New York Times says DOD got 12085 one-page hope sheets for quickie anti-terrorism ideas. Best ideas get an invite to tell them more. If you missed the chance, try SBIR by Jan 16.

Maybe SBIR ought to consider the one-page approach to filtering useless proposals. In principle, as long as it allows anyone to submit a full proposal, it would help both companies and agencies to screen out the dross. BMDO had a somewhat different approach that discouraged useless proposals for a decade: advertising what kind of proposal it wanted and did not want and delivering brutal debriefings to the losers.

LARTA picked ten SoCal tech companies to highlight as making a mark on their industry. Three are SBIR companies.
Simpex (Brea) developed the first prototype in 2000 for the only noninvasive micro detection technology that can measure connectivity within nano-scale dimensions of semiconductors. And for those rare SBIR agencies who believe that co-investment is a firm indicator that somebody cares more than happy words, it got two matching grants from California's TIP program. Simpex has had at least five Phase 2s from DOD.
Chemat (Northridge) started making money with half the revenue from customer sales of sol-gel products to add to the almost one hundred contracts for government agencies and industry clients. Chemat has had at least seven Phase 2s from DOD and Energy for materials.
Syagen (Tustin) developed a chemical and explosive detection technology that analyzes an air sample in a few seconds for the target molecules. It has had at least two Phase 2s from DOD. [story by Wendy Hall]

 

Venture Forum 2002 Applications. Larta is now accepting applications for the 2002 Southern California Technology Venture Forum (SCTVF) through Feb 1. the longest running and most prominent Forum of its kind in California, having jumpstarted over $400 million in investment financing for companies. If you are selected to present, you will be assigned a seasoned mentor team to help you refine your presentation and business plan and prepare you for your presentation at SCTVF 2002 on April 18. [larta Dec 21]

"The Book of Life". Scientists as well as financial analysts caution that gene therapies may never come to fruition. If they do, Dr. Muin Khoury, director of the Office of Genetics and Disease Prevention at the Centers for Disease Control, believes they will be useful only for a handful of rare diseases. A Motley Fool financial columnist tells millions of readers, "There's no reason why the average investor should be invested in biotechnology companies. None." [The Nation, by larta Dce 21]

Another SBIR News Service. The free SBIR/STTR Alerting Service publishes bi-weekly notification of SBIR and STTR solicitation announcements, news and information, and Internet resources relevant to the SBIR/STTR programs. Provided by Pacific Northwest National Laboratory (PNNL).to sign up.

 

Southern Illinois University at Carbondale has broken ground on the $40 million, 45-acre Southern Illinois University Research Park. Plans call for the park to include 12 buildings totalling nearly 236,000 sq. ft. When full, the park should house approximately 75 companies with 800-1,200 tech-skilled employees. Financing for the initial phase has come from an Illinois FIRST grant of $500,000, a $300,000 Congressional earmark, and approximately $700,000 in other federal funds. Verizon also has invested $800,000 in an on-site fiber optic switching center. [SSTI, Dec 14]

two long-stalled attempts to launch statewide funds to invest in fledgling tech companies--one proposed by Mayor Daley nearly three years ago, the other hatched last year by University of Illinois officials--each hit walls in the last six months.W hy? Simply put, Illinois tech promoters can't get their act together. The state is rife with turf battles among a relative handful of bureaucrats and politically connected business people with access to money and influence. [Barbara Rose, Chicago Tribune, Nov 29]

Pork in the Woods. A $200K Congressional earmark is making the concept of a Virginia Highlands Small Business Incubator a reality, as it will pay for engineering studies, site preparation and architectual drawings. The tech incubator will eventually be located in a six-acre Stonewall Research and Technology Park adjacent to the Southwest Virginia Higher Education Center in the town of Abingdon, Va. [SSTI, Dec 7] Since this is Ollie North country, will the arch-conservatives rail against home cooking of federal government handouts?

Max Yoder retiring soon. ONR may not miss Max since it is a bureau, but proposers and scientists who hoped that government would see sensibly what they had to offer will suffer. Max was one of the rarities at ONR - a genius without a PhD. When I judged whether an SBIR proposal had commercial potential, I ignored the opinion of almost every government technical reviewer except a few like Max who somehow had his finger on the pulse of the high tech market in electronic materials even though he was barred by his position from profiting from the information.

VC and Angel Forum for Lovers. The state that advertsies itself as for lovers and against an auto tax will have a one-day forum of VCs and angels March 14, For info

 

Venturing States in Dreamland. Lots of states think that they can help their economies (jobs, jobs, jobs, for which the politicians can claim credit) by directly funding start-up companies. But they are having no more luck than the private VC funds in keeping the money flowing this year, says ROBERT GAVIN of THE WALL STREET JOURNAL, Nearly every state has seen early-stage venture investments fall substantially in the first nine months of this year, according to the PricewaterhouseCoopers Money Tree Survey. Nationally, these types of investments fell $15.7 billion, or 78%, from last year. State legislatures have also had a tendency to abandon investment schemes that require regular appropriations with no obvious short-range tax income return.

Meanwhile, Gavin also reports that the Corporation for Enterprise Development, a Washington, D.C., nonprofit economic-development group, attributes the success of the best state economy performance to long term thinking with emphasis on investing in education, environmental protection and infrastructure. The battle between the lobbyists for state investment (political euphemism for a handout) will rage between the direct subsidy approach (give money to companies and incubators) and making the state a a healthy place for business.

NSF SBIR in Homeland Security. NSF invites SBIR proposals for its January solicitation for "out-of-the-box" regarding both perceived potential terrorist threats and technologies to defend against them. NOT proposals for incremental development of available technologies; send those to the Air Force. But they must be civil defense, not military, they must make a case for a credible threat as well as for a potential commercial application, and they must be about the nominal topic subjects - BT and EL. For complete info. No free lancing into other science areas; NSF isn't that flexible even for a national emergency.

 

Army Rewards Experience (Nov 26) Physical Optics with 11 awards, Foster-Miller with nine awards, and Cybernet Systems with six awards top the Army Phase 1 SBIR list.Companies that have already had zillions of SBIRs from just DOD: Foster-Miller 549, Physical Optics 312, and Cybernet 92. Out of 2055 proposals, 312 won, a 15% acceptance rate. And from just the proposal titles it looks like Army has continued its self-service looking for predictable results with little regard to long range tech impact. The usual suspects doing the usual software and analysis projects. Modeling Integrated Helmets for Aviation; Exhaust Impingement Effects Predictive Capability for Future Combat Systems (FCS) and the 21st Century Truck; Computational ElectroMagnetics Analysis Assistant; Web-based Techniques for Remote Scientific Visualization; Next Generation Software for Efficient Remote Parallel Visualization of Large-Scale Time-Dependent CFD Data.

Ycch! They are almost all solutions to existing problems that could be done by almost any competent entity: large or small, aerospace prime, university, or small hobby shop. The Army does NOT care about agility in getting new technology into a market place because these are almost all things that the Army will make for itself or merely acquire the knowledge. The companies will be joyed to do the work and collect the pay until the Army money runs out and then the work will end. Economic impact on the US economy? Nil. The money would have been spent for R&D jobs anyway and there will be no momentum of new products or technology that will energize a new industry that will create new and better employment in a decade.

The Education Myth. Every state development agency knows that one route to a high-tech community is a more educated work force. Like most conventional wisdom, it works for political sound bites. But it takes more than a husky forward to make a basketball team. Now John Bound (U Mich) says that education indeed has less effect than the universities would have the governor believe. Bounds's study suggests that kids with new degrees have 49 other states to choose from for employment and that transport by jet plane moves workers a lot faster than a Conestoga wagon would.[report in Business Week, Nov 26] Just as having the only fax machine is worthless, being the only college grad in a community has its limitations. So, states and regions with Silicon Valley envy will have to think multi-tasking.

 

Just a Little Innovation, Please, We're NASA (Nov 23) Despite the efforts by the House Science Committee Republicans to get provable commercialization into non-Defense SBIR, NASA has awarded yet another Phase 2 award crowd of mission service contracts. We presume that a pony of some innovation must be in that pile somewhere. Three triple winners in a crowd of old NASA friends: Creare, Eltron Research, Physical Optics, TDA Research, and a couple of of double winners among the 126 contracts, That will be about $90M of good steady government incremental advances for NASA's mission. Both NASA and the winners will no doubt exult in the spinoff possibilities but they will dodge any economic measure of NASA's investments.

Want to see how to win awards year after year? Study such companies as: Barron Associates, Reconfigurable Guidance for Reusable Launch Vehicles Energy Science Laboratories, Lightweight Passive Vaporizing Heat Sink Intelligent Automation, Time Modulated Ultra-wideband Phased Array and SAR Radar L'Garde, Inflatable Structure for Tensioned Membrane Planar Antennas Lynntech Hydrogen-Air Fuel Cell for High Altitude Aircraft Use Scientific Systems, Aircraft Prognostics and Health Management, and Adaptive Reconfigurable Control .

Government Static, Industry Rising. The Republican economic conservatives (not the social radicals) must be winning. The share of US R&D funded by industry has been steadily rising for four decades from 33% in 1960 to 68% in 2000. In constant (uninflated) 2000 dollars the government amount has been around $50B.O fthat 68%, 13 points came in the 1990s. [source: NSF]

Your Tax Money at Work. Despite 100,000 employees, the Internal Revenue Service is in a fog about how much abusive tax shelters cost the Treasury. Replying to a critical report by government auditors, IRS official Larry R. Langdon wrote that HNC Software which detects fraud by using neural network technology, has been hired by the agency to "help us identify corporations using abusive tax shelters and estimate the size of the compliance problem." Saying that Langdon's response was actually released by mistake, an IRS flack refuses to disclose the contract's total price. [Janet Novack, Forbes, Nov 26]

 

If a Little Bit is Good, A Little Less is Better? The Federal and State Technology Partnership (FAST) made its first round of 30 awards, totalling $3.45M, six weeks ago. This program was created by Congress in very large part because of the need and interest demonstrated by the Science & Technology Council of the States. The FY 2002 appropriation has been reduced to $3M. [SSTI, Nov 16]

NIST Still in Business. ATP will have $60M for new awards in FY 2002 and $184M for existing projects and administration. Overall, NIST gets $674 million, $77 million more than FY 2001. The Manufacturing Extension Partnership received more than $106M to remain available until expended. NIST did not escape Congressional earmarks. (At least $40M) More information is available in the conference report for the Commerce-Justice-State appropriation: ftp://ftp.loc.gov/pub/thomas/cp107/hr278.txt

California Bound and Need Money?. Los Angeles has a new edition of its guide for tapping the federal treasury for technology money. LARTA offers a short version free and the full version for a fee of its 2002 Federal Technology Funding Guide.

rather than correct their anti-innovation policies, governments want to pick and back technological winners. Their inability to do so gave us nuclear plants that bankrupted their owners, supersonic jets that cannot recover their capital costs, the phenomenally expensive and unusable BSB satellite television system that Sky had to absorb, and a dome to display the wonders of the future. [Irwin Stelzer, The Sunday Times, Nov 11]

A Company Plug for SBIR, SBIR gives our partners an edge. Tap into the trend. DSM actively participates in SBIR. ... DSM is an important player, receiving $3.1M in initial SBIR/STTR seed funding to develop disruptive technology that can address enormous commercial markets including photonics and MEMS assembly processes. Our partnerships are leading us the rest of the way. The SBIR benefit for current and potential DSM customers:
SBIR removes some of the technical risk. SBIR selections are based on a rigorous technical review by experts in the field.
SBIR removes some of the commercial risk. For agencies such as BMDO, an important aspect of the selection criteria is strong commercial potential. In the past three years, DSM has received 6 Phase I and one Phase II SBIR contracts from BMDO alone.
Your customers want innovation but your IR&D account doesn't? The solution is simple: Co-invest. If you co-invest on SBIRs with DSM, you can double your research dollar while reducing the risk. DSM is Dynamic Structures and Materials (Franklin, TN).

 

Maine Voters passed a $5M R&D bond issue for biomedical and marine research and development by Maine-based nonprofit and state research institutions. By a landslide, 53% According to the Bangor Daily News, a 1998 $20M R&D bond has already generated more than $100M in spinoff benefits, including new jobs, federal research grants and additional industrial R&D contracts. [facts from SSTI Weekly Digest, Nov 9]

Do you believe the benefit accounting? Or has the government made the most friendly assumptions about what actually happened and what caused it. For example, did they subtract the jobs and economic activity caused just by spending the government money? By extrapolation, Maine should borrow billions to jack up the state's economics.

Explosive Ideas Wanted. Defense Threat Reduction Agency wants commercial technology solutions for advanced energetics and novel explosives. More bang, a lot more bang, than conventional high explosives. POC: Kelly Dowd, 6801 Telegraph Road, Alexandria, VA 22310- 3398 and e-mail: kelly.dowd@dtra.mil no later than November 231. More information for solicitation number TDS029971764 is available in the Commerce Business Daily issue posted in CBDNet on November 7, 2001: http://cbdnet.access.gpo.gov/ No big news that DOD wants more bang. News would be that anyone actually has a useful idea in this mature industry which goes back to the Middle Ages. Not the oldest profession by far but certainly mature. No, they won't believe you have revised the laws of physics. DOD has been spending regular R&D money on propellants and explosives for a long time and has probably heard all the off-the-wall ideas a dozen times.

New Guide to Federal Tech Funding Available. larta has issued its 2002 Federal Technology Funding Guide, a survey of federal funding sources for technology firms. The sixth edition of the guide provides information on more than 90 regularly scheduled programs, hundreds of links to resources on the Web, and a special section funding for technologies to fight terrorism. An index identifies program by technology area or funding emphasis. larta is one of three regional technology alliances established and funded by the Division of Science, Technology and Innovation in the California Technology, Trade and Commerce Agency. The full guide is available for $39 from larta; an abbreviated, downloaded version is available at http://www.larta.org

When in Doubt, Re-Organize. The government has a standard answer for every program that seems bogged down - reorganize. Let the clock re-start for the critics, goes the theory, although the critics don't buy it. BMDO is now grabbing AGAIN for the re-organize lever for some mix of its three basic options: do it all themselves, parcel the job out to the military services, contract the job out to the big aerospace primes Boeing, Raytheon, Lockheed-Martin, General Dynamics, and Northrop Grumman. The debate is political and endless. Everyone involved lusts for the money that goes with a role. The military services each promise the "perfect" defense and everyone has friends in Congress.

Significant efforts in communication and integration have resulted in the annual solicitations that reflect the Agency's technology taxonomy., says NASA's SBIR/STTR Program Report about its program management. Bureaus talk that way. I think that line says that NASA heard a lot of criticism from within about its topics and fixed them.

Is 30% Good or Bad? Survey results show that over 30% of NASA phase II awards have produced technology that has been incorporated into revenue generating commercial products and services in non-government markets. More than 450 associated commercial products and services in numerous industrial sectors are represented. This demonstrates the pervasive effect of NASA’s SBIR program on the national economy. [NASA SBIR Commercial Metrics Report] What's notable about such stats is their avoidance of economic concepts like Return on Investment. Instead they do what political programs typically do, measure participation.

Pentagon Seeks Tinkerers Against Terrorism.
(Nov 1) DOD is looking for a few great ideas against terror. That is combating terrorism, defeating difficult targets, conducting protracted operations in remote areas, and developing countermeasures to weapons of mass destruction. It wants stuff that can be fielded in 12-18 months. "We've got a new kind of problem here, so if anyone's got good ideas, that can be helpful," notes James Kurtz, a researcher at the Institute for Defense Analyses who spent 32 years in the Army. "They're looking for the guy in the basement of the high school science building who's got a new idea. Nobody has a lock on all good ideas." [Richard Leiby, Washington Post, Oct 31]The announcement calls for anti-terrorist "concepts" in 38 categories, including "countermeasures to weapons of mass destruction." which means almost anything, say, air samplers, sensors to detect small nuclear devices Submit a one-page grabber by Dec 23. If that looks good enough, a 12 pager comes next, and then a full fundable proposal. If you want to submit,you must first register for the BAA game at https://www.bids.tswg.gov/tswg/bids.nsf/Main?OpenFrameset. What are your chances? Not much unless you have something they haven't seen before or a Member of Congress as a champion. Such projects typically recycle the national attic of pet rocks (anti-gravity and perpetual motion). Maybe another business tax cut would prevent terror attacks.

Small Company as Pawn. Clyde started a one-man technology company and won a Phase 2 SBIR. All was going normally until the DCAA assigned a new auditor who was having a conflict with his own management. Suddenly all of Clyde's accounting was fatally defective and for two years Clyde's attention shifted from R&D to defense of his accounting. Clyde could no longer focus on the prospect of $1.2M for follow-on development from his state and a private investor. A year after DCAA assigned Mr X as auditor, X told Clyde that he had been shifted in his job after charging his boss with race discrimination. Soon however, the agency also shifted the boss to be X's boss again. X now had to prove that he was a tough auditor. Then suddenly X disappeared to be replaced by Y who had a totally different approach to auditing. Numbers aren't just numbers. Details and rules that were never raised before surfaced to interpret Clyde's existing accounting system as invalid. After countless meetings (100 hours of joint work alone) and after Clyde revised nearly all documentation, Y disappeared for several months and criminal investigators knocked on Clyde's door wanting all documents for the last five years. Then yet more documents. Meanwhile the boss defending the race discrimination charge claimed that the investigation of Clyde proved that X was incompetent. When Clyde suggested that neither X nor Y should be auditing because they are all entangled with the discrimination case, the government attorney threatened yet more investigation. Case still pending. Kafka, where are you?

Corporate R&D Alive and Well. The special pleaders that government must do more for US R&D rings hollow in the face of growing corporate R&D. Last year public US corporations almost doubled the growth rate of their investment in R&D in 2000, up 9.3% to an estimated $163B. Government R&D for government purposes also partially feeds the tech growth rate with some unintentional spin-off. As John Pike used to say about Star Wars spending "You can't spend $4B a year and not get some spinoff."

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STTR Law Signed
(Oct 19) The new law doubles the percentage set aside to 0.3%, ups Phase II amounts to $750K, and lets agencies stretch out Phase 2s beyond the nominal two years. It also pumps a trickle of money into the have not states to pretend that they can compete with Silicon Valley. See HR 1860 on Thomas Legislative Locator. Actually the new law gives each agency no new power it didn't already have. The total money is peanuts and the agencies are still free to ignore any serious commercialization. The law is just a political sop to the small business community which thinks it is getting something. In fact, it is getting nothing except the $5M that goes to the have-not states, and even that is in danger of not being appropriated. Ain't politics a hoot?

Massachusetts mirrors USA world position - strong and growing but losing ground to competitors. Bob Kispert director of Mass S&T reported that Massachusetts, while continuing to be in the top 10 states for federal R&D support received, is losing market share to other states as they become more technologically competitive. The report credits some of this loss to the concerted efforts and "effective" tech-based economic development programs of some rising states. Could all those Route 128 wannabes actually be gaining on Silicon Valley? Just as the Germans and Japanese gained relative ground on USA in the 60s and 70s. Everyone was winning but the USA no longer owned everything. Which led to a declinist attitude, especially against Japan in the early 80s. Kispert's report "Maintaining the Innovation Edge" calls the Massachusetts science and technology community to create a comprehensive S&T strategy that reinforces the state's economic development goals.

Eyewash Coming. NASA will publish a web/hardcopy based magazine Venture Briefs to promote NASA's commercial success with SBIR. Good luck with making lemonade out of that lemon. NASA, which pours most of its SBIR money into mission activities, would not have a compelling commercial story. It is likely to continue the fiction that a few success stories proves the investment mettle of its managers. Don't look for rational economic analyses like that risked by BMDO. Publication target date is Dec 1 and companies can submit material to attiva@erols.com.

before DARPA officials even decide what to fund, "one of the questions senior management asks is, 'Is somebody else able to do this problem?' If they are, let them do it," says Alexander. And if not, DARPA primes the pump, providing enough time and money for the technology to take root in the commercial world. "With the right investment at the right time, I can steer industry toward an area that will be useful. I nudge them." [David Talbot, DARPA's Disruptive Technologies, MIT Technology Review, Oct01] Such was BMDO's SBIR philosophy before the Dark Forces grabbed power. The difference between DARPA and BMDO SBIR was one of scale (multi-millions v.$1M) and a narrower focus at BMDO for anti-missile technologies. But both sought disruptive technologies that would make life both better and worse for future BMDO Directors (an job where no man ever lasts more than a few years): better because it brought a few technologies that would never have been born otherwise, and worse because it would cause BMDO to shift its plans. That was also the usual complaint by the military establishment about DARPA. In a post-script to the DARPA piece, Michael Dertouzas, late founder of MIT's Computer Science Lab, noted that DARPA has been responsible for about one-half of the major innovations that have made information technology what it is today. While that may overstate the government contribution to info-tech, it should be warning to the conventionalists at BMDO and the military services that if they want to stay on top of the heap where all that info-tech has put them, they have got to open their minds to investing in odd ideas by odd-talking people. Out of $8B in anti-missile money, BMDO can certainly spare the $100M to be devoted to guarding the future even if one gaggle of technocrats with too little other technology money to justify their jobs has to be shifted somewhere else in BMDO.

Science Directory. Looking for a U.S. government lab that studies mad cow disease, projections of how global warming might affect the ranges of forest trees, or information on alternative fuel vehicles· Drop by SciTechResources.gov, a select list of federal government Web sites offering all kinds of scientific and technical information. This still-growing guide, compiled by the National Technical Information Service, spans subjects from aeronautics to transportation and allows you to search by agency, topic, type of resource, and key word. You can also browse a roster of more than 30 Web portals that have gathered information on subjects such as invasive species, biotechnology, food safety, and neutron scattering. The site also offers access to millions of government reports and studies. www.scitechresources.gov [Science, Sep 21]

The House passed a bill to extend and double STTR to 0.3% of the R&D extra-mural budgets of the big agencies. The politicians sponsoring the bill made the usual blather which will be ignored by the federal agencies who will do pretty much whatever they want in implementation as long as they follow the letter on award sizes and solicitations. The happy words about economic growth will take a distant second to the agencies' serving their own needs. Passage was without debate and seemed related to the sudden willingness to pour out billions to large companies, especially airlines, hurt by the Sept 11 terrors.

 

Opportunity To Be Wasted The entrepreneurial economy, already hurting badly before the Sept. 11 terrorist attacks, has taken a sharp turn for the worse. Entrepreneurs say their customers have entered a state of suspended animation, stunned by the terrorist attacks and their aftermath. Partnering deals are in limbo. But early-stage companies continue to burn through their precious cash, and some of the venture capitalists who back them wish for a "timeout" that they know is just wishful thinking. ... Venture capitalists talk of funding new technologies, e.g. those that provide security or video-conferencing. Even some start-ups grazed by the tragedy are still candidates for future funding. ... Funded or not, most start-ups are keeping expenses to an absolute minimum. Some call it "hibernating" and just trying to hang on until a warmer climate loosens up funding and purchasing by potential customers. Of course, this raises the question of whether would-be entrepreneurs will themselves hide from starting companies in a world economy that has gone from fragile to something worse. That would crimp innovation in America, surely. Paradoxically, though, the payroll slashing could bring new entrepreneurs to the scene. [Bernard Wysocki Jr, Wall Street Journal, Sep 24]

The Silicon Valley Fastest 50 might have been fast, but they were slow to make money for their investors.So slow, in fact, they went backward. Stocks of all but one plunged over the past 12 months -- a majority of them losing 80 percent of their value or more. Individual investors suffered huge losses -- more than they would have if they'd invested in the average Nasdaq company, down 69%. For the first time ever, most venture capitalists lost big money, too. Venture capitalists invest early in a company's life, and traditionally have made the most money from a company as its value appreciates. These VCs invest when the company is tiny, and so can buy up a big stake of ownership at a low price. When they sell their company shares at a public offering, venture capitalists can make a killing. But the money lost over the last year was the result of a new attitude. About three years ago, euphoria surrounding the Internet began changing the rules of investing. VCs and other investors began putting money in companies -- even in non-Internet companies -- that weren't even close to profits -- hoping to strike gold on the future of the so-called New Economy. In hindsight, the New Economy was ephemeral, the old rules have returned with vengeance -- and VCs are now paying for their past sins. [MATT MARSHALL, San Jose Mercury News, Sep 24]

The government has an opportunity here to provide seed capital for new technology. But the signs give no confidence that such will happen. The distribution of funds like SBIR are in the hands of the technocrats who have no interest in seeding technologies or companies for growth of the economy. They care about their particular programs and they never saw a budget dollar they didn't lust for to do more of what they are doing already. The law of diminishing returns and the idea of high-risk high-payoff do not invade their consciousness. Even the most entrepreneur-friendly SBIR program is losing an internal fight by the technocrats to grab all the SBIR money and apply it to "relevant" BMDO program. That's code for grabbing the power and promotion that comes with a larger budget. The bureaucrat's brass ring.

Round Up the Usual Suspects, and give them SBIRs. NASA SBIR Phase 1s hired multiple winners, especially companies that have been multiple winners for years and years, to do things like New Technique to Identify the Onset of Combustion Instability, Network Implementations for Real Time Communication and Data Transfer, Development of Boundary Vorticity Dynamics Based Closed Loop Flow Control, Constraint-based Workflow Management for Life-Cycle Analysis and Design, Object-Oriented, Network-Based, Health Management System, Hybrid Model Fusion for Gas Turbine Engine Diagnostics and Prognostics, Digital Flow Diagnostics System for Complex Flows, Virtual Collaborative Training and Operations Simulation System. Old names with what NASA claims are innovations: Creare 7, Foster-Miller 3, Intelligent Automation 5, Lynntech 6, MER 5, Orbital Technologies 6, Physical Optics 4, Physical Sciences 3, Southwest Sciences 4, SRS Technologies 3. Of course, these are Phase 1s, not serious money. But they do open the door to doubling the mediocrity by giving incremental R&D the real money - Phase 2 money. If you want NASA money, be conventional and stress reliability and predictability.

If you proposed to DOD in the summer round of SBIR, be prepared for a surprise - war changes everything. The military services will suddenly have new wants by the time the funding decisions are made and they may well see SBIR as a way to shift their R&D programs to satisfy immediate needs. Although DOD will find hunting terrorists another war for which they are ill prepared, America does well at ad hoc war provided you don't look too closely into the victory claims. This war, for example, could well mimic the Vietnam experience of counting bodies as a measure of success. We do have a businessman as SECDEF and the White House will be pressuring him for results by beating him over the head with Jack Welch's books.

 

SC fund on the prowl for investments. A newly formed South Carolina venture capital group is scouting the Charlotte area for investment deals. Leaders of the Trelys Venture Partners plan to visit Charlotte every few weeks to meet with venture capitalists and entrepreneurs... Trelys is trying to raise a $25 million fund to invest in high-growth technology companies. Managing partner Larry Wilson says the fund will invest in companies across the Carolinas and in Atlanta. This fall, he expects to begin investing $1 million to $2.5 million in deals with other venture capital groups. ... Blue Cross and Blue Shield of South Carolina has invested $2M. ... The Trelys partners plan to focus on South Carolina,which has seen three venture capital deals, totaling $90 million, signed through the end of the second quarter. [J.C. Zoghby, Business Journal of Charlotte, Sep 10]

VC no longer easy money in NC. Venture capital investment dropped sharply across the state in the second quarter, falling to $103M from a record $745 million during the same period last year. North Carolina is following a national trend toward far less venture capital investment. ... That makes things tougher for entrepreneurs, who had grown accustomed to the easy-money days of the late 1990s, experts say. ... Charlotte still trails the Research Triangle in attracting venture capital investment. ... In the past two years, the number of local firms known to have collected significant cash from institutional VC investors can be counted on two hands: Amplistar Inc., Pilot Therapeutics, TransTech Pharma, Accordant, Furndex.com, Healant and the now-defunct eDesignerSource. [J.C. Zoghby, The Business Journal of the Greater Triad Area, Sep 10]

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IS THE SCIENTIFIC BUREAUCRACY THE QUINTESSENTIAL SPECIAL-INTEREST GROUP? ... "With the possible exception of veterans, farmers, and college students, there is no group that squeals more loudly over a reduction of federal subsidies than scientists. They are the quintessential special interest group, and in effect, they make the oil industry look like a piker." ... Isn't American science struggling to survive on meager funds, the result of post--cold war budget cuts inspired, in part, by the American people's alleged indifference, even hostility, toward science? Poppycock, Greenberg replies in a book that is better documented than most National Academy of Sciences reports yet reads as briskly as a Dashiell Hammett detective story. (I devoured it until 4 A.M.) ... "There is too much hype," he quotes Maxine Singer, one of the few female members of the National Academy of Sciences, as saying. "Every gene that is discovered will lead to a cure for cancer. Maybe, but not for a long time. Even the Superconducting Super Collider was said to have important implications for improving human health." For anyone naive about the politics of science, Science, Money, and Politics is the perfect curative. [Keay Davidson is a science writer for the San Francisco Chronicle and author of Carl Sagan: A Life (John Wiley, 1999), Scientific American, Sep 01]

The attacks on New York and Washington are acts of war if perpetrated by or with the tolerance of a foreign government. The apparently total surprise will produce hand-wringing followed by attempts to explore (no stone unturned) every sort of intelligence technology that could prevent another such surprise. Money is not likely to be an object. Organizations with quick response modes, like DARPA, should be rich sources of R&D for new high-tech ideas. Dust off your sensor technology. And if I could hear the explosion hundreds of yards away, the BMDO SBIR office just up the hill from the crash side of the building must have felt a mighty thump.

If you are in a position to put your company in whatever state you choose, you might want to consult the Small Business Survival Index with which the Small Business Survival Committee, a Washington-based advocacy group with a definite bent toward less taxes and less government, rates states. Nevada was best and DC worst. [scouting thanks to Jeff Bond, a government guy who finds anti-government and other sites about high-tech small business]

Air Force Dual Use S&T Program Conference. AF DUS&Twants to cost-share research projects with industry for the development of a technology that has both military utility and sufficient commercial potential to support a viable industrial base. A main objective of the AF DUS&T Program is to obtain for defense procurements the economies of scale, accelerated product improvements, and increased sustainability inherent in the commercial marketplace. Since 1997, the AF DUS&T Program has started 121 projects for $476M outside the FAR as "investment partnerships" A one-day workshop on AF DUS&T Program Sept. 27 at the Ohio Aerospace Institute (OAI) in Cleveland. Contact, Register at www.oai.org/events/ . More information on the overall AF DUS&T at http://www.dtic.mil/dust/

With the completion of the 2001 edition of the Maryland Innovation and Technology Index, the Maryland Technology Development Corporation (TEDCO) is able to show state policymakers and tech community leaders graphically and statistically the state’s progress since the first Index was prepared two years ago. Innovation indices or S&T report cards, as some states and communities refer to them, help identify areas of strength, weakness or underperformance. The first assessment undertaken, for Maryland in 1999, provides a benchmark for measuring future growth or progress. Subsequent indices can help tech-based economic development practitioners refine their efforts. Comparing Maryland on 66 items to five other states Massachusetts, New Jersey, North Carolina, Pennsylvania and Virginia TEDCO concludes from the 2001 Index that the report paints a picture of opportunities missed. Maryland is at best holding its own among competitor states, or worse, losing ground. [SSTI, Aug 24]

Works in OK, Let's Try It In IA. GOP legislative leaders told a meeting of the Iowa Taxpayers Association on Wednesday they're moving to create a new venture-capital program so the state can attract new small businesses and expand existing ones. ... the attorney general that a venture-capital program can be devised that won't run afoul of the state's constitutional restrictions on lending. That clears the way for Iowans to go to work on a serious venture-capital program like the one Oklahoma pioneered so successfully ... Oklahoma provides what are called "contingent tax credits" to those who invest in certain start-up businesses. The state agrees to provide an income-tax credit worth the amount of money lost in such an effort. So, if investors lose money on a deal, the state lets them subtract that amount from their state income-tax bills. By making such a guarantee, the state takes away much of the risk ... Venture-capital experts say Oklahoma's state government has never lost any tax revenues through the program. [DAVID YEPSEN, Des Moines Register, Aug 16]

Transparency. Let's have a round of applause for CalPers, the giant state pension fund, for transparency. Beth Healy of the Boston Globe (8/17/2001) reports Money managers aghast that pension investor shows returns, rankings. It's a report card that has rocked the secretive venture capital world, and one that even the `A' students didn't care to see displayed on the refrigerator. Calpers, the giant California pension fund that sets trends for many large investors, has posted on its Web site the performance of every venture or buyout fund in which it's invested for the past decade. Firms typically guard these numbers carefully, but the Calpers chart even says which funds are meeting expectations, and which are disappointments. ... The industry buzz around the report stems from the secrecy with which venture firms and buyout artists guard the specifics of their returns. Virtually every firm claims ''top quartile'' performance, and the numbers they give out are suspect, venture analysts say. Steve Lisson of Austin, Texas, on his controversial Web site, InsiderVC.com, tracks venture returns by doing his own calculations on venture portfolios. He is the only independent source on such numbers and has drawn fire from some venture capitalists for breaking the code of silence. ... over the long term, Calpers has been doing something right. As of March 31, its average annual return for 10 years of private equity investing was 17.5%. The Wilshire 2500 Index, a broad stock market benchmark, was up 13.9% in that period. Would that the federal government would do the same with alleged investment programs like SBIR.

Little Guys Should Get a Share of Contracts. The political spokesman for a new government set-aside program said that small contractors were being systematically denied contracts because the bureaucrats would rather deal with known entities with proven track records - large contractors. The spokesman said too little is done to include those that serve with vigor locally but are not as large as the traditional partners of federal government. Sound like a familiar spiel? It's not SBIR; it's the faith-based charities appeal by Bush's front-man John DiIulio [Wall Street Journal, Aug 17] Maybe then the Republican administration will be advocating SBIR. Nah! Why would you expect politicians to be consistent?

Michigan Makes Pre-Emptive Strike for Fuel Cell Commercialization, Manufacturing. What are you doing to protect your state or local economy from technological advances that will completely overturn an industry 10, 20, 30 years from now? With the prospect of someday losing 27,000 high-paying tech jobs at 15 automotive engine and powertrain plants, Michigan has unveiled a plan to position the state as a leader when automotive applications of fuel cell technology make the internal combustion engine obsolete. ... the strategic plan and market study call for the state and automotive industry to jointly:
Form a club Create a Michigan Advanced Automotive Powertrain Technology Alliance;
Form another club Investigate the feasibility of creating a power electronics Center of Excellence;
Form another club. Establish a Michigan Hydrogen Infrastructure Working Group to include the investigation of necessary changes and lead time requirements for service and repair of infrastructure related to fuel cell and alternative technology vehicles;
Usurp the usurper. Promote the demonstration and testing of prototype fuel cell vehicles and support the commercialization of fuel cells for vehicle and stationary power generation applications; and,
Study the problem Conduct an economic study to determine the most appropriate financial incentives for the development and commercialization of fuel cell and other advanced technology vehicles. [ SSTI Weekly, Aug 16,01]

RTI plan gets second wind. Leaders of the Regional Technology Initiative -- who promised but never delivered a March plan to bring Cincinnati to the forefront of the New Economy -- are trying again after months of racial strife, political fallout and a sagging economy. Under the plan released Aug. 9, Jack Cassidy, president and COO of Cincinnati Bell, will spend the next few weeks assembling a 15-member leadership council that will direct a "Technology Growth Accelerator." Headquartered at the Greater Cincinnati Chamber of Commerce, the accelerator will be a combination of people and resources to support high-tech initiatives, entrepreneurs and the big businesses that would work with them. [Rachel Melcer, Cincinnati Business Courier, Aug 13]

 

Now Hear This. The Navy says that (for 1999) 45% of the firms winning an SBIR were newbies to Navy SBIR and 19% were new to the whole government. That does NOT mean that you have a 45% chance is you haven't won before. First, if you have a mediocre proposal, you have no chance. Second, that figure does not say how many awards were made to firms winning more than one award. In the extreme if the Navy made 99 awards to one firm and one to a newbie, it would report that 50% of firms were new firms.

The Navy has a commercialization assistance plan. Most likely if you win a Navy SBIR you would be tracked to contribute your stuff to some Navy development program, since the Navy clearly says its SBIR focus is the fleet. But, still, in the hope ...., it has a three track commercialization help program. Observers may note that Navy propaganda on the subject shout about a few big stories (to which the Navy may have made a substantial contribution) but nothing on any economic analysis. That lack usually means that the story is poor and the big successes may well have happened anyway. Without any decent analysis, outsiders are just guessing.

A Haven for the Uncompetitive. Don't want to compete for SBIRs on the basis of commercialization? Blame the economy for the lack of interested investors and then bet that your competition who really wants to commercialize cannot get them either and claim that your sweet technology is as good as theirs. Paul Krugman explains, The driving force behind the current slowdown is a plunge in business investment. It now seems clear that over the last few years businesses spent too much on equipment and software, and that they will be cautious about further spending until their excess capacity has been worked off. And the Fed cannot do much to change their minds, since equipment spending is not particularly sensitive to interest rates. [New York Times, Aug 14]

Kortum and Lerner calculate that a dollar of VC money produces 3-5 times as many patents as a dollar of corporate R&D. About which VC Geoffrey Yang says that cost of capital has recently gone from zero to infinity for ground-breaking ideas. Not to worry, the government SBIR will let you keep the patent and give you a little free capital. Actually, under some circumstances, it will give you a lot of free capital. For conventional ideas with predictable results, the government may give you endless contracts to keep grinding at one of their problems. It's not exactly capital you can use for anything else, but, hey, it's a living.

Try Cincinnati. On a per capita basis, the report positions Cincinnati as the nation's leader in broadband availability with 85 percent of the city's population having access to broadband services. Seventy-nine percent of all Ohioans live in areas where they can obtain broadband services. While increasing 25 percent over six months, broadband services continue to be found primarily in urban areas. By 2005, Ohio plans to have 90 percent of its population equipped with broadband access. [SSTI Weekly Digest]

The Child is Fine, but the Parent Needs Treatment. Business Executives for National Security (BENS) said that In-Q-Tel is doing fine with investments and fruits brought to the parent CIA. So what? The CIA isn't ready for such fruit baskets. Read the The Report of the Independent Panel on the CIA In-Q-Tel Venture

Fruit from the SBIR Tree The competition is heating up as more manufacturers introduce 1310-nm vertical-cavity surface-emitting lasers (VCSELs) to the market. For the last couple of years, the optically pumped design by Gore Photonics (Lompoc, CA) has had the 1310-nm limelight all to itself .... Picolight (Boulder, CO) and Emcore have not made any product announcements, but Picolight says that it privately demonstrated 2.5-Gbit/s small-form pluggable (SFP) devices based on a GaAs material system at slightly under 1310 nm at OFC, and Emcore is not yet divulging its chosen material system, but says, as does just about everybody else, that it expects to have product samples available by the end of this year or sometime next year. While many of these companies are playing the technological details of their devices close to the vest. ... "Picolight has managed to generate two quarters of double-digit growth on the order of 30%,We think the reason for that is our focus on optics at the edge of the network, not optics at the core, as well as the focus on the next-generation platforms." [Laser Focus World, Aug 10] Gore Photonics and Picolight each got their starts from BMDO's SBIR.

Would a Bear Take Advantage of a Mouse? Apparently too many stories have gotten around about large contractors taking advantage of small busineses by making a sub-contracting deal and then defaulting on some key promise. The Senate SB Committee has asked GAO to look into the accusations (if GAO can find time after going after Cheney's secret task force meetings.)

Not As Shabby as most spy stories, says a panel about In-Q-Tel. The venture fund started by the CIA two years ago in Silicon Valley has made solid progress but needs work to realize its full potential, according to a report by the non-partisan Business Executives for National Security (BENS). The CIA can breathe a sigh of relief. BENS's conclusion is much more favorable than the view held by many panel members -- well-regarded venture capitalists, executives, lawyers -- just a few months ago. ... Venture capitalist Cox said he was at first perplexed about In-Q-Tel, thinking that a slow-moving government firm in the venture capital world would be a ``total waste of taxpayers' money.'' ... Still, Louie is the first to admit that start-ups want the CIA as a customer, not just for the money. ``Government money is the most expensive money you can ever take. There are all these regulations and rules that go with it,'' he said. ... , the panel found cultural resistance to In-Q-Tel from within the CIA. The In-Q-Tel budget is viewed ``as a burden across the entire agency,'' the report added. [MATT MARSHALL, San Jose Mercury News, Aug 8] So, outsiders think it is getting somewhere and the insiders don't like it. When Gilman Louie finishes with In-Q-Tel perhaps the government can hire him or his clone to fix SBIR which has been strangled by the insiders.

The Agency That Keeps Giving and Giving.And nobody knows how to get rid of it. "Big Government and Affirmative Action" (Kentucky, 224 pages, $29.95), Jonathan J. Bean's brief report on the SBA, is at once a powerful argument for killing off the agency and a shrewd analysis of the political impulses that make its termination nearly impossible. Says DAN SELIGMAN's review [Wall Street Journal, Aug 7]. The agency's responsibilities nowadays are a mishmash. It makes direct loans to companies mindlessly judged to be "disadvantaged" because they are small. .. The agency also guarantees bank loans to shaky companies, thereby also guaranteeing that the banks will remain huge fans of the SBA. ... A recurrent theme in the SBA's history is the tension between (a) pragmatic bureaucrats who tried to limit loans to prospects with some kind of demonstrable business ability and (b) civil-rights partisans who saw the agency as an instrument of social change and therefore bent the rules to favor the uneducated and inexperienced, especially minority-group members. An outsider could plausibly tell himself that neither position made much sense. If SBA loans were going to good business prospects, then who needed the SBA? Its loan recipients would be those who could borrow from plain old neighborhood banks. But if loan eligibility translated into a "competition in disadvantage," then the agency would end up running a racially tinged spoils system guaranteed to generate social tensions. ... the SBA's ultimate political strength comes from another source: the simple, or possibly the word is dopey, belief of Americans everywhere that "small business" is sacrosanct. It is this belief that terrifies politicians contemplating action against the SBA. ... Mr. Bean quotes Herbert Stein's sage comment about conservative governments: "A revolution can hardly be engineered from outside the government, and even conservative governments when in office do not want to limit their own powers. So the radical conservative revolution is the dream of conservatives out of office, but not the practice of conservatives in office." Which explains the durability of a lot more than the SBA.

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Hope Springs Eternal (Aug 6) that public "investment" will bring fame and fortune. GOVERNOR ANNOUNCES WORLD-CLASS RESEARCH CENTERS ACROSS STATE. ... Largest One-Time State Investment in History to Promote High-Tech Research, Jobs. ..... Governor George E. Pataki today announced an unprecedented series of major awards totaling $102M to create eight Strategically Targeted Academic Research (STAR) Centers and five Advanced Research Centers (ARCs) across New York State -- representing one of the largest one-time high- technology/biotechnology related investments in State history. ... Since 1995, New York State has fostered the growth of its high-tech and biotechnology industries by investing more than $730 million in the technology business sector and our world-class research laboratories and academic institutions.

Note that the first words are "governor announces". Maybe state political money can build world-class research, and maybe the legislature will soon tire of waiting for instant fame and breakthrough science. Most legislatures tire easily, particularly before the next election cycle. Science, on the other hand, needs patient investment. Maybe the governor should study what Corning has done that makes the city look so prosperous without government investment. The Corning Museum of Glass, although a little heavy on atmospherics, shows what can be done with patience in a seemingly mundane material like glass. It's not really mundane but since it is everywhere, it seems common.

Yes. Virginia has a Santa Claus Virginia will hand several thousand dollars to companies who want to win SBIRs. Contact Jan Curren, Director, Technology Awards, Tel: 703/689-3044. Or go to http://www.cit.org/Submenus/HTML/financialindex.htm

 

8 Lessons from the Telecom Mess. Deregulation simply isn't working. ..Celebrations broke out in 1996, as the U.S. telecommunications markets were thrown open to competition. A mogul-studded audience in the grand rotunda of the Library of Congress watched a Webcast of comedian Lily Tomlin and local schoolchildren eager to have broadband Internet services. President Bill Clinton signed the Telecommunications Act of 1996 into law using the very pen President Dwight D. Eisenhower used in 1957 to authorize the interstate highways. ... Shortly after the ceremony, one senator who backed the legislation took Federal Communications Commission Chairman Reed Hundt aside. "We gave one side everything they wanted, and then we gave the other side everything they wanted," Five years later, the telecom industry is a mess. For the first time, industrywide revenues are contracting.

Steve Rosenbush and Peter Elstrom [Business Week, Aug 13] have a plan: pain and then relief. 1) Eliminate subsidies for all but the truly needy, and let the Bells raise basic phone rates; 2) force the Bells to open their markets to competition (in a world of well-heeled lobbyists, fat chance) 3) pay for a broadband rollout; 4) slaughter the sacred cows. Take spectrum away from the Defense Dept., television broadcasters, and the satellite industry; 5) eliminating delays that have thwarted the Telecom Act (not while well paid lawyers are still breathing); 6) don't worry about whether a merged company would dominate one niche, but instead consider its share of the total telecom market; 7) If companies want to charge premium prices, they must develop premium products; 8) Telecom-equipment makers and carriers must accelerate the deployment of new technologies based on Internet protocols and other open standards. Note there is no call for more research or small high-tech innovation. The industry has lots of great new products, too many for the revenue stream to support.

Wisconsin is about to put $1.5M into TechStar, a consortium of universities, businesses and the Metropolitan Milwaukee Association of Commerce to help turn academic and corporate research efforts into marketable products. Good luck, legislators think that money is the answer to almost every dilemma.

A Deliberate March
(Jul 25) The Army's annual roster of SBIR Phase 2 awards shows a deliberate march into the future on little cat feet. Slow steady progress. 130 projects plus nine Fast Tracks. DOD has de-emphaseized Fast Track and no longer has any stats on its Website. Useful gizmos like Enhanced Hand-held Electromagnetic Induction Sensor for Landmine Detection and Fuzzy Logic-Based Smart Battery Controller and A Cotton Towlette for Nerve Agent Decontamination. Useful software like Logistics Site Planning And Operation Tool and Engineering Design Software for Military Incinerators. Generals still don't like surprises and apparently think they have such a huge lead on any enemy that they need only plod ahead safely to avoid any political or technological minefields. Companies with great stories of innovation can take them elsewhere.

There are precisely 1,454 federal domestic-assistance programs ready to put more than $1.5 trillion into eager private hands. ... The Government Assistant Almanac" (Omnigraphics, 925 pages, $210) ... The existence of so many programs can be a little confusing to even the keenest businessman, so Commercial Service grants provide "assistance on sources of export finance available from the U.S. Export-Import Bank, SBA [the Small Business Administration], and the U.S. Agency for International Development." Thus does Uncle Sam pay you to find more of the money he is giving away. ... Incidentally, there is no sign that Mr. Dumouchel received a grant to compile his catalog. Such self-sufficiency is rare these days. [Doug Bandow, Wall Street Journal, Jul 24,01] Small high-tech business can get into the larder with SBIR's $1B a year handout.

At a Congressional love-in, the small business committee unanimously recommended confirmation of Hector Barreto as head of SBA. During a hearing marked by praise and accolades, Barreto was asked to comment by the Chairman on whether he would commit to fight for a budget that would protect established programs within the SBA. Allowing wide room for future flexibility, he affirmed he would support existing programs and identify new programs that assist small businesses in an efficient and effective manner. Among some of the specific programs that he was asked to maintain a vigorous support for are the 7 (a) loan program, Hubzone funding, 8 (a) procurement, New Markets Venture Capital, Microloan, and SBIR & STTR programs. Will the Bushies then cut the SBA budget while acclaiming the value of the programs?

More, More, Give Us More
(Jul 19) An appetite that feeds on itself, The Bush administration is calling for a 6% increase in research funding. Government researchers say a tripling of the research budget is needed in the next five years. ``We will be behind the rest of the world'' if it doesn't happen, said Ruzena Bajcsy, assistant director for the National Science Foundation. ``Our markets and products will not be competitive.'' ... The U.S. spends about 2.7% of GDP on research and development. .... CEOs from Cisco, Intel, 3Com and about three dozen other tech companies warned last month in a letter to Congress that the current budget proposal would threaten important new projects, and called for a 15% boost in NSF's funding to $5.4B. [Heather Fleming Phillips, San Jose Mercury News, Jul 18,01] The iron triangle will work: companies and universities who benefit, bureaucrats who administer, and politicians who buy votes will all combine with a motherhood story. The only check is a maximum budget allowed for all handout spending and even that is subject to imaginative accounting to allow tax cuts while spending increases. It's pure inspiration to see the arithmetic. SBIR beneficiaries can also pretend that there is a crying need (they'll cry as much as needed) for more investment in what they do.

Making the Government Let Go of the IP Rights Rep. Tom Davis (R-Va.) said July 17 he is considering changes to the intellectual property (IP) laws and regulations that make it difficult for the government to access cutting-edge technologies and collaborate with commercial industry in research and development. Davis's main measures would be to
1) Amend the Bayh-Dole Act to allow government officials to waive any contractor obligation or government right;
2) State in legislation that, when negotiating contracts involving intellectual property, government officials may serve the government's best interests by obtaining only those IP rights necessary for maintenance of fielded equipment and allowing the creator of the IP to retain other rights.
3) Provide a nonjudicial forum for IP disputes. GAO said such new laws were not needed because government acquisition officials are not yet using the IP flexibility already on the books. A 3M rep said the law has faults that could stand a dose of giving more to the contractors doing government R&D. Although SBIR was not mentioned as a special case, IP rules have litttle impact when the technology has little market value anyway.

 

Fort Lost in the Woods. Missouri budgeted a dream - $1M for a research park in Fort Leonard Wood - but the governor vetoed $550K for the SBDCs. The Missouri Technology Investment Fund supports the Electronic Materials Applied Research Center, Missouri Manufacturing Extension Partnership, SBDCs (usually), Innovation Centers, and Centers for Advanced Technology. [story from SSTI Weekly Digest, Jul 13] And how many top class scientists and engineers will move there for the isolation from the kind of people they MUST interact with to be productive? There's a reason why the Army puts its basic training sites in such places.

Creating Opportunity:Tools for Building Tech-based Economies, September 19-21, Omni William Penn, Pittsburgh. SSTI is a national non-profit organization dedicated to improving government-industry programs that encourage economic growth through the application of science and technology. The Institute also works to advance cooperation between the states and the federal cooperative technology programs for more effective economic development.

Want to Evaluate a Political Program? Ask the beneficiaries softball questions about whether they like it. Which is what GAO did in preparing for re-authorization of STTR since the politicians on the Congressional Small Business Committees want to keep the constituents happy. Government programs in a democracy, after all, are meant to satisfy interest groups and national efficiency is a secondary consideration. In the few numbers generated, GAO found that 106 projects which must have spent about $50M generated subsequent sales of $132M with expectation (dreams) of another $130M this year and $900M after five years. No numbers on profits, federal taxes paid, ROI to any investors, nor what happened to similar companies that never heard of STTR. One note: 94% of the firms had also gotten SBIR and only 1% thought STTR should be canned. GAO Report-01-766R

Yes. It's Fine (grimace); No More Please.
(Jul 9) At a House hearing the federal agencies saddled with STTR objected to more STTR even though they had the good sense not to indict themselves by saying it wasn't worth the money. They co-opted the money into ordinary R&D, then of course, had no results to show other than an input measure of spending the required money. Next day, over in the Senate GAO reported results: from half the 201 Phase II STTRs 1995 - 1997: 1)the companies claimed $132M in sales and about $53M in additional developmental funding with more sales "projected" out to 2005; 2)the companies claimed 41 patents for the core technologies and the creation of 12 spin-off companies, 3) 27 projects were discontinued when the government money ran out While such numbers sound nice to Congress small business panderers, they have no comparison to real companies and no mention of any ROI by any measure. Are they good or bad? Who knows? And no one wants to ask. As for authorization, the administration wants no more; as for Small Business Committees, why should they not want all they can get on behalf of their constituents (even though it is a mirage since no new money is appropriated)?

 

Two Sobering Ideas for SBIR Advocates
Then there's Bastiat's broken-window fallacy. It seems someone broke a window. It's unfortunate, but there's a silver lining. Money spent to repair the window will bring new business to the repairman. He, in turn, will spend his higher income and generate more business for others. The broken window could ultimately create a boom. [Which is why catastrophes like earthquakes and hurricanes boost GDP.] Wait a minute, Bastiat cautioned. That's based only on what is seen. You must also consider what is not seen -- what does not happen. What is not seen is how the money would have been spent if the window had not been broken. The broken window didn't increase spending; it diverted spending.Obvious? Sure, but we fall for a version of the broken-window fallacy every time we evaluate the impact of a government program without considering what taxpayers would have done with the money instead. Some people even judge monetary policy by what happens, without considering what might have happened.	Bastiat stressed that because we have limited resources and unlimited wants, it's foolish to contrive inefficiencies just to create jobs. Progress comes from reducing the work needed to produce, not increasing it. Yet, a day doesn't pass that we don't hear of some proposal to "create jobs," as if there's no work to be done otherwise. If it's jobs we want, let's just replace all the bulldozers with shovels. If we want even more work, replace shovels with spoons. Bastiat suggested working with only our left hands.
Bob McTeer's piece [Wall Street Journal, July 5] points up two SBIR fallacies. SBIR pretends to give new money to small high-tech business and then takes credit for any good results without ever asking what might have happened if the agency R&D program had been left alone to devise its own efficiencies. The politicans are passing out spoons to increase jobs by diverting spending to constituencies who cannot prove their comparative efficiency. Both the beneficiaries and the politicians will claim the good was done. Which is certainly true, BUT not as much good as might have been done by NOT diverting the funds. Fear not, the political calculus will continue to divert the funds because the diffuse losers have no political voice. Concentrated benefits and diffused costs win every time. The present Congressional debate over STTR will illustrate how politics trumps economic sense.

 

Just a Few Warming Stories Small company gets a government handout and develops a useful product. Therefore, the government fund for such projects should increase. Good politics, mindless economics. Six years ago, Idaho Technology Inc. was a six-person company that occupied a corner of a potato- equipment plant owned by Chief Executive Kirk Ririe's family.Today the biotechnology company employs 65 scientists and engineers who work in a research park in Salt Lake City. Its LightCycler device, which can analyze DNA in 10 minutes, has generated more than $100M in sales, largely through a licensing agreement with Roche Applied Sciences. Idaho Technology developed LightCycler in collaboration with the University of Utah. ..Ririe licensed Wittwer's technology, but sales were slow until they received a [$100K] STTR grant from the NIH. Less than two years later, LightCycler hit the market. Doctors use it to test the effectiveness of drugs in treating HIV. The U.S. military uses it to test for biological weapons. The Internal Revenue Service uses it to make sure powder found inside threatening letters isn't really anthrax, Ririe says. He credits the technology transfer program for the success. ... By 2005, STTR grant recipients expect to post more than $1B in sales for technology developed through the program, according to a GAO study. And as the Army holds, "If a little bit is good, a whole lot is better." The Senate wants to jack STTR from 0.15% to 0.5% and awards bigger amounts per contract. Says one bureaucrat, The current $500K limit on second-phase SBIR grants -- which are awarded to projects already shown to be feasible -- "stifles small-business interest in the program, especially since the small business must share between 30% and 60% of that award with a research institution," says Walter Polansky, who oversees the Department of Energy's STTR program. [story by Kent Hoover, Business Journal of Charlotte, Jul 2]

The usual questions intrude: Why would only the government fund a measly $100K for a product that was so close to maturity and sells so well? What measures should the government use to decide whether leaving the agencies alone to do R&D is a better use of the money? Since there is no new money being appropriated anyway, what would happen if the program were to die? Was the government just competing with private market investors to protect the ownership share of the company owners? If so, why?

Need Lobbying Help in Pittsburgh? For Joe Kuklis and his partner, John Dick, the troubles experienced by the Internet industry presented the perfect atmosphere in which to start a serving tech companies. Back when dot-coms and their brethren were flush with cash, the industry largely shied away from government interaction. But that attitude may be ripe for change with the economic downturn, and Mr. Kuklis and Mr. Dick have started GSP Consulting Corp. to take advantage of techies' inexperience at moving in government circles. Mr. Kuklis, 29, and Mr. Dick, 25, left jobs in Sen. Rick Santorum's Pittsburgh office early this year to start GSP. The company, which also will take old-economy clients, will lobby in Harrisburg and Washington on common issues such as legislative goals and appropriations requests. GSP will focus on governmental assistance consulting: helping tech companies navigate different levels of government to find grants, low-interest loans and contracts. ...Many tech companies didn't need or want to explore these [government] avenues a year or two ago, he said. Venture capitalists and the stock markets provided capital, and some entrepreneurs worried about government regulation. With the economy souring, though, tech companies are turning to alternate sources of funding and customers. ... GSP targets small and midsize tech companies, Mr. Kuklis said, because the entrepreneurs who start them often are too busy to chase politicians and because giants like IBM already are well-connected. GSP's clients include Saturn Capital Inc., which helped fund FreeMarkets Inc., and MediaSite Inc., both of which are based Downtown. [Jason Gallinger, Pittsburgh Business Journal, Jul 2]

More Time for SBIR Comments
(July 2) In response to Congressional requests, the SBA has reopened the comment period on the draft policy directive to guide agencies’ administration of SBIR. Interested parties may now submit their comments to the SBA Office of Technology through July 23, 2001. SSTI has made the SBA’s draft policy directive available on its website at: http://www.ssti.org/Digest/Tables/051801t2.htm Three perspectives on the proposed draft are included on the following web page: http://www.ssti.org/Digest/Tables/060801t2.htm Comments should be sent to technology@sba.gov or to: Maurice Swinton, Assistant Administrator for Technology, Office of Technology, Office of Policy, Planning, and Liaison, Office of Government Contracting/Business Development, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416 [www.sti.org]

 

Peace Through Light says the logo on the lab wall at Kirtland AFB. The Air Force has a bigger hammer idea - lasers to shoot down enemy weapons. David Freedman explains in MIT Technology Review (J/A01) how an enemy cannot outrun photons and how the AF puts great faith in a laser-loaded 747 that might shoot down ballistic missiles (if only the bad guy will let a 747 close enough) for only $10000 a shot. But as the military has found, big laser beams don't come in little packages. The big package means that only a Goliath can be laser-equipped and that the sensitivity of the laser to "adverse action" provides lots of opportunities for Davids. And given the AFD's penchant for using SBIR is direct support of its immediate R&D goals, there should be plenty of opportunity for technology Davids who can schmooze and stroke and do competent work.

The SBA may not cry much over the loss of $539M, says Louis Jacobsen, Wall St Journal, Jun 18, because the drones get a 3.4% pay increase. Meanwhile, the Bush budget whacks 40% from the budget (until Congress fixes it) with NO LOSS OF SERVICE because SBA will charge more fees for borrowing and will kill Clinton-era programs incliding VC in inner cities. After all, that VC money is needed in the upscale burbs where folks vote for Republicans.

 

Can anyone find a shred of technology innovation in this AF SBIR economics study?

Enabling Affordability in Science and Technology The environment within the Department of Defense for acquiring weapon systems is rapidly changing. The defense procurement budget has fallen more that 50% from its peak, and DoD and the services are demanding more performance for less cost. Gone are the days when new systems could be developed and produced simply for reasons of greater payload, better reliability, more weapons on target, improved technology, etc. Now the benefits of performance improvements must be balanced against cost to arrive at a "best value" solution. In other words, the technology must be affordable. In the past, affordability was not often a priority for AFRL laboratory programs because the emphasis was on new technology, and the focus was strictly on performance. AFRL is attempting to measure and report ROI for S&T programs. Since a cost saving can't always be demonstrated for a new technology that provides previously unattainable military capability, innovative methods of measuring both investment and return, need to be developed. . This multi-phase SBIR develops the methodology and tools to evaluate financial returns on S&T investments. Phase I identifies and tests the ROI utility measures of merit. Phase II develops the prototype affordability tool set. DoD's acquisition community has a problem that is also common to many businesses: determine how to determine and then optimize return on investment (ROI) for science and technology. Decisions to invest in technologies that appear to have large performance potentials but do not deliver the desirable ROI, cost millions in lost opportunities. In their effort to develop and produce systems better, cheaper and faster, many large industries, aerospace and automotive, are moving to virtual digital design environments. The objective of this research project is to provide a computer tool that will enable AFRL, DoD, and industry to evaluate the affordability of an investment in science and technology by means of an ROI utility. An effective methodology/tool for evaluating financial returns on science and technology investments that will benefit the AFRL and can eventually be applied to the commercial environment The resulting tool has great potential for effective use in any industry.

Just what US industry needs - another ROI model, this time by a government contractor in a set-aside program. While the AF and the DOD need R&D evaluation, the pecularities of government R&D goals make it highly unlikely that such an automated tool would fill the bill. It would be like a lamp post for a drunk - used more for support than for light. Anyway, it is NOT technology innovation; it is yet another service contract for the AF to develop computer tools for the economic aspects of AF management.The AF and DOD also need some seemingly credible way to claim cost savings which it never returns to Congress anyway. Maybe an answer from a computer will be believed (don't bet on it). Knowledge of physics not required. Oh, never mind, the company likes it, the AF likes it, the Congressman from the District will love to announce the Phase 2 award, and teh SBIR advocates will claim another great innovation.

Republicans and generals, who never met a defense budget increase they didn't like, found 18.4 billion reasons to spend more on defense. Amid the fuss about closing B-1 bases, the R&D chief Aldredge talks up 8% more R&D spending (which translates directly into more SBIR). Science sees a 10% rise in DOD research. To some extent, though, they are all dreaming. With no real external threat in the world that would be countered with more military toys, the Dem Senate will drag its feet on more Defense spending and will go for only stuff that services invididual members' districts. Pork will be the meat of choice.

DOD announces the availability of approximately $40M under the Dual Use Science and Technology program for the creation and development of new products or processes to support a production base for numerous service topic area links. Projects should have both military and commercial applications, (1) focusing on technologies that will have a major impact on the cost, performance or sustainability of defense systems and (2) identifying a commercialization path for the proposed technology while also discussing how potential commercial applications are sufficient to support a production base capable of meeting future defense requirements. Small businesses, minority institutions and historically black colleges and universities are encouraged to apply. Proposals are due on August 21, 2001. This solicitation and its application guidelines [Mark Kish, ssti@ssti.org]

Got a Hot Idea and Cold Potential Partners? Not every good idea can be absorbed by the market. Consider the fate of the builders of fiber-optic lines: Level 3 has hit a wall even Mr. Crowe may have trouble overcoming. The company's original ambition -- to build history's largest, most advanced fiber-optic network to carry exploding amounts of Internet traffic -- is now part of one of the biggest gluts the country has ever seen. All told, about 39 million miles of fiber-optic cable stretch underneath U.S. railroad beds, corn fields, natural-gas lines and roads, enough to circle the earth 1,566 times. Companies racing to build or expand nationwide networks laid some $90 billion of fiber during the past four years. Merrill Lynch & Co. estimates that only 2.6% of the capacity is actually in use. Much of it may remain dark forever. [REBECCA BLUMENSTEIN, Wall Street Journal, Jun 18] Those pioneer builders have more capacity than they can sell and thus they cannot easily afford to upgrade to your dandy new technology. They have driven down the price of communications which is good for your service costs but bad for your acceptable cost for a new technology. If you are a typical SBIR winner, you have a great technology that costs too much. And just because the government accepted your commercialization story, you are likelyto have to depend on government for a while to keep the R&D alive until you either get the cost down or the industry's cost threshold somehow rises. The good news is that the government is a sucker for a great technology/bad economics story.

 

Before the U.S. can shoot down enemy warheads hurtling through space, it will have to find them. And for that, the Pentagon will have to solve the problems of SBIRS Low.This little-known plan for a constellation of low-orbiting satellites, scheduled to be launched during the next 10 years, is supposed to resolve what is probably the toughest challenge of missile defense: finding and tracking with pinpoint accuracy complex warheads traveling at 15,000 miles an hour and surrounded by dozens of decoys. [CARLA ANNE ROBBINS, WALL STREET JOURNAL, Jun 15]

This SBIRS is not about high tech small business; it is about a high-tech big problem. BMDO will be doing lots more R&D about this and a zillion other hurdles to the politically desired silver bullet of Republican defense ideas - a missile system that actually works. In general, the Republicans have the same problem that Democrats do - they only know how to spend money in search of a solution to a political problem. They don't actually know how to solve problems other than re-election.

We Got Juice for You. California's energy crisis has inspired a Massachusetts economic development agency to create an ad campaign to lure away the Golden State's coveted high-technology workers and cutting-edge companies. Ads making light of the energy crunch recently began appearing in California newspapers. The ads, entitled "The Lights Are on in Massachusetts," show an aerial night-time view of the United States, with nearly all the country in darkness, except for Massachusetts, which is brightly lit. As though the meaning wasn't clear, the ad also says, "We're inviting your business to harness our energy as well." ... California officials are sloughing off the ad campaign, said Steven Maviglio, press secretary to California Gov. Gray Davis and a former Massachusetts resident. "There's no good reason to move back, and I think most employers see it that way ... Just because the light bill is a couple of dollars more, I don't think companies will pick up and move across country." [Edward Mason, Boston Business Journal, June 11]

Defense S&T wants a bigger piece of a bigger pie. Asst Sect Aldridge told Congress that S&T ought to have 2.5-3% of DOD which would be a $2B increase from its present $7B. Everyone has an idea how to spend more Defense money. That would mean another $50M of SBIR to be mismanaged in suppressing innovation that would actually make neat new products. But the expected direction for any new SBIR money is foretold by DOD's attitude in removing Fast Track statistics from its SBIR website. When your trend is downhill, change the subject.

Uh Oh, Job Cuts at SBIR Firm. Call out the Congressional subsidizers. A small high tech business has to cut 14% of its workforce for lack of business. Ibis Technology, a parts manufacturer for the semiconductor industry, said on Thursday it was cutting its workforce by about 14% as part of cost cutting measures. Ibis had about ten Phase 2 SBIRs from 1990-98 from DOD which loved its SIMOX rad-hard electronics material.

 

Leaving Small Businesses Behind (June 4) Calvin Coolidge said, "The business of America is business." George W. Bush, the first president to have an M.B.A. degree, has issued a correction. If his first budget is any indication, the business of America today is big business. Small companies and individual entrepreneurs, it seems, are somebody else's business. ... His budget slashes funding for the SBA by 40. The budget would increase fees for borrowers and lenders, and the agency would have to start charging entrepreneurs for using [heretofore free] small-business development centers ... Over the past eight years, the S.B.A.'s guaranteed loan program nearly doubled. [when] the agency nearly quadrupled loans to minorities and tripled the number of loans it backed for businesses run by women. We also doubled the number of women's business centers across America increasing the flow of capital as well as the information that helps people succeed. Women are now launching businesses at twice the national rate. Today, as growth begins to slow, President Bush is proposing to cut this economic engine. Even as big corporations have begun to make big layoffs, the Bush budget would cripple a small agency that can help pick up the slack. The nation's 25 million small businesses, which employ more than half of the private work force, have been responsible for more than three-quarters of the 22 million jobs created in America since 1992. ... The Fed estimates that 45 percent of banks have already tightened lending to small businesses..... Slashing the S.B.A.'s budget would exact a cost from our economy. I think of the story of a small technology company that in 1969 secured a loan of $300,000 that was backed by an S.B.A. initiative called the Small Business Investment Company Program. It was a small but critical investment in that company's future and, as it turned out, in the new economy. That company was Intel. Today, Intel pays in income taxes about twice what it takes to fund the S.B.A. for a year. Returns on a minimal investment can be huge indeed. Big businesses like America Online, Apple Computer, Staples, Outback Steakhouse and Callaway Golf started out as small ventures and needed a helping hand along the way. How are we going to develop the big businesses of this century if we don't nurture small businesses today? President Bush has said that he understands small business growth. Now he needs to show that he meant it. Fred P. Hochberg was deputy administrator and acting administrator of the Small Business Administration from 1998 to 2001. [New York Times, Jun 2]

Congress Wants to Know Is the CIA's In-Q-Tel experiment in venture capital worth it? Beauty once again will be in the eye of the beholder. Just three years after it started, Congress wants to know if we're rich yet. The same problem that state legislatures have with venture investments: profit takes longer than an election cycle. If CIA is lucky, Congress will just mouth the usual platitudes and then ignore it. Anything else at this early stage would be certifiably laughable.But with a frothing Senate Republican party looking to make some hits, anything could happen when the egos assemble. In-Q-Tel is not the classic government pretend-venture operation that the agencies capture and turn into their purposes. It is intended to capture the new technolgy for the government with an eye to having private capital do a lot of the lifting. Enemies are everywhere. The free-market philes will see evil in such government intervention in R&D info-tech markets, and the government insiders will see competition that could expose them as too stodgy for info-tech. The GAO has already showd itself incapable of judging VC investment by its fear of any real SBIR evaluations. So, if In-Q-Tel is to be judged, who will judge? A CIA paper on In-Q-Tel says bureaucratic stuff like has focused its initial efforts on the IT roadmap and baseline elements of the program.And a little pandering like Congress is to be congratulated for its support to the Agency. Vernon Loeb's June 3 piece in the Washington Post, cites a few numbers and four companies: SafeWeb, Mohomine, Systems Research & Development, and SRA International . Somewhat more interesting is the chance that if In-Q-Tel works for CIA, other agencies would be encouraged to do likewise with at least a piece of their R&D "investment". Converting, say, a fourth of SBIR to such a program might be a good start.

Downdate on DOD Fast Track. Jon Baron, where are you? The DOD SBIR website has not been updated for a year for Fast Track and the link to current data is dead. Jon was the architect of Fast Track (and of the DOD SBIR website) which the military services didn't want. Now that Jon has moved on, guess what happened.

 

VC Plunge (May 29)Got A Bright Idea that Needs Capital? Who doesn't? But for the moment the VCs are harder to convince. New investments by U.S. venture capital firms plunged 56 percent in the first quarter to the lowest level in more than two years, a recent survey said. Venture investments fell to $11.7 billion from $26.7 billion a year earlier, according to Venture Economics and the National Venture Capital Association. That was the lowest since $6.2 billion was invested in the fourth quarter of 1998. [Hui-Yong Yu, Bloomberg News,May 28, 01] You could try the government's SBIR program but you will run into a wall of resistance to innovation from technocrats who want incremental improvaments to systems they already understand and care little about whether the idea is profitable ot the entrepreneur. You will also run into a crowd of R&D companies who want to service those technocrats.

Stepped on a Beneficiary. When Bush said he would can ATP, the beneficiaries squealed (naturally). According to Technology Review mag, Program proponents call the president's move outrageous. Johns Hopkins economist Maryann Feldman, one of the outside experts who has conducted studies for the assessment office, says ATP is "probably one of the most studied programs in government." Former NIST director Lewis Branscomb says, "The radical innovations that create both new markets and new technology are the toughest to bring off, but if you do bring them off successfully, the returns can be hundreds of times what the investment was. That's what [the program] tries to do." Whether ATP is coprorate welfare depends on your view of whether government should be subsidizing well-capitalized firms to do commercial research. Advocates of R&D, of course, never saw a piece of R&D that wasn't worth government support.

A Greenwood SBIR Seminar. Phase I Proposal Development and Cost Proposal Preparation Workshops, Norman, Oklahoma, June 6-8, 2001. The Greenwoods promise a day of working up to the proposal and a day on (ugh!)cost proposals and government accounting. Contact dluton@ocast.state.ok.us One piece of idealistic advice you might get comes from a Greenwood writing in the OCAST New