Pathways Beyond Innovation:
The NASA Alliance for Small Business Opportunity
By Carl G. Ray
Innovation is defined as the process of taking new ideas to a point of inventing something
new; or a new way of doing things. Through the application of research results and
discoveries, innovation provides a pathway for creating new, value-added products and
increasing efficiencies of scale for organizational operations. Innovation is the catalyst
that keeps technology moving forward and businesses
continuing to contribute to economic growth.
However, that contribution is accomplished only when the innovation is complete. For the average small business participating in the NASA Small Business Innovation Research (SBIR) program, the development of research into applied technologies, the application of these technologies to NASA mission systems and the transfer of these technologies to the marketplace as a product for commercialization are not easy efforts. Even with early-stage funding from the federal government, these firms struggle to move their technologies to the end of the innovation pathway.
NASA is pursuing new approaches to facilitate the successful transition of its SBIR award-winning companies into investment-ready, reliable, high-tech business competitors. The NASA Alliance for Small Business Opportunity (NASBO) is a critical destination on NASA's SBIR innovation pathway that may help more small businesses close the technology-to-product gap.
For a long time, the small-business community has been — and continues to be — one of the most significant sources of innovation. Another growing set of resources are the many research institutions throughout the United States. Congress recognized the potential of these communities back in 1982 when it established the SBIR program, and again in 1992 when it created the similar, but smaller, Small Business Technology Transfer (STTR) program.
These programs are legislated as federal research-and-development (R&D) set-asides for small high-technology firms.
SBIR is a set-aside program for small business concerns (SBC) to engage in federal R&D with the end goal being commercialization of their resulting technologies as products in the marketplace. STTR is a set-aside program to facilitate cooperative R&D between SBCs and U.S. research institutions (universities) to transfer technologies and develop them into commercial products.
The objectives of these programs are to increase opportunities for SBCs to participate in government R&D, improve overall U.S. competitiveness and contribute to national economic growth. STTR has the additional goal to encourage formal relationships between SBCs and nonprofit research institutions for the purpose of providing a pathway to move institutional discoveries to the commercial marketplace.
Currently, five federal agencies with R&D budgets exceeding $1 billion are required to participate in the implementation of the STTR program. The following 11 federal departments or agencies, all with R&D budgets exceeding $100 million, are required to participate in the implementation of the SBIR program:
- Department of Agriculture
- Department of Commerce
- Department of Defense
- Department of Education
- Department of Energy
- Department of Health and Human Services
- Department of Transportation
- Environmental Protection Agency
- National Aeronautics and Space Administration
- National Science Foundation
- Department of Homeland Security (new in 2005)
Both programs are implemented in three highly competitive phases. At NASA, Phase I of an SBIR award is funded at $70,000 for six months and targeted toward establishing feasibility of the pursued research. Then, where laudable results are found, firms may continue to pursue Phase II funding for up to two years and $600,000.
Phase III, however, is the point at which the company must find alternate funding to develop the technology further and/or pursue product development. Not unlike the challenge in the traditional "start-up" pathways of the marketplace, this highly competitive stage continues to be the most challenging.
NASA has participated in these programs since their inception. In 1994 NASA made a major shift in their implementation, resulting in agency-specific goals that included organizational restructuring to administer the programs together, strategic alignment with mission objectives and a more holistic approach to the congressional intent.
For more than 10 years the SBIR and STTR programs had significant value-added innovations such as paperless, Web-based electronic management and subtopic alignment with Mission Directorate programs. Still, participating businesses found themselves facing the same challenge as small businesses in the traditional path marketplace: Investment funding for advanced technology development and/or commercialization is very difficult to obtain.
Lessons learned from discussions and workshops with investment representatives, business service firms and the SBIR firms revealed two significant realities that the new holistic approach needed to address:
- Innovation can successfully move into the marketplace only by attracting additional financial support.
- Many Phase II SBIR/STTR firms, like their counterparts in the small-business community, are typically not prepared to competitively enter the marketplace because of a lack of business maturity.
The challenge was to find a way to improve the attractiveness of the NASA SBIR Phase II firms to the investment community and increase the potential for NASA to leverage the benefits of the SBIR- and STTR-developed technologies.
Thus was the catalyst for NASBO, which was piloted in 2002 in collaboration with the NASA Commercialization Center (NCC) at CalTech in Pomona, Calif. The pilot was designed to explore frameworks for mechanisms and incentives for creating strategic partnerships between the various small-business service providers, including incubators, universities and their affiliates, large contractor firms with potential interest as partners, and most importantly, early-seed capital investors and venture-capital entities.
The concept was to use the large volume and high quality of the NASA SBIR Phase II portfolio to attract the resources for technology investment. That investment attraction is based on two unique aspects of the SBIR and STTR programs:
- When Phase II companies enter relationships with a NASBO chapter, they have already proven feasibility and successfully developed technology using the federal dollars from these programs.
- Firms typically own the intellectual property culminating from their developed technologies. This is perhaps most attractive to early-stage investors.
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| The Center for Training, Technology & Incubation at Cal Poly Pomona is the home of the NASA Commercialization Center. This business incubator is an important resource that offers small businesses and entrepreneurs critical guidance through the turbulent waters of project start-up. |
The NCC pilot has run for two years, during which time eight SBIR companies received NASBO-funded business services, and three ventures successfully moved to the marketplace. To show the potential extent of NASBO benefits, the NCC provided the guidance, interface and funding support for one of the companies to acquire the flight test required to approach NASA Jet Propulsion Laboratory about utilizing (SBIR Phase III) the technology in one of the mission programs. This capability may prove to be the most significant benefit of NASBO, increasing NASA utilization and infusion of SBIR/STTR technologies.
Currently, NASA has one NASBO chapter under a nonfunded Space Act Agreement with Technology Tree in Houston. Two other entities are working with NASA on making the transition to NASBO chapters: the NCC at CalTech, and Georgia Tech's Southeast Regional Technology Transfer Center in Atlanta. The National Technology Transfer Center in Wheeling, W.Va., also is participating as a developmental NASBO member.
While focused on providing business services to NASA SBIR Phase II firms, each NASBO chapter may be uniquely structured, such as:
- The chapter can specialize in different technology or industry areas.
- The partnerships may be geographically regional or national.
- The funding sources may be from the investment community or local sponsorship.
Many NASA SBIR Phase II companies have state-of-the-art technologies, but have found pursuit of investment and ventures daunting. NASBO can provide a conduit for these Phase II firms that have a confirmed technical novelty and validated technical team but need help developing their competitive business potential.
The dramatic increase in our highly competitive and globalized markets demands a renewed emphasis on successful innovation. Rapid changes in the markets have created a new world of competition. Because the current arena is set in a truly global context with high-quality competitors and risk assessment, the rules of engagement are vastly different from those of just a few years ago.
Beyond the innovation and new technology, a highly volatile business arena exists in today's market. For SBIR, the federal government is fulfilling its role with initial R&D investment. NASBO may be a way to ensure that this investment achieves its maximum potential.
Today the challenges for much of the new technology coming from R&D investments are about not only the technology gap but also the business barriers in the marketplace. It's not enough to transfer federally funded technology. The government must be innovative in developing appropriate links and partnerships with state, regional and local supporting infrastructures to facilitate the transition of these small businesses to highly qualified commercial marketplace competitors.
Developing these kinds of pathways will not only help businesses flourish but also increase the value of the SBIR federal R&D investment. NASBO provides a critical element to the SBIR-STTR innovation pathway by helping small businesses make a big difference and continue investing in America's future with NASA.
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