Reinvention

I have been studying up. To be honest, some of the most enjoyable times of my life have been in the academy. Graduate school was a time of optimism and potential. Much of what followed was a disappointment.

After receiving my PhD in 2005, I spent a few years spinning my gears in the sand, sending out cover letters and CVs to hinder and yon, pouring my heart and soul into nearly every application, researching the school and position, making my case as best I could. I was miserable at the task, and miserable performing it.

Several years of that and a stint as adjunct, with the relentless prodding of a career/life coach I had engaged, I finally dropped the search and remade myself as an entrepreneur. That suited me (especially once I discovered SBIR, a program of the U.S. government that provides a means for independent researchers and small businesses to compete for a small slice of federal R&D dollars). SBIR provided funds for basic and early applied research for me and a small team that lasted about five years. Only, things have changed. Priorities in Washington and budget cuts have shifted the focus from basic and early applied research to latter stage development of already proven technologies. The buzz has morphed from "high risk/high reward" to "rapid innovation".

And that has left me and my team out in the cold. About a year ago, I let the others go, as I could no longer ensure payroll would be covered, and I've done nary a bit of research in my field since then. Lately, I've taken to reinventing myself again. I'm working on a novel (one that first took form as the seed of a screenplay intended to highlight the technology I was developing). And I've gone back to school in a manner. I've been taking classes on Udacity and Coursera, as well as other online and offline tutorials. I've been learning Java and improving my C++, as well as honing up on Mathematics which I'd not revisited for three decades.

I've been studying Lean Startup principles and other business coaching tools. I'm advising a couple other technology startups, and incubating a few other business ideas, unrelated to my research, that might sustain me and my family financially for a while, or serve as launchpads for other ventures. I'm keeping busy, and just hoping and believing that my spirits and ideas will keep long enough to jumpstart my income before our savings run out.

SBIR Eligibility at Time of Proposal

In the SBA's current proposed Policy Directive for SBIR, they propose a change in the time of eligibility determination. During the recent Navy Opportunity Forum, David Metzger addressed his concerns about this change. I confess this is the first time I've heard him speak on matters of SBIR when I differed with his view.

The proposed change (Section 121.704--When SBA Determines Size and Eligibility) states that the current regulations determine eligibility only at the time of award, whereas other SBA government contracting programs determine eligibility at the time of proposal. Their intention is to bring these separate determinations in line, and to provide a date certain to small businesses to ensure they are eligible at the time of proposal.

Metzger's contention is that this would reduce the number of SBIR eligible firms that are created. Here's why: Let's say you're a professor at a university, or a mid-career engineer or scientist in industry. You've got an idea that responds to a need or requirement for an SBIR. You prepare the proposal, while retaining the comfort and security of your "day job", with the intention of jumping ship or spinning off should your proposal be selected. By that view, determination at the time of award allows someone in a comfortable position to risk less because non-selection would mean merely that they keep their jobs.

While I'm sympathetic to the idea that lowering the barriers to business creation is in general a good thing, what David fails to acknowledge is that many research entrepreneurs don't have the luxury of a secure professorship or corporate paycheck. SBIR is strongest in providing seed-capital and direction to support great ideas that might otherwise languish, regardless of their source. Truth is, those of us most committed to building a long-term sustainable business based on innovative R&D are not cowed by the risks involved in striking out on our own. It is those hungry entrepreneurs who will remain most committed to seeing their ideas through, while many of those coming from industry or university settings may simply fold and return to their pre-SBIR status at the earliest sign of trouble, e.g. "the valley of death," possibly conducting the research, but failing to commercialize the results.

Even if they do succeed at commercialization, here's a scenario that I am not sure SBIR was intended to foster: Let's say you're that mid-career corporatier; you propose to an SBIR agency, and get selected. You take a leave from your post, spend six months or a year on Phase I, get selected for Phase II, and spend another couple years developing your technology. Towards the end of your Phase II, you make some phone calls to your old employers, pitch the new technology to them. They like that the government has paid your salary for a few years and has taken all the risk of the early-stage out of the picture. You've identified a transition customer, so your old company agrees to acquire your company, and hire you back.

The risk has been reduced for the inventor, who moves from the comfort of a secure job, to the temporary certainty of a government contract or grant. After a few years, the ostensible small business is simply reabsorbed into the large corporate structure. How is that different from the government simply contracting directly with a small division or team at a large prime? I've nothing against such an arrangement, and don't argue that innovations can't arise this way.

I simply don't believe that that is the greatest strength of the SBIR program. When I started my firm, I was three years out of my PhD, had spent most of that time applying for faculty posts (~150 in all), and finally gave up the hunt for an academic job in exchange for working full-time to make my R&D vision a reality. I'm far better at research than applying for jobs. Without SBIR, my company never would have survived, and I might be pumping coffee at Starbucks.

The issue is how best can the federal government spend its precious resources to support and stimulate transformative innovations that otherwise would never see the light of day. The safe and comfortable professor or corporatier if they're committed to them will likely pursue their interests regardless (as they already have access to more than 95% of federal R&D investments). Let's leave SBIR to drive innovations where they might otherwise never have a chance.

Publish or Patent?

The mantra of the Academy has long been "publish or perish". The April 14th edition of The Economist presents an op-ed entitled Academic Publishing: Open Sesame in which they argue:

Government bodies that fund academic research should require that the results be made available free to the public. So should charities that fund research.

This is a significant issue for those of us who receive government funding to support for-profit R&D (such as the U.S. Small Business Innovation Research awards). A major dilemma for unaffiliated researchers is whether to publish or patent, or in some cases simply stay mum (trade secret, anyone?).

Academic-minded government agencies, like the NIH, NSF, and Department of Education may likely view the lack of peer-reviewed publications by the principal investigator on the subject of their proposed research as a sign that their ideas have low value in that domain, and may thus not fund the research. But publications may foreclose the possibility of patenting an invention or innovation, a death warrant for self-supporting R&D-driven companies. It's a Catch-22 of sorts. But if the end game is to commercialize the innovation, jockeying for the first influx of early-stage funding needs take second seat.

For researchers supported by an academic institution, especially those with tenure, the choice to give freely of their knowledge is an easy decision to make. Their jobs and careers are secure. Yet university technology transfer offices must keep the balance between enlightening publications and enabling ones, to preserve the potential for patents. But the ranks of unaffiliated, world-class researchers is growing as opportunities in the Academy diminish or become less appealing. We simply don't have the luxury of a fully-staffed and accommodating tech transfer team.

While I've asked the question before whether defensive publishing may not at times be worthwhile, it seems the best long-term tack for small businesses and independent researchers is simply to keep quiet, even at the risk of being marginalized by the broader field.

We are the Entrepreneurs

My thoughts these days go to the core of being a Research Entrepreneur. With the Small Business Innovation Research program (SBIR) finally secure--knock wood--for another six years, there's a little time to reflect on where I came from and where I'm going. You see, four years ago, I was just an unemployed, disillusioned, interdisciplinary PhD. My terminal degree is ostensibly in Musicology with an Emphasis in Cognitive Science, followed by a two-year post-doc in Linguistics. I had never heard of SBIR.

I was unemployed because I had shirked my underemployed status as janitor Adjunct Professor of Music at Chapman University teaching 80 students a term for a gross salary just shy of $15,000/year, with no job security beyond one term at a time, no office, and no health or retirement benefits. Frankly, I may have been better treated as a janitor. That part's the disillusionment.

Despite the common view that professors are a well-paid, secure, and sheltered bunch, that's the reality. Far more end up in adjunct servitude than land tenure-track posts. There's the satisfaction for you of society's promise to those who go through college, to expect their hard work will be rewarded with a decent job, like an apprentice paying their dues to train for a lifelong vocation. This promise is fantasy.

I laugh sadly therefore at Mitt Romney's recent response to a college student at a town hall meeting in New Hampshire that "what I can promise you is this. When you get out of college if I'm president, you'll have a job. If President Obama is reelected, you will not be able to get a job." [Story embedded: skip to 1:40]

The promise is hollow whatever end of the political spectrum it comes from, unless of course someone is proposing a nationalized workforce, and guaranteeing employment. But I haven't heard that, nor would I necessarily endorse it. Indeed, politicians these days seem to be stepping back from bold and specific promises. Our own governor here in Wisconsin once spoke of creating 250,000 new jobs in four years.

Governor Walker gave a talk at last spring's National SBIR Conference in Madison, in which I was pleased to hear a specific pledge not only of new jobs but of 10,000 new businesses in the state. A worthy goal. My proposal has been that one fourth of those new jobs should come from new businesses. According to the Kauffman Foundation, new firms these days create 4.9 jobs on average (my firm's current count is 4.3 FTE). Do the math: 1/4 x 250,000 = 62,500 / 4.9 = 12,755 new firms in the state.

But the promise of jobs as a reward for schooling and hard work is not only hollow; it's misguided. Jobs are not out there like commodities for us to choose among and purchase. Rather, each of us chooses a path to follow. The path ought be defined in part by our talents and skills, and by that which drives us beyond our limitations to make a lasting contribution, regardless of schooling or credentials. Sure, some of us will get jobs that align with our interests. But others of us will follow our passion, define our life's work, and become the job givers. We are the entrepreneurs.

In my view, the greatest value of SBIR is its ability to seed those passions and facilitate entrepreneurial risk-taking, which leads to transformative innovations and technologies, and the creation of myriad jobs along the way. The statistics bear this out. If political leaders are serious about creating new jobs, it is entrepreneurs and innovators who should be getting their attentions.

House Small Business Committee's CLOSED Mic

The majority site for the House Small Business Committee is called "Open Mic". A better name perhaps would be "Censored Mic: tell us only what we want to hear."

On September 23 I posted a couple comments. My comment on the main page, regarding SBIR reauthorization has never been posted. When I called, a staffer explained that they get many postings, and not all are open for the public to view. Huh? I thought it was called "open mic". I guess you have a different understanding of that term. Surely, they have a right and responsibility to keep discussions on topic. But to censor views that don't support their portrayal of things is a bit beyond the pale.

The other comment I posted on the "feedback" page regarding the high cost and uneven burden of health insurance for small companies, garnered the following response:

Delivery has failed to these recipients or distribution lists:
SmallBusinessPress@mail.house.gov
The recipient's mailbox is full and can't accept messages now. Microsoft Exchange will not try to redeliver this message for you. Please try resending this message later, or contact the recipient directly.

Not quite what I was hoping for. So, I resubmitted the comment on their main page. Still no posting. A week later, I resubmitted a somewhat extended and specific version of my SBIR reauthorization comments on their resources page summary of H.R. 1425, which presents an incomplete and misleading depiction of the actual bill. For your edification, despite the actions of the House Small Business Committee, I append that September 29 comment and my suggestion for dealing with small business health insurance below. You can judge for yourselves whether they warrant censorship.

SBIR Reathorization

We need long-term or permanent reauthorization of SBIR. The Senate had called for 14 years, then compromised for 8. No shorter! The three year reauthorization in HR 1425 (section 101) is woefully short. It takes more than three years for a single review and award cycle for Phase I and Phase II. Small businesses and agencies need the certainty of a long term reauthorization in order to develop crucial innovations.

We need SBIR to be retained as it was intended: to spur innovation and business creation. That means, there should be no softening of the small business definition criteria and no accommodation for businesses majority owned and controlled by any entity other than individuals or another small business(sections 106/107). No large venture capital-owned businesses (no hedge funds/no private equity); no large corporation subsidiaries. This is needed to ensure cost-effective use of taxpayer dollars to support innovations, business and job creation, while cutting out the middlemen. "Financial structure" matters!

SBIR should be expanded to reflect the value of small innovative businesses, which employ 40% of American tech workers. We currently receive a mere 4% of federal contracts and grants. The percent allocations for SBIR should be increased from 2.5%. A reasonably conservative figure would be 5% of agencies' budgets for SBIR. As a minimum the Senate (S. 493) compromise of increasing SBIR from 2.5% to 3.5% over ten years should be adapted.

There should be absolutely no loopholes created for bypassing Phase I (section 105). Period. Small dollar (~$100-150k) Phase I awards are necessary to ensure that the program continues to seed the earliest stage, high value/high risk/high reward ideas, without overextending the federal government's commitments. Phase I allows risk to be mitigated, while providing capital for early stage ideas that have nowhere else to get funding!

Thousands of businesses, tens of thousands of patents, hundreds of thousands of jobs depend on the House Small Business Committee doing what's right for SBIR and the nation. We depend on you not to cave into to special interests. SBIR needs to be maintained as a merit-based driver of innovation, problem solving, and job and business creation and growth. It has succeeded in this for over a quarter century. No more compromises.

Small Business Health Insurance

Here is a simple idea to benefit small businesses and their employees, and to simplify the burden on insurance company actuaries. Here is a new regulation that would simplify things, while providing for a more fair distribution of health care costs among the population.

Require that health insurance providers establish rates by geographic region and other broad demographic measures, rather than by the size of the employee pool at a particular company. It is absurd that the premiums charged per employee are two or three times the rates that would be charged for the exact same employee if they walked across the street to work for a company with 800. If rates were determined fairly, without regard to the size of the company pool, my rates would drop substantially, allowing me to continue providing coverage, while rates per employees at large corporations would barely nudge upward. It would be a fair distribution of rates, reflecting the actual risk factors per individual, and would even the playing field, so small businesses could compete on an equal footing with large companies for the same quality employees, without having to gouge their own bottom lines.

How Not to Create Jobs

If the brinksmanship of the past few months is any indication, the last thing on politicians’ minds is actually clearing the decks for innovative entrepreneurs to create new businesses, jobs and commerce. With more than 112,000 small employers in Wisconsin accounting for more than 52% of private sector jobs and a whopping 97.9% of all state employers, you’d think our voice would be louder and clearer.

Yet efforts to support small business creation and job growth are too often silenced in the din of politics. The remarkable fact is that most state and federal plans intended to create jobs are woefully misdirected—biased toward producing profits for middlemen and investors rather than efficiently creating new businesses and jobs. Let me explain: if a contract goes to a start-up or small company, the entire amount can be spent to create jobs and innovations; If the funds rather go to supplement investment in companies, investors reasonably enough expect to skim off a profit, leaving a reduced portion of funds to support jobs and innovations.

In March of this year, U.S. Senator Mary Landrieu introduced a bill (S.493), years in the making and culminating from a herculean effort to address the concerns of multiple constituencies. The bill enjoyed bipartisan support with eight co-sponsors: three Republicans and five Democrats. It was blessed by small business organizations, federal agencies, and investor outfits as an acceptable compromise. S.493 had one simple objective: to extend the SBIR and STTR programs which direct a small percentage of federal R&D spending toward small businesses and partnerships with universities.

The costs are negligible: the nonpartisan Congressional Budget Office estimates administering the program at a mere $30m/year, to award more than $2B in contracts and grants to America’s small businesses. In effect it is budget neutral: They are not separate line items, only a percentage of whatever funds are budgeted to federal agencies.

The program has been around since 1982, has founded or expanded some 28,000 businesses, many of which became major employers like Qualcomm with 17,500 employees. America’s small businesses account for nearly 40% of patents issued, but receive a mere 4% of the federal R&D funding. For every $400k of taxpayer money, small businesses produce one patent. Universities in contrast require nearly $15m of federal subsidies for every patent issued. In terms of efficient use of funds, small businesses produce results!

Unfortunately, before a full vote in the Senate, at least 150 mostly unrelated amendments were proposed to S.493. In May Senate Majority Leader Harry Reid tabled it. The leadership of the House Small Business Committee is supporting instead H.R. 1425, a bill that would radically change SBIR/STTR for the worse. The House version as it stands would in effect destroy these programs, shifting the focus from seeding innovative job-creating research into a scheme to subsidize Wall Street hedge funds, private equity, and venture capital, concentrating our bets in a few mostly mature companies that have already been identified by investors as potential cash cows. Here are a few of the changes that are proposed:

• Current law requires a short-term, low-budget Phase I for all awardees to prove the feasibility of an innovation before a large outlay of taxpayer funds; H.R. 1425 does away with this requirement, allowing untested ideas to receive $1m or more right from the start, reducing the number of new ideas that get tested.
  
  
• Currently, SBIR/STTR contracts and grants are reserved for American small businesses, owned and controlled by individuals, permitting 100% of the funds to go directly to the company for jobs, benefits, and research; H.R. 1425 does away with the small business requirements, transforming the programs into subsidies for hedge funds, private equity, and venture capital.
  
  
• Companies with fewer than 500 employees employ about 40% of the nation’s scientists and engineers, but receive only 4% of federal funding; H.R. 1425 would further distort this situation, removing the opportunity for great ideas to be taken to market.

Why on earth would we dilute a program that has created hundreds of thousands of Main Street jobs to subsidize the profits of Wall Street money managers? Why would we radically alter a cost-effective, proven job creator? A vote on H.R. 1425 is expected September 12. The House leadership must support a better bill. At the very least, they should accept the compromises already achieved in S.493. A better bill means a stronger economy for us all.

Hirono sponsors new SBIR/STTR bills

Quietly, Rep. Mazie Hirono (D-HI) introduced three bills in the House of Representatives, designated H.R. 447, 448, & 449, known as the SBIR Enhancement Act, the Small Business Innovation Enhancement Act, and the STTR Enhancement Act. Significantly, these bills would increase the SBIR percent allocation from 2.5% to 5% of agency's extramural R&D funding, and increase the STTR allocation from .3% to .6%; they would raise Phase I award levels to $200k, and Phase II to $1.5m (Recent SBA guidance suggested $150k & 1.5m); included as well is a stipulation that award levels be adjusted every five years.

Rep. Hirono sponsored all three bills independently, without co-sponsors on January 26, 2011. All three were referred the House Small Business Committee and the House Committee on Science, Space and Technology. Hirono serves on neither. There is no news on discussion or consideration by these committees, but on February 10, the bills were referred to Science & Technology's Subcommittee on Technology and Innovation.

There is nothing in these bills however that addresses reauthorization of the Small Business Act itself, so presumedly any debate or discussion on the duration of reauthorization would be handled separately, or would be amended to these bills.

Washington: Let's get on with SBIR reauthorization, to support small business innovation, job creation, and economic growth!

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.

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!

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.

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.

$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.

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!

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!

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.

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.

Still not quite convinced

Understanding motivation can be key. My friend Fred Patterson, the SBIR Coach, calls it WIIFM: What's in it for me?

Only... we're sold a bill of goods by common assumption, that it's we, the entrepreneurs, the inventors, the scientists, the researchers, who must go as supplicants to the trough of Investors, tripping over ourselves to convince the moneyed that we are worthy of their largess.

I'm still not quite convinced. Turning the tables, I wonder "what's in it for me"? See, I'm a lone researcher, a radical, an oddball, who after several years as supplicant at the trough of Academia, after 150 faculty applications, and a miserable stint of Adjunct Servitude, decided to shirk the bonds I had willingly taken on, and head out on my own.

I stumbled into SBIR. And, now, little more than a year and a half later, my firm is growing from one, to a staff of six (four full-time). We're patent pending, about to start our first Phase II, and our second Phase I with a different agency on a related but distinct project.

I believe in the mission of SBIR to support innovation wherever it lurks. I believe in SBIR as an open competition of ideas, not as earmarks. I believe in the wise use of public funds to spur and stimulate and foster and fertilize the fragile seeds of innovation. What a wonderful idea: small pots of money for outstanding ideas, to support a short path to proof-of-concept.

What's in it for me? I have learned. A spare six months to delve whole heartedly into the realm of my passions, to test the mettle of my ideas, to drive those naked thoughts into evidence. Yes, indeed, this will work, and it will solve your problem. Then, the chance to compete for Phase II funding, to support a full-scale R&D effort for a couple years, creating high-quality jobs along the way. Finally, the chance to make those dreams a reality by commercializing the results of those ideas and that passion, solving real-world problems, paying back the largess of public coffers. That's a win for everyone.

But what's in it for me to (possibly prematurely) sell off parts of my firm to investors, whose interest may more likely begin and end with dollar signs, not passion, or ideas, or public interest? I'm not much for knocking on doors, beating the bushes, and doing a song and dance for investment.

I'm not much for paper entrepreneurship, writing dazzling business plans. Sure, I can project millions in profits like the best of them. Only, it's far more interesting (and difficult) to actually achieve it. Do I need private investment to get there? Will private investment ensure I get there? Will it help?

Those are the important questions. I can't say I know the answer just yet. I'll answer a knock at the door, and listen in earnest to the pitch. But for now, I think I prefer if they work to convince me. I always enjoy a good song and dance.