An Assessment of the SBIR Program at the National Science Foundation (2008) / Chapter Skim
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From page 136... ...
Similarly, the results for sales by licensees of those survey projects' technologies were highly skewed by a single licensee that accounted for over half the total licensee sales dollars, amounting to $200 million or more in licensee sales. Customers: Respondents reporting sales from the referenced NSF SBIR projects were able to identify their customers.
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From page 137... ...
responded that no commercial product, process, or service was/is planned even though they previously had indicated the contrary. 101 The previously noted low incidence of sales revenue reported from process technology (3%)
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From page 139... ...
Thus, it is not surprising that NSF SBIR grantees often form licensing agreements with other companies. The Phase II Survey found that 20% of respondents had finalized licensing agreements with U.S.-based companies and investors, and 21% had ongoing negotiations for licensing agreements with U.S.-based companies and investors.
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From page 140... ...
Attraction of Additional Funding Prior to Phase II: The NRC Phase II Project Survey identified sources of funding that preceded the referenced Phase II grants. Table 5.2-5 shows the percentages of respondents who indicated the referenced technologies received funding from each source, including prior SBIR grants.
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From page 141... ...
In the case of NSF, it is likely that this funding was to meet the third-party match for Phase IIB grants. Nearly one-third of the respondents reported that there were matching funds or other types of cost-sharing in conjunction with their NSF Phase II proposals.
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From page 142... ...
By contrast, venture capital sources provided few matching funds. Table 5.2-6 Sources of Matching or Co-investment Funding Proposed for Phase II Source of Matching or Co-investment Funding Percent of Projects for which Respondents Reported Matching Funds who Reported each Source Another company provided funding 58 Our own company provided funding, includes borrowed 38 funds An angel or other private investment source provided 21 funding A federal agency provided non-SBIR 4 Venture capital provided funding 2 Source: Phase II Survey.
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From page 143... ...
venture capital provided substantially less than either the grant-recipient company or other domestic private companies. Table 5.2-7 Sources and Amounts of Developmental Funding Reported for Phase II NSF SBIR projects Funding Source Average Amount per Project of Developmental Funding ($)
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From page 149... ...
135 PI (no PII = 54%) More favorable 49% Less favorable 59% Sales of Products/processes/services & other 35% No sales & none expected 59% No sales yet, but expected 10% No sales, but outcome in use by Intended target population 4% Source: Phase I Survey Figure 5.2-4 Commercialization Status of 135 NSF SBIR Phase I Projects Why the Phase I Grant Was Not Followed by a Phase II: Nearly 60% of the Phase I grants were not followed by a Phase II grant because, though the company applied, it was not selected UNEDITED PROOFS
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From page 150... ...
While Phase I grants surveyed resulted in an average of 0.3 patents granted, firms surveyed reported an average of 6 patents related at least in part to SBIR grants.
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From page 151... ...
Forty-five percent thought they probably or definitely would not have. Another 21% thought they probably would have undertaken the research, but most of these thought either the UNEDITED PROOFS
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From page 152... ...
The companies expressed a belief that SBIR grants were critical to their ability either to get started at all or to develop capabilities critical to their existence and continued strength. Without exception, the companies sought and received grants not only from NSF, but from SBIR programs operated by other agencies, and, in a number of cases, from other kinds of government funding programs as well -- notably the Defense Advanced Research Projects Agency (DARPA)
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From page 154... ...
Rey, CA machine language professors at USC translation MER Corp Tucson, AZ 1985 Rapid manufacturing $7.9 mil 75 60% prototyping in metal Arco Chem spin-off and composites; other MicroStrain, Inc. 1987 Micro sensors and $5 mil 20 >26% Founder started Williston, VT wireless sensor company on leaving networks graduate school National Nashville, TN 1983 Sorting plastics; $4 mil 14 NA Older company Recovery electronics-based changing technology Technologies metals recycling focus (NRT)
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From page 155... ...
No Linear Path from Phase I, Phase, II, and Phase IIB, into Phase III: The company interviewees made it clear that a simple linear model of Phase I, Phase II, and Phase IIB grants is woefully inadequate to mount the kind of technology research and development program necessary to bring an advanced technology to the point of attracting private sources of funding on favorable terms. Some described how they might get a concept going with a Phase I SBIR grant from one agency, and later take it forward with an SBIR grant from another agency.
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From page 156... ...
In none of the cases was there a simple sequence of NSF Phase I, Phase II, and Phase IIB grants that provided adequate preparation for a launch into Phase III commercialization. "The SBIR grants served as building blocks for us," explained Maria Thompson, President of an award-winning African-American, woman-owned firm, T/J Technologies Inc.
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From page 157... ...
Language Weaver, which offers a seemingly straight path of NSF grants leading to commercialization, actually had about 20 years of university research heavily funded by DARPA underlying its technology development. ATP also provided funding for further development of the technology following a series of NSF SBIR grants.
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From page 158... ...
In most cases, these companies were receiving sufficient revenue from sales, licensing fees, and contract research to supplement their laboratory research and were no longer threatened by financing gaps in government grant programs. But in all the cases, the companies seemed to be wrestling with the issue of how to get the funding needed to sustain technological strength and make advances needed for survival and growth.
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From page 159... ...
As one company president put it, "They are going to try to get all of your IP [intellectual property] , for only a fraction of its value." A representative of a company that has been successful in obtaining private funding also noted the difficult path in obtaining it, explaining that the company founders were turned down multiple times before they received confirmation of the technology by receiving an NSF SBIR grant and became able to demonstrate the technology's potential.
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From page 160... ...
until they received confirmation of the technology by receiving an NSF SBIR grant and becoming able to demonstrate its potential. SBIR as an Enabler and Lifeline: All of the companies interviewed described at least one important role played by the SBIR program, which varied depending on the needs of the company.
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From page 161... ...
The SBIR "is well structured to allow taking on higher risk…" Immersion Corporation: SBIR grants gave Immersion the ability to grow its intellectual property portfolio, the core of its commercial success. The company leveraged the government funding to attract investment funding from private sources.
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From page 162... ...
…SBIR saved our bacon." NVE Corporation: The SBIR program is "the mother of invention." SBIR and other government R&D funding programs are essential to being able to perform the advanced R&D that has allowed the company to produce products for sale and to license intellectual property. T/J Technologies Inc.: "The SBIR grants served as building blocks.
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From page 163... ...
and three issued abroad, which historically amounts to 1.4 issued patents per employee. Patents and the fees they generate are the central focus of Faraday's business strategy, and the company investigates citations by other companies of its patents to obtain knowledge about potential customers.
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From page 164... ...
Language Weaver has more than 50 patents pending worldwide; these patents underpin its commercialization approach. (See Appendix D.)
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From page 165... ...
Another comment heard several times was that the scale of a production facility needed for competitiveness was huge and the capital cost requirements were enormous -- far beyond the capacity of a small company. One company's marketing director noted that agencies who collect information about SBIR impacts typically ask only about product sales, whereas, in fact, most SBIR grantees are not OEM suppliers of product.
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From page 166... ...
NVE is also pursuing a mixed strategy -- commercializing its MRAM technology primarily through "an intellectual property business model," while it continues to design, fabricate, and sell directly a variety of sensors and signal coupler devices for both commercial and defense applications. Immersion Corporation -- though it has the largest annual sales revenue to date and largest revenue from direct product sales among the companies in the case study set, -- has limited manufacturing operations, arranges for some contract manufacturing, and "far and away, depends on licensing fees as its major source of revenue." NRT has maintained a steady annual revenue stream on the order of $2-4 million for a number of years from the sale of equipment, and now is seeking larger markets through partnerships both to operate and to sell equipment.
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From page 167... ...
MicroStrain performs contract research as a source of revenue, but reportedly focuses on product sales. T/J Technologies currently obtains most of its revenue from contract research, but its longer term strategy is reportedly to develop partnerships for commercializing its material technologies.
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From page 168... ...
. "...commercialization is very hard..." Multiple Benefits from Commercialized Technologies: All of these case-study companies linked commercialization of their technologies to SBIR grants and in turn linked commercialization of their technologies to the generation of multiple benefits, including direct economic benefits.
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From page 169... ...
Language Weaver's technology offers a significantly higher rate of accuracy in language translation than counterpart rule-based machine translation systems, and greater speed than human translators -- this could have important military and civilian applications. MicroStain's sensors and networks of sensors offer the benefits of alerting managers to emerging UNEDITED PROOFS
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From page 170... ...
One such study was completed in 2004. It is referred to here as the "2004 NSF SBIR Commercialization Survey" or the "Coryell Study," after the NSF SBIR program manager
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From page 171... ...
A new internal effort to collect commercialization data was begun in the summer of 2005, and provides limited data. The Tibbetts Study, according to the NSF SBIR Program Office, was the first agency-initiated study to produce program performance metrics.
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From page 172... ...
The 50 companies were granted an estimated 377 U.S. and 732 foreign patents that related directly or indirectly to SBIR research or funding.111 Private follow-on investment was $963 million, of which $527 million was considered directly related to NSF SBIR projects.
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From page 173... ...
were "fully successful." The Coryell Study provided more extensive results for 34 grant winners -- 10 with no Phase IIB grants and 24 with Phase IIB grants (15 with more than one)
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From page 174... ...
Table 5.2-12 Survey Results of "Coryell Study" NSF Initial Survey Results, 2003 FY 98 FY 97 FY 96* FY 96-98 Number Percent Number Percent Number Percent Number Percent Full success 36 29% 55 46% 31 53% 122 40% Likely success 20 16% 25 21% 2 3% 47 16% Commercial failure 35 28% 22 18% 16 27% 73 24% Technical failure 21 17% 11 9% 7 12% 39 13% Other 12 10% 7 6% 3 5% 22 7% Source: NSF, May 2003 NRC Workshop Results for 33 Companies Reporting • 27 companies had product sales by NSF SBIR.
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From page 175... ...
(Based on a description provided by NSF SBIR program staff.) 113 Note that this statement should not be confused with the more generally accepted cost-effectiveness criterion that project benefits equal or exceed project costs.
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From page 176... ...
Furthermore, we do not know to what extent "sales" includes samples put out to customers for trial or testing rather than commercial sales. Hence, we can conclude only that between 22% and 32% of projects in the Phase II survey had achieved some degree of sales revenue.
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From page 178... ...
Based on the counterfactual data, the NSF SBIR program can take credit for most, but not all, of the observed effects. A reported 14% of the surveyed firms believe that they definitely or probably would have done the referenced projects anyway, although most of these projects
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From page 180... ...
The newly established SBIR program's emphasis on agency procurement did not fit the NSF model, which is perhaps paradoxical given that the NSF program is considered the first SBIR program. Report of the President, The State of Small Business, 1994, pp.
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From page 181... ...
In contrast, the new multi-agency SBIR program was focused on rectifying the large disparity in research capability of large versus small firms stemming in part from federal procurement practices. Federal procurement of research and development carries with it the "independent research and development and bid and proposal expense" (IR&D/B&P)
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From page 182... ...
118 Ibid. 119 In contrast, some agencies -- particularly DoD and NASA -- are customers for the results of some of their SBIR grants.
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From page 183... ...
Coryell, NSF SBIR Program Staff (since retired) , October 23, 2003.
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From page 184... ...
The largest part by far of NSF's budget goes to research and development by entities other than small businesses. In FY 2004, NSF's total budget for R&D was $4.1 billion, consisting of $3.8 billion for the conduct of research and $0.3 billion for R&D facilities.121 Figure 6.3-1 provides a look at recent trends in R&D funding at NSF, which will be reflected in turn in funding available to the Foundation's SBIR program.
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From page 186... ...
It is achieving a high level of participation by firms new to the NSF's program each year. In 2003, the most recent year examined, more than 60% of grantees were new to the SBIR program.
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From page 187... ...
Thus, the NSF SBIR program in its statements of purpose, goals, and criteria -- hence, intentions -- consistently assigns importance to research quality and knowledge creation. In light of its stated purpose, goals, and criteria, and given that the peer-review selection process appears to have integrity, this study found nothing that would suggest the program is falling down on research quality or knowledge creation.
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From page 188... ...
NSF's SBIR program would appear at first glance to be close to ATP in emphasizing knowledge dissemination and spillovers, in that its second major merit review criteria is "broader impacts." However, the details of NSF's broader-impacts criterion appear to put less emphasis on 122 In contrast, basic research programs view knowledge creation as their primary goal. For these programs, most of the agency's output/outcome/impact measures will likely focus on knowledge creation and dissemination.
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