Opening the first panel, Christina Gabriel of the University Energy Partnership, who is a member of the Academies Small Business Innovation Research (SBIR)/Small Business Technology Transfer (STTR) committee, indicated that the focus of the presentations would turn to suggestions on how to address the issues that have been identified. The panel included the recommendations of a female entrepreneur, Tanaga Boozer, now with the Patent and Trademark Office, and of Peggy Wallace, the managing partner of Golden Seeds, an angel and venture funding firm with a mission to empower women. Tanaga Boozer made a number of suggestions including enhancing outreach measures such as targeting woman and minority innovators at research institutions; conducting SBIR workshops at minority entrepreneurship conferences, Minority-Serving Institutions, and Small Business Development Centers; launching a federal Phase Zero program; and developing mentorship programs for Phase II and Phase I grantees. During her presentation, Peggy Wallace highlighted the difficulty that woman-led businesses face in obtaining financing, noting that only 6 percent of companies that secured venture capital in 2010 had female CEOs and that only 7 percent had female founders. She argued for the importance of increasing the number of women serving on corporate boards, indicating that studies have shown that female board membership is associated with better company performance.
The content of the discussion and issues and recommendations raised by speakers is summarized below.
Tanaga Boozer
U.S. Patent and Trademark Office
Tanaga Boozer of the U.S. Patent and Trademark Office shared her personal story as an SBIR awardee and recommendations for program improvement. In 2003, she started working as a consultant to Florida A&M University, charged with writing an SBIR grant. She then launched a company to create a Web tool to help others receive technology transfer services and identify commercialization resources such as SBIR funding. Her company won an SBIR award from the National Science Foundation (NSF) in 2006 and a patent for her technology in 2012. After the NSF denied the company’s Phase II application, Ms. Boozer began serving as a Department of Defense (DoD) technology transfer reviewer. This, she said, provided her with insights on how applicants can improve their chances of winning SBIR Phase II awards. Others could learn from similar experiences.
Although the SBIR program has, according to Ms. Boozer, succeeded in its first two goals to stimulate innovation and to increase the number of small businesses to meet U.S. research and development (R&D) needs, there is concern about whether SBIR is a research program or a commercialization program. If it is a research program, then it might be appropriate for applicants to receive several Phase I awards to support early research programs and to never seek Phase II funding. If, however, it is a commercialization program, then there should be adequate mechanisms to support an applicant’s seamless movement from Phase I to Phase II and better coordination of federal resources for SBIR awardees. Finally, she indicated that the program must improve upon the fourth goal to foster and encourage participation by women and minorities. Enhancing outreach measures such as targeting woman and minority innovators at research institutions; conducting SBIR workshops at minority entrepreneurship conferences, Minority-Serving Institutions, and Small Business Development Centers; launching a federal Phase Zero program, similar to Florida and Vermont state programs; and developing mentorship programs for Phase II and Phase I awardees may be helpful in increasing minority participation.1
In addition, Ms. Boozer recommended launching a national advertisement campaign that expressly links federal research programs to America’s competitiveness. She noted that it is important to provide context for why the federal government “invests” in research and to highlight how that return on investment is realized as new jobs, new products, and services. Ms. Boozer also suggested that requiring a one-page commercialization or transition plan in “all” research proposals would lead researchers to contemplate the need and the methods for
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1The NRC committee studying the SBIR and STTR programs convened a workshop to learn about the role of state programs in complementing and leveraging the SBIR and STTR programs for regional growth. That event, “SBIR/STTR and the Role of State Programs,” was convened on October 7, 2014.
turning research into commercial innovations earlier in the innovation cycle. This, she predicted, would increase the likelihood that researchers are better prepared and encouraged to participate in innovation programs, such as the SBIR program.
Peggy Wallace
Golden Seeds
Peggy Wallace of Golden Seeds indicated that her company operates the country’s fourth largest angel group, three venture capital funds, and investments in companies with women at the C-level. Golden Seed’s angel investor group is 80 percent female, and its mission is to empower women entrepreneurs. “That’s how we’re going to change the world,” said Ms. Wallace. “We’re going to get the female brain into companies.” Golden Seed’s portfolio includes woman-led SBIR awardees in life sciences and investments with state economic development agencies and inQTel, the CIA’s venture capital fund.
Angel and venture capital funders provide $40-60 billion in financing a year, she noted, according to the National Venture Capital Association and the Center for Venture Research at the University of New Hampshire. Total angel funding is almost as large as venture capital. Angels invest in earlier-stage deals than do venture capitalists, writing average checks of $300,000 to $500,000, compared to average venture capital checks of $500,000 to $700,000, she said.
About 97 percent of venture capitalists are white males, said Ms. Wallace. In contrast, about 20 percent of startups led by women sought venture capital in 2011, and 13 percent received funding. Women receive about 10 percent of venture capital or angel funding in any given year.2 When Golden Seeds started, woman-owned businesses received only zero to 3 percent of such funding. In 2010, only 6 percent of companies that received venture capital had female CEOs, 7 percent had female founders, and 10 percent had a female founder or CEO at some point.
Ms. Wallace noted that women hold 17 percent of U.S. board seats. Some European countries have adopted diversity quotas.3 “That’s the only way to make it happen,” she said. She cited studies showing that companies with female board members perform better than those without female board members.4
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2Dow Jones Venture Source and the Center for Venture Research at the University of New Hampshire.
3See Alison Smale, “Germany Planning Quotas for Women in Boardrooms,” The New York Times, November 26, 2014, http://www.nytimes.com/2014/11/27/world/europe/germany-to-mandatewomens-membership-on-corporate-boards.html?_r=0. Accessed February 24, 2015. See also, European Commission, “Women on Boards: Commission Proposes 40% Objective,” Press Release, November 14, 2012.
4Dow Jones, McKinsey & Company, Fast Company, Fortune 500 studies. See, for instance, Georges Desvaux, Sandrine Devillard-Hoellinger, and Pascal Baumgarten, Women Matter: Gender Diversity, a Corporate Performance Driver, McKinsey & Company, 2007.
As an angel investor, Golden Seeds seeks companies with barriers to entry, such as a deep patent portfolio. Women are underrepresented in patents, although their patents are more likely to be commercialized,5 Ms. Wallace said.
Actively seeking woman-led technology companies, Golden Seeds considers the SBIR program to be a natural pipeline. But the firm often views government funding unfavorably, because investors, to whom Golden Seeds eventually sells its portfolio companies, believe the companies are in business only because they are government-certified as “disadvantaged” small businesses. Ms. Wallace also said that investors prefer DoD over NSF SBIR awardees because of the prospect for military procurement of the companies’ products.
Ms. Wallace noted that angel and venture capital investors exit their portfolio companies within 5 to 10 years, but science often requires 20 years to see success. Thus, early-stage SBIR funding is critical to support these companies through the R&D phase before the commercialization phase.
Ms. Wallace also shared suggestions from CEOs of Golden Seed’s SBIR portfolio companies. They recommended that the SBIR program communicate clearer selection criteria, including the requirement for letters of support. They also recommended that the SBIR program focus on funding R&D on diseases that the private market does not address, a recommendation reflecting Golden Seed’s life sciences portfolio.
DISCUSSION
Grace Wang of the NSF addressed Ms. Wallace’s comments on investor skepticism of NSF grantees. She noted that 40 percent of NSF Phases I and II SBIR companies produced products. Acquisitions of such companies totaled $2 billion over the past 8 years. Successes include Qualcomm, Symantec, and Intralase. Commercialization is best realized based on private-sector criteria, not on whether the NSF or DoD buy products, said Ms. Wang.
Christine Densmore of the National Institutes of Health SBIR program said that the government plays a critical role in early-stage seed funding to “de-risk” ideas and technology. In life sciences, Phase II funding is still not enough to attract private-sector investors to companies still awaiting patent issues. The government and investors need to better educate each other to close this gap, she said.
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5National Women’s Business Council, 2012 Annual Report, Washington, DC.
