[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                    SBA PROGRAMS SPURRING INNOVATION

=======================================================================

                                HEARING

                               BEFORE THE

          SUBCOMMITTEE ON INNOVATION AND WORKFORCE DEVELOPMENT

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

                              HEARING HELD
                           SEPTEMBER 19, 2019
                               __________

                  
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                  
                                                
            Small Business Committee Document Number 116-045
             Available via the GPO Website: www.govinfo.gov
             
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
37-646 PDF                WASHINGTON : 2019  

             

                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                         ABBY FINKENAUER, Iowa
                          JARED GOLDEN, Maine
                          ANDY KIM, New Jersey
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                          JUDY CHU, California
                           MARC VEASEY, Texas
                       DWIGHT EVANS, Pennsylvania
                        BRAD SCHNEIDER, Illinois
                      ADRIANO ESPAILLAT, New York
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                         ANGIE CRAIG, Minnesota
                   STEVE CHABOT, Ohio, Ranking Member
   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
                        TRENT KELLY, Mississippi
                          TROY BALDERSON, Ohio
                          KEVIN HERN, Oklahoma
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        TIM BURCHETT, Tennessee
                          ROSS SPANO, Florida
                        JOHN JOYCE, Pennsylvania

                Adam Minehardt, Majority Staff Director
     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
                   Kevin Fitzpatrick, Staff Director


                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Jason Crow..................................................     1
Hon. Troy Balderson..............................................     3

                               WITNESSES

Ms. Alison Brown, President and CEO, Navsys Corporation, Colorado 
  Springs, CO, testifying on behalf of the Small Business 
  Technology Council (SBTC)......................................     5
Mr. Rohit Shukla, CEO, Larta Institute, Los Angeles, CA..........     7
Mr. Javier Saade, Managing Partner & Venture Partner, Impact 
  Master Holdings & Fenway Summer Ventures, Jackson, WY..........     8
Mr. Ron Shroder, CEO and President, Frontier Technology, Inc., 
  Beavercreek, OH................................................    10

                                APPENDIX

Prepared Statements:
    Ms. Alison Brown, President and CEO, Navsys Corporation, 
      Colorado Springs, CO, testifying on behalf of the Small 
      Business Technology Committee (SBTC).......................    25
    Mr. Rohit Shukla, CEO, Larta Institute, Los Angeles, CA......    31
    Mr. Javier Saade, Managing Partner & Venture Partner, Impact 
      Master Holdings & Fenway Summer Ventures, Jackson, WY......    38
    Mr. Ron Shroder, CEO and President, Frontier Technology, 
      Inc., Beavercreek, OH......................................    53
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.

 
                    SBA PROGRAMS SPURRING INNOVATION

                              ----------                              


                      THURSDAY, SEPTEMBER 19, 2019

                  House of Representatives,
               Committee on Small Business,
          Subcommittee on Innovation and Workforce 
                                       Development,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:41 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Jason Crow 
[chairman of the Subcommittee] presiding.
    Present: Representatives Crow, Veasey, Houlahan, 
Finkenauer, Kim, Balderson, and Burchett.
    Also Present: Representative Chabot.
    Chairman CROW. Good morning. The Committee will come to 
order. Thank you all for joining us this morning, and a special 
thanks to all the witnesses for coming in. I want to get this 
hearing kicked off at the appointed time, and we will have 
probably some other members come and go as we proceed here. So 
we appreciate your time.
    One of the keys to long-term growth in our economy is to 
create an environment that encourages innovation. We know that 
when given the opportunity, it is small firms that have proven 
they can lead the way innovating and creating new jobs in 
America. Many innovations in businesses that we benefit from 
today found their starts in basements and garages around the 
country.
    From 2000 to 2017, small businesses created 8.4 million new 
jobs, or nearly 2/3 of all the new jobs created in the U.S. In 
my own district in Colorado, 93 percent of employer businesses 
are small, and many of those are professional, scientific, and 
technical services.
    One of the ways we have spurred innovation is through 
targeted and smart Federal investments in research and 
development. Since the 1980s, the SBA has led the SBIR-STTR 
program, also known as America's Seed Fund, to invest in 
research and development of cutting-edge technology. The SBIR-
STTR program is funded through a Federal set-aside of 
extramural research and development funding spanning 11 Federal 
agencies. Each agency offers direct grants to science and tech 
entrepreneurs to help bring their technology to the market 
under the direction of the SBA's policy directive.
    Over the last 3 decades, the SBIR program has boasted 
significant return on investment and has generated billions in 
tax revenue. A study of the Navy and Air Force programs show 
that the $6.25 billion in SBIR funding generated $8.8 billion 
in new tax revenue and $92.1 billion in overall economic 
impact.
    Despite the success of the program, these program set-
asides have only been incrementally increased to 3.2 percent as 
part of the 2011 reauthorization over the last 6 years. Since 
then, our global competitors like China have aggressively 
invested in research and development.
    When SBIR-STTR was first implemented in 1982, the U.S. was 
at a crossroads, much like we are today, and in danger of 
losing its leadership in innovation due to globalization. More 
than 30 years later, due to stagnant investments in research 
and development, the U.S. is once again at risk of falling 
behind. Due to short-term cost cutting and failure to 
accelerate the infusion of Federal funds, other countries are 
swiftly catching up to the U.S. For example, China has 
drastically diminished the U.S. lead in innovation as they have 
aggressively invested in research and development, while the 
U.S. investment as a percentage of GDP has actually dropped.
    The SBIR-STTR program plays a critical role in maintaining 
the U.S. dominance in innovation. U.S. technology has 
maintained a lead because of significant success in information 
and communications technology. The computer, microchip, and 
Internet were all achieved through partnerships between 
government, academia, and entrepreneurs.
    The first computers were funded by the military and 
commercialized through the University of Pennsylvania and 
Harvard. Similarly, Google founders, Larry Page and Sergey Brin 
used Federal funding to research and then develop a prototype 
of today's Google search. Most significantly, Qualcomm 
developed the microchip that changed the global face of 
wireless communications using grants from these programs. The 
company now holds more than 13,000 patents, has over 35,000 
employees worldwide, and is valued at nearly $100 billion.
    Like the SBIR-STTR program, the SBA's Growth Accelerator 
Competition Fund is changing how innovation is funded in 
America. Over the last 5 years, the competition has funded over 
223 projects in 45 states. The competition also has had 
significant success reaching diverse applicants, awarding 44 
percent of the awards to women, 41 percent to underserved 
communities, and 16 percent to rural communities.
    However, the SBA and participating agencies can do more to 
foster innovation and help the U.S. maintain its global 
leadership. In the past few months, I have spoken with 
researchers and small business owners who have shared their 
experiences with SBIR-STTR. They point to what their industry 
calls the ``Valley of Death,'' where innovative ideas that do 
not get timely or appropriately funded cannot move forward. In 
order to remain competitive in innovation with the rest of the 
world, there is a significant need to reduce process burdens 
and streamline the application process.
    We will use today's hearing to not only discuss the 
benefits of the program, but also consider where they can be 
improved. We will also highlight ideas like the Air Force's 
Pitch Day model, which awarded a business in my district with 
an SBIR Phase I award, to small business innovation vouchers 
for commercialization and technical assistance programs.
    I hope that today's discussion will shed light on the many 
benefits of these programs, and I look forward to working with 
my colleagues to improve the SBA's ability to accelerate 
innovation and maintain U.S. competitiveness.
    I thank each of the witnesses for joining us today, and I 
look forward to your testimony.
    I would now like to yield to the Ranking Member, Mr. 
Balderson, for his opening statement.
    Mr. BALDERSON. Thank you, Mr. Chairman. And good morning to 
all of you on the panel. And thank you very much for taking the 
time out of your busy day to come forward to us today. I know 
it is challenging sometimes.
    Innovation is the engine that drives our country's success. 
Our economy's foundation is built on technology breakthroughs 
that find state-of-the-art solutions to difficult problems, 
then capitalizing on those products specifically through 
entrepreneurship.
    This coalition is particularly important for our small 
businesses. Small firms tend to be nimbler, more responsive to 
market changes, and more rapidly than bigger counterparts and 
driving innovation to make the U.S. a leader in the world 
economy.
    In this modern era of globalization, it is essential for 
both America's competitiveness and national security that small 
businesses are easily able to develop and commercialize their 
innovative products. This is why programs like the Small 
Business Innovation Research and the Small Business Technology 
Transfer programs are so important.
    Small technology-based firms tend to be highly incentive, 
constantly pioneering new advances. The Federal Government 
should encourage this innovation. Buying these newly developed 
technologies with other Federal R&D efforts was seen as a 
natural extension both to boost small business participation in 
Federal activities and to solve agency institutional problems, 
be they at the Department of Defense, National Institute of 
Health, or the Department of Energy.
    All too often, good ideas never materialize. This could be 
due to lack of funding, lack of public understanding, or 
perceived lack of marketplace for revolutionary technology.
    The SBIR and the STTR programs bridge the gap between this 
and practical building our economy and improving the function 
of the Federal Government in the process.
    Similar to the strategy that brought about the SBIR and 
STTR programs, the SBA's Growth Accelerated Fund competition 
was designed to support small business job creation by giving 
early stage entrepreneurs opportunities to immerse themselves 
in intense learning. Accelerators can provide founders of early 
stage companies with education, mentorship, financing, cohort-
based training, and technical assistance.
    In the SBA program, accelerators, incubators, coworking 
startup companies, and other entrepreneur models compete for 
grants of $50,000 each. In 2019, the competition focused on 
accelerators that work with high-tech entrepreneurs who are 
potential SBIR or STTR program applicants. The applicants must 
focus most of their efforts in support of entrepreneurs in the 
following groups: opportunity zones, socially and economically 
disadvantaged, women-owned businesses, or entrepreneurs located 
in states and territories that are traditionally 
underrepresented in the programs. Taken together, these 
programs aim to increase the number of small businesses in the 
high-tech segment of our economy, as well as raise their 
presence in Federal research and development efforts. That is a 
win-win for both the private and public sectors by creating 
jobs, growing companies, and providing solutions to complex 
problems.
    Again, I thank all of you for being with us this morning. I 
yield back, Mr. Chairman.
    Chairman CROW. Thank you, Mr. Balderson. The gentleman 
yields back.
    And if Committee members have an opening statement 
prepared, we would ask that they be submitted for the record.
    I would like to just take a minute now to explain the 
timing rules. Each witness gets 5 minutes to testify and the 
members get 5 minutes for questioning. There is a lighting 
system to assist you. The green light will be on when you 
begin, and then the yellow light comes on when you have 1 
minute remaining. The red light comes on when you are out of 
time, and we ask that you stay within that timeframe to the 
best of your ability.
    Our first witness, Dr. Alison Brown, hails from Colorado 
Springs in my home state of Colorado. Dr. Brown is the 
president and CEO of NAVSYS Corporation, a GPS technology 
company and SBIR awardee. She has over 15 years of experience 
in GPS receiver design and holds eight GPS-related patents. She 
is currently a member of the U.S. Air Force Scientific Advisory 
Board and served as a space representative for the Institute of 
Navigation Council in 1993. Dr. Brown is a member of the 
Editorial Board for GPS World and received the SBIR Tibbetts 
Award for her excellence in the program. She received her B.A. 
and M.A. in Engineering from Cambridge University, England, and 
earned an S.M. in Aeronautics and Astronomics from MIT--that 
kind of makes my brain hurt, Dr. Brown--where she was awarded 
the DuPont Scholarship and studied as a Draper Fellow. She also 
has a Ph.D. in Mechanics and Aerospace from UCLA.
    Welcome, Dr. Brown.
    Our second witness is Mr. Rohit Shukla, the CEO of Larta 
Institute, an internationally recognized technology 
accelerator. In founding and growing Larta Institute, he has 
developed a reputation and expertise in the commercialization 
of innovations emerging from government-funded initiatives, 
research institutes, universities, and larger companies in the 
private sector. Mr. Shukla has a Master's degree in Social and 
Political Sciences from Cambridge University, England, and a 
Master's degree in Communications, Arts and Sciences from 
Loyola Marymount University of Los Angeles.
    Welcome, Mr. Shukla.
    Our third witness is Mr. Javier Saade. Mr. Saade is a 
managing partner and venture partner at Impact Master Holdings 
and Fenway Summer Ventures. He was one of the highest ranking 
Latino appointees in President Obama's Administration where he 
served as associate administrator of the Small Business 
Administration. In that role, Mr. Saade oversaw the Small 
Business Investment Company, Small Business Innovation 
Research, and Small Business Technology Transfer System, both 
the programs we are going to be talking about today, and growth 
accelerator fund programs which collectively and since 
inception have invested over $120 billion in 320,000 small 
companies. Mr. Saade holds an MBA from Harvard Business School, 
an M.S. in Operations and Technology from Illinois Institute of 
Technology, and a B.S. in Industrial Management and 
Manufacturing Engineering from Purdue University.
    Welcome, Mr. Saade.
    I would now like to yield to our Ranking Member, Mr. 
Balderson, to introduce our final witness.
    Mr. BALDERSON. Thank you, Mr. Chairman.
    Our final witness today is Mr. Ron Shroder, chief executive 
officer and president of Frontier Technology, Inc. (FTI), in 
Beavercreek, Ohio. Mr. Shroder has nearly 40 years of 
diversified, technical, and management experience in the 
Department of Defense, commercial, and other Federal markets. 
During his tenure, FTI was awarded the SBA Tibbetts Award for 
the very best in Federal innovation research. He has been a 
member of the Governor's Ohio Aerospace and Aviation Technology 
Committee. Thank you for serving on that Committee. Great 
Committee. And is the former national president for the Defense 
Planning and Analysis Society.
    Thank you for being with us today, Mr. Shroder. Always good 
to have a great Ohioan here.
    Chairman CROW. Thank you very much, Mr. Balderson.
    Welcome, Mr. Shroder.
    Dr. Brown, you are recognized for 5 minutes.

     STATEMENTS OF ALISON BROWN, PRESIDENT AND CEO, NAVSYS 
CORPORATION; ROHIT SHUKLA, CEO, LARTA INSTITUTE; JAVIER SAADE, 
 MANAGING PARTNER & VENTURE PARTNER, IMPACT MASTER HOLDINGS & 
    FENWAY SUMMER VENTURES; RON SHRODER, CEO AND PRESIDENT, 
                   FRONTIER TECHNOLOGY, INC.

                   STATEMENT OF ALISON BROWN

    Ms. BROWN. Thank you very much, Chairman Crow, Mr. 
Balderson, and members of the Committee. I am very honored to 
be here today talking to you about the Small Business 
Innovative Research program and what a huge advantage that has 
been to my company and others in the state of Colorado.
    My name is Alison Brown. NAVSYS Corporation is a small 
business located in Monument, Colorado, and we have been 
development innovative positioning, navigation and timing 
solutions for the government and private sector since 1986. 
Much of our success has been from the technology that we 
developed with funding through the SBIR program. As an example, 
we developed an early device for use on Air Force radiosondes 
with an SBIR contract and that transitioned into the very first 
deployed emergency 911 system in Colorado. And the phone that 
we developed using that technology is actually now on display 
at the Smithsonian Aerospace Museum.
    Throughout my company's history, we have only been able to 
bring innovations to the warfighter and field these solutions 
rapidly because of the SBIR program. However, we, like many 
other small businesses, have faced challenges, in particular in 
SBIR transitions, both in protecting our intellectual property 
and also in obtaining Phase III contacts with the Department of 
Defense. Today, most of the protections enacted by Congress 
already to improve the SBIR process have not yet been 
implemented in the defense Federal acquisition regulations.
    Today, we have updates to the SBIR policy directive that 
include this legislation that have been released by the Small 
Business Administration, but the SBA is not staffed to enforce 
their own policy, and small business continue to face 
challenges due to the lack of defense acquisition regulations 
which implement this SBIR legislative language.
    Government industry panels established under the National 
Defense Authorization Act of 2016, the Section 809 and 813 
panels, both recognize the importance of SBIR in defense 
acquisitions. The Section 809 panel on acquisition reform 
recognized and recommended that the SBIR program both be made 
permanent and also that the SBIR allocation should be doubled, 
increased from 3.2 percent currently to 7 percent.
    I personally served on the Section 813 panel, which was 
chartered to look at improvements to technical data rights, and 
that resulted in recommending that SBIR data rights should be 
afforded similar protection within defense acquisition 
regulations as commercially developed items. The argument for 
this was that the intent of SBIR data rights is to reward small 
businesses for their innovation and invention and they need 
that protection.
    The SBIR program remains today one of the few successful 
paths for small businesses to bring innovations into the hands 
of the warfighter. Recently, Dr. Will Roper, who is the 
assistant secretary of Air Force for Acquisition, Technology 
and Logistics initiated a new SBIR Pitch Day model as a faster, 
smarter approach to compete for ideas that can solve near-term 
problems for the Air Force. NAVSYS has won two Pitch Day SBIR 
awards to date.
    In the first Pitch Day, contracting officials reviewed 417 
submissions. They invited 59 businesses to pitch their 
proposals in person in New York last March. I was there. It 
took only 15 minutes for me to make my pitch to a panel of Air 
Force program executives, and literally 10 minutes later I had 
received the Phase I contract award. We expect to receive our 
phase two contract later this month, which is less than 8 
months after submission of our first proposal.
    The SBIR program provides the mechanism to bring innovative 
companies into the DOD ecosystem. Dr. Roper said the next 
challenge is to organize to do this type of activity at scale. 
So I would ask that you consider first mandating that DOD 
promptly updates the DFARs to align with the SBIR policy 
directive; to adopt the recommendations from the Section 809 
and 813 panels; and to increase funding to facilitate rapid 
transition of SBIR-developed technology under programs such as 
the Air Force Pitch Days.
    And just to close, in General Stephen Wilson's own words, 
``Allow small businesses to deliver speed of capability to the 
battlefield.''
    Chairman CROW. Thank you, Dr. Brown.
    Mr. Shukla, you are now recognized for 5 minutes.

                   STATEMENT OF ROHIT SHUKLA

    Mr. SHUKLA. Chairman Crow, Ranking Member Balderson, 
members of the Committee, thank you so much for inviting me to 
speak before you today. It is a privilege to bear witness to 
the greatness of the SBIR-STTR program, and I just want to add 
here that we also were a recipient of the SBIR Tibbetts Award. 
I just want to make sure that everybody recognizes that. Thank 
you.
    For over 17 years, Larta has been providing 
commercialization services to SBIR and STTR grantees at several 
agencies, civilian agencies--NIH, NIST, USDA, NOAA, and DOE 
being the most recent one--covering our mission as an 
organization to focus on solutions that feed, fuel, and heal 
the world. We have worked closely with some 4,000 SBIR-STTR 
grantees since 2004. One size does not fit all, and I will come 
back to that in a second, in a minute here.
    Companies in the SBIR program, the ones that we have 
certainly been involved with over the last 17 years, are at 
different stages of maturity, development, different mindsets, 
objectives, assets, and histories. So we have developed a 
network-centric model of assistance to serve this diversity, 
one that customizes the experience of commercialization to meet 
the grantees' needs and objectives realities of the 
marketplace. One that uses the wisdom, experience, and networks 
of a host of demand experts, functional professionals, and 
industry buyers and investors, to focus grantees on their best 
and highest prospects in a highly dynamic and competitive 
marketplace. To be clear, we are what you might consider a 
virtual accelerator.
    This approach has been very successful. Our portfolio 
companies have raised over $2 billion. There have been 50 
acquisitions, 10 IPOs, and as important, the vast majority of 
companies that we have served are still around and doing 
reasonably well, beating the odds on survival of small 
businesses which you all know about.
    Providing these innovators with the tools to navigate a 
competitive marketplace and then having them be a part of our 
evolving and powerful network has drawn attention to the 
success of what is now known as ecosystem services approach. We 
perfected this over a long period of time.
    The emergence of TABA, which you are well aware of, which I 
take a little credit since the germ of the idea emerged from a 
proposal which I spearheaded when serving on NACIE, the 
National Advisory Council of Innovation Entrepreneurship 3 
years ago, has been a vote of confidence in the idea, and in 
many ways caused some concern for us and grantees and agencies 
alike.
    I should mention the work done here by John Williams of the 
SBA and Negat Raoul of the SBA in spearheading the notion of 
commercialization and the funding that goes with it. I believe 
it is positive that we have recognized the importance of 
commercialization and have provided funding to enable 
commercialization to be more than just a footnote in the SBIR-
STTR grantees' world.
    However, as I said, one size does not fit all. It would be 
a mistake to make this an individual handout program and it 
would be a great step forward to recognize in an ecosystem 
services concept reducing risk, increasing viability, 
visibility, and credibility by deploying the curated experience 
and wisdom of a marketplace is an approach that fits the 
profile of our times.
    What does this mean? For you, for your consideration, it 
means enabling a hybrid approach. Let agencies solicit and have 
accountable to them and the SBIR-STTR companies GSA vetted 
contractors like ourselves providing ecosystem services. And 
also allow companies to choose their own vendor if they 
demonstrate that they know what they know and can afford the 
risk.
    Most research-based companies, however, in our experience, 
do not necessarily know at the beginning in particular what 
they do not know. And this is not surprising, and it is not a 
reflection of any condescension on my part. We have tracked, 
surveyed, and brought into our network thousands of companies, 
and it is clear from our work that this is a true reflection of 
the reality of research-based businesses, in addition to the 
government itself as a user and buyer of services of the kind 
that Dr. Brown mentioned here, created by SBIR companies. It is 
itself, I do not think, not especially well tuned to the 
prospect of emerging such products paid for by the U.S. 
taxpayer except arguably in the Department of Defense. And I 
say arguably because you heard from Dr. Brown.
    In summary, one size does not fit all. Commercialization is 
an ever-expanding journey, not a destination. You should 
recognize the importance of ecosystem or HUB services and 
providers who have been successful in curating and providing 
these services as vital to the future of the SBIR program. This 
is informed choice and the government should consider how it 
might prime the pump on Phase III.
    Thank you very much.
    Chairman CROW. Thank you.
    Mr. Saade, you are recognized for 5 minutes.

                   STATEMENT OF JAVIER SAADE

    Mr. SAADE. Thank you, Mr. Chairman Crow, Ranking Member 
Balderson, members of the Committee. Thank you for having me 
here today.
    As you mentioned, I previously served as associate 
administrator of the SBA which runs, among others, the programs 
that are being discussed here today. Some of the companies out 
of the hundreds of thousands that received some of these grants 
and investments include Apple, Qualcomm, Tesla, and Genentech. 
But my focus here today is on the SBIR and the Growth 
Accelerator Fund competition.
    It was launched under my watch in 2014. The program's 
genesis is rooted in Obama's first term when the economy was in 
a freefall. One of the things the administration was focused on 
was a more inclusive and accessible economy, and it should 
continue to be a big part of the economic agenda. The economy 
turned around and the economic indicators are strong but the 
prosperity generated has been uneven. It is now more uneven 
than before the 2008 crisis. Tens of millions of people have 
been left behind. Most of them are from underrepresented 
groups, hard to upscale workers, and rural communities.
    This dynamic is magnified in our innovation economy. 
Venture capital's persistent geographic, gender, and racial 
homogeneity, evolving business formation pathways, and the lack 
of diversity in private and public companies' C suites and 
boards affect this dynamic and affect the productive capacity 
and growth potential of our economy.
    The government's role investing in the building blocks of 
innovation, empowering innovators, and clearing a path for 
anyone with talent cannot be overstated. Our innovation 
ecosystem as you have all mentioned is one of our country's 
crown jewels, but other countries are catching up fast. China 
is probably the best example.
    And the digital divide in the U.S. continues to get wider. 
More pathways enhance the ability to scale participation in the 
economy, but they continue to be sporadically reachable.
    The Growth Accelerator Fund Competition is one of these 
pathways. The fact that diversity in any form continues to be 
part of the conversations is good and bad. Good, because we are 
talking about it. Bad, because we are talking about it.
    The competition had two goals, which it accomplished. One, 
leveling the playing field in geographic areas with less access 
to traditional sources of capital. And two, supporting 
ecosystems and companies owned by, managed by, or that support 
underserved groups like veterans, people with disabilities, and 
minorities.
    The competition is now in its fifth year, and with 
relatively little money as mentioned before, it has supported 
more than 200 entrepreneurial ecosystems in 45 states, D.C., 
and Puerto Rico. They, in turn, support thousands of startups 
and entrepreneurs in places like Anchorage, Little Rock, 
Shreveport, Harrisburg, Detroit, and San Juan.
    You mentioned a few of the statistics and the program has 
been very successful in reaching underserved groups. Twenty-one 
percent of the winners had startups that were owned by or led 
by American Indians, Alaskan Natives or Native Hawaiians. 
Eighteen percent led by individuals with disabilities. Seventy 
percent by those with limited access to capital. Eighty percent 
who are racial minorities, 42 percent led by veterans, and 90 
percent had startups owned or led by women.
    The program can certainly be improved but the data points 
to the Accelerator Competition being a successful component of 
the American entrepreneurial ecosystem.
    At a high level, some things that Congress and the Agency 
should think about: One, is establish more permanent support 
and policy from a funding and policy perspective. Two, enhance 
the pathways for the thousands of startups that graduate to 
access the SBIR and STTR programs. Three, improve coordination 
with your districts and all the others around the country. 
States and cities are very important. Four, enforce tighter 
administration of the program with more robust reporting and 
metrics. Five, examine interagency overlap with other 
entrepreneurial support programs. Six, improve and continue 
underrepresented group and geographic gap outreach. Seven, and 
think about having different levels of award sizes.
    I am happy to answer any questions about this or the other 
programs. Thank you for listening.
    Chairman CROW. Thank you, Mr. Saade.
    And Mr. Shroder, despite the fact that like my friend and 
colleague Mr. Balderson, I am sure you are a Buckeyes fan, you 
are recognized for 5 minutes.

                    STATEMENT OF RON SHRODER

    Mr. SHRODER. Thank you, Chairman Crow, Representative 
Balderson. It is an honor to speak to the Committee on such an 
important aspect as innovative research, especially with FTI's 
long history in the program.
    As most of you know, the program started in 1977, under the 
National Science Foundation. It did not take long for the SBA 
to figure out how important a program it was, and it culminated 
with President Reagan signing it into law in 1982. Since that 
time there have been tremendous numbers of economic studies 
that have occurred on the program. When you look at those, what 
you can clearly see is, well, the money was extremely well 
spent, something that we can all be proud of.
    In this particular case, there are aspects like the 
National Cancer Institute study that talks about the return 
from taxes is a 3-to-1 ratio. There are more than one hundred 
thousand jobs in just that study alone that are very high-
paying, good jobs. The revenue generated by companies is 10 
times that.
    My background with the Defense Department is a little bit 
more associated with some of those other studies as well. And 
as you know, there are programs out there, like just the Joint 
Strike Fighter Program has published reports that said that 
SBIR technologies have saved half a billion dollars on just one 
program within the Defense Department. It is something that we 
can all be proud of, while DOD also published the fact that 
there is a 12-to-1, a 19-to-1, and a 23-to-1 return ratio. I 
sit here and smile when I think of what Congress has done 
because effectively, you have become the Shark Tank of the 
government long before the program was popular. You took the 
risk to invest in the technologies, and as small businesses, we 
thank you for that very, very much.
    The key is to understand what the technology and the 
program does. And realistically, a lot of people in the 
community will focus on the funding, the Phase Is and Phase 
IIs. But let me tell you as a small business what that does for 
you is it allows you to have a few people to work on a concept 
and a prototype in hopes that ultimately you can commercialize 
it. The real program success is in the Phase IIIs. That is 
where the jobs are. That is when customers can acquire as much 
as they want with any kind of funding that they want. It is 
jobs, jobs, and more jobs. And that is where our companies, our 
employees, the families of those employees all benefit, that is 
where the growth comes from, and that is what we very much 
appreciate.
    And realistically, while the program has been in place for 
37 years, it is this Committee and what it has done to evolve 
the program over the years that is so critical. Because the 
subtle changes of allowing a company to grow beyond the 500 
limit when you are going into the Phase III and producing more 
jobs, was critical to the program's success. But it was not 
just that. The recent addition of the 3 percent administration 
fee to allow the government people that we interact with to 
come to us and actually work on it is equally critical.
    You can look at a variety of those aspects, the most recent 
policy guidance from the SBA talking about use the Phase III 
program to the maximum extent possible is critical for 
companies like FTI, because when we go to the government and 
talk about ``here is the technology, you agree that it might be 
valuable and you can use it,'' they need to see from you and 
from the SBA and from the DOD that it is allowed, that they do 
not have to be scared, that they can take it and run.
    So again, from our perspective, we thank you for subtle 
changes throughout the decades. It is very, very critical to 
us. Which then leads us to, so what is next? And I think there 
will continue to be subtle changes as this program goes on. 
Those of us that are in the battle of it can give you some 
suggestions. I think they have got to come from your heart. I 
will tell you, after 37 years, I still do not understand why 
the program is not permanent. It is something that generated 
what is in every phone that we have today. It is across the 
examples you gave. I really do think it is time to make the 
program permanent. And I realize that some will hesitate 
because they will worry about the ability to monitor it. I 
think there are ways you can build into the law that you can 
consistently check on it. If you do look at considering it to 
be a permanent program, I think what you put into that law is 
critical as well, things like rapid innovation funding which is 
the key starter to get those new customers over that risk 
aspect since you have only built a prototype; the 3 percent 
administration fee to allow the government to actually help you 
run the program; all of those things are critical to the 
success of any permanent program that you look at, as well as 
even who is in the program. You know, American-based technology 
companies that can take these things and run, these are 
critical.
    So mostly, I thank you very much for the opportunity today, 
for the changes that you have done over the years, and for the 
courage to look at the program in the future.
    I will be happy to answer any questions as we go forward. 
Thank you.
    Chairman CROW. Thank you, Mr. Shroder.
    We appreciate the testimony that all of you shared today.
    And I would like to now submit this letter from the Clean 
Energy Business Network for the record.
    Without objection, so ordered.
    I will begin by recognizing myself for 5 minutes.
    This is a question for all of the witnesses. In my opening 
statement I talked about this concept of the ``Valley of 
Death,'' many businesses in my community, my district have 
talked about. So I would like to hear briefly from each of you 
whether that is an idea, a concept, or a term that you have 
heard of. Where that exists in the pipeline of the development 
of your businesses, and what we can do to help close that to 
make sure that we are setting folks up for success long term.
    Maybe we can start with Dr. Brown.
    Ms. BROWN. Thank you very much.
    Chairman Crow, the ``Valley of Death'' is real. And it is 
not just into Phase III. I mean, we go into valleys every time 
between Phase I and Phase II. I mean, that is what is so 
revolutionary about what the Air Force is doing with their 
Pitch Days is they are rapidly moving us through the process. 
We already have Phase III commitments now from Air Force 
partners that want to see our technology move forward. And what 
is different there is we are being given access. Before the 
SBIR program, we were working for the research institutes. Now, 
they traditionally do not move technology fast through the 
process. They are there for the long-term vision. But what we 
need to really move the innovation ecosystem into the hands of 
the warfighters is technologies that can move fast; that can 
get in front of the decision-makers, can show them. We are not 
asking for a handout. We just want the opportunity to be able 
to be able to walk in, show them what we can deliver. And that 
is what the SBIR program has done.
    Other programs that are being started to get innovation 
into the hands of the warfighter we do not see as having nearly 
the opportunity to be as successful as the SBIR. Congress, 
basically, you know, they asked for rapid prototypes to be 
enacted. They gave the DOD acquisition authority to do other 
transaction authorities. If you go look at those programs, the 
vast majority of them are giving awards to the large 
businesses, not to the small innovators, not to the 
nontraditional contractors, but to the same companies, in fact, 
the foundation of our Department of Defense, I mean, they are a 
national asset as well. But----
    Chairman CROW. It sounds like speed is a really essential 
element here, that the process is taking long and one of the 
unique aspects of the Pitch Day is that it expedites it fairly 
significantly.
    So would you say that there is an opportunity to scale this 
and roll it out to other services and that would be helpful?
    Ms. BROWN. Absolutely. And I would also say it is the speed 
and the access. Getting us in front of the decision-makers so 
they can make the decision of what we can do to help them.
    Chairman CROW. Thank you.
    Mr. Shukla?
    Mr. SHUKLA. Yes, sir. Of course we have heard of the 
``Valley of Death,'' but I also think there is a consideration 
given to the chasm of relevance. Making yourself relevant to a 
set of buyers and potential users is what should be encouraged. 
I do believe that credibility, reduction of risk, visibility, 
viability are all issues for small businesses in the research 
phases of their programs, including Phase I and Phase II.
    One of the things we have done is to reduce that risk, 
increase the visibility and viability of these companies, 
increase their credibility by putting ourselves on the line, 
essentially, in front of buyers and investors and so on and so 
forth. It is a proxy of what Dr. Brown talked about in the 
Defense Department, getting them before people who might be 
interested in taking these on.
    There is a range of different things that can be done and 
should be done. It is a highly-dynamic kind of process trying 
to engage a marketplace where there is a tremendous amount of 
competition. I will say, and Javier might back me up on this, 
the landscape of funding has also changed dramatically. It is 
no longer just about venture capital, and it is no longer just 
about corporate capital either, corporate investment capital. 
Foundations are now investing in companies. Family offices have 
become really active. These are all channels that you have to 
keep juggling with and working with and we do that on behalf of 
these small businesses because their success is our success.
    Chairman CROW. I am going to give the others an opportunity 
as well. Thank you.
    Mr. Saade?
    Mr. SAADE. I do not have much to add. I will say that it is 
the 21st century and the way in which business formation 
happens, capital formation happens, how people access 
technologies has changed. And with that is concentration of 
said capital. And the path of least resistance typically is to 
write big checks. But the ``Valley of Death'' affects the 
smaller entities which need smaller checks. So there is all 
kinds of issues there, and yes.
    Chairman CROW. Thank you.
    My time has expired.
    The Ranking Member, Mr. Balderson, is now recognized for 5 
minutes.
    Mr. BALDERSON. Thank you, Chairman Crow.
    Mr. Shroder, while the SBIR has proven beneficial to early 
stage growth, the process itself can make it hard to develop 
products because of delays. Can you offer any recommendations 
as to how to alleviate some of the pinch points that people 
face?
    Mr. SHRODER. I really think it is a corporate culture that 
has to be evolved. I think you have to look at it as if you are 
on Shark Tank. And when you are on Shark Tank, I think we are 
honored to have your funding. And while this topic of the SBIR 
might be a particular focus, we as a company have to make sure 
that we are spending the money in a way that you would be 
proud, and that being proud does not include just looking at 
the technology today but spending those resources to productize 
the technology in a way that goes beyond the two or four or six 
people that you are talking to originally.
    And so it is challenging as research engineers, et cetera, 
to literally take the scope of what might have originally been 
defined in a topic of an SBIR Phase I or whatever and think 
that to commercialize it we are going to have to expand that 
scope. And when we expand that scope, it is going to broaden us 
to other customers, and those customers will be able to use 
that product maybe in a slightly different manner than what it 
was originally envisioned to be. But I give you the equivalent 
of if we were Microsoft and we were all using Microsoft Word at 
some point in time, what is going to happen is if you want a 
better spellchecker, how would you like to be the only 
organization that pays for that change? That does not work. 
What you have to do is diversify that increase in capability 
across a broader audience, and you need to have that focus when 
you start the Phase I and Phase II SBIR.
    Mr. BALDERSON. Okay. Thank you very much for that answer.
    Dr. Brown, according to the Census Bureau, female-owned 
firms account for 36 percent of all American businesses, and 
that number is steadily rising, which is a good thing. Can you 
offer any advice to female entrepreneurs who may be interested 
in applying to the SBIR program?
    Ms. BROWN. One advice I would like to give them is 
basically a real world story about a friend of mine who is also 
a woman-owned small business. It is an unfortunate fact of life 
that women in the defense industry face discrimination. And 
there have been cases where women have been permitted to be 
part of the 8(a) program. The 8(a) program has significantly 
more access to opportunities for businesses than the Women-
Owned Small Business program, significantly.
    So my friend had faced significant discrimination. She went 
through quite frankly a humiliating experience which I have 
elected never to do myself, and she put forward her experiences 
to the 8(a) and applied to become a member of that program. 
Other women have been successful in going through that process. 
She was denied, not because she had not experienced 
discrimination; she was denied by the SBA because she had 
persevered and succeeded in spite of that.
    Now, no other member of the 8(a) program is required to go, 
first of all, through that humiliating experience. And 
secondly, would be judged ineligible for that program just 
because the fact that they had actually succeeded.
    So I would ask that you consider giving women-owned small 
businesses the same blanket protection that other minorities. 
We are not a minority but we are definitely a minority in small 
businesses in government contracting. Please give us the same 
protection as other 8(a) programs and do not require us to go 
through this humiliating process even though we have suffered, 
in many cases, more than other minorities.
    Mr. BALDERSON. Thank you very much. And we will help you in 
any way we can. Thank you.
    Mr. Chairman, we are pretty close to being out of time, so 
I will yield back my remaining time.
    Chairman CROW. Thank you. Thank you, the gentleman yields 
back.
    And now I would like to recognize the gentlelady from 
Pennsylvania, Ms. Houlahan, for 5 minutes.
    Ms. HOULAHAN. Wow. I wish I had been here to hear what you 
were just talking about. I am grateful to you all for your 
testimony and for coming here.
    We actually have a lot in common. I was a program manager 
in the Air Force. I am also a MIT person. My mom is a GPS 
person. And I am an entrepreneur and small business owner 
myself. And so a lot of what you guys talk about really 
resonates with me. And so some of my questions have to do with 
training of workforce development. And so one of the things I 
have heard of consistently that we do not have, for small 
businesses, a really good pipeline of STEM-trained workforce. I 
think that people who are from larger and more established 
businesses do not have quite the same pipeline problem. And so 
I have had the chance to try and travel within my community--I 
am from the Philadelphia area--to find programs that are trying 
to elevate people into that pathway. Specifically, one of them 
was in the University City Science Center in Philadelphia. And 
I was wondering how we as a Federal Government can help you all 
in this particular issue, if you could talk about that.
    Ms. BROWN. Thank you so much for bringing that up. STEM is 
actually a passion of mine. I volunteer extensively both with 
the local universities, mentoring girls as young as 12. I mean, 
it is being shown that we have to basically get young people 
excited about technology and moving into our industries at that 
age, and girls in particular are very disadvantaged in being 
able to have role models and so forth to move forward.
    I would like to circle back on the SBIR program, just give 
you some real world stories.
    When I first moved to Colorado, you know, my main office is 
actually in Monument, which is not far from your district. And 
at the time that was a very sleepy little town. It has grown a 
lot since then but it was very sleepy. I got involved with the 
local high school, and one of my early employees was actually a 
high school student, Randy Silva. We sponsored him. He went 
through University of Colorado. We actually gave him 
scholarships and so forth. He came back and worked for us and 
was an absolute star.
    I am happy to say we have continued that model. I have a 
high school student from Salida High School now. We started a 
field office there. This is a very small, rural mountain town. 
We quite frankly are very disadvantaged in our local high 
school in terms of access, broadband access in particular. So 
this student is just amazing. We have him working on new 
technologies related to position, navigation technology, deep 
learning, and we are soon going to start developing some new 
game technology. He is just lapping it up. And other students 
there have similar abilities, and when they are given access to 
the broadband, they are given access to mentors, they are given 
access to the online courses. He is doing online university 
course right now. That is revolutionary. And I would like to 
thank you for the SBIR program because it has enabled companies 
like mine to bring on and encourage these youth.
    Ms. HOULAHAN. Gentlemen? Anyone else?
    Mr. SHUKLA. Thank you, Ma'am. I just wanted to say there 
are lots of imaginative approaches to workforce development in 
particular going on around the country. I think you will hear 
from industry generally across the board in innovation and 
technology that there is a real concern with the preparedness 
of the workforce and the availability of talent. And clearly, 
one of the responses has been to import talent using obviously 
the conventional method of doing so over the years which of 
course has come under considerable stress as you know more 
recently.
    I will say the one thing you can do as a government is to 
actually focus on integrating the different efforts in 
workforce development across the agencies. So labor has a whole 
bunch of stuff. EDA at the Department of Commerce has a whole 
range of programs. I think if you start to look at them and see 
what the common elements of training and block grants, for 
example, for education and training to the states and to local 
programs at the community colleges, you will find that you will 
reduce duplication, reduce the silos between programs, focus on 
the particular objective of being able to get a well-trained 
workforce for different kinds of new jobs, and not just 
technical jobs but jobs that can actually work on critical 
thinking across the board. You do not see that very often. You 
do not see that kind of coordination. In fact, it has been 
going on now for 25-30 years that I have seen starting in the 
Clinton Administration and moving all the way down.
    Ms. HOULAHAN. No, I appreciate that. And I am a freshman 
here and in my first 8 months what I have seen is definite 
silos, you know, whether it is programs that help women 
entrepreneurs or programs that help veteran entrepreneurs. I am 
both. You know, and so when I ask questions about the 
intersectionality of those, there is kind of crickets. And so I 
think that is a really good point.
    I have only 7 seconds left so I yield back the balance of 
my time. Thank you.
    Chairman CROW. Thank you. The gentlelady yields back.
    Now I will recognize the gentleman from Tennessee, Mr. 
Burchett, for 5 minutes.
    Mr. BURCHETT. Thank you, Mr. Chairman, Ranking Member, for 
holding this important hearing.
    As all of you know and exemplify, small business owners 
have to be innovative and willing to take some risks. That is 
what defines American entrepreneurs and defines all of you all.
    I was happy to help introduce the Small Business Innovation 
Research and Small Business Technology Transfer Improvement 
Act, and I will require each of you to restate that name to me 
as you leave today.
    That is a joke, by the way. Just making sure you all are 
listening over there.
    And along with my colleagues, including Mr. Baird and 
Chairman Crow, I feel this legislation will help provide some 
competitive funding opportunities that encourage small 
businesses to take risks and pursue innovative research for 
technology commercialization and frankly do what you all do 
best.
    This is a question for Mr. Shroder. Can you talk a little 
bit about--and if any of the others want to add in after him 
that would be great--about how the SBIR program allows 
companies to take risks on technologies they believe in but 
might not have the financial wherewithal to work on it?
    Mr. SHRODER. You know, I go back to the Shark Tank aspect. 
We are fortunate to have resource dollars associated with it 
that we can take the risk of hiring those STEM people into 
engineering and scientific aspects and not be afraid of failing 
on a technological approach. We look at failure on a technology 
basis as just an opportunity to learn what does not work so 
that we can move to the next aspect. When you are doing that on 
Department of Defense funding aspect that is very challenging. 
You do not want to use their money in a way that is 
questionable or that they would be disappointed by. But when 
you are doing that with an SBIR program and SBIR dollars, as 
long as you learn from that and adapt your technology to deal 
with those under that aspect you are really given an 
opportunity to succeed. And once you get past those, I will 
call them the valleys, the challenges, the technological 
breakpoints and you adapt, I think you then have a much 
stronger technology that hopefully you can ripple throughout 
the rest of the organization.
    So for us, the SBIR program is unlike any other aspect that 
we dealt with. It gives you the opportunity to take the risk. 
Fail until you succeed.
    Ms. BROWN. I work in both an advisory capacity for the 
Department of Defense, you know, through my Air Force Science 
Advisory Board work as well as a small business. So one of the 
things that I see that is so important in technology today and 
bringing it forward in innovation is the willingness to fail 
fast and learn from your failures. And if you do not take 
risks, you do not get the great advances. So for example, 
Iridium. Wonderful system. You know, the first global, low 
earth orbiting communication system. It has been dramatic in 
changing lives all over the world. It was developed here in 
America. And it was developed with a lot of sponsorship from 
the Department of Defense. But one of the biggest items--it 
would never have been built as a DOD system, and the reason is 
because they took the risk to fly all of their satellites with 
non-space-qualified parts. Space qualification adds a decade 
into the legacy of technology introduction into military 
satellites. We are still working with technology, you know, 
that was developed 10 years ago and was hardened and tested 
that is considered safe to use in satellites. Iridium took a 
total different approach. The ``gray beards'', as it were, in 
the defense industry thought it was not going to work. It did 
work. If they had not been able to take that risk, afford to 
basically try it, work around it, develop solutions, we would 
not have that system today and we would not be looking at this 
huge explosion in broadband satellite Internet that is all 
going to be based on commercial technology that is coming from 
the other companies following them.
    Mr. BURCHETT. To piggy-back on that, is there any 
opportunities to advance on others' failures? I am a gearhead 
and I like the history of Ferrari. And Mr. Ferrari actually 
never built a car. He just built a wonderful 12-cylinder engine 
and had other people build his bodies. But he watched his other 
racecars would end up crashing and then he would find out what 
they did and then innovate on it, and so he did not have those 
same catastrophes.
    Mr. SHRODER. I certainly think there is a lot of that. We 
talk about in our case, you know, maybe he talked to people and 
figured out his bodies and the cars were not the best, but we 
oftentimes use the concept that we have two ears and one mouth. 
Sometimes we have to use them in that proportion. The key is 
listening to what the customers need and then adapting. And 
when you start off, to be fair, when you think you understand, 
let's take a Phase I SBIR topic, it is a one-page description. 
For you to imply that you truly understand what they think is 
the problem is at best a little speculative. So the most 
important thing you can do in a Phase I or Phase II program is 
just to sit down and listen and describe to them what you think 
you have heard them say, let them get a chance to reiterate it, 
go talk to others that are similar to them so that you end up 
finding out more and more about what the real problem is, which 
is way more valuable than the actual topics and the 
descriptions that come out of the system.
    Mr. SHUKLA. So if I might just add one little thing. I know 
they are talking about the Department of Defense in particular, 
military procurement. In the civilian agency world, in the SBIR 
world, risk is baked into the process itself as they both 
alluded to and Javier alluded to as well. One thing we do is to 
ensure that we maintain continuing intelligence about the 
marketplace. That we can share with additional folks coming 
into the program, cohorts that we are training. That is 
extremely important because it is experiential learning that we 
are able to impart to grantees that they otherwise would not on 
their own be able to access.
    Mr. BURCHETT. Thank you, Mr. Chairman. I have gone over. I 
appreciate your indulgence, brother.
    Chairman CROW. Thank you.
    I would like to now recognize the gentlelady from Iowa, Ms. 
Finkenauer.
    Ms. FINKENAUER. Thank you, Chairman Crow.
    The topic of today's hearing means a heck of a lot to me. 
You know, I came to Congress to help Iowa small businesses fuel 
innovation and create jobs. But more importantly, the 
underlying part of that is I grew up in a state where I started 
seeing a lot of my friends that I graduated high school with 
move away. And we have got to figure out ways to create more 
opportunity in rural areas, bring people back home, and also 
make sure that they can stay and find opportunity.
    And so one of the first things I tackled was making sure 
that the Small Business Innovation Research program and the 
Small Business Technology Transfer program were more accessible 
because I found that that was a great vehicle to be able to do 
it.
    I was actually sworn in with Chairman Crow on January 3rd, 
and by January 14th, I was really proud to get to pass my first 
piece of legislation, the Small Business Stimulating Innovation 
through Procurement Act of 2019 along with my colleague that I 
met right across the hallway from me in Cannon, Congressman 
Curtis. It was a bipartisan bill, one that I knew was 
incredibly important, again, for our state and for our 
communities all across the country. You know, the Small 
Business Innovation Research program and the Small Business 
Technology Transfer program have truly put innovative small 
firms on the map. These programs have given our small 
businesses the opportunity to participate in Federal research 
and development and commercialize their work. This is a win 
obviously for small businesses and for economic innovation and 
growth, again, all across our country.
    However, more small businesses could be benefitting from 
these programs. My bill, actually, requires government 
personnel to conduct outreach to small firms on the Small 
Business Innovation Research program and the Small Business 
Technology Transfer program, specifically, H.R. 246. Obviously, 
the bill that I have been talking about, they were able to 
pass, Stimulating Innovation through Procurement Act of 2019. 
It would add a duty to the role of the procurement center at 
the SBA to actually assist small firms with these programs.
    I am proud of this work. It was one, again, that just made 
sense and something that we needed to get done, again, to help 
the next generation, and we have done our work here in the 
House to get this thing done and passed. But I will keep 
pushing every day for it to become law.
    Mr. Shukla, if this bill is signed into law, how would H.R. 
246 help stimulate small business innovation in places like 
Iowa? What would that mean for rural areas?
    Mr. SHUKLA. Thank you very much, Ms. Finkenauer.
    I will say, since I have also worked in Iowa, by the way.
    Ms. FINKENAUER. Oh, my goodness.
    Mr. SHUKLA. Involving food and ag, and life sciences, in 
particular, two anchors of the state's economy, and in rural 
Iowa, I will say that you are absolutely on the right track. 
The one thing I would ask though is for you folks to empower 
the SBA with funding and staffing. They are really 
understaffed.
    Ms. FINKENAUER. Yes. Absolutely.
    Mr. SHUKLA. And to connect in the conventional funding 
apparatus of SBA which is lending, in particular, with the 
innovation, which is really, really, really underfunded in 
terms of staffing.
    If you want to be able to increase the output of innovation 
in rural areas, you have got to be able to expand the scope of 
what they currently do. They do some great things with the road 
tour, the roadshow and the road tour to underserved areas and 
to rural areas, but I think it should be expanded beyond that 
for outreach and training and procurement and a whole range of 
things that need to be brought together.
    Ms. FINKENAUER. So if this bill were to get signed into law 
and these procurement officers were made to then work with some 
of our small businesses to get those government contracts, what 
would that mean specifically?
    Mr. SHUKLA. Well, it would certainly mean that you could 
have, like you do right now with the SBIR program, in any case 
to set aside for small businesses, is you establish a core 
group that you can actually reach out to in rural areas. USDA 
does a program on rural development but it is frankly 
underserved in my opinion. So I think you could do some things 
in rural parts of the U.S., the broadband initiative is one of 
them, that could be linked directly to the SBIR program itself 
for topic areas and so on.
    Ms. FINKENAUER. Great. Thank you so much. And thanks for 
explaining that to folks on the Committee and to Washington.
    And I just also want to take the opportunity to thank you 
all for coming to testify here today. It does mean a lot, and 
we have got some good work to do and I am excited to get to do 
it.
    And thank you, again, Chairman Crow. And with that, I yield 
back.
    Chairman CROW. Thank you. The gentlelady yields back.
    I just have one follow-up question. The district that I 
represent is one of the most diverse districts in the country. 
I have over 150 languages spoken in one of my cities. Almost 
one out of every five residents was born outside of the country 
and they are very unique challenges to our immigrants and 
refugee communities in starting and growing businesses and 
accessing these programs.
    I would love your thoughts on, just very briefly, on what 
your experience has been on those challenges and what we could 
be doing better to make sure that we are reducing barriers and 
opening those up for those communities.
    Mr. Saade, do you want to start?
    Mr. SAADE. I will give it a try.
    Look, the pathways to economic prosperity have widened, but 
the people that control the purse strings, and I am not talking 
about necessarily where we sit today, but in the private 
sector, have concentrated. So it is not only immigrant 
communities but anyone, if you look at the general macros and 
the demographics of the population, something like 30 percent 
of the population is white males. And I do not have anything 
against white males, but the reality is that the country is not 
white male. And if you believe that talent is equally 
distributed, yet opportunity is not, then a good place to focus 
is not just necessarily on the raw ingredients of what takes a 
technology to a company to the capital markets and to 
eventually millions of pensioners holding the stock of a 
publicly traded company but just giving the people access to 
the door because, I mean, at the end of the day, without these 
programs, 70 percent of the technologies in the Apple phone 
would not exist. A drug that saved my dad, Rituxan, and Biogen 
its maker, would not exist without SBIR. So just the fact that 
they exist is an amazing thing.
    But the country is changing. The world is changing. Many 
countries are out there with knives in their mouth trying to 
take us off the pedestal across many aspects, including 
economic diplomacy and entrepreneurial diplomacy. So yes, I 
agree with you that a focus on less served groups, and that 
includes immigrants, is smart business. On top of the fact 
that, one last thing, if you look at the biggest companies in 
the United States by market cap, 40 percent of them were 
started by first generation immigrants. So all the money that 
Wall Street loves and all the stocks we love to buy, it is 
literally the lifeblood of, and I do not want this to be an 
immigration pitch, but immigrants are hugely important to the 
innovation economy.
    Chairman CROW. Thank you, Mr. Saade.
    Thank you to all the witnesses for sharing your time.
    Representative Kim, one of our colleagues, is on his way 
right now and had a question he wanted to ask. So I would open 
it up to Mr. Shukla and Ms. Brown and Mr. Shroder, if you have 
any comments on my last question.
    Mr. SHUKLA. Yes, sir.
    You know, in 1986, Margaret Thatcher turned to Gorbachev 
and said, Mr. General Secretary, the ice's most difficult point 
is breaking up. The fact of the matter is things are in flux, 
and they are in flux. And what Javier was talking about in 
terms of immigrants leading economic development in certain 
areas is true. And access is also becoming a big issue.
    Now, I am very optimistic that we are actually finding ways 
of being able to deal with this issue. Obviously, there are 
some real concerns on a national level and a Federal level. But 
at the state level, states like California, for example, are 
very diverse as you know. I come from one of the most diverse 
cities on the planet. And it also has extreme inequality. But 
there are lots of things that are being done to address 
different aspects of it. And I am very optimistic. That is what 
I would like to tell you.
    Ms. BROWN. Thank you for asking the question. As you have 
heard, of course, I am an immigrant. I was sworn-in in-front of 
the Capital, the steps of Colorado as a result of Ronald 
Reagan's Immigrants Day. It is a day that I always remember.
    One of the thing that I think would be most appropriate to 
try and help your diverse constituents is better and equal 
access to capital. Immigrants have great ideas, but when you go 
into a bank and you are looking for a loan and you are trying 
to get approval, you just have to look at the numbers to see 
that women and immigrants are disadvantaged in that domain.
    The SBA has some fantastic programs. They have had 
programs, too, that really try to improve rural access to 
capital, which is even more disadvantaged. So I would 
encourage, look at the numbers. If the numbers are not showing 
that we are spreading access to capital equally, look at how do 
you fix that. Because you cannot make a business without 
getting a bank loan.
    Chairman CROW. Mr. Shroder?
    Mr. SHRODER. I am not sure I am the best one to answer the 
question but I will tell you, as you think through it, if it is 
more of a discussion, stay focused on the Phase III for just a 
second. Because you can enter through the immigration. It is a 
little bit hard for my background because from an immigration 
perspective it might be hard to get Defense Department 
clearances to do the classified work. So while being a 
Caucasian male and having a company I am proud of, et cetera, 
we have been able to hire a lot of people. We have grown from 
two states to I think we are in 26 states now across the board. 
So we would like to think that it is spread out at least more 
geographically. But as you think of the program in the future, 
whether it is capital and other things, I think you have got to 
find that balancing act of when you are actually doing it to 
generate the start of a new program versus actually the hiring 
of those immigrants. I know we have hired significantly in 
Colorado recently. To us, immigrants are fine as long as they 
can work in that environment, and they have been an important 
part of growth for us. But you can understand the challenge of 
clearances and other things that might be associated with 
Defense Department programs.
    Chairman CROW. Thank you.
    I would now like to recognize the gentleman from New 
Jersey, Mr. Kim, for 5 minutes.
    Mr. KIM. Thank you, Mr. Chairman. And thank you so much for 
coming here and talking with our Committee. I was rushing over 
here from the Conference Committee for the National Defense 
Authorization Act where we talked a lot about the importance of 
innovation in our system as well, in our national security, 
certainly in our energy sector, and so many other important 
components.
    So coming straight out of there, I wanted to rush on over 
here and just really kind of get a sense from you of some of 
the steps that we can take. I know that SBIR, STTR, and some of 
these other programs, they play an important role in terms of 
spurring the technological innovation. And these programs like 
these that have allowed the United States to create not only a 
sustainable workforce but also to become the leader in tech 
innovation despite strong global competition. As I said, this 
is particularly the case in clean energy and a number of other 
places where I think this overlaps with a lot of interest, 
certainly in my own district as we are thinking about the 
future role that we can play in that innovation.
    So I just wanted to start, Mr. Shukla, you have advised 
multiple nations on technology-led innovation. What kind of 
investments should the United States Government make to remain 
competitive in innovation on a global scale, especially in 
sectors like clean energy?
    Mr. SHUKLA. So I do think that there are incredible 
investments that have been made by this country in Centers of 
Excellence across the United States and universities, in 
cities, in clean tech foundation funds, in the competitions 
that exist around clean tech. The one concern is there is 
considerably less coordination than there ought to be. And so 
when you have funding that comes down different silos, either 
Federal or state, there really is no coordinated effort to say 
what are we trying to achieve? What are the success factors 
that we are looking at? What kinds of jobs are we likely to be 
able to get from this? Where else can we prime the pump to make 
sure that we have those kinds of investments that yield results 
and monitor them?
    It is easier when you have a smaller economy. I mean, 
Germany decided, you know, we are going to go specifically into 
solar production and solar technology and solar energy and all 
of the aspects that matter, only to then be bested by China. So 
when you have countries that do not play by the rules even 
though they are supposed to play by the rules because they have 
been inducted in, you have to be particularly careful about 
this. And it is a cautionary tale only because this has 
happened in food and ag. It has happened in life sciences. It 
has happened in materials. And it has happened now in clean 
tech and clean energy.
    So I think we have got to really focus on what is our 
national goal, in particular, and then make sure that we 
coordinate over every single agency and also every single state 
which has programs in this regard. The Federal Government 
almost leaves this aside and says, you know, that is up to you 
guys to do this. Under our Federal system that might make sense 
but I do not think as a national objective it makes sense to be 
able to leave things to the wind, so to speak.
    Mr. KIM. Thank you for that. I appreciate this.
    Mr. Saade, I wanted to just seek your thoughts on something 
in particular.
    So for 5 years the SBA has funded the Growth Accelerated 
Fund competition which awards monetary prizes of $50,000 to the 
Nation's most promising small business accelerators and 
incubators. Now, 60 percent of the funding is steered to 
support entrepreneurs in one of the following groups: women, 
socially and economically disadvantaged, opportunity zones, or 
those located in states underrepresented by SBIR-STTR. Can you 
please speak to the value of the program and providing support 
to traditionally underserved groups?
    Mr. SAADE. Sure. Thanks for the question.
    You can think about it as financial services or banking, 
but just to focus it on the innovation economy is venture 
capital and the entrepreneurial activity funding pools pursue 
is concentrated in basically five states. And in those five 
states it is six cities. And those cities are magnets for 
people. They are magnets for the tax revenue they generate. It 
is very difficult to compete with those.
    The fine congresswoman from Iowa was talking about it from 
her perspective, Iowa. And it cannot be overstated that 
discovery can happen anywhere but typically what happens is 
that one of these technologies or one of these companies gets 
discovered and a venture capitalist from Menlo Park or Brooklyn 
invest in them. They basically uproot the seed and move them to 
Menlo Park or Brooklyn. So the reason for that is because those 
places are ecosystems by design and they have been around for 
years. No one is ever going to replicate Silicon Valley again 
for a lot of reasons. There are a lot of ingredients that made 
that happen. But the reality is that there is a lot of cities 
and places in America--Boulder, Austin, suburbs of Seattle, 
that are not trying to be Silicon Valley but are trying to 
combine all those ingredients and make their entrepreneurial 
ecosystem important.
    This program essentially anchors the ecosystem literally by 
building and supporting ecosystems. And the hypothesis was 
pretty simple. By creating the ability for serendipitous 
collisions to happen and a focus of attention on different 
communities, including in your state, Mr. Kim, you will support 
a more entrepreneurial economy. And it has been shown that 
places with more entrepreneurial energy and more business 
formation actually have better economies.
    So the program, sort of like SBIR and STTR functions as 
first risk capital because no one else in the private sector 
would ever take the risk because it is a 30-year runway to 
develop a national priority. There is no one in the private 
sector that is going to take a risk on Shreveport or my home 
town of San Juan. So the government's role with just that 
little bit of money is to help catalyze some of those things.
    And one more thing I will add is that $50,000 in the great 
scheme of things is the salary of a person with a college 
degree, generally. Not much. But the idea around the ecosystem 
is that it attracts private capital. And at that, the program 
has been pretty successful. And Congress I think has a match 
requirement on some of the dollars that go into accelerators. 
So it is a low risk and low dollar way to kind of open the 
aperture for opportunity.
    Mr. KIM. I appreciate that.
    Chairman CROW. Thank you. The gentleman's time is expired.
    Mr. KIM. I yield back.
    Chairman CROW. Thank you.
    Thank you to all the witnesses for your time, sharing your 
expertise and experiences. This is very valuable for us as we 
look at all the legislation and the fixes and things that need 
to happen to make sure that we are remaining competitive.
    Increasing our competitiveness by supporting small business 
innovation is more critical than ever as we heard about today. 
As our world continues to become increasingly connected, 
America's lead in technology is crucial to our economic 
prosperity and national security.
    The partnership between federally funded research, 
academia, and private industry has been pivotal to U.S. 
technological advancement since the 1930s and has helped the 
U.S. maintain leadership despite stagnating investments. 
However, that lead is rapidly evaporating. That is why 
investment improved access to these programs and the Growth 
Accelerator Fund Competition must continue to grow and succeed. 
The members of this Committee must continue to raise awareness 
of the value of these programs and lead on developing policies 
to ensure their success.
    I look forward to working with Ranking Member Balderson so 
that small businesses in the U.S. have the tools they need to 
innovate, grow, and create jobs on Main Streets all around the 
country.
    I would ask unanimous consent that members have 5 
legislative days to submit statements and supporting materials 
for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
Committee, we are adjourned. Thank you.
    [Whereupon, at 11:56 a.m., the Subcommittee was adjourned.]

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