoD SBIR Phase II awarded ($750k); two full-time researchers hired (one PhD).
• May 2010: third part-time employee hired.
• [August 2010]: anticipated start date for fourth full-time employee (PhD).

Summary: Government R&D contracts awarded to one start-up firm in the amount of $970,000 has translated to the creation of 7 jobs (three PhDs, one Master's). Do the math*: that's less than $40,000 of government investment per job per year of the contracts, or less than $57,500 per FTE!

* $970,000/3.5 years/7 jobs; $970,000/3.5 years/4.825 FTE.

Hungry Entrepreneurs Innovate

Startups: Poverty is Underrated. Be Glad That You’re Not Rich (via TechCrunch)

TARP neglects small businesses. Are you surprised?

via Thomson Reuters News:

U.S. Small Firms Not Benefiting from TARP: report

WASHINGTON (Reuters) - The U.S. government's program to bail out the banking industry is not doing much to help small businesses play a part in the economic recovery, an overseer of the government's bailout program said on Thursday.

Firestorm against Nydia Velazquez

Small Business California notes the rising firestorm against Nydia Velázquez, current (and hopefully soon-to-be-departing) Chair of the House Small Business Committee, whose loyalties to small business seem to be ever more in question.

Rick Shindell's SBIR Insider posted notice a few days ago of Nydia's latest outrage in the form of the following statement (in her official capacity as chair of the House SBC):

Without the participation of venture-backed companies, the SBIR program has become little more than corporate welfare for marginal companies who are unable to secure external market based funding.

It's quite amazing really that she could be so (willfully) ignorant of the ways innovation and job growth have been spurred in this country for the past quarter century, and the essential role that SBIR and perhaps other similar programs have played in SEEDING innovative small businesses.

Once again, for the record, if there are any VCs out there with even the slightest interest in SEED FUNDING, stand up and be heard. No? Noone! I didn't think so.

SBIR, remade in the image of the puppet masters who control Nydia Velazquez (D-NY) and her companion-in-arms Sam Graves (R-MO), the committee's ranking member, would cease to foster, support, and sustain small business innovation and job growth. Unfortunately, it's not simply their actions, but the general inaction in Washington that most threatens the economy and the prospects for innovative high-tech small businesses to play our leading role.

The offending comment was not a private offhand remark, but passed on March 4 by unanimous consent of the entire House Small Business Committee as part of the committee's Views & Estimates document sent to the Chair of the House Budget Committee. Interestingly, the document was subsequently "corrected" to reword the offending passage, softening the language that calls for exactly the same thing: dismantling of the SBIR focus on seed funding of small businesses.

Read Scott Hauge's firestorm post on Small Business California. And read Rick Shindell's background on the story I describe here, then take action to urge our elected officials to do what's right. I join Fred Patterson in his call to have Velazquez removed as chair of the House Small Business Committee. It's time. Is anyone in the leadership in Washington listening?

IEEE Position Paper on SBIR

The Institute of Electrical and Electronics Engineers (IEEE) has issued a policy paper (dated 12 February 2010) regarding SBIR reauthorization. Their statement is in keeping with the quarter century success of the program, in support of retaining the 3-phase nature of the program, and preserving its focus on encouraging and seeding innovation from small independently-held businesses. They argue for increasing allocations to the program, and for streamlining the awards process to shorten decision making.

Common sense!

Is Defensive Publishing Appropriate for Small Businesses?

IBM has announced its plans to expand "defensive publishing" rather than patenting as a means to protect its intellectual property. A patent prevents others from practicing the specifics that are covered by the patent, but opens up a Pandora's box of potential work-arounds and litigation. Defensive Publishing is in essence placing IP into the public domain, rendering it thereby unpatentable by anyone, even the inventor.

Since public domain knowledge can be cited as prior art against patent applications, the onus would rest on any subsequent inventor to prove novelty beyond whatever is covered by the defensive publishing. Such an approach would allow IBM or anyone else to practice their art, to use the IP that has been published, making it more difficult for others to restrict that practice by means of a patent.

I have considered this an approach, easier and cheaper than preparing and submitting patent applications, then waiting the 2, 3, 5 years it takes to hear whether it's been approved or denied. The fear for a small business is that while a company like IBM has name recognition and a reputation to rest on, a small little-known quantity like my firm may easily be swallowed up. Were I to engage in defensive publishing, it would protect the ideas in preventing others from restricting my ability to practice them. But it might ring the death knoll of my company.

The fear is that as soon as those ideas become valuable, a large company with a top-notch marketing team, a long-standing reputation and credibility might simply scoop up the ideas, rebrand them, and put me out of business. It's a tough call, a very tough call. Because in the heart of, I'm a researcher. Far worse than going out of business would be for the ideas to never see the light of application.

But am I ready to prepay my company's cemetary plot, in hopes that we won't need to use it any time soon?

Harry Reid: Remiss of Duty

Senate Majority Leader Harry Reid circumvents the efforts of the leaders of the Finance Committee to strip the current Jobs bill of Small Business provisions. Just who does the leadership in Washington think will create jobs in this country?

Contact your Senator to do something about it!

Is China's Growth Unsustainable?

Of course, all things good and bad come to an end. The Economist's Robin Bew is projecting an 8%+ growth rate for China's economy in 2010. But a little talked about statistic may soon end China's hubris. As The Economist reported back in December, the year 2010 will likely mark a major milestone in China's demographics.

Largely a result of China's one-child policy, the percentage of the population dependent on others (mostly the elderly and the young) will begin to rise for the first time in decades. Over the coming years, as fewer and fewer active workers support greater numbers of pensioners, we will see China's economy plateau and then shrink. I wonder what the ramifications of this demographic shift will be on governance? Only time will tell.

Inside Boxes

In an article ostensibly lamenting the collateral impact of increased security for America's borders, the following sentence appears:

Among postdoctoral students doing top-level reasearch, 60% are foreign-born.

Putting aside the implication that native-born doctoral students are somehow subpar, I wonder at the worldview that might make sense of such a statistic. Just what could "top-level research" possibly mean objectively? By what stretch of the imagination might we constrain cutting-edge research into manageable gradations, such that some students' research could be deemed top-level, mid-level, low-level, remedial?

It would seem that such a worldview might in part be to blame for what Commerce Secretary Gary Locke has described as a broken innovation ecosystem. If innovation is stifled in America today, a large part of the blame rests in the assumption that the value of research can be known in advance, that such value can be assigned on the basis of what is already known, rather than on the basis of what is yet to be discovered.

At the risk of repeating myself, it is to support and sustain the discover of new innovations that there is such a need in the economy for seed funding, small pots of money to sustain a spare few researchers testing the mettle of their ideas, and driving the successful attempts to market. The Small Business Innovation Research program (SBIR) is one of the few sources for such seed funding, and just now it's being held hostage to the whims of the House Small Business Committee, in particular the committee's Chair, Nydia Velázquez, and Ranking Member Sam Graves. Their maneuvering has kept the SBIR program from reauthorization for two years now, doling out so far six short-term continuing resolutions. Whatever their motivation, support for innovation and small businesses is not among them!

Can Karen Mills pull it off?

SBA Administrator Karen Mills talks with NPR's Renee Montagne. It's good to hear all the recognition of the value and contribution of small businesses in creating jobs. Let's get on with it!

Listen here:

Direct Lending to Businesses

The New York Times reports on a small business owner's question posed recently to President Obama during a town hall meeting in Tampa, Florida. Steve Gordon's proposal was that if the government is to be involved in supporting loans to small businesses, why not lend directly to those small businesses? Obama's response was to explain that the SBA doesn't have the infrastructure in place to process and oversee direct loans; that local banks are better able to handle such loans more efficiently. The frustration of course is that even these local banks are still lending too little, too late.

Interestingly, this comes on the heels of the President's renewed pledge to do away with subsidies to support private lending to students, in favor of an expanded Direct Student Loan program. One difference perhaps is that the Direct Loan program already has in place the infrastructure to handle these loans. Regardless, there are still those who resist such a move toward reducing wasteful and inefficient government subsidies.

Is there any reason that the SBA and the Direct Student Loan programs couldn't team up to handle small business lending as well? With all the talk of increasing partnerships between universities and entrepreneurs, wouldn't such a pairing be an appropriate first step?

It is a valid question and worthwhile discussion to be had: what is the most efficient means for utilizing existing government revenues for the purpose of supporting and sustaining the development and growth of job-creating businesses?

Hidden Agenda in Supreme Court Decision?

No, I can't speak from any inside information, nor do I have the stomach to fathom or dissect the motivations of Supreme Court Justices. But the recent decision regarding campaign finance has a hidden impact that seems to be largely overlooked in the tumult of coverage:

Who has the most to gain from a greatly expanded and lucrative market for self-interested campaign ads?

I'll give you a hint: where will those ads appear? With all the widespread talk of trouble in the media world; with even Rupert Murdoch lambasting Google for republishing media content for free; newspapers dying; television advertising suffering...

Got the picture? Campaign ads provide a potential windfall for those advertising platforms currently suffering an immense reduction in revenues. The National Small Business Association implies as much in their reporting. Could the Supreme Court's ruling be influenced in part by the economic misery of traditional media? No telling. The results will likely speak for themselves!

Commerce Secretary Locke almost gets it

U.S. Secretary of Commerce Locke seems to have a sense that innovation is what drives an economy, that supporting entrepreneurship is key. Yet, the worldview he presents of where innovation comes from is deeply entrenched in the idea that smart ideas come from universities, and entrepreneurs' role is essentially limited to bringing smart university folks' ideas to market.

[Commerce Secretary Gary Locke Announces Plans for Forum on R&D Commercialization at Universities]

The problem that Secretary Locke seems to miss is that:

The university system is BROKEN! The rewards and incentives are not extant for the majority of the country's best and brightest innovators, who fall through the cracks of a broken university system!

There are simply not enough research faculty positions to employ the great bulk of innovative thinkers who are not hired for standard faculty positions because they're focused on researching new ideas that don't easily fit within the confines of traditional and change-averse disciplines, who are therefore erroneously judged to be less-qualified or less-desirable as teachers. Those who are granted tenure track positions are quite often bogged down with too many classes, too many students, and too many committee assignments to effectively teach and research.

If we really want to leverage the capabilities of our universities and entrepreneurs, we need to strengthen both! If we want a real stimulus to the innovation economy, we must:

• Provide the framework for universities to double their research faculty.
• Judge universities on the percentage of their doctoral graduates who are fully and appropriately employed upon graduation, and create incentives for those who are most successful in this regard.
• Provide the incentives for innovative thinkers to create, sustain, and grow their own research businesses (NEXT HINT: SBIR!)
• Enough with the dilly-dallying: let's remove the roadblocks to reauthorization; let's remove the hindrances and watering down of a truly cost-effective, job-creating program and get SBIR pushed ahead.
• Double the allocations (to 5%); keep award sizes within reason; retain the three-phase system; seed the ideas that drive the economy!

That's how to create a Research Entrepreneur economy! We want people who are equally passionate about research as about business. And we need to secure the environment where ideas thrive and are cultivated into proofs-of-concept; proofs are coaxed into prototypes; and prototypes are driven into the market.

Get on with it Washington!

Updating company address in CCR

If you move the location of your offices, and try to update the information on the Central Contractor Registration, you might notice that the "physical address" fields are uneditable. If you call, the Federal Service Desk (866-606-8220) you may wait on hold for close to an hour, only to be told what I will tell you now:

Call Dun & Bradstreet directly at 866-705-5711.

The CCR gets their information from from D&B, which in turn gets their information from the relevant state registry. D&B will likely indicate that they can update the information manually, upon being furnished with appropriate documentation (e.g. a utility bill or bank statement for the company at the new address). But you should also update your company's information with the relevant state offices that handle registrations for companies and corporations. You will also need to login to CCR about 48 hours later, to confirm the updated information.

Come & Go

Last month I wrote about a social networking site for innovators, Boliven. Sad to say, I just received notification of the pending dissolution of the site:

After approximately a year of beta product releases and extensive user feedback, the Board of the company has determined that it no longer makes good business sense to continue to operate the Boliven website and associated services. We were happy that over 100,000 unique monthly visitors and over 6,000 registered members found utility from Boliven, but as of the end of last year we had fallen short of some of our other operational and financial goals.

We have decided to make our website and its services available until next Friday, January 22. ... We hope that you will be able to find a suitable substitute for the services we have sought to provide. ...

That's too bad, really. Sorry to see them go.

Kosher Pork?

I received a call today from a regional purveyor of business support services to small R&D businesses like mine. The CEO had been referred to me by a couple trusted advisors (two who had helped me along with my first SBIR Phase I proposal, and since). The call was to set up a meeting for later in the year to discuss the services they might be able to offer my company. What's been indicated to me is that they help small businesses like mine to obtain Congressional "plus-ups" to support Phase II+ and Phase III stage R&D.

Clearly, I'm interested in propelling my company ahead. I am committed to the research, and believe firmly in its potential to reach the broader commercial market. Importantly, I also believe that the results and products of this R&D will have a positive impact on people's lives. Else, I wouldn't be in this business in the first place. But something raises my hackles. It sure sounds to me like I'd be soliciting earmarks from Congress, pork in other words.

Now, I'm open to hearing what's on the table, what services they might offer my firm, what benefits might accrue. I don't want to be too hasty in judgment. Underlying the effort (at least in theory) is a desire to identify specific needs of particular agencies and to fill those needs with the R&D that we are best poised to offer. But part of my dilemma (as I've written before) is that I believe in a merit-based review process.

I fear that in pursuing the private interests of my firm (with horse blinders on), I might be violating a fundamental principle that I wish to uphold. The question (for me as for the Nation) is how to accomplish great things without sacrificing principles to get there. Do well by doing good, not the other way around.

Find Your Contract in WAWF

WAWF (Wide Area Workflow) is the Department of Defense's "Web-based system for electronic invoicing, receipt and acceptance". When you have need to refer to your contract, but you don't have it easily at hand, you can find the electronic document on WAWF. Here is what you do:

1. Login to the system
2. Expand the Vendor submenu
3. Click on View Vendor Documents
4. Select the appropriate location code (CAGE)
5. Run a search for an active or archived document (i.e. an invoice)
6. On the search results page, the relevant found documents will be listed
7. If you click on the item in the Contract Number field, the relevant contracts and mods will be listed
8. Clicking on any of them will open the document in PDF