3

NSF SBIR/STTR Processes

NSF has developed sophisticated processes for administering its SBIR/STTR programs, which it calls America’s Seed Fund (NSF, n.d.a). Indeed, NSF’s programs are distinctive in that they consider a nearly unrestricted set of potential project topics and have staff devoted exclusively to running the programs. This chapter reviews the agency’s policies and procedures for soliciting applications, engaging reviewers, selecting award winners, and administering the awards. In the context of the broad mandate for the programs, it describes sources of commercialization assistance offered to awardees at all stages of the award cycle (from preaward to post–Phase II). The chapter considers the impact of agency processes on the participation of woman-owned firms and firms owned by socially and economically disadvantaged individuals, as well as firms from states that receive few NSF research awards, and offers a detailed discussion of how the agency’s SBIR/STTR program directors measure success.

The principal sources of data for this chapter were committee members’ discussions with NSF SBIR/STTR program directors; input from small-business owners, SBIR/STTR awardees, and former NSF staff; information publicly available through the NSF SBIR/STTR program website; and the SBIR/STTR annual report, available from the U.S. Small Business Administration (SBA). Each discussion covered a similar set of topics and lasted approximately 45–90 minutes (see Annex 3-1 at the end of this chapter for a list of topics and participants). Additional data and background information were provided by the NSF SBIR/STTR Program Office.

NSF’S SBIR/STTR OFFICE AND TOPIC SOLICITATION

The NSF SBIR/STTR programs are centralized within one directorate. Until very recently they were part the Division of Innovation and Partnerships within the Directorate of Engineering, but they are now located within the newly created Directorate for Technology, Innovation and Partnerships (TIP). The TIP Directorate is focused on “strengthening and scaling the use-inspired and

translational research that will drive tomorrow’s technologies and solutions” (NSF, n.d.b), a mission that is advanced by the objectives of the SBIR/STTR programs. The establishment of the new TIP Directorate presents a unique opportunity for NSF to expand its diversity and inclusion efforts and to connect the SBIR/STTR programs with NSF-funded research in other directorates.

NSF’s SBIR/STTR funding allocation is based on NSF’s overall extramural research and development (R&D) budget and is not divided among disciplines on a pro rata basis based on Congress’s appropriations to individual directorates.¹

The centralization of the NSF SBIR/STTR programs appears to facilitate the agency’s ability to modify and evolve its programs and is another example of how NSF’s programs differ from those at other agencies. The program office is staffed by a team of dedicated program directors with substantial administrative authority, each of whom has responsibility for a particular technology portfolio. The organizational structure provides an enhanced ability to train and socialize new program directors, who deal exclusively with SBIR/STTR applicants, award winners, and potential applicants.² The office employs a centralized portal for applicants with clear rules and requirements for NSF’s SBIR/STTR programs while allowing program directors to use their discretion and expertise in reviewing and selecting awardees.

NSF states that it encourages SBIR/STTR proposals in nearly all technology and market sectors except for clinical trials and Schedule I controlled substances. It lists the following technology topic areas in its annual solicitation (NSF, n.d.c):

• Advanced Analytics (AA)
• Advanced Manufacturing (M)
• Advanced Materials (AM)
• Artificial Intelligence (AI)
• Augmented and Virtual Reality (AV)
• Biological Technologies (BT)
• Biomedical Technologies (BM)
• Chemical Technologies (CT)
• Cloud and High-Performance Computing (CH)
• Cybersecurity and Authentication (CA)
• Digital Health (DH)
• Distributed Ledger (DL)

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¹ In addition to the new TIP Directorate, the NSF directorates are Biological Sciences; Computer and Information Science and Engineering; Education and Human Resources; Engineering; Geosciences; Mathematical and Physical Sciences; and Social, Behavioral and Economic Sciences.

² In contrast, for example, many of the SBIR/STTR program managers within the institutes and centers of the National Institutes of Health (NIH) are responsible for applications for NIH’s Research Project Grant Program (R01), which represent the bulk of NIH’s research funding. Only the National Cancer Institute has centralized its SBIR/STTR program within the institute (NASEM, 2022).

• Energy Technologies (EN)
• Environmental Technologies (ET)
• Human-Computer Interaction (HC)
• Instrumentation and Hardware Systems (IH)
• Internet of Things (I)
• Learning and Cognition Technologies (LC)
• Medical Devices (MD)
• Mobility (MO)
• Nanotechnology (N)
• Pharmaceutical Technologies (PT)
• Photonics (PH)
• Power Management (PM)
• Quantum Information Technologies (QT)
• Robotics (R)
• Semiconductors (S)
• Space (SP)
• Wireless Technologies (W)

For each of these technology topic areas, several subtopics are listed. In addition, NSF invites proposals for “Other Topics,” which it describes as “projects that do not seem to fit into one of the other technology topic areas, but still meet the NSF SBIR/STTR goals of supporting research and development of deep technology, with commercial viability and the potential to benefit society” (NSF, n.d.c). While some other agencies, such as the National Institutes of Health (NIH), are similarly less prescriptive in their funding solicitations, NSF is broader in its topic solicitation, likely because its statutory mission is quite broad—“to promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes.”³

NSF SBIR/STTR topic areas serve as a mechanism for dividing workload among program directors, not as an exhaustive list of NSF interests or a reflection of relative priorities. One program director noted that the focus of the SBIR/STTR programs is as broad as NSF, with program directors having the autonomy to grow and develop their topic areas as they see fit. Another observed that although program directors are influenced by the content and the volume of proposals, they also have the latitude to develop topics that meet the needs and requirements of the U.S. population or industry. They attend seminars and talk to experts to learn about and understand whether certain research areas will set the stage for translational research and ultimately commercialization. While some program directors mentioned talking to colleagues in other parts of NSF, frequent interactions were not mentioned, nor was there mention of an institutional policy to support collaboration across NSF. However, the move to the new directorate

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³ U.S. Congress. P.L. 81-507, National Science Foundation Act of 1950 (May 10, 1950).

and additional resources to support commercialization of NSF-funded research in fiscal year (FY) 2023 may facilitate such conversations.

THE APPLICATION PROCESS

As discussed above, NSF’s SBIR/STTR programs solicit proposals that seek funding for innovations for a broad range of technologies. The award structure is relatively simple compared with that of other agencies, with fixed award amounts that do not vary by topic.⁴

The application process for a Phase I award starts with a Project Pitch, which serves to determine whether an applicant is a good fit for the program before the firm dedicates the resources necessary to prepare a Phase I proposal. Currently an NSF Phase I award provides up to $275,000 in funding for a period of between 6 and 12 months. After completing Phase I, a firm can apply for one of the agency’s Phase II awards, which provide funding of up to $1 million over a period of up to 24 months. In contrast with the practice of some other agencies, only NSF Phase I awardees are eligible to apply for an NSF Phase II award.

Although the Small Business Act and SBA’s SBIR/STTR Policy Directive allow NSF, along with NIH, 12 months to notify applicants of awards after submission of their applications and an additional 3 months to issue the awards, the process from submission deadline to funding for NSF SBIR/STTR awards usually takes about 6 months.⁵ See Table 3-1 for approximate timelines for NSF applications; a graphical representation is provided in Figure 3-1.

Project Pitch

In 2019, NSF introduced the Project Pitch as a required step in the NSF SBIR/STTR application process. Its purpose is to determine whether a potential Phase I SBIR/STTR project meets program objectives (to support innovative technologies that show promise of having commercial and/or societal impact and involve a level of technical risk) before a firm submits a Phase I application. The pitch offers potential Phase I applicants an opportunity to receive quick, initial feedback on their potential application for Phase I funding before they commit the resources necessary to complete a Phase I application. A firm may submit only one Project Pitch at a time to NSF for consideration.

The Project Pitch consists of a two- to three-page written submission briefly describing the technical innovation that would be the focus of an SBIR or STTR award, the project’s technical objectives and challenges, the market opportunity for the innovation, and the project team (NSF, n.d.d). To submit a

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⁴ For example, NSF does not offer a “Direct to Phase II” award or a combined Phase I and Phase II award, and does not allow Phase I awardees from other agencies to apply for an NSF Phase II award.

⁵ See the Government Accountability Office report showing that the mean notification time to awardees was 169 days, and the median notification time was 165 days (GAO, 2021).

TABLE 3-1 NSF SBIR/STTR Timeline Description

SOURCE: NSF SBIR/STTR website and presentations to the committee.

Project Pitch, a potential Phase I applicant need not be legally incorporated as a small business, nor does it need to register in the System of Award Management (SAM) database; Research.gov; or the SBIR Company Registry, operated by SBA—all of which are required when a full Phase I application is submitted. NSF staff respond to Project Pitches in approximately a month.

If the Project Pitch is deemed a “good fit” for the program, the applicant will receive an invitation from NSF to submit a Phase I proposal. The program director who reviews a pitch has sole discretion to invite a Phase I proposal; however, if the program director concludes that an invitation will not be issued, the pitch is reviewed by a second program director or a member of the NSF SBIR/STTR leadership team, who must concur with this determination. Any applicant that does not receive an invitation receives feedback indicating why the project is not a good fit for the program. According to NSF, about 15–25 percent of companies are not invited to submit a full application, although more recent data show a higher percentage of companies are not invited. Those submitting successful Project Pitches have 1 year to submit a Phase I proposal. Only 30 percent of firms submitting a successful Project Pitch actually do submit a Phase 1 proposal⁶; as shown in Figure 3-2, however, it does not appear that the adoption of the Project Pitch has substantially affected the number of applications to the

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⁶ Committee discussions with Ben Schrag at May 5, 2022, meeting of the committee.

programs. Other Phase I proposal requirements and restrictions, which include ensuring that the proposer is a small business and limiting each firm to submitting one proposal per submission period, may be restricting the number of applications.

According to NSF, the Project Pitch is not intended to be a rigorous screening device; instead, its purpose is to give quick and relatively paperwork-free feedback to firms before they make the time investment necessary to apply to the programs while ensuring that proposed projects include a technical innovation. According to some program directors, moreover, given the wide range of topics that make up NSF’s programs, pitches provide a preview of the types of expertise that would be required among Phase I proposal reviewers.

Phase I Applications

As noted, firms submitting a successful Project Pitch have 1 year to submit a full proposal. Before NSF adopted the Project Pitch, SBIR/STTR applications were often returned without review if the paperwork was not completed correctly.⁷ Now, using feedback from Project Pitch, program directors can help firms fix application snafus that might have caused an otherwise meritorious application to be returned.

Before submitting a Phase I application, the applicant must be legally incorporated as a for-profit entity and registered in SAM, Research.gov, and the SBA SBIR Company Registry, and proposals must reflect program requirements. For STTR applicants, 30–60 percent of the work must be performed by a research institution partner. SBIR awardees are not required to work with a research institution, but they can partner with one as long as at least two-thirds of the work is performed by the awardee. NSF requires the principal investigator (PI) for either SBIR or STTR awards to be employed at least 50 percent of the time (at least 20 hours per week) by the applicant for the entire duration of the Phase I award. PIs may be graduate students or faculty members, as long as they meet these employment requirements. NSF STTR applications must include a named co-PI from the research institution. Phase I awardees normally have 6–12 months to complete their projects.

Review Process and Selection

Once a full proposal has been submitted to NSF, it undergoes a formal review process. Program directors have discretion in selecting reviewers and deciding whether to use review panels or ad hoc reviewers. In addition, program directors can use their discretion to advocate for applicants for whom peer review scores were not high should they feel that these scores do not reflect the potential

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⁷ The last slide of a 2013 NSF SBIR outreach slide deck, presented by an SBIR/STTR program director, states in bright red, “100% compliance required, or proposal will be returned without review” (NSF, 2013).

value of an innovation or were somehow biased. For both Phase I and Phase II awards, program directors must consider intellectual merit, broader impacts, and commercial impacts (NSF, n.d.e):

• The intellectual merit criterion encompasses the potential to advance knowledge.
• The broader impacts criterion encompasses the potential to benefit society and contribute to the achievement of specific, desired societal outcomes.
• The commercial impact criterion focuses on the potential of the activity to lead to significant outcomes in the commercial market.

The review process is typically completed 30–90 days after the proposal submission deadline.

Program directors stated that they seek technical innovation, a high level of risk, and potential for social and economic rewards. While reviewers of both Phase I and Phase II proposals must consider potential commercial impact, Phase II reviewers also consider whether the outcomes of an applicant’s Phase I work provide a foundation for the proposed Phase II activity. Some program directors observed that Phase II review panels may include more specialized reviewers because the proposed project will be further along in pursuing its commercialization potential.

Program directors have wide discretion in deciding the makeup of each review panel for their set of applications. NSF created the PRIM database to help find panel reviewers across all NSF programs. Program directors also use internet searches to find reviewers, and many have their own reviewer lists. Review panels typically include individuals with expertise in one of the solicitation topics and understand the SBIR/STTR process. Some program directors mentioned selecting reviewers from the NSF award database, using keyword searches on awards in the preceding 5-year period. They also mentioned finding reviewers by searching LinkedIn or through research institutions; outreach events; or interest expressed by entrepreneurs, scientists, and researchers.

Some program directors prefer to use ad hoc reviewers, rather than review panels for proposal review because with this approach, the turnaround is generally faster and managing the review process is less complicated. Other program directors prefer the rich discussion associated with panel reviews, especially when there is a wide range of individual scores.

Program directors offered differing views on reviewer diversity. Some discussed striving for ethnic or racial diversity in each panel, while others reported considering academic rank (full professor versus assistant professor) as an aspect of diversity. Program directors use referrals from other reviewers to expand the pool of reviewers and help increase panel diversity, a method that appears to work well in engaging women as reviewers. Other program directors ask conference attendees to volunteer to serve as reviewers and reported good results with this

approach. Still others mentioned searching for women and minority reviewers based on names. And some program directors indicated that finding panelists from underrepresented groups was a challenge for a variety of reasons, including time constraints for some potential reviewers.

Panel makeup may also vary by the project phase. According to program directors, Phase I reviewers tend to be more academic than Phase II reviewers because the purpose of Phase I is to demonstrate technical feasibility. For Phase II, some program directors stated that their panels tend to be about half academics and half entrepreneurs. The committee intended to verify these reviewer breakdowns but was unable to gain access to the names of reviewers or any demographic statistics about them, including their place of work (research institution or industry), gender, race or ethnicity, or geography.

For the most part, a program director’s decision to fund a proposal aligns with the recommendations of the ad hoc reviewers or panels. However, program directors consider myriad factors in making these decisions, and they have the discretion not to follow reviewer recommendations in accordance with their start-up and innovation experiences. They may also have requested additional information that may affect their decision but was not available to reviewers, information that may relate to their broader point of view or other considerations influencing the decision, especially when individual reviewer scores vary widely. Other considerations mentioned by program directors include the firm’s trajectory and whether, in the program director’s opinion, the SBIR or STTR award would be catalytic or have the potential to “move the needle” to advance the technology. Other factors, on the other hand—including participation in NSF Innovation Corps (I-Corps, discussed below), diversity, or being from an Established Program to Stimulate Competitive Research (EPSCoR) state—are considered but seem to have limited influence on program directors’ funding decisions, although participation in I-Corps may help demonstrate proposers’ interest in or motivation to commercialize their technology.

Additionally, program directors were asked whether there was a bias against funding prior NSF SBIR/STTR awardees. Some program directors mentioned that they rarely fund previous award winners, while others indicated that the existence of a prior award did not influence subsequent selection decisions. Indeed, some program directors noted that certain technologies need multiple awards to move their development forward. As discussed in Chapter 4, the share of NSF SBIR/STTR awardees without previous SBIR/STTR awards from any agency has increased over time, rising from 19.0 percent in FY2000 to 81.8 percent in FY2021. Overall, NSF funds more than 300 SBIR and STTR awards annually, a number that grows each year with increases in the agency budget, and the vast majority of these awardees never received a previous federal grant, even outside of the SBIR/STTR programs.⁸

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⁸ For COVID-19 funding, NSF made it clear that prior awardees could be funded (NSF, 2020).

Phase II Applications

As noted earlier, NSF Phase I awardees are eligible to apply for a Phase II award of up to $1 million 6–24 months after receiving their Phase I award. Unsuccessful Phase II applicants are not eligible to reapply for a Phase II award. Phase II awards, called “Research towards protype,” are selected after a Phase I project has been completed, with a final report submitted. The review process for a Phase II award is similar to the Phase I process. The recipient of a Phase II award continues the work of the Phase I project, but the focus turns to creating a prototype of the product or service. A Phase II award is normally for 2 years.

With its 2011 reauthorization of the SBIR/STTR programs, Congress permitted agencies to issue Phase II awards of up to $1 million, indexed for inflation. Since October 2022, agencies have been permitted to issue Phase II awards for nearly $2 million, and they may issue larger awards after receiving a waiver from SBA. As noted, however, NSF has limited Phase II awards to a maximum of $1 million, including funds for business and technical assistance, although many Phase II awardees receive substantial supplemental funding.

OTHER SUPPLEMENTAL ASSISTANCE

NSF offers a variety of assistance to help firms pursue the goal of achieving commercialization.

Assistance to Phase I Awardees

Phase I awardees are offered I-Corps, a Beat the Odds Boot Camp (see Box 3-1), and access to the Commercialization Assistance Program.

I-Corps is open to all NSF awardees, not just those in the SBIR and STTR programs. In fact, some Phase I awardees have already participated in I-Corps before applying to the SBIR or STTR program. The 7-week program is designed to help entrepreneurs understand the commercial potential of their innovations. The I-Corps program was initiated in 2011. In 2017, the program was expanded, and it now includes regional programs (hubs) in addition to the national program.⁹

The Beat the Odds Boot Camp is a mandatory training program for Phase I awardees. Like I-Corps, it helps awardees understand the market for their innovations and develop a business model for success. Up to $20,000 of the Phase I award budget can be used to cover costs incurred during this training, such as for tools for customer discovery, domestic travel, conference fees, and staff time associated with participation in Boot Camp activities. The Boot Camp “pushes companies to develop stronger business models, market strategies, and successful products,” with a main goal of “provid[ing] early-stage companies with an

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⁹ https://beta.nsf.gov/funding/initiatives/i-corps/about-i-corps.

introduction, or refresher, in customer discovery and business model validation” (NSF, n.d.f, para. 2). As part of the camp, each participating firm is required to form a team that includes the PI (representing the technology) and the firm’s president/CEO (or another team member responsible for driving the commercial effort). The learning activities help the team enhance their business acumen by attending lectures on building a start-up, creating a business model canvas (key activities, resources, partners, value propositions, customer relationships, and more), and identifying a minimum of 30 prospective customers.

Phase I awardees are also offered NSF’s Commercialization Assistance Program. Through this program, Dawnbreaker, a contractor to NSF, provides commercialization assistance, which includes helping Phase I awardees develop the commercialization plan that must be included in a Phase II application.

Assistance to Phase II Awardees

A variety of other programs are offered to Phase II awardees, ranging from technical and business assistance (TABA) funds to the opportunity to apply for Phase IIB or other supplemental funding and assistance.

Phase II applicants may request up to $50,000 in TABA funds. These count toward the $1 million Phase II award limit and can be used to pay one or more third-party service providers to assist with one or more of the following commercialization-related activities:

• identifying and developing customers for the NSF-funded technology;
• providing advice on financing strategy and fundraising from the private sector;
• establishing strategic partnerships with relevant stakeholders;
• evaluating and protecting intellectual property;
• evaluating and establishing regulatory and reimbursement strategy; and
• other activities that will accelerate or strengthen the case for commercialization of the underlying technology.

Phase II awardees with access to outside investments or other funds are eligible to apply for a matching Phase IIB award to advance commercialization of their innovation. The third-party funds may come from multiple parties, may be the result of sales or licensing fees, may be from investment by another company, may be government (non-SBIR federal, state, or local government) funds, or may be from a venture capitalist or angel investor. Phase IIB applicants must have third-party investment or commitments of at least $100,000, and the ceiling for matching Phase IIB funding from NSF is $500,000.

Formal Phase IIB requests must be submitted at least 1 month prior to expiration of the Phase II award. The Phase IIB funds can be used only for R&D activities that build on the Phase II work to aid in commercialization. Phase IIB award periods range from an additional 12 months for a Phase IIB matching request of less than $250,000 to an additional 24 months for Phase IIB matching requests of $250,000–$500,000. Review of Phase IIB funding requests is based on intellectual merit and the potential for broad impacts and is completed internally by NSF SBIR/STTR program directors.

Other Supplemental Assistance

Given that not all Phase II projects overcome their technology development risk by the end of the project period, NSF provides other opportunities for awardees to continue development to advance their technologies toward commercialization. Bringing innovations to market is very costly, even after technological breakthroughs have been achieved. NSF offers four types of programs for Phase II projects that provide personnel or additional funding to an ongoing project:

• educational opportunities,
• commercial/strategic partnerships (Technology Enhancement for Commercial Partnership [TECP]),
• institutional opportunities, and
• additional opportunities.

These opportunities are available to Phase II awardees (and in some cases all NSF awardees except Phase I SBIR/STTR awardees). Phase II awardees are encouraged to discuss with their program director their intention to submit a proposal for supplemental funding. Requests are competitively evaluated and are considered alongside all SBIR/STTR funding requests, including the Phase I and Phase II proposals.

Educational Opportunities

Educational opportunities include requests for students, teachers, and veterans to be mentored and work actively on an NSF-funded project, including a Phase II SBIR or STTR project (NSF, n.d.g). The goal is to engage them in

science, technology, engineering, and mathematics (STEM) projects in entrepreneurial companies.

There are four such programs. The first, Research Assistantships for High School Students, provides $6,000 per year per student for up to two students. The goal is to provide mentorship and support active research participation in STEM fields among high school students from underrepresented populations. The second program, Research Experience for Undergraduate Participants, provides $8,000 per year per student for up to two community college or university students. The third program, Research Experience for Teacher Participants, provides $10,000 per year per teacher for K–12 teachers and community college faculty to participate in engineering research. Finally, the Veterans Research Service allows veteran students, precollege STEM teachers, and community college faculty to participate in active NSF awards, providing $10,000 per participant per year.

Technology Enhancement for Commercial Partnership (TECP)

TECP provides funding equaling to up to 20 percent of the Phase II award amount for additional research that goes beyond the Phase II project’s objectives in order to meet technical specifications or additional proof-of-concept requirements. This additional research is expected to boost commercial potential and lead to partnerships with industrial partners and venture and angel investors. See Box 3-2 for more information.

Institutional Opportunities

Institutional opportunities provide funding for partnering with centers or community colleges. They include the following programs:

• Centers for Research Excellence Science and Technology and Underrepresented Groups (CREST) (Phase IIA) awards provide funding to foster partnerships between firms receiving Phase II

• awards and minority-serving institutions that received CREST or Historically Black Colleges and Universities Research Infrastructure for Science and Engineering awards. The available funding is 20 percent of the Phase II award amount for no more than 1 year.
• Community Colleges (Phase IICC) awards provide up to $40,000 in funding for partnerships between firms receiving Phase II awards and community college researchers and students.
• SBIR/ERC Collaborative Opportunity is aimed at providing a beneficial research and commercialization platform through collaboration between Phase II awardees and Engineering Research Center faculty, researchers, and graduate students. The available funding is 20 percent of the Phase II award amount for no more than 1 year.

Additional Opportunities

Additional opportunities, which are not included among supplemental funding to awardees but which can benefit Phase II awardees, include the NSF-funded INTERN (Non-Academic Research Internships for Graduate Students) program and the American Society for Engineering Education (ASEE) Innovative Postdoctoral Entrepreneurial Research Fellowship (I-PERF) Postdoctoral Diversity Fellowship. The INTERN program funds graduate students to work in real-world internships for up to 6 months. An NSF-funded (non-SBIR/STTR) graduate student requests the supplement. The Phase II awardee benefits from having a STEM student work in the firm with no out-of-pocket costs, while NSF supports the student. The goal of the ASEE I-PERF fellowship is to increase the participation of students from underrepresented groups in postdoctoral programs. The funding provides stipends for these individuals to work on a Phase II project.

NSF SBIR/STTR PROGRAM DIRECTORS

NSF seeks program directors with a mix of academic, industry, and start-up experience and a strong technical background. With one exception, members of the current team of program directors hold a Ph.D. in math, science, or engineering. All of them have substantial industry experience—more than a decade for all but two. The majority have experience with the laboratory-to-market life cycle, primarily in start-ups; one current program director has 26 years of experience at a larger, established company. This practice of hiring program directors with both technical expertise and industry experience is not new to NSF. Even 20 years ago, NSF was hiring Ph.D.s with industry or venture-funding experience. Program directors are generally permanent NSF employees, although two of the program directors who recently came to NSF are current academics who were hired under Intergovernmental Personnel Act authority (also called “rotators”).

As discussed earlier, NSF SBIR/STTR program directors are focused solely on those two programs, whereas in most other agencies, the SBIR/STTR assignment is one part of the program director’s job. Each program director is assigned to oversee one or more topic areas. Since the committee interviewed program directors for this study, a number of new program directors have been hired. At the time of the committee’s interviews, there were only nine; their median tenure as NSF SBIR/STTR program directors was 8 years, with a range of 2–18 years. Although one recent program director left NSF after 9 years to work for a start-up, recent program directors in general do not appear to rotate back into industry.

While NSF has introduced several new initiatives designed to help innovative small businesses, applicants that are new to the programs, especially those that have not previously submitted applications for any federal programs, may have difficulty understanding the requirements for submitting a successful application. Some of the difficulties faced by new applicants may be well suited to more generic assistance than is typically provided by program directors. An application assistance program, for example, would free up time for program directors, allowing them to focus their energy and expertise on more technical issues facing applicants.

Training for New Program Directors

Many of the program directors were introduced to the SBIR/STTR programs as awardees, reviewers, or both, so they understand the operational side of the programs. Program directors new to the programs learn the job by shadowing other SBIR/STTR program directors. Under this “apprentice model,” they are assigned to work on a one-on-one basis with an experienced program director who can explain how NSF operates the programs. New hires observe panels and proposal reviews to learn how operations are conducted and findings are documented. Eventually, they are assigned to look at a few proposals for which funding decisions have already been made. They also meet with key people in each division to learn about complementary roles and assignments. In sum, new program directors learn by shadowing, observing, and doing, a model that is facilitated by the programs’ centralized nature.

Over time, experienced program directors continue to learn as they oversee new topic areas or fill gaps as needed. For example, one program director who led the Advanced Manufacturing and Nanotechnology portfolio for 5 years assumed leadership of Education Technology for 2 years. After discovering that many Education Technology proposals relate to information technology, artificial intelligence, and robotics, they rearranged the topics into new areas that better reflected the changes in the field. They were then asked to lead an environmental topic, and are now back to managing the Advanced Manufacturing and Nanotechnology topic. Another program director worked on I-Corps for 2 years. Participating in this program provided new insights that they brought back to the

SBIR/STTR programs. Such experiences allow program directors with different backgrounds to learn new areas and bring their expanded expertise to the programs.

How Program Directors Measure Success

The goals of the SBIR and STTR programs are to (SBA, n.d.)

• stimulate technological innovation;
• meet federal R&D needs;
• foster and encourage participation in innovation and entrepreneurship by women and socially or economically disadvantaged persons;
• increase private-sector commercialization of innovations derived from federal R&D funding; and
• for STTR only, facilitate the transfer of technology developed by a research institution through the entrepreneurship of a small-business concern.

The NSF SBIR/STTR program directors interviewed by the committee echoed NSF’s stated mission, many of them indicating that their goals are to foster innovation and help create businesses and jobs in all areas of the United States. At the same time, they expressed awareness that there are often other metrics of success. They expressed the view that they also look for firms with loftier societal goals—firms that can change industries and help people and the planet, consistent with NSF’s vision of filling the gap in the innovation ecosystem by funding work that would not be funded by venture capitalists and others because of long development timelines, the capital intensity of the proposed technology, or the inherent high-risk nature of technology development. In the words of the program directors, the SBIR/STTR programs provide catalytic capital to foster small businesses’ cooperation with industry and universities that enables the development and commercialization of high-risk and high-reward innovative technologies. The programs are designed to help companies become attractive to outside capital. The ultimate societal benefits, according to some program directors, are enhancing U.S. competitiveness on the international stage, improving health and quality of life through innovation, and accelerating the ability of the U.S. population to generate wealth.

Achieving these goals requires success at each stage of the SBIR/STTR process. For example, success is described as giving companies a chance to receive funding for their ideas and providing constructive advice that helps even those firms that are not funded. Success during Phase I is described as funding young start-up companies that have raised either no money or only small amounts from friends, families, or angel investors; have a good idea; and are technically strong. Awardees need not be commercially sophisticated at the start of Phase I

because, as one program director noted, NSF provides commercialization training. (See the description of the Beat the Odds Boot Camp [NSF, n.d.f] for Phase I awardees in Box 3-1 earlier in this chapter.) Program directors described Phase II success as including derisking of the innovative technology to set the stage for a pathway to commercialization, participating in NSF postaward commercialization programs (NSF, n.d.h), and launching new products that translate the technology into valuable products.

Another facet of success is training entrepreneurs, even if their project is unsuccessful. This training has three main components: guidance by program directors during the Project Pitch and Phase I and II application processes, feedback from reviewers, and participation in the Beat the Odds Bootcamp. Going a step further, some program directors mentioned broadening the pool of participating entrepreneurs as a measure of success, consistent with the third goal of the SBIR/STTR programs—fostering and encouraging participation in innovation and entrepreneurship by women and socially or economically disadvantaged persons. As described further in the next chapter, this broadening of participation continues to be a challenge for many reasons.

Finally, another aspect of success cited by program directors is making the public aware of NSF’s work and the research it supports through the SBIR and STTR programs. As part of what NSF calls its Ambassador Program, awardees are encouraged to use the NSF logo on their websites and to spread the word about their funding on social media (NSF, n.d.i).

OUTREACH BY PROGRAM DIRECTORS AND EFFORTS TO IMPROVE DIVERSITY

SBIR/STTR outreach efforts at NSF involve a mix of active “on the ground” activities and targeted information. Program directors interviewed by the committee discussed a variety of outreach events, noting that (pre-COVID) they were “on the road a few weeks per year.” These efforts include participating in the SBA Road Tours to underserved areas of the country, speaking at conferences and organizations such as university technology transfer offices, attending national and regional trade shows, and presenting webinars about the programs; they also include using paid advertisements for broad outreach to entrepreneurs, investors, universities, and professional associations. As one program director noted, the goal is to inform entrepreneurial and innovative communities about the program and to let them know that program directors are responsive to their questions.

Although part of the SBIR/STTR budget can be allocated to outreach, program directors already appear to be fully occupied with the Project Pitch, review, and selection processes, leaving little time for them to engage in formal outreach. Most program directors said they feel overwhelmed by their workload, which reduces the time they can spend with individual applicants and outreach efforts, and described the pressure of meeting the demands of increasing SBIR

and STTR budgets with multiple annual selection cycles as intense. At the same time, most program directors said they view the entire SBIR/STTR process, including all touch points with applicants, reviewers, and awardees, as a form of outreach, with one program director noting that multiple hours each day can be devoted to responding to their emails. Another described networking with (reviewer) panelists as a great way to spread the word about the program, noting that reviewers sometimes become SBIR/STTR applicants, and SBIR/STTR applicants and awardees are sometimes tapped to be reviewers. In general, while program directors were uniform in highlighting the importance of broadening participation and diversity with respect to sex, race/ethnicity, geography, and discipline, they are uncertain about how they can do more given their workloads.

Although program directors mentioned giving talks at conferences, participating in the city-to-city SBA Road Tours, and talking to potential applicants, many pointed out that communication and diversity activities are handled by others in the directorate, such as the communication specialist, who works with a public relations firm to develop an outreach campaign. The SBIR/STTR program office also has implemented its own digital outreach campaign with marketing agencies using phone and online channels. In addition, NSF also has a diversity specialist in the Office of Equity and Civil Rights, although this individual is not a dedicated SBIR/STTR resource.

NSF provides financial support to professional organizations with diverse populations (e.g., Society for Advancement of Chicanos/Hispanics and Native Americans in Science [SACNAS]), which enables program managers to host preconference events, talk about the SBIR/STTR programs at conferences, or have a booth. NSF tries to track where people learn about the programs, but said it is difficult to do so.¹⁰ The NSF website does list (under events) the annual conferences where NSF staff participated during 2021. They include those of the National Society of Black Engineers, National Organization for the Professional Advancement of Black Chemists and Chemical Engineers, American Indian Science and Engineering Society, Society of Women Engineers, National Society of Black Physicists, SACNAS, Women in Engineering ProActive Network, and Society of Hispanic Professional Engineers (NSF, n.d.j). The events section of the website links directly to the conference webpages, but those webpages do not provide information on how to know whether NSF program directors plan to attend and how to meet them.

On an ongoing basis, the NSF SBIR/STTR program office offers bimonthly, 1-hour question-and-answer sessions to introduce the programs and answer any questions. Registration for these events is listed on the programs’ website (NSF, n.d.j). These webinars are described as an opportunity to learn more about the programs, with program directors answering basic questions about how to get started, who is eligible, and what is sought when Project Pitches are reviewed. During the award stage, Phase II Grantees Conferences give potential

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¹⁰ Committee discussions with Ben Schrag at January 27, 2022, and May 5, 2022, meetings of the committee.

investors an opportunity to talk to the SBIR/STTR teams, learn more about the technologies being developed with SBIR/STTR funding, and increase overall awareness of the programs. Over the past few years, many of these events have been held online, requiring less time to operate.

The approach of one program director was described as “in-reach” to other NSF programs and directorates. These in-reach activities inform program directors in other programs about SBIR/STTR, and they in turn can then inform their awardees about the programs. Examples of such efforts include joining other directorates’ office hour sessions with their awardees, introducing the SBIR/STTR programs at various NSF meetings, and participating in cross-directorate working groups.

The program directors described broadening geographic participation as something they take seriously. They conduct webinars directed at EPSCoR states, considering webinars to be the most efficient way to reach innovators in these states. They noted, however, that proposals from these states do not tend to be competitive, and there appears to be no clear direction from NSF leadership to guide them in these efforts. At the same time, the intense workloads mentioned above reduce the time they have available to do such outreach. Program directors’ suggestions were to hire additional staff to manage the administrative aspects of the work, create programs to assist applicants in states with a low number of awardees, and train program directors and leaders about requirements and strategies.

In summary, while program directors were uniform in highlighting the importance of broadening participation and diversity with respect to sex, race/ethnicity, geography, and discipline, and a range of activities are undertaken to address these challenges, there is a vagueness and uncertainty about such efforts, especially in the face of the substantial workloads of program directors. Although improving diversity by fostering and encouraging participation of women and socially and economically disadvantaged individuals is a programmatic goal for SBIR and STTR, the committee felt that program directors could receive additional resources and direction from NSF leadership on how to advance this goal. NSF could continue and to expand on efforts outlined in its Diversity, Equity, Inclusion & Accessibility Strategic Plan, such as selecting and onboarding individuals to serve 3-month details in the Office of Equity and Civil Rights, and incorporating diversity and inclusion topics into various training opportunities, including its new employee orientation (NSF, 2022b).

CONCLUSION

NSF’s SBIR/STTR programs have evolved since their inception. NSF has experimented with and embraced new methods to improve its programs. The centralization of its programs within one office facilitates the ability to roll out new initiatives and train new personnel. While this program centralization has many benefits, however, it may also have reduced program directors’ interactions with other directorates within NSF. Because of the reorganization of the program

and the creation of the new TIP Directorate, it is difficult to determine whether this deficit will be remedied in the new organizational structure.

In addition, while having multiple application cycles shortens the wait time for applicants, it requires program directors to devote a large portion of their time to helping applicants understand the application process. This time commitment limits their ability to help awardees understand the market and possibly pivot their innovation to other uses, or to reach out to socially and economically disadvantaged entrepreneurs. Some of the activities involved in assisting applicants could be outsourced, as is done with the Department of Energy’s Phase 0 program (NASEM, 2020) and the Application Assistance Program within some of NIH’s institutes and centers (NASEM, 2022).

Still, NSF’s relatively simple approach involving fixed award amounts and the structure of Phase I, Phase II, and Phase IIB awards helps provide clarity to applicants. NSF applicants have three windows of opportunity each year to submit proposals, and successful applicants usually obtain funding within 6 months of a submission cycle deadline, ahead of current requirements.

At the same time, however, the programs’ rigidity appears to be suited only for limited innovations. The Phase II limit of $1 million may be sufficient for software development, but other technologies may need larger investments to be derisked before the private sector is willing to step in, and this gap may be too great to be filled by NSF’s limited supplemental funding opportunities. The imposition of rigid restrictions on the number and size of awards also lacks the flexibility to encourage more complex innovations that may require multiple inventions before proceeding to the marketplace.

Chapters 4 and 5 explore available data on the landscape of NSF SBIR/STTR awards and their outcomes.

FINDINGS AND RECOMMENDATIONS

Finding 3-1: NSF’s SBIR/STTR programs are centralized within one NSF office. Program managers are recruited based on their technical backgrounds; most have start-up/industry experience as well. This program centralization, fully dedicated staff, and staff professionalism enable NSF to be agile and responsive to the needs of innovative small businesses, and to experiment with and implement new initiatives.

Finding 3-2: A lack of flexibility in award size and limited opportunities for supplemental funding limit the attractiveness of the NSF SBIR/STTR programs for firms working with capital-intensive technologies.

Finding 3-3: NSF has modified its SBIR/STTR programs over time as needed. It has instituted processes and procedures designed to increase the number of new applicants and to ease the administrative burden of

applying, which is especially important for innovative small businesses.

Finding 3-4: The focus on drawing new applicants to the NSF SBIR/STTR programs gives program directors relatively little time to assist awardees.

Finding 3-5: NSF SBIR/STTR program directors are aware of the requirement to broaden participation by increasing the diversity of reviewers, applicants, and awardees, but lack the resources to fulfill this mandate.

Recommendation 3-1: NSF should continue to provide early feedback to SBIR/STTR applicants as part of the Project Pitch process and should consider instituting an application assistance program for new applicants.

Recommendation 3-2: NSF should allow companies to submit more than one SBIR/STTR Project Pitch per application cycle.

Recommendation 3-3: NSF should provide additional tools and training to ensure that the NSF SBIR/STTR programs continue to work toward greater diversity of reviewers, applicants, and awardees.

Recommendation 3-4: NSF’s assistant director for technology, innovation and partnerships should give SBIR/STTR program directors greater flexibility in award amounts, including allowing for larger Phase II awards up to the statutory limit.

ANNEX 3-1:
QUESTIONS FOR PROGRAM DIRECTOR INTERVIEWS

NSF SBIR Program Managers Interview: Introduction

• The purpose of the interviews: We are part of a National Academies of Sciences, Engineering, and Medicine committee studying the SBIR program.
• Logistics: recording for note-taking purposes.

1. Goals: What are your goals for the SBIR program from your vantage point?

• What does success look like? How would you know it if you saw it?
• What are examples of success?

2. Can you briefly give us an overview of the SBIR process from your vantage point?

• Please describe what you look for in an SBIR Pitch.
  • What are the topic areas for SBIR pitches?
  • Can firms or industries propose ideas?
• How are reviewers selected?
  • How many of the reviewers come from within their program? How often do they serve on the review panels?
  • What is the timeframe for the review of proposals?
• How are awardees selected?
  • What are key factors looked for in the selection of a company or technology?
  • How much discretion do you exercise in selecting awardees?
  • What is the primary source of accountability or oversight?
  • Do you give both grants and cooperative agreements? If so, what is the difference in what you look for when funding using one mechanism versus the other?
• Other questions
  • What are the trade-offs between administration and evaluation?
  • Are you a convener—bringing people together and then getting out of the way—or an intermediary/high-touch matchmaker?

3. What is the role of Congress and the administration from your vantage point?

• Do you experience oversight from Congress or the administration, if at all?
  • Is the oversight at the program level or at the SBIR level?
  • What specific aspects are affected by congressional oversight?
    • Project selection?
    • Procedures or processes (routines)?
    • Budget line items?

Optional as time permits

• Based on your experience, which companies stand out? (Probe successes and failures)
  • How is commercialization potential evaluated, or is this assigned to a consultant?
  • What kinds of NSF or SBIR commercialization services are available for applicants? awardees?
• Do you recommend that we talk to certain companies and why?
  • Probes:
  • Received venture capital funding?

• • Proposed technology is high risk versus the need for a specific service or tool?
  • Is the applicant a multiple versus first-time applicant or awardee (“mills”/“frequent flyers”)?

Dates and Attendees

NOTE: All interviews conducted via Zoom.

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