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65–651 2011

SPURRING INNOVATION AND JOB CREATION: THE 

SBIR PROGRAM 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD 

MARCH 16, 2011 

Small Business Committee Document Number 112–06 

Available via the GPO Website: www.fdsys.gov 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

CHUCK FLEISCHMANN, Tennessee 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALAN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, General Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

Page 

OPENING STATEMENTS

Graves, Hon. Sam .................................................................................................... 1 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 2 

WITNESSES

Tullie, Mr. Tom, Chief Executive Officer, President and Chairman EcoATM, 

San Diego, CA ...................................................................................................... 4 

Audretsch, Dr. David B., Professor, Indiana University, Bloomington, IN ........ 13 

Squillante, Dr. Mike, Chairman of the Board, Small Business Technology 

Council and Vice President, Radiation Monitoring Devices Inc., Watertown, 

MA ......................................................................................................................... 19 

Rick, Ms. Amy Comstock, Chief Exective Officer, Parkinson’s Action Network, 

Washington, DC ................................................................................................... 122 

APPENDIX

Prepared Statements: 

Tullie, Mr. Tom, Chief Executive Officer, President and Chairman 

EcoATM, San Diego, CA ............................................................................... 6 

Audretsch, Dr. David B., Professor, Indiana University, Bloomington, 

IN ................................................................................................................... 16 

Squillante , Dr. Mike, Chairman of the Board, Small Business Technology 

Council and Vice President, Radiation Monitoring Devices Inc., Watertown, MA ....................................................................................................... 21 

Rick, Ms. Amy Comstock, Chief Exective Officer, Parkinson’s Action Network, Washington, DC .................................................................................. 125 

Statements for the Record: 

Landry, Hon. Jeff .............................................................................................. 165 

Tipton, Hon. Scott ............................................................................................. 164 

Clarke, Hon. Yvette .......................................................................................... 141 

Hirono, Hon. Mazie K. ..................................................................................... 147 

Small Biotechnology Business Coalition ......................................................... 149 


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SPURRING INNOVATION AND JOB CREATION: 

THE SBIR PROGRAM 

WEDNESDAY, MARCH 16, 2011 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 

2360, Rayburn House Office Building. Hon. Sam Graves (chairman 

of the Committee) presiding. 

Present: Representatives Graves, Bartlett, Herrera Beutler, 

West, Barletta, Vela ́zquez, Critz, Altmire, Clarke, Chu, Richmond, 

Peters, Owens, and Keating. 

Chairman GRAVES. Good afternoon. And we will call this hearing 

to order. We are going to have a series of votes called sometime in 

the next I would say half hour probably. And so when that happens 

we are going to go through the ranking member and I’s opening 

statements and then we will try to get through as many opening 

statements as we can. And then we will have a recess and then we 

will come back to work through the process. But I want to thank 

everybody for being here today and for being a part of this hearing 

which begins our work to reauthorize the Small Business Innovative Research program and the Small Business Technology Transfer programs. 

I would, specifically, again, I would like to thank all of you for 

coming out. Some of you came from quite a distance and I appreciate you taking the time to be able to come and speak to us. 

This hearing represents the beginning of our work to reauthorize 

the SBIR program which was last fully reauthorized in 2000. Today 

we are going to broadly examine and stress the importance of the 

SBIR program and take a closer look at how we can work to 

jumpstart entrepreneurs and grow our economy and create jobs. 

The SBIR program was created in 1982 and offers competitionbased awards to stimulate innovation among small, private-sector 

businesses while providing government agencies new, cost-effective 

and technical solutions to meet their varied mission requirements. 

The development of this program is not only significant to the 

unique needs of each of the participating federal agencies but also 

to our national economy. Small businesses renew the U.S. economy 

by introducing new products and cheaper ways of doing business, 

often with substantial economic benefits. They play a key role in 

introducing technologies to the market and responding quickly to 

new market opportunities. Some of the great innovations and the 

companies that have created them came from the industrious enVerDate Mar 15 2010 04:26 May 18, 2011 Jkt 065651 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\A651.XXX A651

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trepreneurs willing to take a risk on new technologies and discoveries. 

In 2007, the National Research Council of the National Academies of Science completed one of, if not the most comprehensive 

examination of the SBIR program. The study found that the SBIR 

program provides substantial benefits for participating small businesses at all agencies in a number of different ways. For example, 

the SBIR program is a significant factor in the funding of new companies, providing partnering and networking opportunities, and 

providing the impetus to start projects that otherwise would have 

never gotten off the ground. 

In terms of job creation, the NRC Survey sought detailed information about the number of employees at the time of the award 

and at the time of the survey, and about the direct impact of the 

award on employment. And overall, the survey respondents reported a gain of 57,808 full-time equivalent employees. Respondents estimated that, specifically as a result of the SBIR project, 

their firm was able to hire an average of 2.4 employees and retain 

2.1 more. 

The SBIR program, as the National Research Council Study 

demonstrates, also provides significant benefits to federal agencies 

to provide additional opportunities to solve operational needs. A 

program officer can post a solicitation that describes a particular 

problem and invite a small business to propose research that will 

solve it. This contrasts with other federal research awards where 

a researcher provides a proposal of personal interest. The nationwide scope of the program also ensures that the agency will investigate various research avenues. Finally, the program, by leading 

to commercialization of the research, diversifies the federal government’s industrial base providing competition among suppliers and 

lowering prices to the government, which saves taxpayers’ dollars. 

I am looking forward to the testimony today and I will yield to 

the ranking member for her opening statement. 

Ms. VELA ́ ZQUEZ. Thank you, Chairman Graves. 

The development of life’s changing products from cancer-fighting 

drugs to advanced electronics drives our nation’s economy. However, without adequate funding for research and development, 

small businesses cannot expand and even the best ideas wither and 

die in what has come to be known as the valley of death between 

startup and commercialization. 

Congress established the Small Business Innovation Research 

program with the intent of funding small, innovative companies 

conducting research and development with commercial potential. 

Since the first grants were awarded in 1983, more than 24 billion 

dollars has been awarded to small research companies funding in 

excess of 100,000 projects. 

In fiscal year 2009, the SBIR program made over 6,400 awards 

totaling $2.5 billion, an all-time high. By all measures the SBIR 

program is among the federal government’s largest research and 

development programs. The public-private partnerships that SBIR 

awards facilitate encourage entrepreneurs to start new business 

and enable existing businesses to expand their operations. SBIR 

awards spirit and innovation and create and retain jobs in all 50 

states, the District of Columbia, and Puerto Rico. 


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According to the National Academies of Science Survey, over 20 

percent of applicants who open a new business often receive an 

SBIR award. This translates to nearly 1,500 new businesses each 

year and an estimated 80,000 jobs created over the next decade. 

While SBIR awards provide small businesses with some research 

funding, most high-tech and pharmaceutical firms need resources 

beyond what is available through SBIR to take their ideas from the 

drawing board to the marketplace. 

If firms are ever going to reach their full potential, the gaps between what SBIR provides and what is needed to develop a product 

must be addressed. This is hindering promising researchers and 

entrepreneurs from commercializing their discoveries. To help foster innovation and bring life changing products to market, SBIR 

programs should be available to all firms without barriers or cost 

prohibitive regulations. Review of the SBIR program shows that it 

has succeeded in funding high quality research encouraging competition and increasing successful commercialization. However, 

areas of witness have been identified particularly with lax oversight which help lead to waste, fraud, and abuse of the program. 

Most troubling are findings of duplicative awards of agencies for 

the same research and the serial funding of firms that continually 

fail to produce marketable technologies. Such examples of fraud 

have become a serious problem, especially with increasing numbers 

of proposals submitted to the SBIR program. It is critical that we 

bolster oversight and curb the waste, fraud, and abuse that prevent 

SBIR and STTR programs from functioning as intended. 

In advance of the testimony, I want to thank all the witnesses 

who have traveled here for your participation and insight into this 

important program. Thank you. 

And I yield back. 

Chairman GRAVES. Just to explain real quick about how the 

process works, you have a series of lights in front of you and you 

each have five minutes. Please try to stay within that. If you go 

over nobody is going to break your arm or anything like that but 

the light will turn yellow when you have one minute left and it will 

go red when you go over your time. And then questions will go 

along the same lines. There will be five minutes for questions from 

each of the members. 

STATEMENTS OF TOM TULLIE, CHIEF EXECUTIVE OFFICER, 

PRESIDENT AND CHAIRMAN OF ECOATM; DAVID B. 

AUDRETSCH, INDIANA UNIVERSITY; MICHAEL SQUILLANTE, 

VICE PRESIDENT OF RESEARCH, RADIATION MONITORING 

DEVICES; AMY COMSTOCK RICK, CHIEF EXECUTIVE OFFICER, PARKINSON’S ACTION NETWORK 

We will start off with Mr. Tom Tullie. Mr. Tullie is the chairman 

and CEO of EcoATM. His company is the first and only company 

to create an automated, self-serve kiosk system that uses patented 

advance machine vision, electronic diagnostics, and artificial intelligence to evaluate and buy back used electronics directly from the 

consumer. He has 23 years of experience in semiconductor systems 

in computing and software. Mr. Tullie, welcome to the Small Business Committee and I look forward to hearing your testimony. 


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STATEMENT OF TOM TULLIE 

Mr. TULLIE. Good afternoon. Thank you, Chairman Graves, 

Ranking Member Vela ́zquez, and members of the committee. 

It is an honor to appear before the House Committee on Small 

Business today to testify about the role that the SBIR program has 

played in EcoATM’s success to date. As Chairman Graves has said, 

I am Tom Tullie. I am chairman and CEO of EcoATM. I would like 

to commend all of you for your role in pursuing successful policies 

that have strengthened companies, created jobs, and fostered innovation in the U.S. 

As I will discuss further in my testimony, the SBIR program is 

among the critical factors that are contributing to our success, and 

these factors that are taking us from a small start up to a fullfledged corporate taxpayer. 

EcoATM was funded with a vision to forever alter the wasteful 

lifecycle of consumer electronics. With electronics recycling rates at 

less than 10 percent, we believe that to achieve this bold vision we 

would have to create a recycling solution that guaranteed convenience, low transactional cost, and immediate remuneration. To execute this vision we developed the world’s first fully automated, selfserve machine that buys back used electronics. It automatically 

identifies, inspects, calculates the value, and pays the consumer on 

the spot. Our initial trials just in the first year of our operation 

with only 10 machines have certainly validated the strategy as we 

have collected over 50,000 different devices and paid consumers 

hundreds of thousands of dollars that they ordinarily would not 

have had. 

To illustrate the scale of the opportunity as well as the problem 

let me tell you a couple of numbers about the mobile phone business. Collectively across America, in our drawers and closets there 

are over a billion cell phones. These phones have a latent value of 

about $12 billion if we could collect and recycle them. In addition, 

150 million new devices every year are retired with a value of $5 

to $7 billion dollars. This is free money that can go into our economy. If we can simply collect these devices, we can create a free 

multi-billion dollar stimulus package by turning people’s trash into 

cash and reinvesting these free dollars back into the economy driving discretionary spending, job growth, and tax revenues. 

In addition to the stimulus package value that we create, we also 

have a great environmental benefit. I am sure most people know 

that cell phones and other electronics contain toxic chemicals that 

are dangerous to our environment. Currently there are 75,000 tons 

of e-waste that get put into our landfills every year. We estimate 

that just a single EcoATM kiosk would divert 25,000 tons of toxic 

mining waste, offset 4,300 kilograms of greenhouse gases, save 426 

gallons of oil with the equivalent of removing 21 houses from the 

grid or 3 automobiles off the road. 

We have been very fortunate to receive a phase one NSF grant 

of $150,000. This grant partially funded the development of our advanced vision and electrical test systems. The vision system is now 

capable of identifying over 1,000 different mobile phones with error 

rates of less than one percent. Interestingly, the NSF has helped 

in a variety of different fronts as our key visions systems engineer 


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actually was put through grad school on a fellowship from the NSF 

Graduate Research Fellowship program. 

Right now we are in the phase of applying for a phase two grant. 

This grant would allow us to fully commercialize our system, as 

well as expand the vision and electrical technology to add other devices other than cell phones such as laptops, digital cameras, GPS 

devices, et cetera. Additionally, a phase two award would allow us 

to explore the development of a standard process for the erasure 

of personal data on these devices and make it much easier to get 

that done. 

I understand the Committee is in the process of evaluating the 

SBIR programs and recommending some changes to the policies, 

especially as they relate to venture back companies. I believe these 

changes should be centered on allowing the agencies to pick companies that deliver the best return for the taxpayer. To do so I would 

encourage legislation that gives the agencies enough freedom to 

pick and stay with the winners throughout the process. I suggest 

partnering with the VC community, not abandoning the companies 

that have received venture funding. This should help the SBIR select good companies that are more likely to excel. Early stage companies are all about momentum. So if the SBIR has picked a winner it should foster that company through its early years and stay 

with it to make the possibility of a great return all that more likely. I also suggest enhancing the criteria and searching for winners 

by funding companies that can not only generate great commercial 

success but public and environmental benefits as well. 

Businesses that excel in all these three areas should generate a 

better total return and EcoATM is an example of one of these businesses that has this triple bottom line. 

I hope my testimony was helpful and will play a role in convincing the Committee and the rest of the House of Representatives that our agency should be given the freedom to pick the winners in order to deliver the maximum return to our taxpayers. 

Thank you again for the opportunity to appear before the Committee and I look forward to your questions. 

[The statement of Mr. Tullie follows:] 


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Chairman GRAVES. Thank you, Mr. Tullie. I now turn to Ranking 

Member Vela ́zquez for the introduction of her witness. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. It is a great pleasure 

to welcome Dr. David B. Audretsch. He is the distinguished professor and Ameritech chair of economic development at Indiana 

University, as well as the director of IU’s Institute for Development 

Strategies. Dr. Audretsch has written extensively on small business 

innovation and entrepreneurship. Additionally, he sits on the National Research Council’s Committee for Capitalizing on Science, 

Technology, and Innovation and Assessment of the Small Business 

Innovation Research program. Welcome. 

STATEMENT OF DAVID B. AUDRETSCH 

Dr. AUDRETSCH. Thank you very much. Good afternoon, Chairman Graves and members of the Committee. 

The impact of the SBIR program has been analyzed in considerable detail in a series of painstakingly meticulous studies undertaken by the board on science, technology, and economic policy of 

the National Research Council of the National Academy of Sciences 

as well as in a number of important studies by university scholars. 

After reviewing these studies I can summarize with confidence that 

the SBIR has generated a number of substantial benefits to the 

U.S. economy. 

The country is no doubt more innovative, more competitive in the 

global economy and has generated more and better jobs as a result 

of the SBIR. What gives me so much conviction concerning these 

studies is the robustness of the findings. Studies with disparate 

methodologies ranking from case studies of recipient SBIR firms to 

interviews with program administrators at the funding agencies to 

systematic analyses of broadcasted surveys of firms and to sophisticated econometric studies based on objective measures comparing 

the performance of recipient SBIR firms with control groups consisting of matched pairs that did not receive any SBIR support. 

They all point to exactly the same thing. The SBIR has made a 

key in unequivocal contribution to the innovative performance of 

the United States, especially in terms of technological innovation. 

In particular, a number of key benefits emanating from the SBIR 

program can be identified from these studies. The key economic 

benefits accruing from implementation of the SBIR are most compelling in terms of two of the objectives stated in the congressional 

mandate, the promotion of technological innovation and increased 

commercialization from investments in research and development. 

There is strong and compelling evidence that the United States 

is considerably more innovative as a result of the SBIR program 

than it would be without the SBIR program. The empirical evidence suggests that first of all recipient firms, SBIR firms, are 

more innovative. Existing small business is more innovative as a 

result of the SBIR program. A careful study undertaken by the National Research Council at the National Academy of Sciences found 

that around two-thirds of the projects funded by SBIR grants 

would not have been undertaken in the absence of SBIR funding. 

That same study also identified a remarkably high rate of innovative activity emanating from the SBIR-funded projects. Slightly less 

than half of the SBIR-funded projects actually resulted in an innoVerDate Mar 15 2010 04:26 May 18, 2011 Jkt 065651 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A651.XXX A651

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vation in the form of a new product or service that was introduced 

in the market. Such a high rate of innovative success is striking 

given the inherently early stage and high risk nature of the funded 

projects. 

Second, the SBIR has generated more technology-based startups. 

The SBIR program results in a greater number of technology-based 

firms. One key study found that over one-fifth of all recipient SBIR 

companies would not have existed in the absence of having received 

an SBIR award. 

Third, recipient SBIR firms have stronger growth performance. 

Studies consistently find the firms receiving SBIR grants exhibit 

higher growth rates than do control groups consisting of matched 

pair companies. 

Fourth, recipient SBIR firms are more likely to survive. The 

early phase for technology entrepreneurial ventures has been characterized as what we heard from the ranking member. It has been 

characterized as the valley of death. The empirical evidence suggests that the likelihood of surviving this valley of death for young 

technology-based SBIR firms is greater than for comparable companies in carefully selected control groups. 

In terms of the second objective, congressional objective in the 

mandate for the SBIR enhancing the commercialization emanating 

from the country’s expensive investments in research and development. Systematical empirical studies reveal that the SBIR has resulted in greater commercialization of university-based research. 

Empirical evidence points to a high involvement of universities in 

SBIR-funded projects. One or more founders have been employed 

at university and two-thirds of the SBIR recipient firms. More than 

one-quarter of the SBIR-funded projects involved contractors from 

university faculty. 

The studies also indicate that the SBIR has increased the number of university entrepreneurs—entrepreneurs coming from universities. The studies find that scientists and engineers from universities have become entrepreneurs and started new companies 

who otherwise might never have been entrepreneurial. Some of 

these university-based entrepreneurs are involved in firms that 

have received SBIR grants. Others have been inspired to become 

entrepreneurs as a result of learning about the efficacy of becoming 

an entrepreneur from the observed success and experience by observing their colleagues who have been involved with SBIR-funded 

companies. 

Despite the compelling empirical evidence of the strong and significant impact of the SBIR program that it has had on the innovative performance of the United States, I should stress several key 

qualifications and concerns. The first is the congressional goal of 

increasing the participation of minorities and disadvantaged people 

in the process of technological innovation remains undeveloped. Female participation has increased only marginally over time. SBIR 

phase two awards to women increased only from eight percent of 

the total awards in the early 1990s to 9.5 percent between 1999 

and 2001. Minority participation has actually decreased over time. 

Minority-owned firms fell below 10 percent for the first time in 

2004 and this trend has subsequently continued. Creative ways to 

enhance the inclusion of previously largely excluded groups in the 


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population and in particular women and minorities in the SBIR 

program will enhance the innovative performance of the United 

States. 

A second concern is that SBIR awards remain geographically 

concentrated in just a handful of regions. Increasing the participation of SBIR awards outside of these innovative clusters will make 

a significant contribution to facilitating innovative activities not 

just in these regions but ultimately in the entire country. 

In conclusion, let me point out that this decade has seen a receding performance of U.S. global leadership of innovation. 

Globalization means that the U.S. has lost its once near monopoly 

in terms of technological and innovative leadership. The SBIR has 

a central role to play in contributing to a renewed U.S. global technological leadership in ensuring that the United States is securely 

encased as a global innovative leader. Nearly three decades have 

transpired since the enactment of the SBIR by the Congress. This 

has provided a good basis for in-depth and careful independent 

scrutiny analyzing the impact of the SBIR program on the United 

States. The evidence accumulated from a broad spectrum of studies 

utilizing divergent methodologies all comes to the same result. The 

SBIR program has unequivocally made an invaluable contribution 

to the innovative performance of the United States. However, as 

global competition intensifies the SBIR program must continue to 

be adjusted and improved in order to generate the innovative performance and ultimately renewed global innovative leader that this 

country deserves and of which it is capable. 

Thank you very much. 

[The statement of Dr. Audretsch follows:] 


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Chairman GRAVES. Thank you. We will next have Dr. Michael 

Squillante. He is the Vice President of Research at Radiation Monitoring Devices or RMD, in Watertown, Massachusetts. He is also 

the chairman of the board of the Small Business Technology Council. He received his Ph.D. in chemistry from Tufts University in 

Medford, Massachusetts in 1980 and has been a full-time employee 

of RMD ever since. In his role he oversees the company’s research 

and development activities across a broad spectrum of areas, including research programs and development instrumentation for 

cancer diagnosis, scientific research, and industrial testing. Thanks 

for being here today. 

STATEMENT OF MICHAEL SQUILLANTE 

Dr. SQUILLANTE. Thank you. I appreciate the opportunity, Chairman Graves, Ranking Member Velazquez, and Committee members. I am here today representing the Small Business Technology 

Council. 

Since 1982, the Small Business Innovation Research program 

has been the principal means by which the federal government 

funds innovation research at small companies. This was not enacted to help the struggling small companies get by; it was enacted 

to require the federal government to make use of the innovation efficiency that is inherent in small firms. 

In 1982, Congress found that innovation creates jobs and small 

business is the principal source of significant innovation. 

The SBIR program was enacted with four goals in mind—stimulate technological innovation, use small business to meet federal research development needs, increase private sector commercialization of innovations, to foster and encourage participation of minority and disadvantaged persons in technological innovation. Prior to 

the SBIR program about three percent of federal R&D funds went 

to small firms. Now with the SBIR and STTR programs included 

that number is only about four percent, most of it obviously coming 

through SBIR. 

But during that time the percentage of American scientists and 

engineers working at small companies rose from six percent to 38 

percent. 

The SBIR is attracting new companies. Thirty percent of awards 

are given to new companies each year and SBIR has been a success. In 2008, the National Research Council of the National Academy of Sciences reported on their study. In the summary of the key 

findings the NRC concluded the core finding of the study is that 

the SBIR program is sound in concept and effective in practice, 

and, currently the program is delivering results that meet most of 

the congressional objectives. 

It is widely accepted that technological innovations and new jobs 

come from small business. In addition, data on patent applications 

show that small firms are by far the most efficient and productive 

inventors on the basis of patents awarded per dollar of federal 

funding received compared to large firms, national laboratories, or 

universities. 

And the companies are commercializing their innovations. The 

NRC study and earlier GAO studies found that the SBIR and 

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tion success measured on the basis of return on investment of federal funding. This is an incredibly high number compared to other 

studies of commercial firms and consumer companies. 

So it is time to move forward. We appreciate greatly that you are 

starting to focus on this program very early in the session. The 

SBIR legislation has been delayed for almost three years with 10 

continuing resolutions while we wrangled over the issue of venture 

capital participation. That issue is now resolved to the satisfaction 

of all of the parties involved with a bipartisan compromise that is 

reflected in the Senate bill that was recently approved in the Senate Small Business Committee. The parties involved in this were 

SBTC, Biotechnology Industry Organization, National Venture 

Capital Association, U.S. Chamber of Commerce, National Defense 

Industrial Association, the New England Innovation Alliance and 

the Bay Area Innovation Alliance. This long delay is causing uncertainty and hardship, and we encourage the House to act quickly on 

this bill. 

For recommendations we support the compromise that is the 

basis of the Senate bill and recommend that the House include 

similar provisions that are in that bill. Some of the significant ones 

are increasing the size of the SBIR set aside. Award sizes are increasing and in order to keep the number of awards from decreasing excessively a modest increase in the size of the SBIR program 

is needed. 

So we support the gradual increase of the program from two and 

a half to three and a half percent. This is a conservative increase, 

and even with it the number of awards will be reduced. Without 

the increase, reduction of the awards would be a disaster for the 

program. In terms of the STTR program, we believe that should be 

increased more significantly. 

To further mitigate the decrease in the number of awards we 

support the enactment of a cap on the maximum phase one and 

phase two award sizes. Without this the reduced number of awards 

would make the program untenable for many small companies, especially the newer, smaller firms that are trying to break into the 

program. We encourage you to act soon to end this period of uncertainty. We are very sympathetic to the fiscal challenges faced by 

Congress this year and we only ask that you understand the plight 

of the small companies and their employees as you proceed. 

I appreciate the opportunity to speak to you today. And Mr. 

Chairman, I would appreciate if I could have the opportunity to revise and amend my testimony. 

[The information follows:] 


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Chairman GRAVES. Absolutely. 

Dr. SQUILLANTE. Thank you. It came to my attention we left out 

one of the addenda. I will gladly answer any questions. 

Chairman GRAVES. I will next introduce Amy Comstock Rick. Ms. 

Rick is the chief executive officer of Parkinson’s Action Network. 

Before joining PAN in 2003 she served as director of the U.S. Office 

of Government Ethics, having accepted the nomination to the Senate-confirmed position in 1999. Prior to her appointment to the Office of Government Ethics, Ms. Rick was associate counsel to the 

president in the White House Counsel’s Office. Ms. Rick began her 

federal service as an attorney at the U.S. Department of Education 

in 1988 and she entered her tenure there in 1998 as assistant general counsel for ethics. Thanks for coming today. 

STATEMENT OF AMY COMSTOCK RICK 

Ms. RICK. Thank you, Chairman Graves and ranking member 

Vela ́zquez and other members for inviting me to testify on behalf 

of PAN, the Parkinson’s Action Network regarding SBIR. 

PAN represents the entire Parkinson’s community, including the 

more than one million Americans who currently have the disease, 

the estimated 60,000 who are newly diagnosed each year, their 

families, and in fact, all the national Parkinson’s organizations. So 

it is on behalf of that entire community that I am here today. 

Parkinson’s disease for those who are not familiar is a chronic, 

progressive, neurological disease that results from degeneration 

and premature death of the dopamine-producing neurons in the 

brain. It is the second most common neurological disease, second 

only to Alzheimer’s. The cause of Parkinson’s is unknown, although 

current research leads to a combination of genetic and environmental factors. Parkinson’s is currently without any known cure 

and we have nothing that slows the progression of the disease. As 

Parkinson’s progresses even with treatment, substantial disability, 

including the inability to maintain balance, walk, speech, and 

movement is inevitable. The symptomatic treatments that we do 

have work well for five to eight years but they lose their effectiveness and have their own debilitating side effects. 

I am here today because PAN, like many patient advocacy organizations, strongly supports the SBIR program. As you would expect, we are most familiar with the program as it operates at the 

National Institutes of Health or NIH. 

To understand why the SBIR program is so important it is helpful to understand how biomedical research is conducted. The therapy development process takes many years from beginning to end. 

For neurological diseases like Parkinson’s, the process can take 15 

years after the time that a basic discovery is made. At the beginning of this process, at the very beginning of this pipeline you have 

basic research that is supported by NIH and at the end one hopes 

you have a drug biologic or treatment approved by the FDA that 

is available to the public. But it is the middle of this process that 

we have already alluded to the valley of death where we take 

knowledge from basic research and pursue its therapeutic potential. And this is where problems can occur. 

This phase of research is called translational research and is 

some of the most difficult and costly research needed to develop 


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therapies that meet a very real public health need. It includes developing pre-human testing, efficacy trials, production design, and 

a range of other steps needed to determine whether a therapy will 

be effective and, of course, safe. Unfortunately, many basic discoveries get lost or are not pursued in this translational phase because 

they lack the funding, professional incentives, and technical expertise needed to advance further. It is disconcerting for people living 

with Parkinson’s disease and other untreated or undertreated conditions to know that many potential therapies or disease-understanding breakthroughs are not pursued to ascertain if they have 

any therapeutic potential because there is not enough funding. And 

this is where SBIR comes in. 

SBIR grants have a significant role to play in the arena of translational research. In 2010, NIH awarded $616 million in SBIR 

grants to hundreds of small companies around the country. NIH 

SBIR grants are awarded to small companies that can bridge that 

divide between basic discovery and the hard, very hard work of 

testing that discovery for its therapeutic potential. 

Historically, these small companies have raised their needed capital from private investors but in recent years we have seen a dramatic and harmful shift away from the investment of private funds 

in biomedical research. Biomedical research takes a very long time. 

The return on investment may not simply be soon enough for investors and also for a disease like Parkinson’s and many other complicated diseases there is a lack of appeal quite honestly to private 

investors because the potential market for the therapy, one million 

people, may not be blockbuster in size and there is greater risk involved in testing therapies for diseases of the brain. Without SBIR 

funding, many of these small companies pursuing one or two 

projects at a time would simply not exist and some very promising 

research efforts would not be pursued. That is why when you look 

at the SBIR program from a patient perspective the program is not 

just about funding small companies. It is about pursuing possible 

treatments for many diseases and all the societal benefits including 

economic that come with that. 

I also want to offer our thoughts on the longstanding issue of 

whether to allow minority, I am sorry, majority venture capitalowned firms in the SBIR program. It does not seem logical that we 

eliminate from eligibility small businesses with research projects 

that otherwise merit public funding just because of the financial 

structure of the small company. In fact, venture capital dollars are 

often the only source of private capital that is willing to fund longterm risky biotech start-up companies and the reason becomes even 

more confounding when one focuses on the fact that the companies 

that are being excluded by the existing—and I hope the compromise goes through—but the existing SBA rule are the very ones 

that are doing work that is good enough to have attracted venture 

capital money even in this very challenging financial climate. The 

very companies that are doing a good enough job in one area are, 

because of that success, barred from federal support for other 

promising research. This policy does not just penalize companies, 

it penalizes patients. 

PAN supports the Committee’s efforts to move the SBIR reauthorization legislation expeditiously through the House and have a 


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bill that can be signed into law before the next reauthorization 

deadline of May 31, 2011. And thank you again for this opportunity 

to provide testimony to this Committee. 

[The statement of Ms. Rick follows:] 


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Chairman GRAVES. Thank you all very much. And I apologize to 

everybody here for the inconvenience of the vote. There is just one 

vote so we will go over and vote and come right back. And we will 

be in recess for just a short time. 

[Recess] 

Chairman GRAVES. We will call the hearing back to order and we 

will get started with questions here and hopefully we will have 

some of our members return as we go through it. 

My question is really for each of you. I will start with Mr. Tullie. 

And I always ask the question on how, you know, particularly in 

a lot of these programs through the SBA, how you found out about 

it. And Mr. Tullie, you can speak specifically to that. Some of you 

have members obviously you can speak to or what your experience 

is talking to other folks but I would very much be curious on either 

how you learned about the program or how, others did or, you 

know, what we can do to improve that obviously. Mr. Tullie. 

Mr. TULLIE. This was the first time any of the founders went 

through the process so we were not really quite sure how to go and 

get it done. We just knew we had to do a lot of things and it was 

tough to get financing right now and we needed to look for alternate ways to get funding. We actually went and hired a consultant 

that had done this before and paid him $5,000. He went out and 

searched the different agencies that would be applicable for us and 

he came up with the EPA and the National Science Foundation. 

And then we just went through the process. 

Chairman GRAVES. Dr. Audretsch. 

Dr. AUDRETSCH. Yeah, I had accepted a job at Indiana University 

about 12–13 years ago. When I arrived on campus the vice president for External Research, Jeff Alberts, wanted to meet me and 

I thought he would ask me how was the move and the schools. I 

could not get him to shut up about what he kept talking about, the 

SBIR thing. He is a psychology professor. He tests—he makes 

cages for animals that they now do up in the space shuttle and 

space station and so on. And in order to do his research at NASA 

he was told he had to start a company. He started the SBIR and 

he just had received phase two funding. And he subsequently employed, I do not know, dozens and dozens of people. And it was 

really hearing him was what keyed me how important the SBIR is 

because it is making entrepreneurs out of very capable scientists 

and engineers, really changing their career trajectories. 

Chairman GRAVES. Dr. Squillante. 

Dr. SQUILLANTE. RMD has been involved in the program since 

the very beginning of the program. The company was founded in 

1974. To answer the question, I remember a conversation when the 

president of the company came to me and said there is this new 

program, SBIR. Do you think we ought to participate? And we 

looked at it and said sure, why not. I assume we learned about it 

through the Commerce Business Daily in those days. No electronic 

communication then. 

Chairman GRAVES. Yeah. Ms. Rick? 

Ms. RICK. As I mentioned in my remarks, Parkinson’s disease is 

not particularly attractive necessarily to large pharmas because the 

population is considered relatively small. One million people have 

Parkinson’s and a brain disease is very complicated and high risk. 


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And so not just about SBIR but we have been very focused as an 

organization and a community on the valley of death where basic 

discoveries, therapeutic potential is not necessarily explored and 

there is not a great deal of private money. So in looking at all those 

challenges for our disease as well as others, you cannot help but 

see the SBIR program. Some companies have received SBIR grants 

for Parkinson’s therapies but it is certainly one of the components 

for trying to traverse that dreadful valley of death and get something to the point where the larger pharma will pick it up and run 

with it. 

Chairman GRAVES. Well, it is always a challenge obviously and 

there are some great opportunities out there for small businesses 

but it is always a challenge, you know, getting the information out 

there so that they know what opportunities are out there. 

I will turn to Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Ms. Rick, since the SBA eligibility determination, small business 

SBIR applications have decreased. Besides changing the eligibility 

criteria rules, what other steps can be taken to ensure that small 

businesses or small firms with the best science and greatest potential to provide treatment are applying for SBIR awards? 

Ms. RICK. Well, in fact, the compromise that is in the Senate legislation seems appropriate to us. It is my understanding as well 

that applications dropped after the SBA ruling and that is not acceptable to us. We think the most important thing is to fund the 

most promising projects. But I think it is—I think we need to find 

a way to move on from the VC issue and again, the compromise 

seems appropriate. And rather focus on educating about SBIR. 

Quite frankly, I think the SBIR program fills one very important 

niche at NIH in terms of need for translational research but it is 

not the only one. And I think there is a lot that needs to be done 

in terms of educating about the value of translational research and 

promoting the value of taking basic scientific discoveries and moving them from a knowledge-based basic research mode to product 

development. And there is a lot of work that needs to be done 

there. And I think there is room, as the Chairman mentioned, for 

more education about the SBIR program in general and how many 

success stories there are from that. 

Ms. VELA ́ ZQUEZ. Thank you. Dr. Audretsch, do truly small businesses receive—really receive venture funding? 

Dr. AUDRETSCH. Yes, sometimes. It is hard to generalize actually 

about which kinds of companies—either which kind of companies 

receive venture funding because the answer is, well, promising 

growth companies do. But they can be small, they can be new, 

sometimes they are actually established. Sometimes, they are old. 

They are big. It is hard to generalize other than these are high potential growth companies. Or conversely, it is hard to generalize 

where small business gets its funding. We all know about the three 

Fs. 

Ms. VELA ́ ZQUEZ. So if you have venture funding it does not necessarily mean that you are a large company? 

Dr. AUDRETSCH. Absolutely not. Absolutely not. 

Ms. VELA ́ ZQUEZ. Dr. Squillante, according to SBA’s TECH-NET 

databases, RMD has won 386 awards for $152 million. This places 


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RMD by itself above 23 states, including Missouri, Montana, Delaware, Rhode Island, and Iowa. In fact, RMD again by itself has 

won more in SBIR funds than Idaho, Mississippi, Wyoming, North 

Dakota, South Dakota combined. In your testimony you go to great 

lengths to talk about the program mission when it was created and 

that it was intended to greatly benefit firms, a lot of firms, to provide the grants for them to move from phase one to phase two and 

then commercialization. So given this, do you believe that when 

this program was created it was intended to greatly benefit just a 

few companies while overlooking so many others? 

Dr. SQUILLANTE. No, I do not think so. I think the program—the 

goals of the program are clear and I think the program is designed 

to support the best research that is in the interest of the agencies 

in the country. 

And that should be a very important criteria? 

Dr. SQUILLANTE. Yes. 

Ms. VELA ́ ZQUEZ. So according to your parent company’s Dynacell 

SEC 10K filing, RMD is part of a six-company corporate conglomerate with annual revenue of $43 million. Given that small businesses applying for SBIR do not have any revenue and are independent, what are some of the advantages that you have over these 

types of entrepreneurs? 

Dr. SQUILLANTE. Well, I think we obviously have experience 

which helps. And we have six research groups. The company has 

grown over the years. We are doing research in high performance 

sensors. We have established relationships with many universities 

and many other small companies so when we submit proposals we 

submit proposals in conjunction with either university groups that 

have skills or equipment that we do not have or with small companies who can provide the expertise that we do not have. 

Ms. VELA ́ ZQUEZ. One of the main purposes of SBIR is to bridge 

the valley of death. And one important challenge that small firms 

have is access to capital. Dynacell, the corporation that owns you, 

was able to establish lines of credit totaling $17 million. So with 

so many access to so much credit, why does RMD need millions of 

dollars worth of taxpayer provided to get those grants? 

Dr. SQUILLANTE. The merger with Dynacell was 2008. Before 

that we were a private company. At this time Dynacell is investing 

money in the commercialization of products. So the SBIR is doing 

just what it is supposed to do. It is helping us develop new technologies, create new ideas, develop these into products. And the 

best part about the relationship with Dynacell is they have the 

means to help us avoid this valley of death by taking our technologies and commercializing them. 

Ms. VELA ́ ZQUEZ. This will provide the means for some of the 

SBIR firms to bring their research into commercialization. 

Dr. Audretsch, under the current eligibility rules it is possible for 

a business with 222 employees and a net worth of $43 million, like 

Dr. Squillante’s company, to receive an SBIR grant. So, however, 

a company with five employees and only a million dollars in net 

worth could be ineligible for these types of grants because it is majority-owned by a venture capital company. So my question to you 

is does this seem like a fair and equitable system? 

Dr. AUDRETSCH. No. 


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Ms. VELA ́ ZQUEZ. Okay. 

Dr. AUDRETSCH. And you did not ask but it also does not make 

economic sense. It does not make economic sense. I would not link 

the financial structure of a company to its eligibility for SBIR. 

Ms. VELA ́ ZQUEZ. Thank you. Mr. Chairman, I have other questions in the second round. 

Chairman GRAVES. Okay. Mr. Barletta. 

Mr. BARLETTA. Thank you, Mr. Chairman. 

Dr. Audretsch, your testimony described how you were concerned 

about how SBIR awards are concentrated in certain regions of the 

country. Do you know what regions of the country have the highest 

concentration of SBIR program award recipients? 

Dr. AUDRETSCH. The Bay Area. 

Mr. BARLETTA. Why do you think this is the case? 

Dr. AUDRETSCH. Because that is where the supply of ideas, the 

potential for translational research is the greatest in the country. 

Mr. BARLETTA. And how do you think we can increase the number of SBIR awards outside of that region? 

Dr. AUDRETSCH. I think by, and this has come up in the discussion, by increasing the information about the program is exactly 

what the chairman asked in his introductory remarks. I think as 

we get away from these very successful clusters of SBIR there is 

much less familiarity awareness that the program exists. So I 

think that there is a big opportunity to increase the participation 

in the SBIR simply through information, by trying to get that message out there. 

Mr. BARLETTA. Thank you. 

Ms. Rick, I understand that sometimes when the National Institute of Health starts doing research on one disease they find that 

treatments for this disease can be useful in treating others. In your 

opinion, how often does this occur? And how important is the SBIR 

operation of the National Institute of Health in finding treatments 

for a wide variety of diseases? 

Ms. RICK. I cannot give you an accurate answer on how often a 

particular compound or treatment moves to another disease. In 

fact, NIH’s primary portfolio is basic research, and in spite of the 

growth that it is experiencing right now into the area of 

translational research, I think basic research is still its primary 

function and 60 percent of its budget goes towards basic research. 

So that would be research that in the neurological area, for example, could be you learn something that is relevant to Parkinson’s, 

Alzheimer’s, MS, Huntington’s. I think that the—it is fundamental 

though that SBIR and other translational programs continue to be 

promoted at NIH in order for us to be able to benefit from the basic 

research that NIH does fund. Our primary problem is getting discoveries, potential discoveries, bright ideas but we have got a long 

way to go to figure out if they are going to go anywhere. Getting 

them through that valley of death to a point where the larger companies are willing to pick it up. And that is exactly the role, for 

biomedical research, that NIH SBIR fills. 

Mr. BARLETTA. Well, like you, you know, I am concerned about 

the dramatic shift away from private investment funds in biomedical research over the past few years. In your testimony you 

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cause biomedical research takes a long time to complete or because 

the size of the potential markets for certain diseases, like Parkinson’s, are too small. In addition to reauthorizing the SBIR program, 

what else can members of Congress do to provide incentives for private investors to invest in biomedical research? 

Ms. RICK. Well, that is certainly an interesting question. There 

could be tax credit options, some of which I know are being discussed now. But aside from SBIR, the National Institutes of Health 

is going through a process right now that you may be familiar with 

of creating a new institute at NIH, the NCATS Institute that will 

consolidate the other translational research that is going on at NIH 

to allow for more efficient and coordinated promotion of 

translational research. And we hope to look at some of the hurdles 

that cross multiple diseases. A good example is blood brain barrier, 

which is significant in Parkinson’s but by no means unique to Parkinson’s. And I think what we need to look at—in our experience, 

translational research has been almost a second class form of research that—it is about product development and therapy development, not necessarily the gaining of further knowledge. And we 

think whatever the NIH and Congress has supported that, what we 

can do to promote the significance of translational research so that 

public dollars are used to bring ideas or therapies to the point 

where private can pick them up. That is really what we need to 

do. And NIH seems to be the most logical place to do that. So I 

would say support for the NIH movement that we have seen last 

year and this year toward promoting translational research within 

its current budget is very important. 

Mr. BARLETTA. Thank you. 

Chairman GRAVES. Ms. Chu. 

Ms. CHU. Thank you, Mr. Chair. 

Dr. Audretsch, one of the goals of the SBIR program is to increase the participation of minorities and disadvantaged people in 

the process of technological innovation, but in your testimony you 

talked about the fact that female participation in SBIR has increased only marginally over time and that phase two awards for 

women have increased only from eight percent to now 9.5 percent 

and also that minority participation has decreased over time. Can 

you say something about why this is occurring and also what we 

should do about this? 

Dr. AUDRETSCH. No. I do not know actually why this is occurring. 

I think that it is an important area for research and for independent scrutiny. I think that it was not—I think this is a very important question. So the answer is no, I do not know at this point. 

Now, the second one, I actually have a little insight as to what 

could be done from my own research of analyzing NIH, the top NIH 

scientists who have gotten funded over a period of time. And we 

see that there is a gender pattern of scientists who start companies. Males have a much higher likelihood of starting companies. 

So when we ask the question why do some scientists at these 

NIH—funding scientists start companies and others do not, gender 

is an important variable. However, when we control for interactions 

with the private sector, if they sit on boards, if they write articles 

with scientists in private industry that gender gap goes away. 


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Now, that does not tell me that would help for the SBIR but it 

does tell me a little bit or makes me—it suggests that interactions 

of scientists, engineers at universities with the private sector, that 

will tend to promote commercialization activities. And we see actually that gender gap disappears. Now, that is not for SBIR; that is 

for scientists starting companies but at least it gives me a hint. 

Ms. CHU. How about with regard to the minority question? 

Dr. AUDRETSCH. Oh, the minority? 

Ms. CHU. How can we increase participation? 

Dr. AUDRETSCH. I do not know at this point. 

Ms. CHU. Okay, well on another topic, the SBIR program is generally recognized as a successful program. However, for two decades it has continued to suffer from some longstanding evaluation 

and monitoring issues. There have been identified problems with 

federal agencies assessing SBIR, including limited in ad hoc evaluation efforts, difficulty in defining and measuring SBIR goals, 

competing SBIR objectives, and limited electronic data collection efforts. The JO did find that SBA had taken some steps to address 

these challenges but we are still behind on the online database and 

some of the data was inconsistent. What steps could be taken to 

ensure that SBIR can adequately assess performance? 

Dr. AUDRETSCH. I think it is to improve exactly what you were 

referring to in the question. To have a systematic data system 

where all the activities are recorded of SBIR firms, but also of the 

applicants. In fact, this would also go—in order to—it addresses 

your previous question. In order to understand the role of females 

and minorities in the SBIR we would need to know about the applicants who did not get funded, for example. So we need to have systematic longitudinal measurement and we need to provide access 

to researchers who want to address the kind of questions you just 

asked. 

Ms. CHU. Okay. There is also a question about awards that are 

sometimes significantly below or above SBIR guidelines. This has 

raised questions about the limited availability of program funding 

and the merits of exceeding guidelines for award amounts. And JO 

found that 50 percent of NIH awards and 12 percent of DOD 

awards exceeded SBIR guidelines. So to what extent do very large 

awards help or hinder access to capital by other qualified companies? 

Dr. AUDRETSCH. The National Research Council and their evaluation. But this has been echoed by most of the research I have 

seen on the SBIR. I think that the flexibility of the program is a 

great asset and it is very difficult. When you really think about the 

scope of the program, you know, it ranges from NIH to NSF to Department of Defense. These are very different missions by these 

agencies. You have got such a heterogeneous group of projects in 

firms so that a one size fits all approach is probably not ideal. I 

think the flexibility has been an asset actually. I do not think this 

is—I think the flexibility does not deter innovative companies or 

potentially innovative companies from applying for SBIR. I think 

it enhances the congressional goals. 

Ms. CHU. Thank you. 

Chairman GRAVES. Mr. West. 


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Mr. WEST. Thank you, Mr. Chairman, and Madam Ranking 

Member. Thanks, panel, for joining us here today. 

And I want to kind of follow on with Ranking Member 

Vela ́zquez’s inquiry as far as, you know, the type of metrics that 

we can use for evaluative criteria because, you know, one of the 

things we want to see is a level-type of playing field. So what I 

would put out to the panel as a question is what things other than 

just commercialization, what are some other good evaluative criteria that kind of gives everyone that semblance of a level playing 

field so they can apply for these grants? Recommendations. 

Mr. TULLIE. As I talked about in my testimony, apply the analysis of what I call the triple bottom line. The agencies should not 

just look at the companies—commercial attributes to determine if 

these guys are going to be successful. Are they going to drive job 

growth? Is there going to be some return to the taxpayers? They 

need to go beyond that and look for the next two bottom lines. Are 

they there? Is there an additional public access? Is there an additional public benefit? In my business I talk about the stimulus 

package because we are taking trash and turning it into cash. But 

there are lots of other public benefits that lots of these businesses 

do other than just driving jobs growth. 

And then the third one that I like to use is what is the hot issue 

of the day that we are all wrestling with? And obviously, it is the 

environment. Right? You should find companies that can provide 

environmental benefit or other benefits that provide greater good 

than just pure capitalization and pure commercialization. I think 

those are all things that should be looked at in the process and I 

do not think they are looked at that much today. 

Dr. SQUILLANTE. If I could respond. I think the question would 

be how would you find metrics to measure success? And the goals 

are fairly clearly stated. Stimulate technological innovation. And 

prior to that is doing good research and development. And that is 

measured by peer review publications and journals. It is measured 

by participating in meetings. It is measured by other researchers 

in the field or other developers in the field adopting the technologies that you have developed under SBIR. And those are definitely quantifiable. 

Meeting federal agency needs. The question there is have any of 

the agencies developed the technologies? And are they supporting 

it for transition to the field? And that is also quantifiable. And it 

is an important part of the SBIR program. And hopefully support 

for that would be enhanced and then measurement of it is also important. 

Increasing commercialization is what we have mostly been working—the community has mostly been working on in terms of quantifying it. And I think by those standards RMD has been very successful in all three of those. 

The fourth issue of fostering and encouraging participation by 

minorities is, it is a demographics question in terms of measuring 

it. And I think one of the things that can be done to improve that 

is the FAST program (Federal and State Technology Partnership 

Program) and other outreach programs like that. And several years 

ago the NIH was very active in trying to do outreach and I think 

NASA has done some outreach. But I think, first of all, the people 


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who potentially could apply for it have to understand the program. 

They need help in preparing proposals and understanding what a 

reviewer needs to see. And the SBTC and I myself have mentored 

small companies to help them participate in the program. So we 

need to educate and reach out to these companies. 

Ms. RICK. If I could just add in the biomedical area where so 

many promising ideas do fail, I think it is important to not use 

SBIR as an SBIR measurement only whether a successful product 

came out of this because again we would prefer that result but in 

the biomedical field, learning that something appeared promising 

and does not work and educating other researchers about that is 

still a lower level of success and high risk projects should be supported by SBIR. 

Dr. AUDRETSCH. Mr. West, your colleague, Mr. Barletta in an 

earlier question raised or mentioned the example of Silicon Valley 

as not only the leader of SBIR awards but more importantly, the 

most innovative place in the world. People say, scholars say, oh, 

the birth of Silicon Valley came from a company named Fairchild. 

Fairchild failed. It never really came up with—it was a semiconductor company. It never really succeeded. But out of Fairchild, one 

of the founders, Gordon Moore, founded Intel and the rest is history for Intel but also for Silicon Valley. I think that illustrates exactly your point, Ms. Rick, that it certainly makes evaluating the 

SBIR program challenging because it is hard for me to say Fairchild was a failure. Maybe to the stockholders but not to Silicon 

Valley. Not to the United States. 

Mr. WEST. Thank you very much. I yield back, Mr. Chairman. 

Chairman GRAVES. Ms. Clarke. 

Ms. CLARKE. Thank you very much, Chairman Graves and ranking member Vela ́zquez. You know, at a time when our nation’s 

economy is struggling to rebound, the SBIRs have played a vital 

role in spurring job creation and innovative—and innovation, excuse me. The district that I represent has been a beneficiary of the 

innovative spirit of the SBIR that the SBIR program fosters. The 

Bio-Signal Group, which operates out of the State University of 

New York Downstate Medical Center, was a recipient of the SBIR 

funding in fiscal year ’07, ’08, and ’09. They have done remarkable 

research on parts of the brain that control different aspects of 

memory, such as spatial knowledge, motor skills, emotional associations. 

Mr. Chairman, I would like to ask unanimous consent to enter 

a New York Times’ article on Bio-Signal’s contributions into the 

record. 

Chairman GRAVES. Without objection. 

Ms. CLARKE. Thank you. 

While I am a supporter of the SBIR program, like Congressman 

Chu, I am concerned with the downward trend in participation 

amongst women in minority-owned businesses. Minority-owned 

businesses participation fell below 10 percent in 2004 and that 

trend shows no sign of turning around. So I would like to extend 

this conversation to the panel. And I wanted to know whether you 

all were aware that the program that SBA had in place to reach 

out to women in minority-owned businesses expired in 2005. Maybe 

this may have some bearing. But I would like for you to give me 


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a sense of what we can do to ensure that this issue is addressed 

in a way that has real world effect of turning these numbers 

around. And I am sorry. I do not have my glasses. And I would like 

to start with you, Ms. Comstock Rick. Excuse me. 

Ms. RICK. Okay. I do not have access to particular data about minority participation in this program but I will say after spending 

years of working with NIH and spending a fair amount of my time 

at meetings with neurologists presenting their research, this is not 

an issue unique to SBIR. That in the scientific research field I 

think minority and female participation is low. So I would view 

that as a larger problem in the scientific world, at least in the neurological world. 

Dr. SQUILLANTE. Well, I think it really is a question of making 

potential applicants aware of the program and then helping them 

with even just the basics of submitting proposals. And teach them 

how to work with—if you have a small company that has one or 

two people you almost certainly need to work with somebody at a 

university. And, you know, you can show someone how they go 

about finding people. It is fairly easy how they go at finding university people. And my experience with the universities, for the most 

part they want to work with other people and collaborators. So I 

do not think it would be hard. And I think a new company, even 

very small with a strong university collaborate, significantly increases the odds. So it really is teaching people who have not been 

in the program what the steps are to succeeding. 

Ms. CLARKE. Dr. Audretsch, this was your, you know, this was 

something that you put out into the atmosphere so I wanted to get 

your feedback on it. 

Dr. AUDRETSCH. Yeah, thank you. Well, I think that the overall 

congressional goal of enhancing American innovation, that is a 

wonderful opportunity. If we can increase the participation rates of 

these groups that have had low participation rates, the economy 

will be more innovative. 

I do not know exactly but I would think that we have addressed 

this in other areas and we have seen a response. I do not think we 

really tried to do this at the SBIR yet so I am not pessimistic. I 

am optimistic. I see it as an opportunity. 

Ms. CLARKE. Yeah, I mean, I just found it almost—I found it interesting that the SBA had stopped their outreach in 2004 and, you 

know, we saw this—— 

Dr. AUDRETSCH. Well, right. In fact, that may be the reason 

why—the part you said yourself. That may be one of the reasons 

why the participation rate has gone down. And like my colleague 

just said, I think that scientists, people at universities, are socially 

oriented. If there are opportunities they will engage in those opportunities. I think the potential for information, bringing people together, there is a big potential for that. It is a social process. 

Ms. CLARKE. Thank you. 

Mr. TULLIE. I will add to that. Now, this is the first process that 

I have ever gone through or any of my founders have gone through 

with regard to a grant writing process. And although we know 

technology for the last 20 or 30 years we have never done grant 

writing. So we had to go out and hire someone who knew how to 

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haps a lot of other businesses did not have available to them; that 

is why they are looking for money. So a novel idea might be to, as 

a requirement of this great grant money that you give us all, is to 

set up some sort of a group amongst the companies who have received these grants to aid these minority-owned businesses in the 

grant writing process. This way they do not have to go out and 

spend $5,000 and look for someone and not even realize perhaps 

that it is available to them. But instead they would go on your 

website and see who the people are that they can talk to. A lot of 

them should be at universities. They probably do it for a living, but 

even other commercial companies should help. Let that be part of 

what we give back. Help new companies write these grant requests. 

Ms. CLARKE. Thank you very much, Mr. Chairman. And thank 

you for your feedback. I yield back, Mr. Chairman. 

Chairman GRAVES. Mr. Richmond. 

Mr. RICHMOND. I guess—thank you Mr. Chairman and ranking 

member Vela ́zquez. 

I guess the first question would be to Dr. Audretsch. You talked 

about Silicon Valley and the concentration there. The New Orleans 

metropolitan area has had some awards but not very many, but we 

now have a concentration on entrepreneurship and innovation in 

New Orleans. What can cities do to push and to assist companies 

in applying for these awards to make it—and leverage the dollars 

better for local municipalities? 

Dr. AUDRETSCH. Yeah, I very much appreciate that question. The 

answer is a lot. They are doing a lot, a lot of varied types of policies, trying to leverage the SBIR opportunities. Among other things 

they have, some states at least, have programs where there are 

program administers who try to link up potential projects from the 

funding agencies with scientists and engineers to try to get a good 

match. And they’ll actually—so they’re really, they’re a middle 

man, essentially. And they go out in the field. I have been with 

some of them and seen this in very interesting meetings. That is 

really their job to try to generate SBIR proposals. Those cities or 

states will also have funds. It kind of links back to the previous 

question. I mean, those concerns about the—about minorities and 

female participation rates can also be addressed at the local level, 

the city level, or the state level by providing funds to help, say, 

with the grant writing. But I think it really—that one-to-one personal contact that says here is what you can do to get funding, I 

think that can make a big difference. 

Mr. RICHMOND. One of the things we did even with new market 

tax credit was to create a state piggybank to make it more advantageous to use it there. In talking to my senior senator, who is Senator Landrieu, who is pushing this, part of the concern as I understand it is the venture capital and the amount of investment that 

they can have for a firm to still qualify. And let us weigh that 

against the long-term reauthorization which is a benefit so people 

can strategically plan years out. The question becomes, if you 

weigh those against each other, what wins. And give me some of 

the concerns that you would have? Do you sacrifice a reauthorization for a larger percentage? And I would just be interested in your 

opinion on that. 


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Dr. AUDRETSCH. I think my colleague before in his remarks said 

he made a plea and said we need to move fast and reauthorize 

SBIR. That has got to have a high priority. I would also point out 

that venture capital is the—venture capital funding is by far the 

great exception in this country to firms large and small. To SBIR 

firms, as well. I would, as I stated before, there is no economic 

grounds for linking the financial structure of a firm to its—whether 

or not it is qualified for SBIR. That is my preference. But the way 

you asked the question is very good. I would put a priority on moving ahead with—so that companies can know and plan in the future. 

Mr. RICHMOND. I appreciate that. And if anyone else wants to 

comment on that that is my last question, so go ahead. 

Ms. RISK. I actually wanted to comment on your earlier question 

about what can cities do. 

Mr. RICHMOND. Okay. 

Ms. RISK. In our experience academic research centers around 

the country—Michigan, Stanford, Johns Hopkins—it varies so 

much in terms of the programs they have to take basic research 

biomedical discoveries and help their researchers get them through 

this valley of death. Some institutions actually have offices that are 

set up to help basic researchers who are not schooled in the intellectual property issues and FDA issues, the funding issues, the 

legal issues for transferring something from a discovery to a product. Some institutions have offices for this, some do not. But there 

is no reason it has to be an academic research center that does 

that. What that is is a smart office that is helping a basic researcher who is schooled in biomedical research figure out how to 

take this potential bright idea that they have and test its product 

potential. That could be done by a city. That could be done by a 

partnership in a city between private and academic research center 

and some public money. So I think there is opportunities to look 

at the successful programs around the country that are doing that 

and see if it can be replicated. 

Mr. RICHMOND. Thank you. I appreciate that. 

Dr. SQUILLANTE. If I could one very brief comment. The obvious 

thing people think of with states is that, they could provide extra 

funding for the companies. Most states probably do not have the 

resources to do that. Massachusetts has an organization called the 

Massachusetts Technology Collaborative and they do not provide 

funding for companies for their SBIR research. What they will do 

and it is small but it is significant, is that if you send them your 

proposal they will review it and they will edit it and they will tell 

you what you should change. And I have seen proposals that they 

have done this to that really turned them from losing proposals to 

winning proposals. It is an extremely inexpensive thing to do. They 

probably get it done with volunteers and it costs the state very little because, I mean, there has to be some administrator in this organization. And it is not officially part of his job but they do this 

for small companies. 

Mr. RICHMOND. Mr. Chairman, thank you for allowing me to go 

over a few minutes and I will yield back. Thanks. 

Chairman GRAVES. Ms. Vela ́zquez. 


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Ms. VELA ́ ZQUEZ. Yes. Thank you, Mr. Chairman. I have a last 

question if I may, Dr. Audretsch. 

The Senate has proposed to allow venture firms to participate in 

the SBIR program but only allow them to access 25 percent of an 

agency’s SBIR funds. Given your knowledge of the program and the 

way venture capital companies come to fund businesses, does it 

make sense to grant in a portion of the SBIR funds to those firms? 

Dr. AUDRETSCH. No, I do not see an economic justification for it. 

Ms. VELA ́ ZQUEZ. What impact would designating an arbitrary 

percentage of award funds to venture backed companies have from 

small businesses and innovation? 

Dr. AUDRETSCH. A negative one. How negative I cannot say but 

it will be negative; it will not be positive. 

Ms. VELA ́ ZQUEZ. If you were to have a percentage, how would one 

even develop a methodology to determine what percent should go 

or be allocated to these firms? 

Dr. AUDRETSCH. I do not think that could be worked out. 

Ms. VELA ́ ZQUEZ. Well, Mr. Chairman, I want to thank you for 

this hearing. And let me just state for the record, we all want to 

get this reauthorization done. But if we were going to authorize 

this for 10, 14 years, we have got to do it right. And it has to be 

in a way that works and works for small firms. Otherwise, we cannot abdicate our responsibility on this committee. Thank you. 

Chairman GRAVES. I would like to echo the ranking member’s remarks. You know, the SBIR and STTR programs are widely recognized as the country’s most important engines of innovation. This 

is the start of the process and we are going to work very hard to 

get a bill out and on the floor, the House floor in May, and then 

ultimately as quickly as we can get it to the president’s desk so he 

can hopefully sign it. But I would appreciate or want to say thank 

you to each of our witnesses for coming and I appreciate you being 

here. And I would ask unanimous consent that all members have 

five legislative days to submit their statements and supportive materials for the record. Without objection that is so ordered and the 

hearing is adjourned. 

[Whereupon, at 2:44 p.m., the hearing was adjourned.] 


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