[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


              OVERVIEW OF THE SMALL BUSINESS INNOVATION
                RESEARCH AND SMALL BUSINESS TECHNOLOGY 
                TRANSFER PROGRAMS

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                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              MAY 13, 2021

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 117-012
             Available via the GPO Website: www.govinfo.gov             
             
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
44-564                   WASHINGTON : 2021                     
          
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                          JARED GOLDEN, Maine
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                         MARIE NEWMAN, Illinois
                       CAROLYN BOURDEAUX, Georgia
                         TROY CARTER, Louisiana
                          JUDY CHU, California
                       DWIGHT EVANS, Pennsylvania
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                          ANDY KIM, New Jersey
                         ANGIE CRAIG, Minnesota
              BLAINE LUETKEMEYER, Missouri, Ranking Member
                         ROGER WILLIAMS, Texas
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                        CLAUDIA TENNEY, New York
                       ANDREW GARBARINO, New York
                         YOUNG KIM, California
                         BETH VAN DUYNE, Texas
                         BYRON DONALDS, Florida
                         MARIA SALAZAR, Florida
                      SCOTT FITZGERALD, Wisconsin

                 Melissa Jung, Majority Staff Director
            Ellen Harrington, Majority Deputy Staff Director
                     David Planning, Staff Director
                           
                           
                           C O N T E N T S

                           OPENING STATEMENTS

Hon. Nydia Velazquez.............................................     1
Hon. Blaine Luetkemeyer..........................................     3

                               WITNESSES

Dr. Joyce Tung, Vice President of Research, 23andMe, Inc., 
  Sunnyvale, CA..................................................     5
Ms. Pat Keady, Founder, CEO, and President, Aerosol Devices Inc., 
  Fort Collins, CO...............................................     6
Ms. Rebecca Todd, Innovation Consultant, Arkansas Small Business 
  and Technology Development Center, Little Rock, AR.............     8
Mr. Jere Glover, Executive Director, Small Business Technology 
  Council, Washington, DC........................................     9

                                APPENDIX

Prepared Statements:
    Dr. Joyce Tung, Vice President of Research, 23andMe, Inc., 
      Sunnyvale, CA..............................................    34
    Ms. Pat Keady, Founder, CEO, and President, Aerosol Devices 
      Inc., Fort Collins, CO.....................................    43
    Ms. Rebecca Todd, Innovation Consultant, Arkansas Small 
      Business and Technology Development Center, Little Rock, AR    45
    Mr. Jere Glover, Executive Director, Small Business 
      Technology Council, Washington, DC.........................    55
Questions and Answers for the Record:
    Question from Hon. Leutkemeyer to Mr. Jere Glover and 
      Response by Mr. Jere Glover................................    84
    Question from Hon. Williams to Mr. Jere Glover and Response 
      by Mr. Jere Glover.........................................    85
    Question from Hon. Davids to Mr. Jere Glover and Response by 
      Mr. Jere Glover............................................    86
    Question from Hon. Meuser to Mr. Jere Glover and Response by 
      Mr. Jere Glover............................................    87
    Question from Hon. Newman to Mr. Jere Glover and Response by 
      Mr. Jere Glover............................................    88
Additional Material for the Record:
    New England Innovation Alliance (NEIA).......................    89

 
                    OVERVIEW OF THE SMALL BUSINESS 
                     INNOVATION RESEARCH AND SMALL 
                     BUSINESS TECHNOLOGY TRANSFER 
                                PROGRAMS

                              ----------                              


                         THURSDAY, MAY 13, 2021

                  House of Representatives,
                Committee on Small Business
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia Velazquez 
[chairwoman of the Committee] presiding.
    Present: Representatives Velazquez, Crow, Davids, Mfume, 
Phillips, Newman, Bourdeaux, Delgado, Houlahan, Mr. Kim of New 
Jersey, Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney, 
Garbarino, Ms. Young Kim of California, Van Duyne, Salazar, and 
Fitzerald.
    Also Present: Representative Schneider.
    Chairwoman VELAZQUEZ. Good morning. I call this hearing to 
order.
    Without objection, the Chair is authorized to declare a 
recess at any time.
    Let me begin by saying that standing House and Committee 
rules and practice will continue to apply during hybrid 
proceedings. All Members are reminded that they are expected to 
adhere to these standing rules including decorum.
    House regulations require Members to be visible through a 
video connection throughout the proceeding, so please keep your 
cameras on. Also, please remember to remain muted until you are 
recognized to minimize background noise. If you participate in 
another proceeding, please exit this one and log back in later.
    In the event a Member encounters technical issues that 
prevent them from being recognized for their questioning, I 
will move to the next available Member of the same party and I 
will recognize that Member at the next appropriate time slot 
provided they have returned to the proceeding.
    For those Members physically present in the Committee room 
today, we will also be following the health and safety 
guidelines issued by the attending physician. That includes 
social distancing and especially the use of masks. Members and 
staff are expected to wear masks while in the hearing. With 
that said, Members will be allowed to briefly remove their 
masks when recognized by the Chair for their statement and 
questions. Otherwise, masks are expected to remain in place. I 
thank you in advance for your commitment for a safe environment 
for all here today.
    During my tenure on this Committee, I have seen countless 
examples of how small businesses drive innovation. Technology 
has changed rapidly over the years thanks to pioneering 
entrepreneurs leading the way. Congress has facilitated this 
innovation through investments in federally funded research and 
development, also known as R&D. As a result, federally funded 
R&D has produced countless inventions and discoveries that have 
changed our country for the better. From Doppler radar to 
computers to the first wind energy turbines, government-funded 
research has a rich legacy of helping launch ground-breaking 
inventions. For innovative small businesses, it can often be a 
struggle to access early funding critical to building a new 
product.
    To reduce risks of investment in small businesses and 
encourage entrepreneurs to commercialize federal R&D 
innovations, SBA launched the Small Business Innovation 
Research (SBIR) program in 1982. Ten years later, the agency 
launched the Small Business Technology Transfer (STTR) program 
to stimulate partnerships between small businesses and 
nonprofit research institutions. These programs are funded 
through federal set-asides of government agencies, and 
development funds. SBIR and STTR have an impact on small 
businesses across a variety of different sectors every year. In 
FISCAL YEAR 2020, agencies contributed $454 million for 1,030 
awards to 744 small businesses. Not only do these figures 
represent an investment in our nation's small firms, but they 
are also funding our country's future.
    Over the course of the last 3 decades, SBIR/STTR have 
funded small businesses that are now economic powerhouses. The 
programs provided companies like 23andMe, Qualcomm, Semantic, 
and Da Vinci Surgical Systems with the early funding they 
needed to develop new technologies and build their enterprises 
into what they are today. These programs also have the 
potential to address persistent barriers that hold back women 
and people of color operating in the STEM fields. Minorities 
often have a harder time accessing seed capital to pursue the 
creation of new technologies and this program helps bridge that 
gap.
    Women hold less than 20 percent of U.S. tech jobs and only 
5 percent are in leadership positions at technology companies. 
According to a recent survey by Pugh Research, Asian Americans 
hold 13 percent of STEM jobs while African Americans hold 9 
percent and Latinos hold 8 percent. These numbers are 
staggering and show we have a long way to go. And I may add, 
increasing the number of women and minorities who participate 
in the SBIR/STTR program is a top priority of mine.
    Today, our country is at a crossroads when it comes to our 
innovative capacity, just as we were when Congress created 
SBIR/STTR. In the latest Bloomberg Innovation Index, the United 
States dropped out of the top 10 entirely. Regaining our 
footing as one of the world's most innovative nations should be 
a bipartisan goal. If we are to accomplish it, it is vital that 
we utilize the power of small businesses.
    I hope that today's discussion sheds light on the 
importance of small business innovation, and I look forward to 
working with my colleagues to improve these critical programs.
    I now yield to the Ranking Member for his opening 
statement, Mr. Luetkemeyer.
    Mr. LUETKEMEYER. Thank you, Madam Chair. And good morning 
to all.
    I thank all of you for being here as we examine the Small 
Business Innovation Research and Small Business Technology 
Transfer or SBIR and STTR programs. Innovation is the engine 
that drives our economy. Technological breakthroughs and the 
entrepreneurship it spurs build our economy and creates new 
jobs by finding state-of-the-art solutions to difficult 
problems and capitalizing on those new products. This 
correlation is particularly important in the small business 
arena. Small businesses tend to be more nimble, responding to 
the market changes more rapidly than their bigger counterparts. 
They drive the innovation sector and make us more agile in the 
world economy. In this area of globalization, making it easier 
for small businesses to develop and commercialize new, 
innovative products is essential not only for America's 
competitiveness but for its national security as well.
    This is why programs like SBIR/STTR are very important. 
These programs, envied and emulated around the world, were 
created based on the premise that small technology-based firms 
tend to be highly innovative and inventive and that this 
innovation should be better harnessed by the Federal 
Government. Binding these new developed technologies with other 
Federal R&D efforts was seen as a natural extension to both 
boost small business participation in Federal R&D activities 
and to solve agency institutional problems, whether at the 
Department of Defense, National Institutes of Health, or 
Department of Energy.
    All too often, good ideas never materialize because of a 
myriad of obstacles. It can be lack of funding, lack of 
understanding, or perceived lack of a marketplace for the truly 
new and amazing technology. The SBIR and STTR programs bridge 
the gap between the fantastical and the practical, while 
building our economy and improving the function of the Federal 
Government in the process.
    The small businesses that participate in these programs are 
rapidly pushing the boundaries of what is possible in a variety 
of fields. From supporting our warfighters, to battling cancer 
and COVID, the SBIR and STTR programs are emboldening our small 
firms to contribute mightily to the fight.
    Current authorization for these programs is set to expire 
at the end of the next fiscal year. Getting a jump on this 
process is essential and I am very happy the Chairwoman worked 
with me to schedule this hearing and discuss our normal mutual 
problem here. Thank you very much, Madam Chair.
    Today, we have an excellent panel of witnesses to discuss 
these programs and provide the Committee with suggestions to 
make them better for small businesses and participating 
agencies alike. I am looking forward to the hearing, hearing 
those ideas, and working with my colleagues across the aisle 
and across the capital to draft legislation we will all be 
proud of and support.
    With that, Madam Chair, I yield back. Thank you very much.
    Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. The 
gentleman yields back.
    I would like to take a moment to explain how this hearing 
will proceed. Each witness will have 5 minutes to provide a 
statement and each Committee Member will have 5 minutes for 
questions. Please ensure that your microphone is on when you 
begin speaking and that you return to mute when finished.
    With that, I would like to introduce our first witness.
    Our first witness is Dr. Joyce Tung, the Vice President of 
research for 23andMe in Sunnydale, California. Now considered a 
startup unicorn worth approximately $4 billion, 23andMe 
received its first SBIR grant from the National Institute of 
Health in 2020. She joined 23andMe in 2007 and leads the 
research team which is responsible for consumer health and 
ancestry R&D, academic and industry collaborations, and new 
research strategies. She earned her Ph.D. in genetics from the 
University of California, San Francisco, where she was a 
National Science Foundation graduate research fellow. Welcome 
Dr. Tung.
    Our second witness is Ms. Pat Keady, cofounder, CEO, and 
President of Aerosol Devices, Inc., in Fort Collins, Colorado. 
She is the past President of the American Association for 
Aerosol Research. Ms. Keady received her Master of Science 
degree in Mechanical Engineering from the University of 
Minnesota and holds two patents from Aerosol Instrumentation 
with three more pending. Earlier this month, she was awarded a 
Businesswoman of the Year award by CEO Today. Congratulations 
and thank you for joining us, Ms. Keady.
    Our third witness is Ms. Rebecca Todd, the Innovation 
Consultant for the Arkansas Small Business and Technology 
Development Center located in Little Rock, Arkansas. Ms. Todd 
assists technology-based small businesses and university 
researchers throughout Arkansas with navigating federal funding 
opportunities within the SBIR and STTR programs that support 
innovation with high commercial potential. She leads SBIR/STTR 
training events and has strong working relationships with 
agency program managers and state funding organizations. 
Welcome, Ms. Todd.
    Now I yield to the Ranking Member to introduce our final 
witness.
    Mr. LUETKEMEYER. Thank you, Madam Chair.
    Jerry Glover serves as executive director of the Small 
Business Technology Council, SBTC, a trade association of 
small, high-tech companies, most of whom are highly involved in 
the SBIR program. Through the laws existence, she has been one 
of its most active supporters. Mr. Glover has a unique blend of 
private and public sector experience. A former CEO and attorney 
in private practice, he has testified before Congress over 30 
times and appeared in over 100 agency proceedings, including 
rulemakings, adjudications, enforcement proceedings 
predominantly within the SBIR and STTR programs. He probably 
knows or would be able to know what our questions are before we 
even ask him, Madam Chair. He obtained his undergraduate law 
degrees from the University of Memphis and a LLM in 
administrative law and economic regulation from George 
Washington University. Mr. Glover, we welcome your 
participation in today's hearing and look forward to your 
testimony.
    I yield back.
    Chairwoman VELAZQUEZ. Thank you, Ranking Member. He yields 
back.
    Dr. Tung, you are now recognized for 5 minutes.

   STATEMENTS OF DR. JOYCE TUNG, VICE PRESIDENT OF RESEARCH, 
23ANDME, INC.; PAT KEADY, FOUNDER, CEO, AND PRESIDENT, AEROSOL 
  DEVICES INC.; REBECCA TODD, INNOVATION CONSULTANT, ARKANSAS 
SMALL BUSINESS AND TECHNOLOGY DEVELOPMENT CENTER; JERE GLOVER, 
     EXECUTIVE DIRECTOR, SMALL BUSINESS TECHNOLOGY COUNCIL

                    STATEMENT OF JOYCE TUNG

    Ms. TUNG. Chairwoman Velazquez, Ranking Member Luetkemeyer, 
and other members of the Committee, thank you for the 
opportunity to testify at today's hearing and share our 
experience with the Small Business Innovation Research Program.
    23andMe is a leading consumer genetics and research 
company. Founded in 2006, based exclusively in the U.S. with 
offices in California and testing performed in North Carolina, 
the company's mission is to help people access, understand, and 
benefit from the human genome. 23andMe has pioneered direct 
access to genetic information as the only company with multiple 
FDA clearance for over-the-counter genetic health information 
and has created the world's largest crowdsourced platform for 
genetic research.
    In 2010, the year of our first grant application, we had 
fewer than 50 employees and minimal revenue from our direct-to-
consumer genetics product. The business also had a goal to 
accelerate scientific discovery by developing a highly 
scalable, consumer centric research platform. This platform 
needed a significant amount of investment in order to develop 
the infrastructure, breadth, and size needed to make it a 
scientifically valuable asset that would meaningfully benefit 
the company. Because we were a small business and because our 
mission was aligned with the mission of the National Institutes 
of Health, we decided to apply to the SBIR program. Over 
approximately 8 years, 23adMe applied for 10 SBIR grants and 
received eight.
    Reflecting back on our participation in the SBIR program, 
we believe that we saw four main benefits. First, our SBIR 
funded work helped us establish our scientific credibility. In 
total, the work funded by our SBIR grant produced at least 32 
scientific presentations and publications. This credibility 
allowed us to realize the second benefit which was the 
development of a commercially viable research platform.
    By 2014, paid research partnerships with industry partners 
made an important contribution to the company's revenue. The 
growth and development of the research platform also enabled 
the establishment in 2015 of the Therapeutics development 
program at 23andMe.
    Third, our SBIR grants helped us to make a substantial 
contribution to the scientific community. The scientific 
publications mentioned previously shared genetic insights on 
conditions ranging from asthma and allergy to Parkinson's 
disease. More than half of those publications were written in 
collaboration with academic researchers at no cost to them. We 
have also used SBIR funding to improve the ethnic diversity of 
data in a protected NIH data repository for use by other 
researchers.
    Lastly, the SBIR program has helped us develop our early 
career scientists. The exercise of applying for and executing a 
grant builds very useful skills for the investigator which 
benefits not only the individual but also the company.
    The main challenge we experienced was the administrative 
overhead of running the grant, specifically, the challenge of 
adequately meeting the accounting requirements. The accounting 
system requirements, which include time tracking on an hourly 
basis and audit preparation were very intimidating, and even 
with help from our finance department, the team spent multiple 
hours every week on time tracking. Given the cost of setting up 
the accounting program, having a singular small grant was not 
really worth the effort. Thus, the dollar limit to the awards 
was also a disincentive to applying.
    Based on this experience, we have three recommendations. 
The first is to reduce the administrative overhead for time 
tracking and creating an accounting system.
    The second is to consider increasing the max award. Given 
the cost of setting themselves up to administer an SBIR award, 
some small businesses may be more motivated to apply for the 
program if the potential reward were greater.
    Lastly, we recommend continuing to fund venture-backed 
companies. In our early days as a venture-backed company, most 
investors were interested in the development of our consumer 
product rather than the research platform and there was 
skepticism about our value as a research partner. Without SBIR 
support, it would have been more difficult for us to build our 
program. We see venture funding and SBIR funding as 
complementary resources to drive higher risk, higher award, 
technology innovation, and commercialization.
    SBIR grants supported our scientific innovation at a time 
when we lacked the track record and credibility to get 
significant funding from other sources for our research and 
development work. We believe research in industry, particularly 
in small startups, will play an increasingly important role in 
innovation and that the SBIR program can play a key role in 
nurturing that innovation.
    Though we are now too large to be eligible for SBIR grants, 
we appreciate the opportunity to express our support for this 
important program. Thank you.
    Chairwoman VELAZQUEZ. Thank you, Dr. Tung.
    Now we recognize Ms. Keady for 5 minutes. Welcome.

                     STATEMENT OF PAT KEADY

    Ms. KEADY. I would like to thank Chairwoman Velazquez, 
Ranking Member Mr. Luetkemeyer, and the entire Committee on 
Small Business for inviting me to testify.
    My name is Pat Keady. I am CEO and president of Aerosol 
Devices, Inc., a small woman-owned business incorporated in 
2014 in the state of Colorado. We develop advanced sampling and 
measurement instruments sold primarily to scientists studying 
the chemical and biological properties of airborne particles. 
Our method of gently collecting aerosolized viruses, including 
SARS-COV2, is considered by leading scientists to be the best 
approach for determining whether airborne viruses present, as 
well as the infectivity or viability of such viruses.
    In 2020, we had revenue of $2.17 million, approximately 
half in product sales and half in grants. We have 11 employees, 
including nine with science and engineering degrees. We have 
been named by Biz West Magazine as one of the 50 fastest 
growing private businesses in Northern Colorado 2 years in a 
row, ranking number one in our size class in 2019.
    Most people recognize that starting a company is no easy 
task and often requires significant financial resources. This 
is especially true when developing a physical product that 
requires design, prototypes, testing, patents, regulatory 
approvals, tooling, and inventory. Having a good idea for a 
product that customers will buy is essential but is certainly 
not sufficient for achieving economic success.
    Ninety-six percent of the startup funding for our company 
came from the personal assets of the two cofounders, including 
myself. Our startup capital totaled $587,000. This amount 
covered the commercial development of our first product but was 
insufficient for product refinement, global marketing, or 
continuing new product research and development.
    This is the point in our company history where the SBIR/
STTR program came in with necessary financial assistance. Since 
our first NSF STTR phase one grant was awarded in 2017, we have 
been awarded six phase one, three phase two, and two subawards 
for a total of $4.68 million. Nearly half of our grants were 
awarded in just the past 12 months to address the COVID 
pandemic threat and to provide early warning of a bioterrorist 
attack.
    With an NSF grant awarded 1 year ago, we fast tracked 
development of a compact, easy-to-use virus sampler that was 
launched into the market last week. COVID-focused developments 
can also be used for measurement of other respiratory 
pathogens, such as seasonal influenza and tuberculosis. Our 
grant funding has come from five different Federal agencies 
demonstrating the versatility that our platform technology has 
for addressing a wide variety of industry and societal needs.
    Approximately half of the funding is a passthrough to our 
university and industry collaborators. We have partnered with 
five public universities and three companies, two of which are 
also small private businesses. The university collaborations 
support graduate students and help to build our Nation's 
intellectual capital. Other products at least partially funded 
by the grants include three patent applications, two 
publications and journals, and dozens of conference 
presentations.
    Our primary interest lies in developing commercial 
products, not simply doing cool research projects. We look 
forward to the day when we can fund our own internal research 
and development without government support. Writing grant 
proposals and the reporting requirements and managing the 
projects is a considerable effort for a small company. A 
weakness in the SBIR/STTR model is that there is no true 
funding to launch a product, what is called commercialization.
    Because of the shortfall, we are actively seeking an 
outside investor. But bringing on an investor has its own set 
of complications and is not the right path for all businesses. 
Until we reach that critical revenue milestone where we can 
truly self-fund, we are grateful for the financial assistance 
of the SBIR/STTR programs. Our goal is to offer an increasing 
number of good-paying jobs and sell quality products to 
customers around the world. We aim to provide an exceptional 
return on the taxpayer investment.
    The SBIR/STTR grants have been a lifeline for our small, 
early stage company. I strongly encourage Congress to continue 
and strengthen this vital program that provides essential 
funding for America's entrepreneurs and helps de-risk 
technology for potential investors.
    Thank you. I look forward to your questions.
    Chairwoman VELAZQUEZ. Thank you, Ms. Keady.
    Ms. Todd, you are now recognized for 5 minutes.

                   STATEMENT OF REBECCA TODD

    Ms. TODD. Good morning. My name is Rebecca Todd, innovation 
specialist at the Arkansas Small Business and Technology 
Development Center (ASBTDC) based at the University of Arkansas 
at Little Rock. I am proud to be here to share some success 
that the Federal and State Technology (FAST) program has 
brought to innovative Arkansas businesses. Hopefully, too, I 
can share some insight on how I believe Congress could and 
should expand the success of the FAST program.
    The ASBTDC has competed for and successfully performed on 
FAST grants, averaging 125,000 for 1-year projects that are 
matched by the University of Arkansas at Little Rock and the 
state in 2010. This program has made an important impact on our 
ability to provide the statewide average about the SBIR/STTR 
program and related ASBTDC services.
    From 2016 to 2020, ASBTDC assisted mentees with winning 52 
SBIR/STTR awards totaling more than $23 million. The mentees 
that we served through our FAST project are often too early 
stage to attract private investment but as the largest source 
of nondiluted funding for early stage research based companies, 
the SBIR/STTR program critical to helping them successfully 
develop and commercialize new products and services.
    We continue to see sustained growth in our mentees' 
success, both in number of SBIR/STTR proposal submissions, and 
more importantly, awards. Since our 2010 opening FAST project, 
ASBTDC has seen a 467 percent increase in total number of SBIR/
STTR awards for our mentee clients. Our participation in the 
programs has positioned us as the state's leading resource in 
providing SBIR/STTR proposal development services.
    As a rural state, Arkansas has many areas that are 
underserved. They lack the awareness of funding opportunities 
available through the SBIR/STTR program. Our staff routinely 
travel the state and utilize data conferencing to offer formal 
and informal educational outreach specific to the SBIR/STTR 
program and related ASBTDC service offerings. As a result of 
this outreach, two faculty members of this program engaged our 
services to submit SBIR applications to the U.S. Department of 
Agriculture.
    ASBTDC has used its participation in the FAST program to 
reach strong statewide partners over the last decade. Referrals 
from these partners and through mentees learn of our centers 
SBIR/STTR services and expand the research of our program. 
Mentees are often inspired by success stories. Women leaders in 
innovation often serve as speakers at our training events and 
their SBIR/STTR successes are featured in our Lab Launch 
newsletter. For example, GSS Group, woman-owned horticulture 
company, GSS Group won USDA SBIR phase one awards on their 
first try after engaging our center services. This company's 
CEO has been a strong champion for our center, leading to a 
number of new mentee referrals from other AgTech companies. 
This success story in our Lab Launch newsletter and in our 
YouTube SBIR success stories video have attracted attention of 
other women researchers across the state.
    As the number of programs grows in Arkansas, particularly 
at the university level, it has become increasingly important 
that ASBTDC grow capacity to actively serve potential mentee 
base.
    In essence, the FAST program has enabled us to establish a 
network of support for small business innovation and provide 
access for all small businesses that would not have existed 
without the support of the FAST program.
    While the funds supporting our efforts have been limited, 
ASBTDC has still managed to help mentees, especially with SBIR 
and FAST projects. We believe other underserved areas should 
have the ability to access the FAST program funds to increase 
SBIR programmatic outreach and services to their populations. 
The FAST program [inaudible] greater value for grant 
participants if the amount of the grants was expanded. This 
would support programmatic offers. If the FAST grant was 
extended to 3 years per project, it would allow FAST awardees, 
like ASBTDC to expand efforts, dedicate more time to existing 
and new programmatic offerings.
    The more that FAST awardees like ASBTDC can cultivate SBIR/
STTR success for small businesses across the country, the 
greater the economic payoff in terms of growth and the number 
of new innovative companies, high-tech, high-paying jobs that 
will attract more students willing to go to universities and 
new solutions for technological challenge areas.
    For every state that participates in FAST, as word 
continues to spread about Arkansas's success in growing 
innovative companies and jobs around a founder's scientific 
passions, the motivation for companies to participate in the 
SBIR/STTR program will continue to grow all across our state. 
This has been a successful model for Arkansas, and we believe 
that it can and should be replicated.
    Chairwoman VELAZQUEZ. Thank you, Ms. Todd.
    Now we recognize Mr. Glover for 5 minutes.

                    STATEMENT OF JERE GLOVER

    Mr. GLOVER. Good morning. I am Jere Glover, executive 
director of the Small Business Technology Council of the 
National Small Business Association.
    I had the privilege 40 years ago of testifying before 
Congress in support of the SBIR legislation. At that time, the 
U.S. was the world leader, worldwide leader in innovation. We 
dominated the technology capital world. We had the best 
education system and the strongest patent system in the world, 
America's small business, the most innovative sector of the 
economy and a wellspring of entrepreneurial energy but received 
only 5 percent of Federal R&D funding. Today, about half of 
venture capital investments are made overseas. Eighty percent 
of all venture capital seed investments, early stage 
investments go into just four industries and to a limited 
number of states. Our patent system is severely weakened and 
small business still receives a very small portion of the 
Federal R&D dollars.
    Small business, with the help of the SBIR program, is still 
the most innovative sector in the U.S. The SBIR program 
provides seed corn for innovation combining private enterprise 
with American ingenuity to enable innovations and Federal R&D 
funding while building on the new products and new businesses.
    When it comes to worldwide competition, the United States, 
as the Chairwoman has pointed out, has dropped from first to 
11th, not even the top 10. Basically, China is simply eating 
our lunch. The Beijing Institute of Collaborative Innovation 
has funded 150 U.S. universities' technologies. One hundred 
eight of those they have commercialized. They have a venture 
fund now to develop these U.S. technologies of $616 million. 
Europe, the European Union is funding 20 percent of its R&D to 
small business. That is at least twice what the U.S. does. 
France has created a $13 billion disruptive technology fund.
    The one important thing to remember about the SBIR from an 
international competition point of view, it is the only U.S. 
program that requires funding to U.S. companies owned by U.S. 
citizens and the work be done in America. The SBIR program is 
working and working well. After 20 National Academy of Sciences 
study, four economic impact studies that look over half of the 
SBIR phase two awards, we can clearly say that it is an engine 
that drives innovation in America. The return on investment for 
the STTR/SBIR firm program at the National Cancer Institute is 
33 to 1. At DOD, it is 22 to 1. For every dollar invested, $3 
of Federal, state, and local taxes are generated.
    In terms of success, I can guarantee you that at least 
three technologies you use on a regular basis were funded by 
SBIR. The GPS on the chip, combining Wi-Fi and Bluetooth and 
the CMAS camera technology, all of which are used in your 
cellphones. So you can clearly see that this, among all the 
technologies, there is a list of SBIR success stories in the 
back of my testimony.
    The market actually loves the SBIR program. Seventeen 
countries have copied it. As I pointed out, China has done an 
excellent job of copying it and taking it further. Ten percent 
or 3,000 SBIR firms have VC inventions. Eight hundred twenty-
nine SBIR firms have gone public. Thirteen hundred have been 
acquired by other companies. And 70 percent of all university 
licenses are going to small business, which recognizes the 
importance of small business to university commercialization.
    What is working with he SBIR program? One, job creation. 
Small business created over 1.5 million jobs. And it is a 
state-by-state analysis how many jobs are being created in 
each. Fifty to 70 percent of all phase two SBIRs are 
commercialized.
    GSA has done one billion dollars worth of phase three 
contracts in the last 2 years. Likewise, the Air Force and Navy 
combined have done over $2 million of phase three contracts. 
Agencies are speeding up the contracting process but more needs 
to be done.
    We need to encourage innovation and support small business 
innovation by, one, making SBIR permenant; two, doubling the 
SBIR/STTR program and restoring the Rapid Innovation Fund 
funding. We need to strengthen the patent system. We need to 
increase the Federal R&D spending. We need to set a goal of 15 
percent for Federal R&D for small businesses. And we need to 
continue streamlining and simplifying the contracting process. 
If we take these actions, you will unleash new technologies for 
America while strengthening our economy, rejuvenating America's 
leadership in innovation. We can beat China and become number 
one in innovation again if we effectively use the SBIR/STTR 
program.
    SBIR is like printing money without inflationary effect. 
Three dollars are generated for every dollar spent.
    It is working well. Thank you.
    Chairwoman VELAZQUEZ. Thank you, Mr. Glover.
    I will begin by recognizing myself for 5 minutes.
    Dr. Tung, I would like to address my first question to you.
    One of the goals of the SBIR/STTR program is to increase 
private sector commercialization of innovations derived from 
federally funded R&D. Dr. Tung, how did early seed funding from 
SBIR help develop the genetic testing services available today?
    Ms. TUNG. I can provide a few examples. In the early days 
of 23andMe, the genetic health information we provided to 
customers was based solely on published research and the 
scientific literature. Today, many of our new genetic health 
reports are based on scientific results from our own research 
platform, the development of which was partially supported by 
SBIR funding. In addition, we have published 32 scientific 
papers supported by SBIR funding. Those results may be used by 
others in the scientific community to develop their own 
products and services.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. Tung, the SBIR and STTR programs share four goals and 
one is to foster inclusion and diversification among innovative 
firms. Yet, this continues to be a challenge. One of my top 
priorities for the upcoming reauthorization is to improve 
participation of minority and disadvantaged persons in the 
program. In your experience, what strategies have worked and 
what are the greatest challenges to this effort?
    Ms. TODD. So our primary areas of industry and regions 
where large populations of these groups are based, it would 
helpful if SBIR/STTR opportunities were presented in a way that 
highlighted specific research interests that align with these 
industry types. For example, SBIR/STTR research topics might be 
highlighted in regions where agriculture is a prominent 
industry. Sharing success stories of companies with team 
members who share demographic features of the groups that you 
are targeting for increased SBIR/STTR program participation is 
always helpful. Videos and feature articles in newsletters that 
have photos are a couple of ways to communicate these 
inspirational stories. To encourage participation from HBCUs, 
highlighting the partnership opportunity inherent in both SBIRs 
and STTRs would be particularly helpful.
    ASBTDC previously hosted an introductory SBIR/STTR workshop 
at an HBCU that featured SBIR awardees both from local 
companies and their university subcontract leadership team.
    Chairwoman VELAZQUEZ. Thank you, Ms. Todd.
    We hear time and again about the struggles that small 
businesses face in overcoming the ``Valley of Death'' where 
research is derailed because of a lack of funding. This 
Committee is dedicated to modernizing the program in such a way 
to better assist businesses in overcoming this stumbling block.
    To the panel, what have you found to be the best mechanisms 
to help businesses commercialize their products?
    Mr. Glover, I would like to start with you.
    Mr. GLOVER. I think Phase III of the SBIR program, which is 
no Federal money and no SBIR money. It has been the single 
best. That is why I wanted to highlight how many billions of 
dollars are now going into Phase III. We are starting to see 
that happening. It needs to happen a lot more. There are 
agencies that do virtually nothing in that area and do not have 
a good record. Some are just getting started. But phase three 
is an opportunity. The use of venture funding was the core for 
the first 20 years of the SBIR program for Phase III. As VC 
moved on to later stage investments, that VC investments of 
RAVC waned. I think phase three has got to be the best way we 
can do that and make sure focus where it is not SBIR dollars 
but it is private sector and non-SBIR goverenment dollars.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. Keady, would you like to comment?
    Ms. KEADY. Well, I would definitely agree that the phase 
three commercialization grants would be extremely helpful. We 
have never gotten one. The agencies where we have gotten our 
grants do not offer money for this and so we have just had to 
do our own bootstrapping in terms of paying for the 
commercialization. And because we have a global product, it is 
also quite expensive to adequately market internationally. And 
so one of the things we are looking at is trying to start a 
search for investing funding. Investors are very risk averse so 
the SBIR funding is good for helping de-risk that. But so far 
we have been deemed too early for significant investment in 
terms of attracting a lot of investment money. But we are 
starting that path. But that is the biggest challenge I would 
agree.
    Chairwoman VELAZQUEZ. Thank you, Ms. Keady.
    My time has now expired. I will recognize the Ranking 
Member, Mr. Luetkemeyer.
    Mr. LUETKEMEYER. Thank you, Madam Chair.
    Mr. Glover, I would like to start with you. One of my 
biggest priorities on the Committee is to root out and rectify 
the waste, fraud, and abuse in every SBA administered program. 
Recent audits that we have been told about here are very 
concerning with regards to this. So my question basically is, 
how are these two programs faring with regards to waste, fraud 
and abuse in comparison to other SBA programs?
    Mr. GLOVER. In the history of the program, I think there 
have been less than 20 waste, fraud, and abuse cases that have 
been brought and that is .0001 percent of all of the SBIR 
program awards. Because of the competitive nature, it is really 
tough to try to engage in fraud there. You have got to first 
win a phase one, then win a phase two, and it has been not 
fraud free but has been very limited, and most of those cases 
involved university connection with a small business where they 
crossed the line and did something----
    Mr. LUETKEMEYER. So the competitiveness of the program sort 
of minimizes the ability for fraud because it is not something 
that if you qualify you automatically get the money. If you 
qualify for it you compete for other people against that. 
Therefore, there is sort of a bump in the road there to prevent 
that from happening. Would that be a fair statement?
    Mr. GLOVER. Absolutely, sir.
    Mr. LUETKEMEYER. Okay. Thank you very much.
    Ms. Todd, can you explain to me how the FAST program 
differs from the original SBDC model of outreach in counseling, 
please?
    Ms. TODD. I am not familiar with the original model. I can 
speak to some of the offerings of our FAST program. Would that 
be----
    Mr. LUETKEMEYER. Well, the SBDC model is such that they do 
have outreach. They do have counseling in it. And is that not 
what a big part of the FAST program is?
    Ms. TODD. Okay, yes. In addition to the standard services 
offered through our center through the FAST program, we are 
able to offer enhance outreach specific to our technology 
clients across the state, including SBIR/STTR program 
exploration, proposal planning guidance and review.
    Mr. LUETKEMEYER. I wish you would answer me rather than 
reading your answer. I understand what you are doing there but 
I asked you a question with regards to the SBDC model. It is 
not in your answer. Would you please answer that question? What 
is the difference between the FAST program and the outreach and 
counseling program of SBDCs?
    Ms. TODD. The FAST program allows us to create programs and 
other offerings of our own that we know will be tailored to 
address the needs of our audiences here in the state. So we 
were able to identify what the needs are among all the----
    Mr. LUETKEMEYER. Okay. That is what the FAST program is. 
You still have not answered my question.
    So the problem here is that the FAST program for almost 2 
decades, almost 20 years has not been appropriated. The annual 
appropriation has not come through; yet, they have been able to 
get the money for it. And my question I guess is why is it so 
essential that somebody apparently in the Senate keeps putting 
money in there in spite of the fact that it is not authorized? 
Do you have an idea on that?
    Ms. TODD. We have been able to achieve lots of success in 
the state of Arkansas through the FAST program, so obviously 
they have more capacity to serve companies and inspire 
companies across the state. Help them with the very competitive 
and challenging process of preparing and submitting these 
applications.
    Mr. LUETKEMEYER. You are doing it better than----
    Ms. TODD. So we have things----
    Mr. LUETKEMEYER. So you are doing it better than what the 
SBDC model can actually accommodate?
    Ms. TODD. We are able to expand on that through the FAST 
program to tailor it and make it our own. It is successful here 
in the state of Arkansas.
    Mr. LUETKEMEYER. Okay. Mr. Glover, you made a lot of 
comments with regards to the phase three here stuff and I think 
Ms. Keady may have misstated here when she indicated that it 
was money that they need for this from the standpoint that it 
is actually not a grant. It is a contract that the government, 
if I am not mistaken here, has with the individual or the 
company. To the first two phases, money is granted, and to the 
third phase you are then given a contract to provide this good 
or service to the government or to whomever as the phase three. 
Is that not correct?
    Mr. GLOVER. It is correct. The phase three money from the 
government would be in the case of the Defense Department, now 
$4 billion over the last couple of years buying SBIR technology 
and putting it in the field for the warfighter or taking the 
technology to a further level of readiness so that it is 
ready----
    Mr. LUETKEMEYER. Okay, so you wanted to further dollars to 
the government to be able to purchase whatever the innovation 
is that is being paid for through the SBIR program; is that 
correct? Is that what you are saying?
    Mr. GLOVER. That is correct.
    Mr. LUETKEMEYER. Very good. I see my time is up. Thank you 
very much.
    Madam Chair, I yield back.
    Chairwoman VELAZQUEZ. Time has expired and now we recognize 
the gentleman from Colorado, Mr. Crow, Chairman of the 
Subcommittee on Innovation, Entrepreneurship, and Workforce 
Development.
    Mr. CROW. Thank you, Madam Chair.
    Ms. Keady, last year you developed a product that helped 
researchers confirm that COVID spreads through the air and your 
technology likely saved lives by informing scientists and 
policymakers on how to prevent infection. And your case also 
demonstrates why Federal investments in R&D are so important. 
In your testimony, you mentioned that your grant funding came 
from the National Science Foundation, the Department of Energy, 
the NIH, Department of Defense, and Department of Homeland 
Security. Can you just briefly explain the differences between 
each agency's administration of the SBIR and STTR programs?
    Ms. KEADY. All of the agencies have very different 
policies, procedures, web portals for submitting grants. They 
have different procedures for reviewing proposals and for 
funding. So each one of them we have to treat as an entirely 
separate thing. It would very helpful if there were common 
portals or common procedures but that is not the case today. We 
have only recently gotten grants from the DOD and DHS, so I am 
less familiar with what all of that entails. We are just at the 
very, very beginning of those. I have the most experience with 
NSF and they have lots of opportunities for learning. For 
example, we participated in an I-Corps program which is about 
customer discovery. I think that was initiated by NSF and some 
of the other agencies have taken that up. But they are all 
very, very different. So we just really have to treat them all 
as a separate customer if you will and learn what their 
particular process is.
    Mr. CROW. And you kind of got to my point by just talking 
about how more complicated it is if you are having to review 
and understand and learn all these different entities, 
different processes. Could you just paint a very short picture 
for us as to how, if you had a common portal and a common 
process, how would that impact you and what type of resources 
would be freed up for you to do the R&D that you do so well?
    Ms. KEADY. Thank you for that question.
    I just think from an administrative point of view it would 
save time in having to create the reports that are needed, 
submit the reports. I just think it would streamline the 
administrative side. The R&D, you know, is unique for each 
grant and so that does not change but the administrative side 
would be much easier.
    Mr. CROW. And then you mentioned that the SBIR/STTR has 
limited support for the final stage of development in bringing 
a product to market. What could be done in your view through 
these programs or through other programs to help businesses 
find investors for that final stage that is obviously so 
critical to getting it done?
    Ms. KEADY. So I appreciate the comment earlier about that 
there are phase three contracts but only certain agencies issue 
those, and DOD being one of them. We have just started with 
them so we have not gotten that far yet. NSF does not, and I do 
not believe NIH does, at least not for the programs that we 
have had.
    Now, your question about how to help companies find 
investors, I think we have been very successful at getting the 
grants. We have so far not gotten an investor, although we are 
trying. And we need to learn how to attract investors because 
they are looking for different things. And I would just say 
that an investor is a long-term commitment, just like a 
marriage. You are entering this relationship for the long term, 
at least until you have an exit. So you have to be very careful 
about who your partner is and so the investor and the company's 
goals are in alignment. And so that is what we are seeking. We 
are confident we will find an investor. We just have not yet.
    Mr. CROW. Thanks, Ms. Keady. I know, you know, I hail from 
your home state as well, from Colorado, and we are all very 
proud of you in Colorado. And the picture behind you of the 
mountains is making me anxious to head west. So I will be 
heading your way shortly. Thank you for your testimony.
    Madam Chair, I yield back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentleman from Texas, Mr. Williams, 
Vice Ranking Member of the Committee for 5 minutes.
    Mr. WILLIAMS. Thank you, Madam Chair.
    The Small Business Administration under President Biden has 
had problems overseeing programs for the past few months. Just 
to name a few, there has been miscommunication between the 
Inspector General and Administrator Guzman, fraud with the EIDL 
program, and delays of implementing critical funding programs 
like the Shuttered Venue operator grants. The SBIR and the STTR 
programs discussed today are carried out by several agencies 
that are overseen by the SBA. And before we authorize these 
programs we must ensure the proper guardrails are in place so 
that both are fulfilling their intended purpose in helping 
small business grow.
    So Mr. Glover, what recommendations can you give to the SBA 
for these programs so that we can avoid some of the problems we 
have seen out of the agency this year and some of those that I 
just mentioned?
    Mr. GLOVER. Well, the SBIR program relies extremely 
strongly on competition. And it has been targeted for audits. 
They looked at everything very carefully. And quite frankly, 
they found very little. And I think it is because there is so 
much competition.
    Quite frankly, it is tough to win an SBIR award. It is very 
hard to do. And you do not find somebody who wants to commit 
fraud having to spend that kind of energy putting it together. 
SBIR proposals are reviewed primarily by scientists who are 
familiar with the technology and familiar with the area. It is 
hard to con those reviewers. So I think the SBIR program is 
fortunate in that regard but I think that there is a problem 
with the agencies that could be doing more Phase III. We have 
been talking to the Department of Energy about their cost 
share. They have for follow-on grants outside the SBIR program 
and even for Phase III cost sharing. You have a million dollar 
award. You have to come up with $200,000 cost share. Small 
business just cannot do that. So basically, small business is 
shut out of all DOE's follow-on, non-SBIR funding. They get 
less than 3 percent there. So it is a problem but it is a 
problem that is diminished because of the way the program was 
carefully structured at the very beginning when it first 
started and what we maintained throughout its history.
    Mr. CROW. Let me move on. Thank you.
    Innovation drives economic growth and gives America a 
strong presence in global markets. Many of these innovators 
start out as small businesses with great ideas but maybe do not 
have the knowledge on how to expand operations to get in the 
pipeline for Federal contracts. Often there is excessive 
amounts of red tape, administrative burdens that make it 
overwhelming for small businesses to attempt to do business 
with the Federal Government.
    So Ms. Tung, you mentioned in your testimony that this can 
be intimidating for scientists who are not familiar with this 
process. So can you discuss personal challenges you experienced 
with the application process for 23andMe and how we can cut red 
tape to streamline proposals for SBIR and STTR programs?
    Ms. TUNG. Sure. So I would say that our primary challenges 
were not with the application process itself which I think was 
relatively straightforward. I think we were more intimidated by 
the rules that we saw afterwards for setting up an accounting 
system and for tracking time because that is how we got 
reimbursement for the funding that we received. So we were very 
fortunate in having a colleague who had done some accounting 
and auditing work. And so he helped us sort of understand and 
interpret the guidelines. But I would say some of our 
scientists, of course, were also scientists who had gotten 
grants in academia and those sorts of RO1 grants did not have 
the same sort of accounting, auditing, and time tracking 
requirements. So I think if you want to use those dollars to 
allow the scientists to spend more time on the actual research, 
you might consider reducing some of the auditing, accounting, 
and time tracking requirements.
    Mr. WILLIAMS. All right. Thank you.
    The SBIR program has had bipartisan support since it began 
during the Reagan administration. Each reauthorization since 
then has made significant changes from increasing award sizes 
to shifting focus of the program to commercialization. 
Currently, it is set to expire September 30th of 2021. As 
reauthorization conversations continue, we should be looking to 
make sure we are getting the maximum return on investment for 
these taxpayer dollars. So finally, Mr. Glover, can you explain 
the effects it would have on small business if this program was 
not authorized?
    Mr. GLOVER. Well, the first thing, there would be 7,000 
individuals and farms around the country that would not be 
getting money to take their ideas, their technology, and even 
advanced innovations at all. Given the fact that venture 
capitalists only make a couple thousand seed investments a 
year, that 7,000 SBIR is absolutely critical to fund it. It 
should be a lot higher. When we look at the rest of the world, 
we look at what China is doing, we look at even what the 
European Union is doing, everybody else is doing more. They far 
passed us. They have taken the SBIR program, copied it, and 
then made it bigger and better. So it would mean a lot of 
companies would not have any chance at all to get their 
technology advanced at all.
    Mr. WILLIAMS. Okay. Thank you. And I yield my time back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentlelady from Kansas, Ms. Davids, 
Chairwoman of the Subcommittee on Economic Growth, Tax, and 
Capital Access for 5 minutes.
    Ms. DAVIDS. Thank you, Chairwoman. And I am, of course, 
glad we are holding this hearing to review the importance of 
the SBIR and STTR programs. And how we can improve them as 
Congress must reauthorize the programs this year.
    As we have heard, these programs play an incredibly 
valuable role in our entrepreneurial ecosystem by providing 
support to innovators and entrepreneurs throughout their 
creation, development, and commercialization stages of their 
products and businesses. And the Kansas 3rd Congressional 
District, of which I have the privilege of representing, has 
some pretty amazing SBIR and STTR funded centers and partners. 
Folks like the Mid-America Manufacturing Technology Center, the 
Bio Science and Technology Business Center at the University of 
Kansas Medical Center. You know, these centers are invaluable 
resources to entrepreneurs and innovators who are looking to 
develop and advance their small businesses and to commercialize 
their products. But even with these awesome resources that we 
have in my state, Kansas has historically received a pretty low 
number of SBIR/STTR awards.
    In 2019, I had the chance to hold a field hearing in Kansas 
City, Kansas, to focus on what we like to call the Silicon 
Prairie in the technological entrepreneurship and innovation 
that is going there in the heartland. And these programs are 
essential in expanding and supporting the small businesses that 
we have got.
    So I would like to start off with Ms. Todd. As an expert on 
bringing these federally funded R&D products to the 
marketplace, I am curious if you could talk to us a little bit 
about the programmatic changes that would have the most impact 
on the types of businesses that you have been supporting.
    Ms. TODD. Sure. Thank you.
    So in terms of commercialization, many of the agencies have 
adopted the Technical and Business Assistance Program, even in 
phase one. And I have seen here in Arkansas, it has been a 
great support for our companies as they are looking to expand 
on not just the research and development projects but also to 
put into place practices that would help them further down the 
road as they plan their marketing sale strategies for 
successfully commercialized products and services.
    So I would say one thing that would help is to have all the 
resources needed to help all the agencies, even if they wanted 
to offer these TABA programs for awarded companies, so they can 
have those resources to be successful in commercialization.
    Also, many of the agencies offer programs that are on 
Customer Discovery, the act four models. And I think that would 
be helpful for all the agencies to offer. It is a key piece of 
successful commercialization. They learn about the market need 
and limitations of current solutions. So this is a great way 
for awardees to be able to ensure that their final technology 
really aligns with what those needs are which typically changes 
over time as well.
    Ms. DAVIDS. Yeah. Well, I appreciate that.
    And Mr. Glover, you know, I kind of want to take you back 
on some of what you were bringing up earlier. I am curious if 
you could maybe, if you have some recommendations about ways to 
support businesses through phase three. You had mentioned that 
in your previous response. Just curious if you have some 
recommendations for us.
    Mr. GLOVER. Well, one, getting a Phase III from the 
government is part of it, but getting Phase III from the 
private sector. We were challenged with the ``Valley of 
Death.'' We may sometimes make the ``Valley of Death'' wider 
but we do not make it any shallower. And our venture capital, 
which had been the mainstay of American ingenuity for 40 years. 
It came shortly before the SBIR program really kicked in. It 
really has moved offshore and to later stage investments, so it 
is really tough. Creating a program to help there. Angel 
investors are there but they are not as busy as we think they 
should be. They are not making as many investments. So it 
really is a challenge. And what is scary is when you see other 
countries doing a better job of this than we do. So creating 
funds that will take technology to a next level, not 
necessarily SBIR funds because we want to keep that program 
that has worked so well pure but it is time for us to realize 
that we are at a competitive disadvantage and we need to create 
new activities. This is the only small business program for 
innovation out there. There should be more.
    Ms. DAVIDS. I appreciate that.
    Chairwoman VELAZQUEZ. Thank you.
    Ms. DAVIDS. Thank you. And I yield back, Madam Chair.
    Chairwoman VELAZQUEZ. The gentlelady yields back.
    Now we recognize the gentleman from Pennsylvania, Mr. 
Meuser, for 5 minutes, who is the Ranking Member on the 
Subcommittee on Economic Growth, Tax, and Capital Access.
    Mr. MEUSER. Thank you, Madam, Chair. Thank you to our 
witnesses. I appreciate your input and your information.
    So Mr. Glover, in your testimony you say that the primary 
strength of the SBIR program is invest in early innovation well 
before venture capital firms and such. Yet, many companies 
receive the SBIR grant year after year. So is that common or is 
it usually they receive it for 1 year, maybe 2, but not 8 to 10 
years in a row?
    Mr. GLOVER. Well, when we look at the government's pattern 
of buying things what we see is that if you are a large 
company, we buy from them every year forever. If you are a 
large university like Johns Hopkins with $2 billion a year of 
coming in, everybody accepts that. For small business, we need 
more small businesses at every level. Roughly 25 percent of all 
SBIR winners are brand new to the program and that has been 
true for the whole history of the program. The government 
actually buys SBIR research for technology for government 
purposes. So a big part, one of the core reasons the SBIR 
program was founded in the congressional mandate is to give the 
government research that it needs. So there are companies, yes, 
that do year after year and they do it because they are really 
good. It is a very competitive program. If they were not giving 
the government the research they wanted for their programmatic 
needs, they would not get follow-on awards. So you need the mix 
of all.
    Mr. MEUSER. I can appreciate that. I can appreciate that. I 
have been a small businessperson for almost 25 years and I 
worked with thousands of small businesses over time, some doing 
business with the government, many with R&D budgets. I am not 
sure I know of any that have actually received this. And our 
role here is not to be critical but to provide oversight.
    So when the companies do receive these investments, okay, 
the taxpayer dollar investments, do you review their EBIDTA at 
the end of the year? What sort of financial disclosures go into 
it? I mean, if a company, you invest $200,000 and 2 years later 
their net earnings are $10 million and their R&D budget is 
pretty substantial as well, does that perhaps disqualify them 
or does that make them more attractive because you are seeing a 
perceived return on investment?
    Mr. GLOVER. The criteria to be eligible for the SBIR 
program is 500 employees. And if you are a very wealthy company 
and doing very well, that is okay. It is perfectly legal under 
the program and it happens.
    Mr. MEUSER. But it is not necessary.
    Mr. GLOVER. Many of our companies graduate. They get 
bigger. They get acquired by new companies. I have in the back 
of my testimony a list of 10 major DOD contractors that have 
acquired SBIR firms through the years, a list of the first them 
have acquired. One company I think has acquired 44 SBIR firms 
through the years.
    Mr. MEUSER. Okay.
    Mr. GLOVER. So it is a career ladder. If you try to only 
seed companies, you may get a few home runs. What we see in the 
program is----
    Mr. MEUSER. Do you do a real ROI estimate annually on the 
taxpayer dollars that go in versus the company's growth?
    Mr. GLOVER. We do audits certainly for defense. Now, 
grants, some agencies do grants and only grants for 
universities, for small business, and for everybody else. Those 
grants are a little softer audits. The DOD audits SBIR firms. 
DCAA is working on that. So they do look at it. But what they 
are auditing for is to make sure that there is no waste and 
fraud and that the money is properly spent. The return on 
investment is what we have seen, the economic impacts that it 
shows, and that is where you are getting 22 to 33 percent 
return on investment and the taxpayer is getting $3 of taxes 
for every dollar they invest in the SBIR program at the 
National Cancer Institute and at DOD which is well over half 
the program.
    Mr. MEUSER. Okay. Well, I had a couple of questions for Ms. 
Keady to see what her experience is but my time is about 
wrapped up. So Ms. Keady, I may send those questions over to 
you if you do not mind.
    But I yield back, Madam Chair.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentleman from Maryland, Mr. Mfume, 
Chairman of the Subcommittee on Contracting and Infrastructure 
for 5 minutes.
    Mr. MFUME. Madam Chair, thank you very much. And thank you 
for what clearly is a very important hearing to look at seed 
programs and other things that are available.
    I would like to just, if I might, direct my question to Dr. 
Tung. I was going through your testimony, Doctor, and you 
mentioned that you had an 80 percent success rate with SBIR 
applications. And I do not know if this question may have been 
previously asked, but that just strikes me as an 
extraordinarily high number. And so I wanted, for the sake of 
better understanding, to get you to talk about what you think 
is directly attributable to that rate and can it be or is it 
being replicated. So I would like to know whether or not it is 
a matter of innovation, it is a matter of who the innovator is, 
or if it is a matter of the nature of the research so that I 
might better understand how we get up to and maintain, I guess, 
an 80 percent figure, success rate.
    Ms. TUNG. So, you know, of course I cannot speak to the 
grant review Committees who are the ones who actually assess 
the grant applications. I can say that what we were told by our 
program officer was that the comments they had gotten back was 
that the quality of the science that we were doing was very 
high. It was like fairly unique and I think we also have a 
track record, to Mr. Glover's point, of actually executing on 
the things that we said that we did and really getting the 
results out there into the scientific community because it is a 
competitive process. So I think that if we had not continued to 
do that grant over grant, my guess is that we probably would 
not have continued to receive them.
    Mr. MFUME. And Mr. Glover, may I go back to the line of 
questioning of the gentleman before me with respect to the 
average number of years that a business can qualify and get 
funded with follow-up rewards? And I am assuming, this is only 
my assumption, that there is no limit to that, or is there?
    Mr. GLOVER. There is no limit to that.
    Mr. MFUME. Okay. Does anyone at your agency review their 
earnings before interest, taxes, depreciation, and 
amortization, to see whether or not these businesses are 
growing or not growing the way they should be?
    Mr. GLOVER. The agencies have had economic impact studies 
done that do analysis of that and show how many follow-on 
research dollars are given, how many follow-on jobs are 
created. They have done a careful analysis of over half of all 
the SBIRs in the last 10 years. And so they look at all of 
that. They do detailed reports and provide those back to the 
public and to the agency and to Congress.
    Mr. MFUME. But are they also looking at the EBIDTA of each 
one of those applicants that continue to get funded?
    Mr. GLOVER. No. And quite frankly, I would urge you not to 
have that happen because that is more paperwork and more 
challenge. This is a program that is primarily driven by 
science. The science and innovation. And when we add different 
layers of review, it slows down the process. It makes the 
scientists take time away from doing the science and innovation 
and have to do paperwork. And one of the common complaints we 
have now is that there is already way too much paperwork 
involved in this process.
    Mr. MFUME. I am sure the members of this Committee would 
argue with you that there is too much paperwork that we are 
involved in, but in order to assure taxpayers that there is not 
any waste, not any fraud, not any abuse, I think that 
additional work in that area is warranted. I think it is 
justified.
    What I am really concerned about though is if I can get 
unlimited awards year after year because of my innovation, who 
I am as an innovator or the research or whatever, it seems to 
me that reduces the amount of money available for a larger pool 
of applicants who want to get funded but the money is not there 
because if it is 3 or 5 years, 6 or year 10, one particular 
business continues to get awards. Could you just kind of speak 
to that?
    Mr. GLOVER. This is basically the only program that gives 
small business a clear window into the Federal R&D research 
funding. And you have got giant corporations, you know, who get 
hundreds of billions of dollars of Federal money. Small 
business needs this window open and it has worked very 
successful. Remember, one of the missions is to give the 
government research that it wants. Without this program, small 
business is virtually shut out of the Federal R&D research 
program. We need to open up more windows for small business.
    Mr. MFUME. I understand. It just seems that without any cap 
on the number of years, Business A could get these awards for 
15, 20 years, let's say, and there are a ton of other small 
businesses trying to get in because they have got clear needs 
for innovation and research but there is a finite number of 
dollars available today. And so if those dollars are eaten up 
because we do not try to get people in and graduate them out, 
it just seems to me that we are complicating the problem.
    But I will yield back, Madam Chair. Thank you for the 
opportunity to ask questions.
    Chairwoman VELAZQUEZ. Is he on? Mr. Garbarino, I think that 
you are muted.
    Mr. GARBARINO. Thank you very much, Chairwoman.
    I just have a quick question. This is a lot of good 
testimony, a lot of great answers so far about the SBIR 
program. But this is really for anybody on the panel.
    I know Mr. Crow asked about standardizing the template or 
making things easier or standardizing some of the paperwork, 
but based on the experiences with SBIR, do any of you have any 
specific recommendations? And I know some of you touched on it 
a little bit in the testimony, about how to help improve the 
program to make it even better?
    And anybody can just jump right in.
    Ms. KEADY. I have one thing I would like to mention that 
has not been mentioned yet. There is a significant time gap 
between receiving a phase one and a phase two and that can be 
very challenging for a small company who is trying to keep 
their employees on the payroll. Sometimes it is 4 months, it 
could be 12 months or more gap, and so you want to continue the 
work but there is this challenge of how to overcome that as 
well.
    Mr. GARBARINO. So you would say making it more of a 
standardized time? I mean, a 4 month to a year delay, that is a 
big gap. What would your recommendation be, just making it more 
standard or moving paperwork quicker?
    Ms. KEADY. I have not thought about it in depth but some 
way to streamline the reviews of going from a phase one to 
phase two would be helpful. And we are also not guaranteed of 
getting a phase two so there is that uncertainty as well, 
although the phase twos have a higher success rate in general 
than the phase ones just because it is a smaller pool of 
applicants and they are already successful in having gotten the 
phase one. But that is something that if there was a way that 
that could be shortened that period of time for review and 
granting award would be shortened, that would be extremely 
helpful as well.
    Mr. GARBARINO. I appreciate that.
    Mr. GLOVER. If I may comment, last year's NDAA required DOD 
to at least standardize, simplify, and expedite a contract 
award. The GAO did a study a few years ago that shows it takes 
2 years to get between phase one to phase two in many cases. 
There should be oversight on that making sure that, in fact, 
happens. There ought to be a standard contract for phase one, a 
standard contract for phase two, and a standard contract for 
phase three. And once a decision is made it should happen. And 
that delay is costing valuable time, especially with innovation 
happening so fast and having such a short half-life. We have 
got to do it quickly and the government is years behind in 
terms of that area. You hit a very sensitive area. I would be 
happy to talk to you more about that.
    Mr. GARBARINO. I appreciate that. It seems like we get in 
our own way sometimes. So I think we should look into 
addressing that.
    From the other witnesses, is there anything else you would 
like to add to that specifically or any other ideas that we 
should be looking at? If not, I yield back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentleman from Minnesota, Mr. 
Phillips, Chairman of the Subcommittee on Oversight, 
Investigations, and Regulations for 5 minutes.
    Mr. PHILLIPS. Thank you, Madam Chair. And greetings to our 
witnesses. Thank you for being with us.
    I represent a district in Minnesota that is home to a 
number of the world's largest medical device firms, many of 
them founded and cultivated right in the Twin Cities and 
started in garages. And those are the great American success 
stories that we all love and wish to nurture more of. I, like 
many of my colleagues on this Committee are dismayed by the 
fact we seem to be falling behind other countries in the world.
    My first question is on that subject to you, Mr. Glover. 
You had mentioned in your earlier comments that China and the 
EU have taken the SBIR model and made it ``bigger and better.'' 
I would love for you to take a little time and share with our 
Committee how they have done so with some specifics so that we 
might be able to better understand how they have leveraged it 
and do better ourselves.
    Mr. GLOVER. Well, they have steadily increased the 
percentage of their research dollars going to small business. 
And I footnote that because most frankly most people do not 
believe it but it is going on. A few years ago it was 16 
percent. It is now up to 20 percent. So they are putting more 
money there. Now, quite frankly, Europe does not have the 
entrepreneurial spirit, the entrepreneurial drive that we have 
but they are putting more money into it. So the main thing is 
more money.
    I highlighted the one Chinese institute because they did 18 
universities in China get together with dozens of universities 
in America to take U.S. research, collaborate with them, often, 
and I suspect most times, the follow-on research and 
commercialization is done in China. But they have taken 150 
products and gotten 108 of them into commercialization. Now, 
SBIR is 50 to 70 percent commercialization but there is $600 
million the Chinese Government has set up as an, in effect, 
venture fund to fund those technologies that they are basically 
taking from the United States and developing over there. So it 
is heartbreaking. To be honest with you, I mean, SBIR set out 
to be U.S. companies, U.S. ownership, and the work done in the 
United States. Much government research can be done elsewhere 
and seeing our technology go overseas is heartbreaking. It 
should not happen.
    Mr. PHILLIPS. Right. I could not agree more.
    Dr. Tung, I would like to as you, too, about your testimony 
highlighting the importance of maintaining venture capital as a 
source of outside cash flow for companies that are trying to 
secure other forms of early stage capital. Can you elaborate a 
little bit on the complementary relationship that you see 
between VC and the SBIR program?
    Ms. TUNG. Certainly. So I think for us, we have a model in 
which our research platform is based upon a consumer research 
cohort. About 80 percent of our customers consent to 
participate in research. It is those people participating in 
research that allows us to have this highly scalable platform. 
Now, the SBIR funding funded the research specifically, the 
collection of data, the analysis, the publication. However, the 
development of the actual online platform itself, all the 
design, all the product, all the engineering, all of that was 
funded by venture funding. So we could not have done what we 
did without the other part of the business having already been 
funded. So really, those two pieces had to exist together or we 
would not have been able to build what we did.
    Mr. PHILLIPS. Okay, thank you. I appreciate.
    With my remaining time, if any of you might chime in, I 
remember when I was a kid in elementary school, business day 
was perhaps one of my greatest forces to have to think about. 
Starting a little business, creating, generating revenues, 
identifying expenses, selling stock, and marketing. And I just 
wonder if you see opportunities in the United States to inspire 
younger generations still in school about the possibilities of 
entrepreneurship and innovation and are there any programs of 
which you are aware that we can go a little further upstream so 
that programs like SBIR and others will have an even wider 
universe to allocate resources to? Are you familiar with any 
programs trying to teach entrepreneurship to kids? Okay.
    Ms. TUNG. Well, I actually do have one thing. This may 
sound facetious but I actually do mean it seriously. There is a 
TV show called Shark Tank in which people are allowed to bring 
their ideas in front of a set of investors. But it is not 
uncommon that you actually see very young people, teens and 
sometimes younger than that, who actually have been inspired by 
that show to bring their ideas into businesses. So I think that 
sort of thing, making it relevant and part of popular culture 
is I think inspiring for a large portion of the community.
    Mr. PHILLIPS. And I agree.
    All right, well, I am running out of time. I thank you all. 
I appreciate this conversation and your testimony. I yield 
back.
    Chairwoman VELAZQUEZ. The gentleman yields back.
    Now we recognize the gentlelady from California, Ms. Young 
Kim, Ranking Member of the Subcommittee on Innovation, 
Entrepreneurship, and Workforce Development.
    Ms. YOUNG KIM. Thank you, Chairwoman. And I want to thank 
all the witnesses for being with us today to discuss these 
important programs. And thank you, Mr. Phillips, for asking the 
question, and for Ms. Tung answering it. Shark Tank is one of 
the programs I watch regularly, too.
    Getting back to our discussion here, SBIR and STTR programs 
are critical tools for small businesses to reach, develop, and 
commercialize innovative technologies to create good paying 
jobs for increasing our competitiveness abroad.
    China and other nations are making concerted efforts to 
bridge that innovation gap with the United States and put more 
resources to commercialize their own technologies. So we must 
not relent our country's position as the world leader on 
innovation and the development of new technologies.
    So keeping that in mind, I am concerned the Biden 
administration has yet to appoint an associate administrator in 
the SBA's Office of Investment and Innovation. So I would like 
to pose this question for all the witnesses. Considering SBA's 
responsibilities under the programs, including agency 
coordination, policy guidance and data collection, how 
important do you think it is to have an associate administrator 
appointed as soon as possible? I know this could be a very 
simple yes or no question. Respond very quickly.
    Mr. GLOVER. Yes. The Investment and Innovation Office 
should report directly to the administrator. Yes.
    Ms. YOUNG KIM. Thank you.
    Other witnesses, your answer, yes or no, how important is 
it to appoint an associate administrator right away? We need 
somebody to coordinate these important programs. You agree; 
right? Okay.
    Well, let me go to the next question.
    The Small Business Act requires the SBA to report annually 
to Congress on the SBIR and STTR programs but unfortunately, 
SBA compliance with this requirement has been an ongoing issue. 
So if we do not have the timely reports, it is difficult for 
Congress to legislate and improve the programs. So in your 
view, what can Congress do to ensure SBA's meeting the 
statutory reporting requirements?
    Mr. GLOVER. We mentioned in our detailed recommendations in 
our testimony making the reports available as soon as the 
agency does and put them on their website. In the old days you 
had to filter them through. DOD, for example, the services have 
to send it to DOD which has to review it, which sends it to SBA 
which the SBA has to send it to OMB to review. So there is a 
built-in process. There is no reason all that information 
should not be put on the web immediately. And so make those 
reports in a much shorter timeframe but put it on their own 
website immediately.
    Ms. YOUNG KIM. All right.
    Do you currently, Mr. Glover, do you think that SBA has the 
online web portal that makes it easier for different agencies 
to put together their report, that way the SBA can put together 
an overall report to Congress in a timely manner?
    Mr. GLOVER. The review process makes it untimely. So let's 
eliminate the review process. Put it on the web, be done with 
it, and move on. Right now, we have been working with DOE and 
we are looking at inside DOD data. DOE data, we are looking at 
things that they do not look at for years but were available--
spending USA track down how many phase threes are being 
awarded. What is happening? We did not know that 2 years ago 
but SBA could do it as well.
    Ms. YOUNG KIM. Thank you. I sense your frustration, sir. 
Thank you very much.
    Let me direct my last question to Ms. Pat Keady. With our 
experience of being women entrepreneurs, can you offer any 
advice to other women entrepreneurs who would like to 
participate in the SBIR program?
    Ms. KEADY. I appreciate that question. And one of the 
things that I wanted to mention is that there is a huge funding 
gap from venture capital or investors in general for women-
owned businesses. That needs to change. I do not know if that 
is government's responsibility but that definitely needs to 
change. We start out with a disadvantage. I do not know if it 
is a bias or whatnot but there is definitely a gap.
    I think when I started my career in the `80s, there were 
very few women in aerosol science and now there are lines at 
the restroom at the conferences so I think we have made huge 
gains in terms of participation in STEM fields. I find that the 
field that I am in is very respectful of women. It is a very 
comfortable place to be. And so I feel that women should not 
hesitate. They just need to jump in.
    Ms. YOUNG KIM. Thank you. I know my time is up, so thank 
you very much all the witnesses. I yield back.
    Chairwoman VELAZQUEZ. The gentlelady yields back.
    Now we recognize the gentlelady from Illinois, Ms. Newman, 
for 5 minutes.
    Ms. NEWMAN. Good morning, everyone, and thank you, 
Chairwoman Velazquez and Ranking Member. Great conversation 
this morning. Thank you to all our witnesses. Learned a lot and 
appreciate our entrepreneurs so much. Having been one I am 
thrilled to see progress like this.
    And I will also just share a point with Ms. Keady. I agree. 
When I was an entrepreneur, I pitched my idea to over 60 VC 
firms and there was exactly one woman in the room. Exactly one 
across. And that probably meant about 150 people. So we need 
more women in entrepreneurial places but also in VC firms I 
will add, too.
    Turning my attention to Mr. Glover, thank you so much for 
your comments today, sir. And really appreciate your 
recommendations.
    So if I heard you correctly, it sounds like, and I agree 
with this because if you read the Wall Street Journal, it is 
clear that that is the case, but it sounds like over 80 percent 
of current funding goes to tech firms. Is that correct, sir, in 
the VC world and PE probably, too?
    Mr. GLOVER. Eighty percent goes to telecommunications, the 
Internet, healthcare and Biotech. It is on my chart in the 
testimony.
    Ms. NEWMAN. Okay, sure. So primarily tech? Can we agree on 
that?
    Mr. GLOVER. Yes.
    Ms. NEWMAN. Okay, good. And that is VC and PE funding 
probably, too, overall.
    So knowing that, is there a possibility that you would be 
comfortable recommending and adding to your recommendations 
that we look at, on our side of the fence, meaning this 
government-based program, balancing that out a bit and 
prioritizing things like green technologies, green 
infrastructure, those in green building substrates, anything in 
the space in the 21st economy, green economy. Do you think that 
there is an opportunity to recommend maybe not fully 
prioritizing but adding some priority to green-based 
technologies as well as women and people of color owned 
organizations?
    Mr. GLOVER. There has always been a reluctance for the 
Federal Government to pick winners and losers when that was 
pre-China and pre the rest of the world. When I look at the 
Beijing Institute of Collaborative Technology, their focused 
areas are robotics, optoelectronics, structural and functional 
materials, energy technology, water treatment, and biomedical 
engineering. They are giving money in those areas so they are 
doing it, and the U.S., we have got to get back in the game. I 
am sorry. My answer 20 years ago was different. Today, they are 
doing it, we are not.
    Ms. NEWMAN. Yes. And I agree 100 percent.
    So I encourage you to put a little data behind that and 
suggest how we can prioritize a few areas. And certainly green 
technologies should be one of them but maybe it is robotics and 
others as well to reassert our competitiveness in the 
international community. Your initial comments, and I have 
certainly read it before, but startling. We have got to assert 
our competitiveness again. I think the best way to do it is to 
look at a 21st century economy and not look backward, which 
would include green technologies and renewables and robotics 
and other such things. So I encourage you to include that in 
your recommendations. And I appreciate your work on this. And I 
appreciate all our entrepreneurs today. And I yield back.
    Ms. HOULAHAN. Thank you. The gentlewoman yields back.
    The gentleman from Wisconsin, Mr. Scott Fitzgerald is now 
recognized for 5 minutes.
    Mr. FITZGERALD. Thank you, Madam Chair. I know at this 
point there might be some redundancy, so let me apologize for 
that in the questions.
    To Mr. Glover, you talked a little bit about streamlining 
or just fully eliminating specific parts of the process. But so 
without sacrificing and without putting into play waste, fraud, 
and abuse protections, the elimination of those, is there other 
things that, you know, the paperwork burden for small 
businesses, as we move forward in technology, we should be 
reviewing that on a regular basis and making changes. Is that 
right or is this something that most of these small businesses 
are able to keep up with on their own?
    Mr. GLOVER. When the SBIR program first started, they 
limited the proposals to 25 pages. There were virtually no 
other rules or regulations. Now, the proposal and the 
solicitations that go out have 100 pages of rules, regulations, 
and procedures. It has gotten awfully complicated. Our guys do 
not like it. The small businesses, especially the new companies 
that come into the program have to spend a lot of time trying 
to understand it.
    Having said that, they are willing to do it because that is 
the only way to do it. But should it be simpler? Should we have 
an automatic system? Yes. We need to go back to what was there 
when we first started. You have got an idea. We will give you 
25K. You work hard on it. We will give you another quarter 
million dollars if you come back and it seems like it is 
working. So yes, the numbers are higher now because of 
inflation over time but yes, we need simpler.
    Mr. FITZGERALD. That is great. That is helpful. Thank you 
very much. And I would yield back, Madam Chair.
    Ms. HOULAHAN. The gentleman yields back.
    The gentlewoman, Carolyn Bourdeaux from Georgia is now 
recognized for 5 minutes.
    Ms. BOURDEAUX. Thank you very much.
    Georgia is home to countless innovators and companies that 
are on the cutting edge of new technologies. Georgia Tech's 
Enterprise Innovation Institute provides some critical 
expertise to businesses as they seek to bring technology and 
research-intensive products to market. And we have many small 
business incubators and accelerators that work closely with 
Georgia Tech on a variety of different projects.
    However, any product that relies on research and 
development of innovative technology is likely to have 
significant concerns around protecting intellectual property 
developed for these projects.
    So one question for Mr. Glover is how do small businesses 
go about protecting the IP that is developed through these SBIR 
and STTR projects?
    Mr. GLOVER. One of the beauties of the SBIR program in the 
IP area is that they are given their rights to that technology. 
And the government cannot disclose that. There are some things 
that should be done to tighten that up because we run into 
battles and fights on the fringes but the SBIR data rights is 
an important provision in there that helps us in many cases. 
But you are right. In those cases where the government really 
wants it, they demand to have, you give away your rights or we 
will not give you the contract. And that happens often, even 
though it is in the law they cannot do that. But they still do 
that and they do that frequently. So data rights are critical.
    Ms. BOURDEAUX. What would you recommend doing to tighten 
that up?
    Mr. GLOVER. We will get back to you on that with some 
specifics. It is becoming more of a problem recently. The Army 
especially seems to be really tough on that data rights now. 
But some of the services are better than others but it is 
critical that you let small business keep their rights so they 
can go commercialize it. We know the government labs just do 
not do a real good job of commercializing. And small business, 
at least if they have got it you have got a chance.
    Ms. BOURDEAUX. Thank you.
    Do any of the other witnesses have any thoughts on this 
matter? Okay.
    Moving on to another question. Ms. Keady, did you have 
something?
    Ms. KEADY. I was just going to say that, again, as an 
entrepreneur, there is no free time in our lives. And so all of 
these things take time and effort. And IP is extremely 
important. We have patents pending right now. Again, it is 
helpful to have TABA money to help support some of that funding 
but that is just one more thing on our plate that we want to do 
right. And so any help we can get is much appreciated. Thank 
you.
    Ms. BOURDEAUX. Got it. I appreciate it.
    I just want to follow up on one other issue that came up 
earlier which was that after the venture capital phase 
launching to a larger business often proves very challenging. 
But I know that there are programs. There are tax credits. 
There are Federal programs out there to help move into that 
next sort of midsized business phase.
    And I wanted to check with you, Mr. Glover. Do you have any 
thoughts about those kinds of programs and whether there is 
anything more we can do to enhance and help women-owned 
businesses, minority-owned businesses, but just businesses in 
general make that next leap?
    Mr. GLOVER. The problem with R&D credits is that you have 
to have a profit to be able to use it. To be honest, our guys 
do not make profits for a long time. Sometimes never. And so 
those R&D credits really do not help you. And the R&D credit, 
if you could sell it or transfer it to somebody who has money 
and you get some cash for it, some of the states have programs 
like that that work.
    But, look, we have done so little to help entrepreneurs in 
the innovation space. There is a whole bunch of things that we 
should have done and we certainly can do. And right now in the 
competitive world we are in, we need to rethink everything we 
are doing. We need to come up with brand new ideas knowing why 
are we still giving less than 10 percent of Federal R&D dollars 
to the most innovative sector of small business? Why is SBIR 
primarily the only program that really focuses on helping small 
business? It is outdated thinking. We are now in a situation 
where the world has passed us and that is happening over and 
over again and we have got to come up with new ideas and a new 
approach.
    Ms. BOURDEAUX. Thank you very much. I agree.
    I yield back the balance of my time.
    Ms. HOULAHAN. The gentleman yields back.
    The gentleman, Pete Stauber from Minnesota, is now 
recognized for 5 minutes.
    Mr. STAUBER. Thank you, Madam Chair.
    As with every government program, finding success is not 
always easy. When I first got to Congress, I assisted a small 
business obtain feedback from the Air Force regarding an SBIR 
application denial. They were never able to get a straight 
answer before my involvement but I was certainly happy to get 
things cleared up.
    I think this leads me to a question that any of our 
panelists can feel free to answer. Do some agencies provide 
better feedback to their applicants than others? Or more 
generally, do you feel that certain agencies make it easier for 
participation than others? Any of the panelists.
    Ms. KEADY. I just want to say in particular I am thinking 
about some of the NIH reviews. It is really a bit of a crap 
shoot as to who your reviewers are as to what kind of scoring 
or feedback you get. And so while I think it is really good to 
have outside experts reviewing these proposals, sometimes we 
get faulty information. I can say one time where we submitted a 
proposal, it was not quite in the pay line, and so we 
resubmitted addressing all of the reviewers' concerns and we 
got a worse score the next time. So that was a little bit 
frustrating.
    Mr. STAUBER. To that point, tell me what we can do to 
eliminate that issue. What is your solution?
    Ms. KEADY. That is a great question and I will have to 
think about that.
    Mr. STAUBER. Okay.
    Ms. KEADY. I do not have an innovative answer.
    Mr. STAUBER. No, that is fine. It was not a trick question. 
Those are some things that are important for us to hear to be 
able to change the regulations or rules to have the ability to 
accommodate more so.
    And then I also have the question, do you think 
standardization of paperwork requirements across agencies would 
help or increase population of small businesses and make them 
more likely to succeed? So the standardization of paperwork and 
maybe the vast majority of the process? And this is for any of 
the panelists.
    Mr. GLOVER. It would definitely help. The challenge for new 
companies, to make a short, simple claim, you will get more 
people participating in the program and you will have them 
spend more time on the science and less time on the paperwork. 
So the more you can standardize and simplify everything in the 
SBIR process, go back to the way it was early on, you are 
right. Yes. It is critical. It would be very helpful.
    Mr. STAUBER. Okay. Any other panelists?
    Ms. KEADY. Again, I am going to bring up a challenge, not 
necessarily a solution, but I think the success in winning 
grants is very much in a person's ability, or a team's ability 
to tell a good story. And so there is a certain amount of skill 
in just writing the grants. And this does not necessarily, you 
know, what about the company who has a great idea but is not as 
skilled at writing or telling the story? I would hope that 
there is a way for those companies to also get to participate.
    Mr. STAUBER. That is an excellent point. We are seeing some 
of the bigger companies hire grant writers and people that 
specialize in that which would give them obviously a better 
opportunity, and we are looking for that small business who may 
not have the capital to hire an individual like that. So that 
is a great point and we cannot forget that. These grants, we 
have to really have them open and available for our small 
businesses. Thank you for bringing that up.
    Thank you to all the witnesses. And Madam Chair, I yield 
back.
    Ms. HOULAHAN. The gentleman yields back.
    And I now recognize myself for 5 minutes.
    My community is just outside of the city of Philadelphia. 
I, as well, am an entrepreneur with a technical background.
    And my first question is for Ms. Keady. With your 
testimony, and actually also with many of the other folks' 
testimony, you have spoken about hiring an outside investor to 
help with the cost of commercialization for your business. In 
your experience, does the SBA offer resources for business 
owners who seek commercialization? Did the SBA offer your 
business any assistance on how to ensure commercialization on 
your aerosol devices?
    Ms. KEADY. I know that NIH and NSF have had programs where 
they have a meet the investor kind of thing. But again, you 
know, it takes time to write the executive summaries, the pitch 
deck, to create the videos. And we have had no real strong 
connections. It is helpful in just honing our message and 
thinking about what we would want to say to an investor. So I 
know they are trying.
    One of the things that we have found, and maybe it is our 
industry, is that investors do not necessarily value grants. 
What they want is traction in the market. And so it is that 
getting to market and having real customers and having real 
success is what attracts investors. Just having grants, you 
know, yay, good for us, but it is not the magic bullet for 
getting an investor.
    Ms. HOULAHAN. Yeah. And if I could follow up on that, 
largely what my role has been in all the entrepreneurial 
ventures that I have participated in has been the operator, the 
person who does operationalize the idea. And so I do recognize 
how important it is. And in fact, that is why I introduced a 
bill with Mr. Balderson, Rhett Balderson, and it is called the 
RAMP for Innovators Act. And it takes exactly about all of the 
things that we have been talking about this time around. 
Whether it is help with commercialization, whether it is help 
with IP and patents, it is those things that are the things 
that bog us down as entrepreneurs, that make us struggle with 
the next level of investment.
    And so I would love if I could ask you guys to share your 
experience. What worked and what did not? What would you share 
in terms of legislative ways to ensure that the SBIR and STTR 
investments are leading to commercially-viable products or 
services and that next level of investment?
    So if I could, I would turn that back to you, Ms. Keady, 
and then to anybody else who might have input in that.
    Ms. KEADY. Well, I would have to say that we are early in 
our journey in seeking an investor. And so I do not have a 
success story yet. But I am very interested in learning what 
other people have done.
    Ms. HOULAHAN. Could I ask Dr. Tung if she might be able to 
give us some ideas of what has worked and what has not worked 
in the commercialization area and how we could be more helpful 
here in this body?
    Ms. TUNG. I think for us, to some of the comments earlier, 
biomedical research takes a long time. A lot of these grants 
have a term of like a year, year and a half, and it is very 
easy for a research project to last 3, 5 years. And so that is 
one of the reasons why you do have to kind of look at trying to 
get grant funding over a long period of time. And I think that 
was critical. It took us a long time and a lot of proof of 
concept of what we were doing was high quality before we got to 
a point where there were outside groups who were willing to 
either pay us for our services or our products or invest in 
that part of the business.
    Ms. HOULAHAN. And Ms. Todd, do you have anything that you 
would like to contribute here?
    Ms. TODD. I would just say as a support organization for 
these innovative small businesses, we always encourage 
scientists to be able to articulate the value proposition of 
what they are bringing to the marketplace as early as possible 
rather than focusing so much on the technical aspects that 
maybe they are naturally more comfortable with. So we 
definitely help them to think through those processes, through 
our consulting services. Also, as part of that we have market 
research that allows us to dig pretty deep into potential in 
terms of long-term market potential, what the competition is 
looking like, demographics of their customers. I think all that 
feeds into helping them tell a good story about the 
commercialization opportunity when they fill out these 
applications.
    Ms. HOULAHAN. I only have 15 seconds and I appreciate all 
of your time. I guess my struggle is it is not about just the 
story; it is actually about the execution on the story and 
actually operationalizing things and actually getting patents 
and IP protected our hard processes. And that is indeed what 
the RAMP Act that we are trying to push forward is addressing.
    I appreciate your time and I yield back.
    And I think I am supposed to be recognizing Mr. Schneider. 
And so the gentleman from Illinois, Mr. Schneider, is now 
recognized for 5 minutes.
    Mr. SCHNEIDER. Thank you, Madam Chair. And I want to thank 
the witnesses for sharing your perspectives today on this 
critically important issue.
    Small businesses are the engine of our economy. As you said 
a moment ago, Mr. Glover, they are what drive innovation in our 
economy and it is critical that we support them. And that is 
why having this hearing is so important.
    While the programs we talked about today have always been 
critical, they have special significance as we focus on the 
economic recovery post COVID-19. This has undoubtedly been a 
difficult year for small businesses and for all Americans. With 
vaccines being distributed throughout the country and 
restrictions being lifted, it is time to look towards the 
future. Small business innovation will be a key driver of 
economic recovery as we seek to tackle new economic challenges, 
get people back into the workforce, and adapt to the changes 
brought on by the crisis.
    I have heard from businesses all over my district about the 
lengths they have gone to just to stay afloat. These programs 
are instrumental in giving small businesses necessary R&D 
capital to innovate which they often lack prior to the pandemic 
but which for many is totally out of reach now. Knowing how 
important SBIR and STTR, I have advocated in the past for 
allowing firms more flexibility in spending and for continued 
funding of these programs.
    Ms. Keady, you talked about your recent experience as a 
business owner, developing new technology using SBIR/STTR funds 
and the limitations in using funds to launch the program. Can 
you talk more about what you could do with a more flexible 
spending structure, as well as how challenging the road to 
profitability was under the current restrictions?
    Ms. KEADY. Well, we were in the fortunate position of 
having a product, albeit in a prototype stage, but having a 
product that was immediately useful for addressing the COVID 
pandemic for researchers in trying to determine whether or not 
the virus was airborne transmitted. And so we benefitted this 
past year in selling to researchers. So for us the challenge in 
terms of flexibility of spending is the SBIR programs by and 
large just fund R&D. And so I think for us, having more 
flexibility, and especially some of the phase one grants having 
higher overhead rates so that we could hire help to do some of 
these other things. As entrepreneurs, we end up doing 
everything ourselves most of the time because we just do not 
have the staff. And so having more flexibility in how the money 
is spent would be helpful.
    Mr. SCHNEIDER. Great. Thank you.
    I do not know if any of the other witnesses want to share 
your perspective on that?
    With the time that is left, and maybe I will start with Mr. 
Glover, from experience, if you were to pick one, two, maybe 
three things that we can do to have the biggest impact as we 
begin this recovery and get to the other side of the pandemic, 
what would you have us do?
    Mr. GLOVER. I think I would first set a goal for small 
business R&D of the Federal R&D dollars. We are spending a lot 
of our R&D dollars and have historically with other 
institutions, large firms, labs, and universities, and small 
business is the innovator and we send such a small share there. 
SBIR is primarily the majority of that money. So that would be 
the first thing.
    I think when we talk about paperwork, we could set a rate 
of return for small business of say 15 percent. We go in and 
fight on what the profit level is going to be on contracts and 
that wastes time, 7, 8, 9 percent. But the regs say you can go 
up to 15. Just automatically set that at 15. Eliminate some 
paperwork there. I think that governing the SBIR program would 
mean twice as many companies would be able to participate and 
fund their technology and make it move forward.
    I think the STTR program, the universities are challenged. 
Seventy percent of their technology is licensed to small 
business. Less than 1 percent does over a million bucks. STTR 
should work. Make the STTR program as big as the SBIR program 
so that you get universities and have the labs participate and 
have a path to get their technology out of the universities, 
out of the laboratories. Team them up with a small business 
with a business plan that goes forward.
    I think those things would all be helpful. I am quite 
frankly concerned with the elimination of capital gains. Taxes 
will remove an incentive for entrepreneurship. I would focus it 
just on small business, just on businesses in commerce, but 
capital gains for small business, especially technology 
businesses should stay.
    So those are some things off the top of my head that would 
be meaningful.
    Mr. SCHNEEIDER. I have gone over my time. Thank you. I am 
sorry I could not get to the other witnesses. But to everybody, 
thank you for sharing your time today. I very much appreciate 
it. I yield back.
    Ms. HOULAHAN. The gentleman's time is expired and the 
gentleman yields back.
    Thank you again to our witnesses for joining us today. Your 
testimony is proof positive of what small businesses can create 
when they receive investment and support. Our country has a 
long way to go when it comes to reclaiming our title as the 
world's most innovative Nation. We must examine the programs 
that have driven innovation in the past and work to empower 
them. The SBIR and STTR program has decades of demonstrated 
positive return on investment and funding of groundbreaking 
technology.
    And if there is no further business to come before the 
Committee, we are adjourned.
    [Whereupon, at 12:56 p.
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