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news and views of MDA

Star Wars was SDIO, became BMDO, and is now MDA

Year 1996..... Year 1997  Year 1998  Year 1999   Year 2000   Year 2001 

A hit, a palpable hit. The U.S. missile defense system managed by Boeing Co on Sunday hit a simulated enemy missile over the Pacific in the first successful intercept test of the program since 2008  [Reuters, Jun 22, 14]

The Missile Defense Agency has conducted 16 tests of the system’s ability to intercept a mock enemy warhead. It has failed in eight of them, government records show.  $40 billion and counting. The solution: shoot more interceptors at each enemy missile, which is the numbers game solution for low reliability.  [ David Willman, Los Angeles Times, Jun 16]

A test of the only U.S. defense against long-range ballistic missiles failed, the third consecutive failure involving [ground-based midcourse defense] interceptor system. [Reuters, Jul 5, 2013] I hope they had a lot of instrumentation aboard the vehicle(s) since the hardware will be hard to fish out of the Pacific.

MDA Focuses. Our goal is to really manage for results. We’ve had a good process in place. What we’re trying to do now is really focus on the products that we generate for the Agency. Says  MDA's SBIR director. We don’t put out sort of a broad call for topics. I think now we are becoming even more focused. It absolutely must have a missile defense application. The whole tone of his interview says they have the bureau in place, and they want stuff that will fit into an already designed niche in the system. No invitation to disruptive technology or return on investment.  No clarification on criteria other than an MDA insertion into a system that is naturally only vaguely described for national security reasons.  Advantage goes to firms with DOD experience or a link with a firm already in the MDA web of contractors.

A flying Boeing 747 equipped with a massive laser gun shot down a Scud-like missile over the Pacific late Thursday, marking what analysts said was a major milestone in the development of the nation's missile-defense system. [WJ Hennigan, LA Times, Feb 12] The USAF version of anti-missile defense: get 'em during powered flight phase. Such a defense requires control of the air in the neighborhood of the launching country.

If you think you want to get some of MDA's SBIR to help both you and the DOD, be prepared to be quite specific on engineering details and performance of your stuff. The latest list of MDA SBIR awards screams that MDA cares little for innovation or market potential. It's nearly a perfect list of military R&D directly serving on-going development and deployment programs. Which also gives an edge to companies who have made friends in the MDA organization.  A Risk Reduction Process for Enhanced Mission Assurance;  Enhancements to Continuum Plume Flowfield Models for Transitional Flow Simulations; Global Missile Defense Battle Management; Rapid End-game Assessment Package; Development of Validated Plume Signature Codes at Nontraditional Wavelengths Utilizing Ground Based Simulation Facilities; Distributed, Cooperative Planning and Automatic Optimization for Existing BMDS Engagement Planner; etc, etc  You're not going to compete for this stuff until you have an inside view, nor are going to attract outside capital for any downstream markets. The chance that private capital will further develop these ideas into products that MDA would buy later with no interim investment by MDA?  NIL; they would rather have knowledge and control now than depend on uncontrolled and competitive investment, no matter how great the ultimate gain.  Which, I suppose, might even be reasonable if they could rely on unlimited funding for their development and procurement plans.

KingRobot sends news that a recent test of a US missile defense system has failed. The test of the Groundbased Midcourse Defense interceptor apparently had a problem with the sea-based X-band radar. Both the target missile, launched from the Pacific, and the interceptor, launched from California, performed as expected. "Yesterday's test was intended to quell doubters of the entire missile-defense approach, with the target missile deploying countermeasures. Critics of the GMD programme say that tests thus far, which have not included such spoilers, have been too kind to the intercept tech. The [military] isn't disclosing whether the intercepting kill vehicle had simply failed to reach the 'threat cluster' of warhead(s) and decoys, or whether it had reached the cluster but hit a countermeasure rather than the actual target."  [slashdot.org, Feb 2, 10]

as for that kinetic contraption, it was a "five-year development program, in its 14th year, not a single flight test, little work on the third stage or the kill vehicle, etc., etc., no known launch platform ..." Rat-a-tat, Gates continued on, in that flat, unassuming Kansas twang that screams: No bull here.  [Time, Jun 8]

Stimulus Program. the largest, most complex test we have ever done,” said Lt. Gen. Patrick O’Reilly, director of the Missile Defense Agency. ... shot down a missile in a simulated attack designed to test a proposed shield ... About $10 billion a year is spent on the program, which is run by the Boeing Company  [New York Times, Dec 6]  The only question for this stimulus program is whether it should spend 30, 10 or 2 Billion a year.

Don't Touch My Rice Bowl.  The Air Force general who runs the Pentagon's missile defense projects said that American interests would be "severely hurt" if President-elect Obama decided to halt plans developed by the Bush administration to install missile interceptors in Eastern Europe.  [AP Nov 12]  When generals wander into politics, they get a command in the wilderness.

At least they spent the money.  the GAO found that its auditors could not assess the performance of contractors and the effectiveness of the Ballistic Missile Defense System (BMDS), the Defense Department's largest R&D program. "Moreover, the tests done to date have been developmental in nature, and do not provide sufficient realism for DOD's test and evaluation Director to determine whether BMDS is suitable and effective for battle," the report [Robert O'Harrow, Washington Post, Feb 27]  But the Bush/Cheney crowd doesn't need any determination by the official determinator to justify pretending that we have a working BMD system. They need only know the right wing wish list.

Ready. the tracking radars and interceptor rockets of a new American missile defense system can be turned on at any time to respond to an emerging crisis in Asia, senior military officers said  ... While the new system is limited, it is the most extensive anti-ballistic missile system the Pentagon has fielded since the Safeguard ABM system ... in 1975 which Congress immediately voted to shut  down  [Thom Shanker, New York Times, Oct 3]

Send More Billions. success when an interceptor collided with a mock warhead high over the Pacific, Pentagon officials said. A target missile was launched from Kodiak Island, Alaska, and tracked by radar at Beale Air Force Base, near Sacramento. The interceptor missile was fired from Vandenberg Air Force Base, north of Santa Barbara, Calif., striking the target warhead about eight minutes later, officials said. “This was a very operationally realistic test,” said  MDA. The technology has been steadily advancing since the 1960s; send more billions.

Love That Analysis. MDA's new list of Phase 1 SBIRs teems with a strange mix of analysis and electronics materials.  Automated Interceptor to Target Assignment Based on Proven, Advanced Techniques for Planning, Resource Allocation, and Constraint Satisfaction , IM Modeling/Simulation Tool for KEI Dynamic/Thermal Loads Associated with Stage Separation , and Linear-mode, Wide FOV, Single Photon Counting APD Ladar Array . Hard to find a single mind at the helm, more like a mere internal competition for a piece of the budget that lets each sub-department have its own SBIR philosophy after which the so-called program manager staples together the list.


Back to the Future.  MDA SBIR announces a NEW! program - it will match up to $500K in Phase 2 SBIR follow-on money from either DOD mainline funds or private investment. Well, it's not the least bit new, only re-discovered.  SDIO started that policy about 1991 and it continued for a decade until the bureaucrats captured the program because they knew better how to run it. As other agencies copied it, MDA abandoned it. The idea brought in tons of money to advance the missile defense technology way beyond what SDIO/BMDO/MDA would ever invest directly. The SBIR advocates roundly condemned the policy because it disadvantaged the life-style service contract companies in the SBIR competition. Applications for the matching money will be considered in February 07. One measure of how well such a policy worked comes from MDA itself in its Tech Applications quarterly newsletter. Business Valuations: More Realistic? lists companies that were acquired, presumably for their marketable technology. MDA (also as BMDO) did earlier similar evaluations that showed how well chosen SBIR projects in market oriented companies produced outsize economic gains while missile defense gained new technology. Unfortunately, MDA itself chose to ignore the findings for the last five years and plodded on with standard DOD R&D procurement. These evaluations could have been (and could still be) the basis for economic evaluation of SBIR itself. But, equally unfortunately, the politics of small business handouts is likely to block any realistic economic ROI calculation.

Program As Usual.  MDA's most recent round-up of invitations for Phase II SBIR proposals asked five questions: 1)  Prototype/Demonstration: What is being offered at the end of Phase II?; Benefits/Capabilities: Why is it important? This is specific and quantitative.;  Program Benefit: Why it is important to a MDA Program. This is specific and quantitative.; Partnership: Who are the partners and what are their commitment? Funding? Facilities? Etc?;  CostA classic search for immediate program benefits including a table for projecting the outcome into the manufacturing schedule (presuming there will even be such manufacturing).  With no curiosity on such aspects as degree of innovation, technical risk, and spin-off potential, which are the legislated (but often ignored) objectives of SBIR, MDA sees SBIR as merely a small business portion of its mainline programs. What's more, MDA has repeatedly tried to cut its SBIR program below the mandated minima. If you are looking for imagination and support for your innovative ideas, don't expect MDA to show much enthusiasm until you can predict exactly when your idea will fit into its planned production schedule.

MDA also accepts as innovation a Little Smart Engineering. The Phase 1 SBIR company will surely succeed in a scheme that will team up with Lockheed Martin Missile and Fire Control (LMMFC-D) to manufacture and evaluate lightweight hybrid composites for MDA’s applications. ... In particular, develop and manufacture IM shipping containers for SRM up to 50-in in diameter.   In addition to using SBIR for what sounds like routine engineering, Phase 2 will probably shift a hunk (could be half) of the SBIR money to a large DOD aerospace contractor - a long held MDA financial goal. Don't worry though, when and if challenged (unlikely) both MDA and the company will shriek in defense of the high degree of innovation since there are hardly any objective standards for innovation.  I wonder why MDA thinks a small company would have any advantage over the scillions of established US container companies in designing and building a box from known materials. The likely answer is that MDA does not think so, but they need a box and don't want to spend mainline R&D funds when they can use the distasteful SBIR.

MDA Seeks Knowledge. Innovation in SBIR? It's whatever the agency says it is, and MDA regularly says it as mere knowledge, as in the expected product from conventional math model projects such as  Advanced models and codes are required to account for all relevant chemical/physical phenomena from propellant combustion through engine performance to plume signature. To that end, relevant phenomena are identified and grouped by category (engine/core flow chemistry, plume/atmosphere molecular interaction, core/interaction spectral radiation) and evaluated against existing models and codes. Applicable tools and current deficiencies are identified and described. Methods are outlined to fill all apparent gaps and remedy all known deficiencies as the basis for a complete physical model incorporated in seamless simulation software supported by documented validation demonstrations.  Math models of reacting flow? Been going on at universities for as long as computers could make numerical scientific calculations. Every respectable technical university has at least two professors doing it. Future market potential? Who cares?  MDA gets another math model it may use and the performing company gets some money. No doubt it will "succeed" in Phase 1 in showing that such calculations are feasible. Would a Phase 2 produce the perfect model? Ask all those professors.  Will the company get a Phase 2? Odds seem good since it has already had $1.8M Phase 2 SBIR from MDA in the last five years for such modeling studies. Hey, it's intellectually interesting work, clean hands, and decent salary for life-style companies. 

MDA has lots of money. Therefore, it legally must have lots of SBIR, if (a real if) it follows the law's mandate. If you're intending to mine that lode, you might read MDA's record of its recent Industry Day http://www.winbmdo.com/conferences/File1.pdf   Once you read through process gibberish and realize that these folks are pure bureaucrats' using word slides they can read to a presumed illiterate audience, you get to the SBIR mission slide. It says nothing about future investment,  or other criteria that proposers can use as a guide. The one clue word is relevance, which unfortunately means something only to the MDA guys, and their ideas keep changing anyway as system development takes its twists and turns and blind alleys. The bottom line: it's like shooting blind. Try the best thing you know how to do, especially if you know that no one else can do anywhere near as well. 

Advanced Technology and the Importance of SBIR 9::10AM Mr. Gary Payton/Deputy, MD/Advanced Systems (Invited) will lead off MDA's Small Business Innovation Research Industry Day.  MDA says it wants to explain the esoteric military terms of missile defense with which it announces its SBIR topics to innovative companies. In practice the really innovative companies want foremost to advance their technologies with DOD's money as a merely useful agent. The likely conference beneficiaries will be the R&D service companies who can talk directly to MDA technologists and managers (if any important ones actually show up) about what MDA wants to fund. But rather than Washington conferences to which companies have to travel and pay for an unknowable benefit, MDA could clarify its attitude by expressing its needs and criteria on its website in terms that companies with no prior knowledge of missile defense could understand. Surely a bleeding edge technology program could harness some leading edge info technology to deliver its message.  Sign up with the National Defense Industrial AssociationSign up with the National Defense Industrial Association by Aug 1  The real reason for such a conference remains obscure (at least to me) since MDA assails SBIR as a annoying inconvenience and an oppressive tax on the "real" programs.  Former astronaut, gentleman, and general Payton should know something about the subject since he had some responsibility for SBIR in both SDIO and NASA. In SDIO he had the good sense to let the guys who knew the SBIR law's intentions run the program with the intent of extracting the maximum available benefit for all concerned given the infancy of really innovative technologies.

Open Innovation Competition. MDA has appointed an Advanced Systems Innovation Cell (ASIC) to pursue and assess innovative concepts and develop algorithms to improve BMDS capability. All and sundry are invited to send in a five-pager until Jan 06. MDA's spring Tech Applications quarterly also announces a similar program for universities at the $150-200K level for three years. 

The test was not a failure, it just was not completed. "We weren't able to complete the test that we had planned. I definitely wouldn't categorize it as a setback of any kind. The test had been planned for a while so it's a disappointment for those of us who were working on it. We will isolate the anomaly and fix it." [Washington Post, Dec 17] Thus MDA "explained" that they started the test sequence which failed before reaching launch. Maybe MDA will take the same attitude when an SBIR contractor has a problem with a test in an SBIR contract. Maybe. 

Center for Defense Information has a report on an October Missile Defence Conference in London  where CDI Vice President Theresa Hitchens gave a missile defense update and speculated on the USAF’s plans for space. She noted that The long-troubled Airborne Laser (ABL) is teetering on the brink of cancellation.  Will ABL actually die? Nah, there's an unwritten rule that each service gets a "fair" share of the MDA pie. CDI also notes that MDA got $10B for next year; it takes a lot of work to spend $10B. 

Dig a Eurohole and Fill It With ... viewgraphs. Star Wars says it plans to deploy to Europe in five years which means the digging has to start soon, sooner than the tests that prove such a system would even work. UK, Poland, Czech Republic, and Hungary are all mentioned as candidates for the holes that would defend Europe against ... But they have spend their politically driven $10B a year on something visible. [story from The Independent, Nov 21]

In Love With Foam.  MDA must have loved the foams as it awarded three Phase 2 SBIRs totaling $4.8M last year to Touchstone Research Labs (Tridelphia, WV) in a field crowded with many many materials competitors. The three published abstracts have not a single number by which an outsider could begin to judge how innovative or economic the allegedly new technologies really are. What little the abstracts reveal suggests a rather mature technology being bought in a pseudo-procurement instead of a nursery stage innovation needing a start. 

Meanwhile, MDA should have tons of money for SBIR as it seems to lose battle after battle to avoid spending its required minimum. Its Phase 1 closes October 15.

MDA Claims Defense.  MDA's latest press release announces yet another interceptor installed in what is implied as a national defense. The Ground-based Midcourse Defense (GMD) element of the U.S. Missile Defense Agency emplaced the fourth interceptor missile designed to intercept and destroy a long-range ballistic missile into its underground silo at Ft. Greely, Alaska ... The interceptors are part of an integrated system of sensors, ground and sea-based radars and an advanced command and control, battle management and communication system designed to detect, track and launch an interceptor to destroy a target warhead before it can reach its intended target in any of our 50 states. Although the system will initially have a limited capability when it becomes operational later this year, it will mark the first time the United States has a capability to defend the entire country against a limited attack by a long-range ballistic missile. Such pabulum designed for political campaigns avoids hard questions about whether it will work at all against a real opponent (only the tooth fairy knows), if so with what reliability (nowhere enough testing to assign any credible estimate, when it will be wholly national (no time soon), etc. An SBIR evaluator might ask which of all the technology funded by SDIO's SBIR since 1985 made it into the system that surely has used some high tech advances 19 years later. 


MDA Changes. In its seemingly endless quest for perfection, MDA has made two changes to its SBIR solicitation terms for October 15. two revisions to the MDA 04.4 SBIR Solicitation Instructions: you can propose a $50K six-month add-on option, with a max of $150K, and its Fast Track "will continue" (whatever that means).  MDA recently threw itself back 15 years in its SBIR approach and is now learning what we earlier managers had already learned. The $150K Phase 1 hints at wanting minor projects that can be finished quickly so they can be incorporated in some MDA program. Service, rather than innovation, would be favored. After all, innovation is a lot more trouble to adopt than a new coat of paint. Why they re-state their Fast Track is hard to fathom. The least likely reason is that they discovered that projects with third-party cash are a lot better than stuff that only a government could love. The most likely is that they got political or legal flak from deviating from published DOD policy. 

Gotta Re-Organize; We're in Deep Doo-Doo.  The Missile Defense Agency Director wants to capitalize on the extraordinarily hard work undertaken throughout the agency to develop and deliver Ballistic Missile Defense System (BMDS) capabilities. Our purpose is to realize the solidarity of your hard work, reduce the distractions and facilitate the commonality in our focus, and maximize the efficient utilization of MDA resources.  The goal is to eliminate wasted energy and encourage harmonizing individual energies towards the common vision to develop and field an integrated BMDS capable of providing a layered defense for the homeland, deployed forces, friends, and allies against ballistic missiles of all ranges in all phases of flight. I am forming the BMDS Integration Working Group (IWG) to harmonize the separate element contracts into a coherent whole. The IWG will need to have insightful discussions, innovative coordinate actions, and a collegial environment to form and evaluate alternatives that reward integrated BMDS demonstrated capabilities. [Al Kamen, Washington Post, Sep 13, quoting a BMDO functionary] That's bureau-speak for "it doesn't work and it's time for a plan B that we don't have"

MDA Phase 2 Bafflegab.  MDA published a section "explaining" its process for Phase 2 SBIR invitation and review. An SBIR Topic Sponsor (either an MDA Element MDA Project Office or MDA Functional Area Office) begins the process for a Phase II Invitation by reviewing the Phase I work of each contractor (along with the Contract Technical Monitor) and making a recommendation on what Phase I efforts should continue into Phase II. The MDA Sponsor recommendation is based on several criteria. The Phase II Prototype/Demonstration (What is being offered at the end of Phase II?), Phase II Benefits/Capabilities (Why it is important), Phase II Program Benefit (Why it is important to an MDA Program), Phase II Partnership (Who are the partners and what are their commitment? Funding? Facilities? Etc? This also can include Phase III partners), and the Potential Phase II Cost. This is the basic business case for a Phase II invitation and requires communication between the MDA Program, the Phase I SBIR Offeror, and the Phase I Technical Monitor. An MDA SBIR Working Group then reviews the entire Phase II Invitation list and forwards their recommendations to the MDA Source Selection Authority for final approval.  The kind of stuff written by and for the crats with little info from which a competitor can judge the odds. Not surprising since the entire cost of proposing rests on the small company. All signs, though, point to overriding weight given to "what's in it for us?" - Why it is important to an MDA Program. To score well on that criterion, the proposer has to get inside the skin of the MDA tech guys - an MDA Element MDA Project Office or MDA Functional Area Office - who shy from talking to the public. To reach them the company has to pound on the doors insisting on its right to access public officials. The chief architect and operator of MDA's SBIR is Dr Charlie Infosino and the small business advocate is Mr Stephen Moss. What you want from them is the names and contact means for getting to the individuals who will opine on whether your proposal is slick or schlock on the criterion of value to MDA. Some of the topics give you a start with the name and address of someone with a mda.mil e-mail address. 

Baby Steps, Baby Impact.  MDA's list of Phase 1 awards area phantasmagoria of baby steps for purely military technologies by companies that have been doing military funded SBIRs for a long time.  Economic spillover will be zip, thereby putting a great burden on MDA's Tech Applications people to advertise lemonade.  If you are even thinking remotely about proposing to MDA's next solicitation in October, read the abstracts in your field, go visit the companies, think about partnering with one of them, learn the MDA lingo of sub-programs that would use your stuff, use or invent figures-of-merit that MDA would respond to, call around to the MDA points of contact to find the technical people who review proposals. In short, get as far into bed with MDA's ideology as you can, because the winners are going to be the companies who cater to MDA's fantasy of eliminating SBIR altogether in favor of regular incremental improvements in established technologies and programs. Ugh! 

Thinking MDA SBIR? Think mature. Clark-MXR (Ann Arbor, MI) got a Phase 2 to build  a manufacturing workstation (the “ABL” Workstation) capable of drilling precisely contoured holes in various materials specifically for the Airborne Laser. MDA's Tech Applications quarterly - Update - describes the non-proprietary (we hope) aspects of the technology. The Airborne Laser is a flying dream to shoot down missiles in their launch phase from a not-too-distant airplane with a high power laser. Tactically, such a plane would have to be in the air on alert within range and not get shot down itself by any power that was strong and daring enough to launch a missile against the USA. Unfortunately for SBIR, such a project borders on using SBIR for procurement rather than for nurturing infant technology. Which is wholly in line with MDA's  recent decision that nurturing was a waste of their money and that direct service was more efficient.  The next chance to propose a new idea that has been thoroughly tested to MDA is unknown since MDA has chosen NOT to play in DOD's summer solicitation, ends Aug 12 in DOD Solicitation 2004.3. The good news for the Tech App folks is that mature technologies make great copy that doesn't require long  imagination to get to the commercial return on tech investment. It makes Update look good even though it is already the best of the government tech app programs.  

Miracle scheduled for September. If all goes according to the political re-election plan, MDA will declare operational readiness of whatever they have on the ground in September. But not without a lot of naysayers claiming it has never been tried in even simulated anger and will still be in a state of design flux. But then, we did that with ICBMs in the 50s and 60s and who knows whether they would have worked as planned. The MDA boss, Gen Kadish, must be under intense political pressure to make it sound like the dream works even though his military experience says don't risk battles with untried stuff. Fortunately, the ICBMs were never put to the test, and it is likely that MDA's first few generations won't ever be tested either. For now, their only mission is to shoot down Democrats.  Aficionados of ICBM can see a fully preserved silo with a demonstration what can be done when money is no object. It's a Titan site just south of Tucson. 

Prognostics, modeling, and analysis. Got a little company that likes clean hands and mathematics?  Go find a non-profit that likes the same things - they're all over the map, and they're usually called universities. Write an STTR proposal to MDA which last year funded 70% of proposals presented, and heavily on analysis. They even saw high innovation in yet another math model of the thermal decomposition of H2O2. Due April 15. Although MDA has a huge innovation challenge to shoot down missiles, that challenge does not seem to extend to SBIR/STTR where MDA seeks incremental advances in knowledge. 

Anti-Democrat Missiles.  So, says the White House, we don't know if they will work with acceptable reliability against ICBMs; we are sure they will work against Democrats though in an election year. The Bushies want to install, at considerable taxpayer expense, a BMDO system that experts say is at best a poor chance.  In December 2002, President Bush called for a system by the end of this year. Republican presidents love to call for wonderful defenses which if they worked would be indeed wonderful. But Weapons experts outside the Pentagon have argued that there is no imminent threat that would justify the program's huge expenditures, up $1.2 billion from the previous year, and the deployment of a system whose capabilities are unknown. [New York Times, Mar 12]  Is the technology ready? Some of it. Is the system ready? Who knows. Unfortunately for Bush's imitation of Reagan, there is no longer a strategic opponent we can spend to death regardless of whether the deployed systems actually work. 

MDA's technology commercialization arm won a Distinguished Technical Communication award from the Society for Technical Communication. The award actually goes to MDA's contractor - the  National Technology Transfer Center-Washington Operations (WO)- which evolved from an excellent in-house office to a well-run contractor operation as a subsidiary of the NTTC. The NTTC itself is a Senator Byrd pork project for West Virginia. In those days SDIO (the first Republican name for MDA) cared about tech transfer and spin-off of its leading edge tech research. WO has kept the operation alive and sparkling despite MDA's slide into conventional military development of a weapons system. See WO in action

Grinding away until it's economic. BMDO's Tech Applications report touts the spin-offs for many companies funded by MDA over the years. Most are SBIR companies that spend only 2.5% of MDA's R&D money. The first story is Pyrograf-III from Applied Sciences (Cedarville, OH) which had been grinding away on carbon fibers for nearly two decades. It has had at least 30 Phase 1 SBIRs and 7 Phase 2s from DOD since 1987.plus twelve Phase 1s and five Phase 2s from other agencies plus some piece of an ATP award to Goodrich et al.  It has grown from four employees then to 21 employees now and MDA's report claims the production capacity if fully subscribed for 70,000 pounds a year (with "plans to double capacity") at $100 a pound. Not too many industrial products can be sold with $100/pound major ingredients. Applied Sciences' history raises the obvious policy question; what does the government think it is doing in long term bare survival funding for a product that may never be economic? Is there any government-wide strategy as there might be in a large industrial firm investing in a potential new supplier or product source?  The likely answer is that the government has no strategy (other than the political move of apportioning a part of R&D funding to small companies); each agency does whatever it likes with little regard to any grand investment strategy. No agency is responsible for the intelligent investment of any other agency's funds, nor of intelligent investment of government funds as a whole. There is NO management review of investments, no investment board of directors, no one held accountable for return on investment. 

MDA Lets Loose. MDA posted a horde of SBIR and STTR awards on its website. 424 Phase 1 SBIRs (from 1860 proposals), 44 Phase 1 STTRs, and 109 SBIR Phase 2s. That's enough to consume a big share, say $80M of even the huge MDA budget. .Lots of awards to companies who have been speaking SBIR to DOD agencies for two decades; the same companies whose names parade through the award lists from the military services. And for safe projects unlikely to have much impact once the SBIR money is spent. One Phase 2 will do some mods to a math model of a burn-'em-up laser - the kind of science that any university can do with zero market potential. Ah well, it's MDA's money to waste if they want; they'll never be held to any account except having handed out the money to the target class.  The SBIR advocates get their wish - their members get a share of the pie. Among the many awards for math models are a few things that sound like innovative technology with a future in the hands of companies that have an real market mindset:  Crystal IS, Belford Research, Crystal Research, IPITEK, Peregrine Semiconductor, Sensors Unlimited. The acid test, of course, comes later in the Phase 2 competition, but judging by the first dozen awards (announcement delayed for the others), the prospects are bleak. If you won a Phase 1, get to know as many MDA people as you can since that is the only way you can know the magic words they are looking for and even those words are subject to arbitrary change.  

The Public - Who Cares? MDA has notified at least some winners from the Phase 1 winter competition that extended into spring with the receipt fiasco, and some Phase 2 winners although the web site denies that 2003 yet exists.  Ah well, the first law of SBIR is to pass out the money, not to tell the public what's happening.  Congress can forgive a lot of sins except dodging payouts to constituent groups. But it does feel like MDA has dumped its nearly two-decade enthusiasm for engaging the public - another sign of bureaucratic takeover. 

Innovate! That's MDA's prime directive to small technology companies undertaking early-stage research in its SBIR program, says the opening line in MDA's Tech Transfer newsletter MDA Update. Could the right hand not know what the left hand is doing? Certainly the right hand - MDA's SBIR program operators - have made it clear to SBIR hopefuls that nothing will be funded without letters of credit from MDA staffers.

What's With MDA's Fast Track?  Even though MDA was the example that inspired DOD's Fast Track, all signals now are that MDA has abandoned FT despite formal participation under the DOD solicitation. Stories emanating from MDA FT applicants are that it is neither fast nor a track. MDA has apparently taken the attitude that Fast Track is no different than regular Phase 2 applications: batch processing, disdain for private support, and a requirement that applicants obtain a support letter from a high MDA official. The support letter requirement shifts the advantage to companies who work the Pentagon on the inside and to the disadvantage of companies with innovative ideas that were not invented at MDA (the NIH syndrome).  Working against MDA's apparent attitude problem is the fact that MDA is not spending the required SBIR funding. Its website shows far to few Phase 2s selected for the  money that it must spend. Sounds like a replay of the FY2002 attempt to scuttle SBIR by financial shenanigans. It will either have to defy Congress or abandon its requirements for hand-holding of MDA officials by every Phase 2 hopeful. The officials have neither the time nor the interest to entertain all those companies for the effort it takes to work up a deal. 

Even though MDA's SBIR has turned non-commercial the MDA Tech Transfer group National Technology Transfer Center's Washington Operations (NTTC-WO) won a prize - the Society for Technical Communication (STC) Award of Excellence for its 2002 special report "MDA Technologies: Tools to Counter Terrorism."

Market 2002 Performance of BMDO SBIR Companies

Company Market Cap
Dec31 ($M)
Gain 2002 Profit ($M) Symbol
Advanced Photonix


+17%  -.4 API
ATMI 567 -22% -33. ATMI
American Superconductor 64 -60% -60 AMSC
American Xtal  40 -77% -77 AXTI
APA Optics 18 -50% -5 APAT
AstroPower 174 -52% +5.1 APWR
Conductus 15 -70% -17 CDTS
Cree Research 1190 -44% -203 CREE
Emcore 80 -83% -122 EMKR
HNC Software merged      
Illinois Superconductor gone      
Implant Science 25 -70% -2 IMX
Irvine Sensors 10 +150% -4 IRSN
Kopin 272 -72% -21 KOPN
Nanophase Technologies 43 -47% -5 NANX
Nonvolatile Electronics 36 +20% -2 NVCR.OB
Spire 16 +100% -1 ORYX
SatCon Technology 23 -73% -25 SATC
Spire 22 -20% -1 SPIR
Superconductor Technologies 36 -73% -21 SCON
Vixel 50 +10% -11 VIXL
TOTAL $2890M -53% $-600M
What do the numbers mean? The market cap measures investors' view of future profits, the business risk of new technology. The profits measure whether the new technology can make money now. The profits numbers here are skewed by special situations at two companies who reported huge nominal losses but are actually making money. Profit numbers are those reported by Yahoo Finance as available to the common stock. Why market cap as the acid test of a company's efficient use of SBIR? What better cold-fact measure? Still, many companies whose technology won't stand market scrutiny will rationalize more government succor for the eternally potential commercial appeal that would never pass an economics exam. And most government agencies have become witting co-conspirators.
Why only BMDO's SBIR winners? BMDO was once the only agency that cared whether the companies live or die as economic entities. No one else had data on which to rate proposers. No one else recognized that if the economics don't work out then the government investment becomes mere welfare. Now no agency cares as each serves its own interests. In another tech-wreck year, this BMDO SBIR portfolio did even worse than the NASDAQ which was -31%.

Some Other SBIR Public Companies Not Supported by BMDO

Company Market Cap
Dec31 ($M)
Gain 2002 Profit ($M)
Albany Molecular 480 -40% +39 AMRI
Embrex 90 -36% +8. EMBX
Energy Conversion 215 -50% -24 ENER
Ibis 44 -65%  -13 IBIS
Surmodics 490 -19% +6 SRDX
ViaSat 300 -15% -7 VSAT

MDA Dances the Shuffle. Last year MDA tried to slough off half its SBIR funding, but no other DOD agency would take up the slack. Now MDA says that because of that shuffle, it could not obligate its legal share and therefore it should not have to ever obligate it. $30M fell into the hole. Murder your parents and throw yourself on the mercy of the court as an orphan. But the political arm of SBIR - SBTC - has raised the alarm in Congress that MDA should not be allowed such fruits of its crimes. SBTC has also notified DOD that it will file a brief with GAO to get DOD to re-open the fouled SBIR solicitation 2003.1. 

MDA Goes Eclectic for STTR. Even though the proposal aren't yet in for SBIR, MDA has already published its 2003 STTR topics, an eclectic bunch of requirements:  predicitng the future, modeling the decomposition of H2O2, IR materials modeling, COIL lasers, GPS/INS coupling. Innovative vision was shelved again in favor of predictable results from incremental projects. Unfortunately for the reputation of DOD's SBIR, such topics suggest coziness between several MDA staffers and specific contractors for narrow specialized subjects. Modeling the decomposition of hydrogen peroxide sounds particularly odd: the chemistry is well known, tons of academics have already worked on the problem, the odds of any follow-on or spin-off are minuscule, and a small company has no inherent advantage over large enterprises in such a task. It is merely a way to hijack SBIR to do ordinary R&D tasks that would otherwise be done by large entities.  DARPA, by contrast starts its Topic 001 with Commercial Development. of ...... , followed by Topic 2's COTS-Based ....   Proposals Due April 16

MDA revealed eight more Phase 2 SBIR winners. Three went to veterans and three sound like only modest innovation. The rest sound reasonably innovative in technologies with a future. No word on whether any were Fast Track. 

Fast Track? Bah,  humbug, hints MDA, a Fast Track is just another Phase 2 proposal with a somewhat better commercialization story. Noises emanating from MDA's SBIR office, which is the official mouthpiece but no longer the decision maker, say that the DOD Fast Track standards do not apply to MDA (even if they still might apply to DOD). Specifically, the DOD rules promise Fast Track when the company has timely submission, matching cash, and technical sufficiency. It's the technical sufficiency part that MDA seems to have abandoned in favor of the usual relevancy to existing programs.  Thus Fast Track proposals have to run the same gamut of successive committee approvals in which any committee has an effective veto. That's the usual government way where every office holds a veto over any new action. Third party cash as a validator of the technology's value no longer impresses the technocrats who focus most of their daily energy on getting a bigger piece of next year's budget. 

Fuzzy Standards at MDA. A Phase 1 MDA SBIR winner briefed his technical manager towards the end of the contract with a view to learning what matters for Phase 2. The manager reported that MDA, for which he only acts as a contracting agent says, "program needs", which is bureau-speak for we'll do whatever we want. Further advice was that "matching funds and Fast Track do not have much weight in the selection of phase IIs". What that means for Phase 1 winners is that you must find, by whatever means, a friendly face in MDA which usually presents a "don't bother us" face to the public, especially to small inexperienced companies. Well, you might ask, "if they don't known what they want for Phase 2, why did they give us a Phase 1?" Good question. They do have tons of money that they would like to spend outside SBIR but may not have the nerve to shortchange SBIR below the legally mandated minimum. The days of a consistent innovation and future potential standard for SDIO/BMDO/MDA Phase 2s are over, done, finis. There's no single mind deciding and no standard available to an outsider.


MDA rounded up the usual suspects for mostly conventional R&D with its summer batch of Phase 1 SBIRs. The Oct 30 announcement claims it decided the 262 winners on Sept 24 which is only five weeks from the solicitation close. Fast service for a bureau!. Familiar SBIR names abound: ALPHATECH (at least 113 previous awards), American GNC (87), Coherent Technologies (125), Creare (352), Fiber Materials (40), Foster-Miller (713), HYPRES (106), MetroLaser (81), Mission Research (270), Irvine Sensors (69), ORINCON (138), Physical Sciences (242), Scientific Systems (116), SVT Associates (65), Systran Federal (65), TDA Research (211), Technology Service (99), Ultramet (166). So, these few companies have already had 2500 SBIR awards which is in the neighborhood of $500M. What do you suppose the economic return has been to the government or to the national economy from profits and jobs that followed the $500M? Don't bother asking the new MDA (the old BMDO actually cared). Oh sure, perfectly competent R&D companies who will perform knowledge gaining projects like Agile Engagement Planning: Integrating Decision Graphs with Stochastic Dynamic Programming Solvers; Adaptive Waveform Coherent Ladar Fusion for Long Range Tracking, Discrimination, and Kill Assessment; Reliability of Space-Borne Turbo-Brayton Cryocoolers; Divert and Attitude Control Systems (DACs) Thruster Non-Destructive Examination, Development of an Air-Transportable, Rapid Production, Mixed Base Hydrogen Peroxide System, Improve/Develop Metrology for VLA (Very Low Absorption) Coatings, Ultra-Wideband RF Discrimination Techniques
Ah well, who has the gold makes the rules, and where there are no metrics to define success, no one can refute any claim. If you are one of the lucky winners, keep in touch with your technical overseer and emphasize the practical effect of the results of your Phase 1 work. Then pay attention to the deadlines because the bureau honors neatness and timeliness. It would also help if the overseer could point you to the technically responsible technocrat at MDA who has influence with the shadowy committee(s) actually deciding the winners. That technocrat is also an opening to possible follow-on contracts although MDA's track record on bringing SBIR companies into mainstream funding is bleak.

MDA's 2003.1 SBIR topics have become the standard laundry list of military agencies. The first 17 topics all have the same technical point of contact. Lots more opportunities for well-comtrolled engineers to get a government contract for a well-controlled study project.


MDA gave two Phase 1 SBIR awards to StratCom International (Keedysville, MD) whose CEO is Mr. James Abrahamson [rtd]. One was for Stratospheric Missile-Intercept Launch System . As if a start-up company could develop and build an anti-missile launch system. What's unusual is not that the DOD uses SBIR for study contracts, but that the company is the child of the first director of SDI, LTG Jim Abrahamson, a fine general to work for. After all, who would know more about missile defense? The topic under which the project was proposed, Techniques for Missile Defense was a catch-all which invited projects with a degree of technical risk where the technical feasibility of the proposed work has not been fully established.. The other Phase 1 was for Metal Storm, an outer extension to the kill vehicle which the abstract claims is a well developed, flexible and fully patented and fully demonstrated technology which promises improved kill vehicle reliability against unanticipated phenomenon and countermeasures. This proposal is to accomplish exploratory development on this concept for enhanced kill vehicle performance and kill potential. Which makes it sound like the only risk is in systematizing the concept into an actual kill vehicle that flies (at a cost of zillions per test).
One wonders why, with a $7B kitty, MDA uses the highly restrictive SBIR as the vehicle to fund a three-star general to start development of a major subsystem of a missile defense. It is, of course, one way to use SBIR funds for the mainline program. MDA last year worked a deal with one part of Congress to cancel half its SBIR, only to have to restore it later when the rest of the Congress demanded that DOD cover the loss, but no other DOD agency loved either MDA or SBIR enough to overfund their SBIR program by $70M. The basic rule still applies who has the gold makes the rules.We wonder what size the Phase 2 will be. At least tens of millions, although the one-man company would be hard pressed to absorb that much money and the SBIR rules mandate that the small business must do half the work. So, unless MDA ditches the SBIR rules, it can only give a real system development company, like Lockheed-Martin or Boeing, half a Phase 2, which is pocket change for an aerospace prime. We'll watch and see whether MDA even tells the public how and why Phase 2 is funded. Classification often comes in handy for opacity (wouldn't want Saddam or the terrorists or the New York Times to know).



VC Help for BMDO Infants. Although the ATP still funds some of the world's richest companies, it has also given a VC hand to three MD-VA infant companies. Genex's 3D display ideas got a start from BMDO (now MDA) with $1.9M in 1997 and then another $1M+ each from BMDO and AF. Neocera''s HTSC got its first Phase 2 SBIR from BMDO in 1992, and Luna's nano-stuff had its first Phase 2 from BMDO in 1998. Note that the first funder of all three was the agency that measured economics as well as technological sweetness. Alas, MDA has since dragged itself down into the bureau-swamp of mostly conventional R&D and even though it is swimming in money will try to either wriggle out from under SBIR altogether or fund predictably incremental projects. Actually, the government has another chance to start out right as it forms a Homeland Security SBIR program. Since the tech side of anti-terror needs the same kind of big tech advances as Star Wars needed, here's a chance to put a seed-technology leader in charge.

SBIR proposers and wannabes want to know: what is MDA looking for? Defense agencies typically state their criteria in ways that outsiders cannot use (whatever is good for the Navy), since a federal agency isn't concerned with the economics of proposing. It doesn't even seem concerned with its own costs of reviewing. Outsiders have to look to the agency's actual awards to read its mind. An example of what MDA has become: It funded two Mission Research projects in Phase 1. Mission Research has been an R&D company since 1970 and has won 242 SBIR awards from DOD since 1984. Its website mentions commercial products but talks only about sales of R&D to happy customers who pony up $90M a year to feed 450 employees. One project will develop a tool to simulate common schemes and allow for direct evaluation of their efficacy under typical environments which tool would then be used to choose and optimize mitigation schemes for given mission scenarios of photo-detectors. The second project will design, simulate, and perform layout on a series of small scale integrated circuits to be used as replacements for 5400 series devices used in many military and space systems. Both projects sound like the ordinary R&D for which small companies have no particular advantage. MDA here is merely filling minor gaps in its R&D by substituting a small company for open competition. If Congress ever wanted economic impact from SBIR (other than motherhood words) these kinds of projects will NOT deliver it. MDA says not only does it not care about economic impact or commercial investment as a route to better products, it doesn't even want much innovation.

MDA Phase 1 winners (hooray!) should read their notification letters carefully for rules on submitting Phase 2. MDA abandoned the BMDO concept that Phase 2 should be proposed when the company feels the technology is ready to compete. Instead, MDA has adopted the bureaucratically convenient rule of considering only Phase 2s that they have formally invited to propose and only in a narrow window in October. It's their money and they can do almost any foolishness they want with it. If your supplier of a key material can't deliver on time, you may have to wait a year for the next window. That way MDA can give many more Phase 2s to companies doing paper studies and software, which seemed to be their aim in shifting their SBIR organization anyway.

MDA Emerges from Cocoon(Apr 23)Missile Defense finally revealed its SBIR approach in announcing 381 Phase 1 winners from 274 companies. Plus it named 34 Phase 2 winners since the regime change last October. It looks like a mix of predictable contract research and technical innovation. It will take some analyses to tease out the real strategy in the absence of any publicly useful statements by MDA. Wouldn't want those terrorists to know what they're up to. It is clear that a lot of companies whom BMDO had treated as living dead that subsisted wholly on government contracts are back in the mix with much of the same limited promise and limited scope. To MDA's credit, it also published the abstracts with the names. Some contracts are already underway and the Phase 2 submission window will only open for October (as the rules are presently stated). Two companies got five wins: Fiber Materials and Materials Modification. Five got four wins: Advanced Ceramics, ALPHATECH, Applied Physical Electronics, MicroCoating Technologies, and Structured Materials Industries. Note the dominance of materials companies in the multiple winners. But the problem with most of the new materials is that they are too good (= too expensive) for commercial use and thus they will go no farther than the government is willing to take them. A few innovative sounding things like a laser refrigerator, more GaN crystal growth methods, Ferroelectric Random Access Memory, and a spin transistor, buried in a mountain of the usual safe R&D stuff like sensor network management software, an altitude sensor, YABMI (yet another battle management internet), scramjet enhancement (why bother with "enhancement"), a rain erosion test thing, a gizmo for COIL, and spectral parameter modeling. Ah well, Phase 1 is not a serious commitment; look to Phase 2 selections to see the real SBIR philosophy. 381 is a big number that will not be big enough if MDA doesn't again convince Congress next year to halve its SBIR tax rate from the law's 2.5%.

MDA's Phase 2s for the last quarter of 2001 actually have only a little junk in that most of the projects that might find use in any number of applications. Such a list is probably due to the nature of the Phase 1 selection in 2000 and 2001 when Jeff Bond selected projects on criteria that valued a future for the technology.

BMDO Mixed STTR Message. After ditching the idea that SBIR should be innovative and a broad call for new technology, BMDO's STTR solicitation says it hasn't yet found its footing. After a long-winded recitative on BMDO's mission, the single topic of Electronics and Superconductivity invites almost anything and says that proposers need know no specifics of BMDO's program. What will BMDO actually do? Who knows? Until they go through the travail of a real Phase 1 selection, not even they know what they will do. The web site shows no Phase 2s as having been selected since Aug 1, two months before the policy bloodbath.

(Jan 3) BMDO appealed and got legislation that cuts its SBIR from a 2.5% tax to half that number by limiting the tax to $75M. Other agencies who hate SBIR will be examining the move to see if they can copy it. Any net loss will be in the minds of the SBIR advocates who will scream "we wuz robbed". The move is only for FY2002 and does relieve BMDO of huge problem of intelligently spending that much money since the Phase 1-Phase 2 structure of SBIR cannot handle large abrupt changes in funding. Oh, sure, an agency can throw the money away, any fool can do that.

Market 2001 Performance of BMDO SBIR Companies

Company Market Cap
Dec31 ($M)
Gain 2001 Profit($M) Symbol
Advanced Photonix* 9 0 0.2 API
Advanced Technology Materials 724 23% 5.3. ATMI
American Superconductor 577 -39% -30.2 AMSC
American Xtal Technology 323 -56% 23.2 AXTI
APA Optics 37 -52% -3.4 APAT
AstroPower 367 58% 2.5 APWR
Conductus 51 -39% -18.2 CDTS
Cree Research 2130 -16% 21.6 CREE
Emcore 464 -63% -12.2 EMKR
HNC Software 728 -24% -34 HNCS
Illinois Superconductor 86 54% -28.2 ISCO
Implant Science 83 89% -3.2 IMX
Irvine Sensors* 4 -92% -21.8 IRSN
Kopin 958 36% -19.8 KOPN
Nanophase Technologies 81 -46% -5 NANX
  8 -20% -2 ORYX
SDL merged     SDLI
SatCon Technology 86 -37% -22.2 SATC
Spire* 22 -20% -2.3
Superconductor Technologies <116 <78% -15.3 SCON
Vixel 45 0% -22.6
TOTAL $7120M -15% $-227M
What do the numbers mean? The market cap measures investors' view of future profits, the business risk of new technology. The profits measure whether the new technology can make money now. The profits numbers here are skewed by special situations at two companies who reported huge nominal losses but are actually making money. Profit numbers are those reported by Yahoo as available to the common stock. Why market cap as the acid test of a company's efficient use of SBIR? What better cold-fact measure? Still, many companies whose technology won't stand market scrutiny will rationalize more government succor for the eternally potential commercial appeal that would never pass an economics exam. And most government agencies have become witting co-conspirators.
Why only BMDO's SBIR winners? BMDO was once the only agancy that cared whether the companies live or die as economic entities. No one else had data to rate proposers. No one else recognized that if the economics don't work out then the government investment becomes mere welfare. Now no one cares as each agency serves its own interests. This BMDO SBIR portfolio beat the NASDAQ which was -21%.

Some Other SBIR Public Companies Not Supported by BMDO

Company Market Cap
Dec31 ($M)
Gain 2001 Profit($M)
Embrex 142 18% 7. EMBX
Surmodics 612 6% 2.2 SRDX
ViaSat 353 +23% 9 VSAT

dateline 2001


Dress Right, Dress.. Having gutted the innovation of its SBIR, BMDO wants to grab all the missile defense programs. The Wall Street Journal reports that Gen Kadish wants to control the funding and management (bureaucratic terms for ownership) of the Army, Navy, and Air Force anti-missile programs. Centralization is a bureaucrat's first instinct and is usually a wet blanket on innovation which requires some independent actors.

the cancellation seems to have been largely driven by the recommendations of Lt. Gen. Ronald Kadish, who heads the BMDO. Gen. Kadish has gone out of his way under both the Clinton and Bush administrations to delay, dumb down and otherwise impede the most promising options for near-term missile defense: short- and long-range anti-missile systems based on the Navy's existing $60B Aegis fleet air defense infrastructure. [Frank Gaffney, Washington Times, Dec 18] Gaffney is the ultra-hawk and the Washington Times is the ultra right-wing allegedly normal newspaper. The lead headline every day calls some strike of Republicans against Democrats.

Missile Defense Not So Easy
(Dec 17) As soon as the Congress caved in to Bush's passion for missile defense and doubled BMDO's budget to $8B, the Navy is pulling the plug on the presumed easiest of the defense schemes by cancelling its program. Which points up the political dream nature of a national missile defense. Even though they can throw money at it, they cannot make it work "By Direction of the President". Which points up Ron Kadish's dilemma of whether to deploy present technology or keep trying to find technology that can do the job. His present attitude of procuring what exists needs re-thinking in light of the Navy's admission that the easy scheme is not working.

A Pile of Free Money. Even though BMDO has not yet issued any sign of how it will run its SBIR, a quick calculation says that its biggest problem will be too much money. If the planned Republican wish of $8.3B comes true, and most of it is still RDT&E, and the lion's share (70%) still is spent with contractors, BMDO's SBIR should be something like $145M. Awkwardly, SBIR's structure of a little Phase 1 money makes any huge increase almost unspendable. BMDO thus faces the choice of awarding a gazillion Phase 1s or funding just about every Phase 2 proposal. It must either lower its standards or default its legal obligation to spend 2.5% on SBIR. If you have a decent idea or a decent Phase 2 concept (don't they all?) this is the year to float it.


Death to SBIR Co-Investment
(Nov 5) BMDO quit the game after 15 years of being the only federal agency to believe that co-investment and market potential were the best clue that an SBIR company would do anything except spend government money. BMDO has internally re-organized to hand military managers the choice of where to spend SBIR money. They will ignore commercialization and consistent evaluation and thus companies will have to take up schmoozing BMDO managers to discover the real rules. Without a single decider, there will be no consistent approach to innovation or its exploitation. Government connection will beat innovation. It remains to be seen whether BMDO will continue a transparent management or descend into the normal bureaucratic opaqueness that leaves everyone outside the Pentagon guessing. The shift means the end of any economic return analysis.
What Should BMDO Proposers Do? Welcome to arbitrary and opaque government. At the moment, even BMDO does not know how it will handle SBIR. Now that the people who lusted for the money got their wish, they are not prepared for the management. Each office has a few contracts it wants to award but no plan for coping with a flood of proposals and the required administration. Those offices probably expect the same kind of administration from the SBIR office that they had before. But that office and its central management has evaporated. Expect pandemonium. Expect calls not to be returned even if you find someone to talk to. You will have to do what companies do with the military services: make a thousand phone calls to find the guys who want what you are selling. The coming solicitation in January will look like a lottery; no one can predict what kind of proposals will win Phase 1. Cast your proposals in terms of a great advantage you have in militarily useful figures of merit. Study as much as you can the specific devices BMDO is working on and expect those devices to change. Make friends with the large contractors who spend BMDO's money and design and build the systems. Any large aerospace company either is doing it or wants to do it. Make friends and partners with the companies who have won a lot of military SBIRs; they know the system. Go to the DOD lists of Phase 2 winners to find out who they are. Remember that BMDO has over $100M they MUST pass out in small SBIR awards next year. A lot of companies will get a piece of that pie.

Success Breeds Failure. BMDO's latest issue of its Update quarterly newsletter on commercialization highlights co-investing as a prelude to BMDO's Oct 1 announcement that it was no longer interested. After all, what better indicator is there than real money form an outside investor to demonstrate industry's interest to move the innovation beyond prototype?, says one BMDO office; we will pursue just our mission, says the same office within weeks. Interestingly, the piece shows 22 SBIR companies as co-investors in other SBIR companies. In the three years 1997-2000, BMDO's SBIR (Phase 2) awards attracted $180M to match BMDO's $200M. Now, if the new approach survives a Congressional attack on Dark Age management, all that will be history. Congress might well ask why success has been abandoned after years of showing just the kind of fruit that could sell SBIR. But then, the Dark Force management would like SBIR to go away and if they cannot kill it in law, they would least abduct it in practice.


BMDO Changes Some SBIR Rules
(Oct 1)Military First, Ditch Commerce.To start the new federal fiscal year off with a thud, BMDO's SBIR solicitation for the January Phase 1 proposals has a few noticeable changes that stem from the internal battle to shorten its vision. Phase 2 proposals from this next round of Phase 1 awards will be accepted only in a narrow window starting next October, which makes life easier for bureaucrats reviewing them. Eventually, they will come to regret that move when their pet projects will have to wait a year if they miss the window. The mission of BMDO SBIR has shifted to improve the performance or reduce the cost of ongoing development programs in BMD which is code for serving the immediate program needs. BMDO's special FasTrack is dead and the DOD procedure will be followed which tries to downplay commercial impact while pretending to honor it. Missing are the ringing phrases about private sector investment which is consistent with generals and SES views that the economy is not their job regardless of what the SBIR law says. Defense-crats have always found justification for ignoring civilian objectives in the name of their higher mission of military operations. The idea of relevance marches through the solicitation even though the crats didn't have time to revise the topics to fit their new schemes. The true test of their intentions will appear in the list of selections in the spring (if the new masters of the universe can get themselves newly organized in time).
Why, you might ask, are they ditching a model program for which the manager just received the program advocates' highest honor, a Tibbetts Award and has published remarkable economic analysis to show that there is a definitely competitive ROI for many of the companies and technologies? The military cares nothing for Tibbetts, what he stands for, or for what SBIR stands for. The technocrats within BMDO lusted for the $100+M that BMDO's SBIR will get next year which is huge in the scope of the peanuts devoted to other new technology. "We need that money" they said, "and besides, what has SBIR ever done for us?" Well, it won't do much if you won't let it. The technocrats had a shorter focus of the next test or demo for which a whole new technology would not be available in time. In a bureau, budget is power and every manager can find all kinds of rationalizations for more money/power for their particular "rice bowl". SBIR had too much money to be ignored as just another social program handout.

Bureau Couldn't Stand Prosperity. Rumor has it that BMDO has decided to ditch its 15-year SBIR success story and adopt the military model. That means that commercial potential will get lip service. If they like your engineering, any commercial fantasy will suffice. If they don't like your engineering, no great commercial story will save you. Look for opaque management, vague debriefings, and schedules that serve the bureau. The premium for proposers will be on schmoozing the internal BMDO people who are seizing the reins. Look for repeated and even sequential contracts to favored contractors who have learned to play ball with the internal people. Don't look for any announcements.


Co-Investment. Need a partner who understands both investment and SBIR? SBIR makes little sense without co-investment and a marked trail to a future self-sufficiency for the technology. Otherwise it is just the usual government R&D for either benefit to the government agency and/or hoped-for large societal gain. But the only SBIR agency taking co-investment seriously is BMDO, which has even published a list of SBIR winners who have themselves become co-investors in other firms' SBIRs. The editor and commercialization whirlwind Leslie Aitcheson has written a piece for BMDO's commercilization rag Update that names the names: II-VI, American Superconductor, American XTAL, ATMI, Cree, Crystal Systems, EMCORE, ENTECH, FED, FiberTek, Ibis, Kigre, Neocera, Nichols Research, Nova Scientific, Ortel, PRA, Schwartz Electro-Optics, Silicon Mountain Design, Thermacore, and Triton Systems. Some company news from the BMDO website: Advanced Fuel Research said that its commercial spin-off company, On-Line Technologies is being acquired by MKS Instruments for $22M; Thermacore (Lancaster, PA) has agreed to be acquired by Modine Manufacturing for $110M. Both Thermacore and AFR were big consumers of SBIR


We Don't Yet Know That We Need It. Jeff Bond, program manager with the BMDO's SBIR group, cautions that combining thin-film batteries with existing photovoltaics is no easy task. "What Lithium Power is proposing in this phase is extremely high risk," he says. "We're looking to fund the wild ideas, if you will. We don't have any specific requirement right now to use the technology." High risk, wild ideas, no specific requriement? Real innovation? David Essex's MIT Technology Review piece was only about a Phase 1 SBIR by Lithium Power (Manvel, TX) to combine thin-film lithium polymer with existing photovoltaics to form the main structural panels of spacecraft, saving space and allowing lighter weight or more power, claims Lithium Power president Zafar Munshi. Nice start after which must come a serious proposal for a Phase 2 (real money) that brings in the co-investment that shows the idea has something somebody cares about. Not necessarily BMDO at this point becuae bureaus take a long time to change their minds about what they want as progress makes their current wants obsolete. Bond's SBIR idea is to get little innovative firms started toward self-sufficiency if and when they can show something beyond wishful thinking.

One Rose Does Not Make a Summer says the general. BMDO Director Kadish says that one test success doesn't say much about reliability. Nevertheless, the advocates are screaming for deployment, apparently in the hope that such a system would never be seriously tested. People who think hitting a bullet with a bullet is so revolutionary should remember that DARPA did it once in the mid-80s. Now BMDO faces the age-old question: do we freeze the technology that gave us our one success and develop a system around it, or do we keep advancing technology until we have a much better system. One tiny part of BMDO used to have a role to advance the technology option with technologies that might be available in the marketplace. SBIR. Lately, the "let's deploy" faction has found a way to divert the technology adventure into routine support kind of stuff. But there's still a lot of money floating through BMDO under a Bush anti-missile religion, and BMDO still has enough SBIR left over to do the really exciting new technology things on top of the mundane.

Even though BMDO said that its interceptor smashed the oncoming missile (and its political opponents) into smithereens just by hitting it at the Mach many relative speed, BMDO will seek a hotter impact to blow even the smithereens into smithereens. General Sciences (Souderton, PA) gets a Phase 2 SBIR to develop hot materials (Hi-Therm Reactive Materials) that blast the target at impact more than mere inert material would do. Will their marginal weight be worth the marginal kill potential? Every pound of zero value-added weight reduces acceleration, fuel economy, and maneuver. Commercial potential? Oh sure. No, this is war stuff and the military will have to continue the development after Phase 2. Chances of that happening? General Sciences has had 37 SBIRs from DOD since the mid-80s, including several on such exothermic materials, which explains what about half the employees have been doing for 15 years. The other half must be attracting military money somehow for stuff that only a general could love if he doesn't have to pay for it.


Whatever you are working on now, I don’t care about. I want to know what you have in the back room, that if you had a little capital for it, you would try it out. That is the wild idea that I want to find, because it is the wild ideas that are the technologies for tomorrow. The words of a real SBIR manager who wants real innovation.... ... Unlike the military services who don't mind safe incremental improvements, BMDO cannot get where it wants to go with incremental advance. On the other hand, BMDO can't afford to chase every interesting advance to its logical conclusion; BMDO has neither the time, the money, nor the interest in such pursuit. So, Bond looks for the big potential innovations that can ALSO attract private investment to carry the development through its big money days.
Bond's quote appeared in a National Defense piece by Roxana Tiron. The rest of the piece is the usual story of how to win a government contract to do defensive R&D - scmhmoozing, partnering with a DOD firm, hiring a consultant, It's pretty much nice sounding theory that leads mostly to R&D service contracts. If you want Bond's money, though, all those things are irrelevant to his two main criteria: degree of innovation and potential for commercial investment. Great ideas will get funding; mediocrity will go to the tail of the line where it MAY get funded if some government drone takes enough interest.


BMDO Joins the Mob
unified comprehensive radiation simulation tool for complex flow phenomena at arbitrary altitude. The innovations enable unprecedented accuracy, efficiency, and generality for optical signature simulation to support multiple scientific and systems applications ... The software product contains extensive capabilities for broad commerical applications in research and development which include engine performance diagnostics, pollution/contraband monitoring, molecualr spectroscopy, remote sensing, hyperspectral imagery, enviromental monitoring, global warming, and computational fluid imaging. A comprehensive rigorous unified physical formulation and accurate efficient robust computation technique are described for simulating complex compressible viscous reacting multiphases flow phenomena ... : Benefits to BMDO include enhanced capability, fidelity, and speed for flow computation to support target optical signature analysis and simulation with application to detecting, tracking, typing, targeting, and intelligence. Potential commercial applications include advanced computational fluid dynamics and imaging methodlogies with broad utility for investigating flow-dependent physical phenomena and related optical effects.
Same company, two different math models, two different Phase 2 SBIRs. Chances for ROI? Would you invest in yet another modeler with nice science? Who do you think will pour money into the enterprise when the Phase 2s end? BMDO mainline programs that insisted they be funded? Not bloody likely. Not in 15 years have they done so. The mainline programs will find a thousand excuses NOT to fund any continuation of the work as they whine that SBIR should fund more such work. Other DOD programs? More interesting question since the company claims a ton of clients who service DOD. It has had several BMDO mainline contracts. And now, let's guess, the BMDO staffers want SBIR to pay for what they used to buy without SBIR. And with such proven client base, why does it need SBIR to attract buyers? Surprised that bureaucrats act like bureaucrats? Not when Congress sent such a muddled masage on what SBIR is for and turned over control to the federal agencies who can do almost anything they want. Congress got what it wanted - an apparent handout to small business (motherhood, apple pie, and the flag). Unfortunately for everyone concerned, the handout is a mirage since the money comes from the pot that was going to small business anyway.

(May 31) BMDO funded 20 Phase 1 STTRs in 18 companies for an average $69K. In general, they are material innovations, eight using some combination of nitride or SiC semiconductors. The deliberately vague abstracts tell only the general approach with few specifics by which an outsider could just any degree of innovation. But, if BMDO has continued its course of dual-use development, the Phase 2 competition will be stiff among market-smart innovators. Nine companies won for the first time.

Seed Those Newbies. BMDO so far this year has approved six SBIR Phase 2s for five companies. For five of the companies it is their first BMDO Phase 2 award and for the other company it is its second award. BMDO (the first last year) believes in innovations with a market appeal and thus weeds out repeat proposers who don't have much original or have already proved to be poor at commercializing. If you are new and you look marketable, your best chance for SBIR money is BMDO. And if the Congress ever wants to use real metrics for evaluation SBIR, it will look to BMDO as the model of what to do and how to do it. For the long run, BMDO is seeding the technologies of the future that will find their ways into BMDO systems (if they ever get fielded) and eventually the other military services will get a free ride as the private markets do the heavy investment lifting and take the big risks. One exception, though, Kazak Composites, has had a slew of Phase 1s and three Phase 2s elsewhere for what sound like applications of variants of its core technology. Although abstracts are deliberately vague, it sounds like BMDO has joined the application parade under probable pressure from the same kind of safety-first internal people that drive service SBIR awards. The other are first-time DOD.

BMDO Funds 36%
(Mar 4) BMDO funded 166 Phase 1s, 36% of 463 proposed in its annual round at 126 companies. of which 57 won for the first time. Average award was $65K. Why so high a percentage winning? BMDO clarifies its criteria instead of just hiding behind a blind statement that it will fund what it likes. Oh, the others dress up their rhetoric in blather like "mission requirements" of which no outsider can ever fathom the meaning. BMDO, at least until the latest grab by the missioneers for the pot of money, well publicizes its Phase 1 criteria - innovation! That looks like it will end as BMDO sinks into the morass of the othe rmission agencies that reward schmoozers and synchophants. The winners from such a shift will be the contract R&D companies with negligible prospects for commercializtion preoposing to a group of techies with equally negligible interest. One firm - ALTAIR Center, LLC. won eight proposals. That bunch of Russian surnames won five BMDO Phase 1s last year and two Phase 2 proposals from the two Phase 1 projects in 99. In electronic materials, 52% of the proposals won.

Market 2000 Performance of BMDO SBIR Companies

Company Market Cap
Dec31 ($M)
Gain 1999 Profit($M) Symbol
Advanced Photonix* 9 -71% 0.2 API
Advanced Technology Materials 590 -32% 38. ATMI
American Superconductor 577 2% -17.3 AMSC
American Xtal Technology 726 123% 3.9 AXTI
APA Optics 77 -43% -3.5 APAT
AstroPower 367 138% 3.6 APWR
Conductus 83 -1% -20 CDTS
Cree Research 2530 0% 38.6 CREE
Emcore 1250 175% -256 EMKR
HNC Software 956 -63% -126 HNCS
Illinois Superconductor 56 115% -26.1 ISCO
Implant Science 44 39% -3.1 IMX
Irvine Sensors* 52 -30% -15. IRSN
Kopin 702 11% 11.1 KOPN
Nanophase Technologies 150 141% -4.1 NANX
Oryx 10 -68% -1.7 ORYX
SDL 13000 81% -160 SDLI
SatCon Technology 137 71% -13. SATC
Spire* 27 50% 6.8 SPIR
Superconductor Technologies 65 68% -22.5 SCON
Vixel 45 -89% -24.4 VIXL
TOTAL $18454M 27% $-593M
What do the numbers mean? The market cap measures investors' view of future profits, the business risk of new technology. The profits measure whether the new technology can make money now. The profits numbers here are skewed by special situations at two companies who reported huge nominal losses but are actually making money. Profit numbers are those reported by Yahoo as available to the common stock. Why market cap as the acid test of a company's efficient use of SBIR? What better cold-fact measure? Still, many companies whose technology won't stand market scrutiny will rationalize more government succor for the eternally potential commercial appeal that would never pass an economics exam. And most government agencies have become witting co-conspirators.
Why only BMDO's SBIR winners? No one else cares whether the companies live or die as economic entities. No one else would use such data to rate proposers for Phase 2 money. No one else recognizes that if the economics don't work out then the government investment becomes mere welfare. No one else has ever been heard to mention such measures. This BMDO SBIR portfolio beat the NASDAQ which had its worst year ever at -39%. Note: BMDO is looking for more ATMIs and Crees and SDLs to get started. It will rejoice in two or three big wins out of every 20 or so new companies it funds. To get such a result, though, it looks for hard evidence that the proposing company has the right ingredients for success. Not many proposers have them.

Some Other SBIR Public Companies Not Supported by BMDO

Company Market Cap
Dec31 ($M)
Gain 1998 Profit($M)
Embrex 121 41% 7.5 EMBX
Surmodics 577 167% 4.2 SRDX
ViaSat 287 -29% 8.7 VSAT

-----------------------  dateline 2000 ------------------


It Sounds So Military BMDO handed a Phase 2 SBIR to a project that sounds so military - develop a hot gas filter that can remove contaminants, particularly carbon particles, from the gas generator that fuzzes the IR capabilities of an anti-missile seeker. The we-gotta-have-our-needs-met crowd should love it although history predicts that they will never put a dime into the product. Still, Quoin (Ridgecrest, CA, next to China Lake's big Navy R&D base) has hopes and some track record in such technology. In addition to being a managing tenant of an incubator out there in the desert, it claims to be the world's largest manufacturer of a particular flare with production rates of 20,000 flares per month and hopes to double or triple. Quoin, with help from the Navy developed its Fire Quick Flare System to help the Forest Service Wildland Fire Fighters start fires. The project abstract mumbles the usual happy vague words about commercial spinoff but if BMDO's SBIR has not been yet taken over by the purely militarists, it must have offered some strong evidence of commercial markets to win in BMDO's competition.


BMDO Gets 46% ROI
(Oct 23) BMDO says the government would have got a 46% Internal Rate of Return from investing in the IPOs of companies that went public after BMDO SBIR awards. VCs drool at such figures, and BMDO's report likens itself to a VC. Even though it is all hypothetical, it provides the kind of analysis that SBIR ought to be doing across the government if it to maintain a credible claim of being a government VC. Of course, the SBIR advocates will wriggle by claiming that SBIR has all sorts of other valuable goals. Which one would you like to hear? Before the BMDO SBIR squad go out and apply for jobs as VCs, we should note that they have picked the cream of the crop - the few companies that went public - although some of them died thereafter. The great majority of companies BMDO funded have not been measured as investment vehicles. And some rich successes never went public such as CoreTek selling itself for $1.4B. The formula focused on credible and available data by assuming that the government invested the amount of SBIR money it had awarded the company before the IPO at the IPO price. Still, 46% is something any mutual fund manager would kill for (and could have had if it had just bought BMDO SBIR companies at their coming out). Credit for the idea and the analysis go to Jeff Bond the four-year-plus year manager of BMDO SBIR and Leslie Aitcheson an editor working in the highly visible technology transfer machine that BMDO has had for over a decade. Read "Can SBIR Measure Up? A BMDO Perspective" on BMDO's site in the Reports section.
What will be BMDO's future attitude toward its SBIR? Applause and encouragement? Not bloody likely. The SBIR Program Manager who picks the SBIR winners will still have to battle his managment tooth and nail to keep an investment focus. His management, like the management at every other agency, hate SBIR and see no need whatever to divert R&D money into such social foolishness when it could be used for more of what the agency is doing already. They do not buy the argument that investing in innovation with big commercial market potential will get them more in the long run than spending the money on whatever they are doing for today's programs. Why should they? The long run will not happen on their watch. Well, they could take the position that they are public officials charged with doing what is best for America in the long run. Unfortunately, such managers are rare. BMDO had one for several years who protected SBIR from the raids, Dwight Duston, but he retired and went into the VC business although he still advises BMDO's tech transfer program. So now it is Jeff Bond's vision of what is the smartest investment of SBIR, and what the law actually requires, against a phalanx of long-faced managers aiming at badly-needed test successes in the next year. The big risk to SBIR success is that Jeff has no protector which means that one day the long-faced managers will win a battle and SBIR will then become just another small business set-aside for mops and brooms from which there is no mechanism to revert to an investment program. Then the hypothetical IRR will be less than 0.46% instead of 46%


Far from lamenting July’s highly publicized test failure, advocates of a defense against ballistic missiles should rejoice. The move to deploy an ill-conceived system supported by the Clinton administration has been stymied, and the prospect of a far more effective defense is greatly increased. The system that failed in the July 8 test conformed to the main provisions of the 1972 ABM treaty between the United States and the late Soviet Union. That treaty, which became defunct when the Soviet Union collapsed, expressly prohibits the deployment of national missile defenses and allows only a tiny, highly localized defense based on old, ground-based technology. So it is hardly surprising that a system designed to fit within it, like the one the administration is recommending, would turn out to be inadequate. [Richard Perle (Prince of Darkness), American Enterprise Institute, Aug 00] Unfortunately, Perle's prefered defense is merely geo-politics, as it was when he was a Reagan defense appointee, not real-life bristling defenses. He wants to deploy a boost-phase system that works only in viewgraphs. If a boost phase system could actually be built, we would have a real debate instead of a mere theological debate. Ah well, it's election time again. Got any great technology ideas that would o'erleap the barrier without suspending the second law of thermodynamics?


(June 13) BMDO wasted little time in picking 15 Phase 1 STTR winners from 12 companies including seven companies winning for the first time (at BMDO). A couple of familiar names who should have had commercial success by now if their stories in the early 90s held any water: Intelligent Automation (perennial winner in DOD and testifier before Congress about how great SBIR is and had $4.5M of Phase 2 awards in 1998 which makes at least 26 Phase 2s in the 90s); Bipolar Technologies still grinding away at better batteries (the quest of many companies); Chemat Technology with electronic materials (which has converted only three of 18 Phase 1 DOD awards to Phase 2); and Nonvolatile Electronics whose GMR technology never quite made a great market story. They will all get yet another chance to show their market appeal. Virgin awards (no awards in SBA database) to Boston Nitride, Light Processing Technologies, MP Technologies, and Nitronix. The virgins get what SBIR should be giving - an early boost for infant technologies in companies who haven't yet had a chance to prove their technology's market appeal. The rest get to argue how valuable their research is. BMDO, though, will put a high barrier in front of the veterans to get to Phase 2: prove your market appeal, no more claims of great potential stuff (as football coach Bill Parcells says,"Potential means you haven't done a damn thing.") BMDO's SBIR/STTR attitude is that a service research award is just a slice of bread for the hungry, an true investment award is in making a new kind of bread.
Meanwhile the Navy picked 17 STTR winners including two more to Intelligent Automation and one more each for Nitronix and MP Technologies. The respective managers can argue with the company whether the projects are different or only one project so compelling that both picked it. One award went to AstroPower but not for the silicon solar cells that puts AP high up on recommended lists for alterrnative power investments. Two went to old standbys HYPRES and Mission Research both of whom have had SBIR support for more than a decade. Big Navy winners are AlN, IR detectors, and SiC devices, plus the usual service to the fleet of product improvements.

213 winners
(Mar 17) BMDO listed 213 Phase 1 SBIR winners to 158 companies. 39% of the winners were from first-time BMDO-winning companies. Average award is only $65K, to keep the company focused on the Phase 2 and not just doing an R&D service contract.Every topic, even lethality, won at least one award with the biggest groups in sensors and electronics which usually make the best SBIR material. Only a few went to the usual suspects who win lots of SBIRs and always have an excuse for not making it over the threshold to commercialization and away from the government nipple: HYPRES, MER, CSA Engineering, DSR (a Navy darling), EIC Labs, F&S, and Mainstream Engineering. With only four exceptions, all winners are doing something technologically innovative. And only a few fish were thrown to the I-want-what-I-want-now bears prowling outside the SBIR enclave. One pure analysis, somebody to improve Java as if 80 gazillion programmers weren't doing that in the private sector in the open scheme that Sun invented, one AI babble, and one math model. A 2% junk rate, BTW, deserves high praise in SBIR. With all that interesting technology competing for Phase 2, there should be some stiff competition among business plans which play a huge role in BMDO's Phase 2 competition.

Electronic Action. The high-temperature superconductor stocks cooled yesterday. Conductus -18%, Superconductor Tech -10%, Illinois Super -16%. By contrast, though, Irvine Sensors shot up 43% on a day when semiconductor stocks did well and NASDAQ hit another record. The only official news was the BMDO SBIR contract. If every BMDO Phase SBIR could cause a $100M market cap gain, what a great story SBIR would have. In general, if BMDO had taken a hypothetical equity in these companies when it put in the SBIR money, it would have a pile today for the Treasury. The three superconductor stocks alone would have added something like $100M to the Treasury.


Irvine Sensors (Costa Mesa, CA) announced yet another Phase 2 SBIR to to demonstrate a superconducting digital router for high-speed communications. Under the contract, Irvine Sensors plans to exploit TRW's superconducting high speed switching technology to develop a "super switch" that could evolve with the communications industry's ever-increasing need for speed.. Since the contract is from BMDO and since Irvine has had lots of such contracts, you can bet the co-investment hurdle is pretty high since BMDO does not believe in funding a new technology until the market awakes. Which is why BMDO stopped funding the superconductor companies years ago when the technology worked but the market wouldn't buy it. Today the market seems ready for superconductors for wireless but that wouldn't have happened until wireless got loved by the public.

Market 1999 Performance of BMDO SBIR Companies - Ya Cudda Made A Mint

Company Market Cap
Dec31 ($M)
Gain 1999 Profit($M) Symbol
Advanced Photonix* 31 284% -0.8 API
Advanced Technology Materials 866 55% 6.6 ATMI
American Xtal Technology 326 122% 5.9 AXTI
APA Optics 136 232% -3.3 APAT
AstroPower 157 104% 2.9 APWR
Autonomous Technologies merged merged merged  
Conductus 85 673% -2.2 CDTS
Cree Research 2519 314% 15.0 CREE
Emcore 454 175 -21.7 EMKR
E-Tek Dynamics 9074 175% 27.7 ETEK
HNC Software 2601 149% 23.8 HNCS
Illinois Superconductor 26 50% -18.9 ISCO
Implant Science 31 (IPO)0% -0.6 IMX
Irvine Sensors* 74 90% -10.4 IRSN
Kopin 630 146% -2.7 KOPN
Nanophase Technologies 62 121% -6.3 NANX
Ortel 1440 1312% -4.9 ORTL
SDL 7717 1281% 16.9 SDLI
SatCon Technology 80 57% -13.6 SATC
Spire* 18 80% -2.8 SPIR
Superconductor Technologies 38 27% -10.3 SCON
Vixel 392 (IPO)1% 21.2 VIXL
TOTAL $24567M 390% $21M
(* already public at first BMDO SBIR.) "IPO" means 1999 IPO. What do the numbers mean? The market cap measures investors' view of future profits, the business risk of new technology. The profits measure whether the new technology can make money now.
Why market cap as the acid test of a company's efficient use of SBIR? What better cold-fact measure? Still, many companies whose technology won't stand market scrutiny will rationalize more government succor for the eternally potential commercial appeal that would never pass an economics exam. And most government agencies have become witting co-conspirators. Why only BMDO's SBIR winners? No one else cares whether the companies live or die as economic entities. No one else would use such data to rate proposers for Phase 2 money. No one else recognizes that if the economics don't work out then the government investment becomes mere welfare. No one else has ever been heard to mention such measures.
This BMDO SBIR portfolio way whacked the NASDAQ Composite which skyrocketed 86%. BMDO's 390% is enough to make any VC drool and send all the competitors scampering to see what BMDO is funding. But like the 18% rise in the S&P Index when most stocks fell, the BMDO SBIR rise was driven by a few big winners in opto-electronics. On both the New York Stock Exchange and Nasdaq (up 86%), two-thirds of the stocks are down at least 20% from their highs. As a measure of how well the companies have done since their IPO, assuming equal amounts invested in each company at the offer price, the gain would be 150% says the BMDO Program Manager as of Dec 15. Which still gets VCs to drool. What would be BMDO's ROI if it had taken a proportionate share of equity at in exchange for the SBIR investment? No one knows exactly, but that would be the acid test of whether BMDO's investments are better for the nation than merely buying Treasury bonds with the set-aside money. BMDO would have a nice chunk of ATMI and Cree and Irvine Sensors and Spire and Vixel and overall would have enough equity value to pay back its entire SBIR program since 1985. BMDO may attempt that calculation both for the public companies and for the private companies. Then the Congress should pay attention to such econometrics if SBIR is to be anything more than a handout to good science-hobby companies, Perhaps a Congressional staffer should ring up BMDO's Director and ask such a question. Or the National Research Council's coming study could try such metrics. Can these prices be sustained? Well, the Price-Earnings multiple for the lot is 1000 and even companies that have been losing money for years had big price gains. That cannot last. Note: BMDO is looking for more ATMIs and Crees to get started. It will rejoice in two or three big wins out of every 20 or so new companies it funds. To get such a result, though, it looks for hard evidence that the proposing company has the right ingredients for success. Not many proposers have them.

The Others - SBIR Public Companies Not Supported by BMDO

Company Market Cap
Dec31 ($M)
Gain 1998 Profit($M)
Embrex 86 105% 2.5 EMBX
Surmodics 216 102% 1.6 SRDX
ViaSat 404 399% 5.8 VSAT

  --------  dateline 1999  ----------

Ya Coudda Made 150%
(Dec 16) If you had invested $10K in the IPO of each BMDO SBIR supported companies who went public, you would have made a 180% profit, says BMDO's Tech Transfer newsletter Update. Although that is not a good measure of BMDO's ROI for its SBIR it is at least a serious effort to measure something meaningful. It is a huge leap above the usual government Tech Transfer blather and warmed-over company propaganda. BMDO shows that it is watching economic performance as a criterion foits SBIR investments. Sweet technology is just a necessary, and far from sufficient, criterion. The 21 companies still surviving returned $360K profit for the simplest possible strategy - an equal amount invested in each one. Actually, the gain would be closer to 150% because three companies were left off the list. Crystallume went south (-10K); Autonomous Technologies was merged into Summit Technolgies (+about 14K), and APA Optics (no gain). Read the list when BMDO posts it to the site.
Other economic measures would show ROI as a yardstick to compare BMDO's SBIR with companies the government never helped and with other companies the government did help. Some of the evaluation questions will be raised at the American Economic Association annual affair in Boston next month in a session devoted to SBIR. But until such measures are adopted with the cooperation or displeasure of Congress, BMDO is the clear leader in at least trying to show an economic return in a program whose blather at least offers economic gain.


Maybe A Lot More BMDO SBIR
(Dec 27) As long as the Republicans own the Congress, even by a sliver margin, they bow to the God of go-it-alone defense. Now they and the Administration are planning yet another money boost, $2.2B next year (FY2001) to National Missile Defense development and deployment. NMD means the notional system in CONUS. Leaving aside the question of whether it is a fantasy to think it that NMD can actually work with the technology available, at least all the RDT&E portion of that will have to surrender 2.5% to BMDO's SBIR.
That's good news for companies who want to seriously commercialize new high-risk technology because BMDO is so far the only agency with a consistent and economics driven attitude toward commercialization of its SBIR. If you think you want some of that pie, start now sketching your business plan and commercialization strategy, which will have to be pretty good to compete in that game. Forget saying we'll first spend BMDO's money and then we will somehow commercialize. You will need some serious view of the market you will enter and how your technology will command a competitive advantage.

(Dec 22) The photonics stocks keep rocketing without regard to reasonable PE multiples. Ortel up another 17%, SDL up 8%, (both are several multiples of their year-beginning values), E-Tek Dynamics up 7%, Emcore up 7% The Photonics West conference in January should be a giant celebration of the industry's recognition and a shopping extravaganza by investors snooping for the next Ortel and SDL. They might look at BMDO's funding record for SBIR as one source of where smart seed money went that needed government help.If only BMDO (or at least the Treasury)v had a proportional piece of each company for the investment it made when the company was barely noticeable.


Hurtling into each other at an amazing 4 miles a second, a sophisticated military gadget collided with a dummy Minuteman missile yesterday in what the Pentagon called a successful first "hit-to-kill" test of the ambitious national missile-defense system run by Boeing. The hit was a boon for the scaled-down "Star Wars" missile-defense program that envisions interceptor rockets carrying "kill vehicles" smashing into warhead-laden missiles headed for the United States. [Seattle Times, Oct 3]So, Stars Wars ain't dead; and never will while a Republican breathes in the Senate. Actually, such success (not be confused with the failures and recent success of short-range THAAD) means that R&D will continue with big funding. But however wonderful such a success, the technology inside is NOT good enough for a national defense. BMDO will have to field a much richer technology to get the hit rate and efficiency and reliability to a reasonable level. A hole-in-one, as Star Wars continual kibitzer physicist John Pike notes, needs more than good golf to become a hole-in-one every time. Which is where the little guys in the little companies can play an important role IF BMDO TAKES A LONG ENOUGH VIEW TO LET THEM For the moment, though, there should be a frenzy of Republican calls for more, more with speeches about more money from some unknown source. SBIR funding will follow automatically as 2.5% of the 70% of it that goes outside government labs. BUT unless someone guards the henhouse, the foxes will grab the feed for the golden goose. Like all mission bureaus, the developers think short range and input - any budget increase that helps me look good in this year's program is a compelling national need. SBIR has been trapped in this net at most mission agencies where SBIR decisions are decentralized and run by colonels or their NASA equivalent. Long range investment takes a back seat even though a rational analysis would show that SBIR that obeyed the law (real innovation with a commercial potential) can never help this year's program. Instead, the money is diverted to short range projects with predictable results and thus no long range benefit. From the SBIR standpoint, where the amount of money is fixed, it is a competition between contract R&D houses who promise the predictable results and the big time innovators who will need several years and many times what SBIR can provide to make the big splash that their technologies promise. BMDO has been one of the leading activists in going for the big future results (like Vixel's IPO last week). Leading the routine R&D camp are the big winners and their political lobby SBTC. They like the regular employment and the small profit but, like eating an ice-cream cone, where's are the protein for the future muscle?
Would that the allegedly strategic players, like the SBA, acted as an active agent for innovation and commercial potential instead of a lapdog for the presently vested interests. SBA could do a lot of good for the program if it would analyze it with intellectual honestly as an economic program. Even if the analysis showed that more commercial intent is needed and that agency autonomy has to be changed and that less money would better than more money. Eventually, everyone would be better off: the agencies would get most of their R&D money back without the artificial constraints of the social program; the agencies would actually get better technology in the long run; and the economy would get a better flow of technology options.

Can't Do It, Should't Do It., say three critics about BMDO. Lewis, Postol, and Pike "Why National Missile Defense Won't Work", [Scientific American Aug 99], all three critics since the outset, argue that the technical task is too tough, especially when countermeasures are relatively easy, and is geopolitically destabilizing. The same arguments from a decade ago. Will BMDO fold, and its forward looking SBIR with it? Not bloody likely. Missile defense is an imperative in the best doable form. The critics are probably right that the national defense against ICBMs has not reached enough maturity for serious deployment consideration and thus remains a Republican mantra for political purposes only. The US is a big place, the launchers are far away, and the missiles fly high and fast. Expect the DOD and the Republican Congress to either ignore the piece or issue a conventional statement of national importance, anfd then business will go on as usual at $3-4B a year of which SBIR will get many tens of millions.

Nice layout and decent writing about new technology, but who's buying it? It's a government tech transfer pub, to raise industry awareness of BMDO-funded innovations, extolling the winning spinoffs of Star Wars technology spending. Standard government approach - great technology with great performance numbers with no economics from which to judge whether the technology will catch a lot of shelf dust or put IBM out of business. Sure, the companies want to keep economics away from their competitors, but technology with no compelling economics to overcome the reliability doubts about technology and company will find no volume market. Of the 13 company stories, one - Intellisense - said that its $250 product would compete with a $5000-10000 product. Companies like Mainstream Engineering which two years ago had 150 SBIRs have the usual qualitative technotalk. Visit BMDO's Update which says Some of our most well-received publications can be viewed on-line. Summer issue not yet posted and Website can be slow.)


BMDO picked 8 STTR Phase 1 winners in 8 companies out of a batch of 90 proposals with an average amount of $75K. Not many in a tiny program that is more mirage than program. Note the gap between a 9% acceptance rate for STTR and a 25% for SBIR. Why? The economics of proposing somehow changed? Too many universities having their proposing costs covered by government grants? With a small pot of money, the BMDO manager has little flexibility to do the most good. As a result, awards are few. If you have a really good BMDO STTR idea, save it for SBIR where BMDO has full flexibility to treat it right. Evenings as Well Another counter-indicator that says SBIR is not solving a problem of any real capital shortage in small companies: the NASDAQ will start trading evenings as well to keep up with the demand for stock trade. Technology has not only obsoleted the trading floor (which no longer exists on the Australian exchange), it also obsoleted the factory mentality of 10-4 five days a week.


Mouse Bites Dragon
(May 27) BMDO lost the GAO protest by Intellectual Properties Inc (Huntsville, AL) when GAO declared that BMDO's evaluation inadequately evaluated the innovation of a Phase 2 SBIR proposal "Passive Multistatic Hitchhiking Array for Search, Track, and Target Recognition". IPI's chief Bob McIntosh was in his former government life the best SBIR Contracting Officer with whom I ever dealt. GAO's order didn't award IPI the contract, it only told BMDO to find another Source Selection Authority and evaluate the proposal again - the fourth time. The third evaluation included about 22,000 experts who had the usual divided opinion. GAO seemed to hang its reasoning on the fact that some experts said it was innovative and useful with BMDO not rebutting each such opinion in its refusal to fund it. McIntosh now has to re-submit the proposal, if he wants to actually get the money, despite a common fear that a bureau would never find a way to fund a protester. The BMDO that I served for a decade is bigger than that although not so soft as to award a mere consolation prize to an undeserving proposal. My BMDO was careful to consider every proposal on its merits without regard to rattling of lawyers or Congressional interest or disagreeability of the proposer.
GAO wins no prize for its handling of the question. GAO's decision reads like a quibble among procurement lawyers. It misses the essence of what SBIR is supposed to be. A passenger's lawyers are arguing with an officer on the Titanic over a right to a first class deck chair before the English Crown Court. Dickens would have satirized it. The examiner gets so wrapped in the details that he/she misses both the competitive aspects of SBIR and the idea that SBIR's overall objective (in my view) is the most innovative new technology in the most entrepreneurial companies most likely to make a market success (commercial or military) of the results. Instead it spends its energy parsing expert comments when I suspect most expert reviewers did little more than scan it. It focuses on was it or wasn't it innovative. Of course it is; all R&D is innovative to some degree. That's a necessary but not a sufficient test. Apparently the examiner was yet another lawyer living in a static world who ignored any views about the larger objective and whether this proposal competed well for that objective.

BMDO 99 SBIR Winners
(Apr 1) BMDO picked 182 SBIR winners from its 686 proposals (27%). 150 companies of the 417 proposing. 206 companies proposed for the first time and 69 won at least one. Two of these new first-time winning companies won three awards and six of these new first-time winning companies won two awards.

If the SBIR world likes BMDO's approach of funding projects and companies most likely to have a post-SBIR life, get ready for a bigger dose. The Congressional Republicans have a secular religion: anti-missile defense. Bigger and better, even if unlikely to work very well. Spending on anti-missile defense has become the goal as was spending the Russians to bankruptcy the Reagan goal. The North Koreans have conveniently provided the visible rationale and the failure to get a 10% tax bill going has provided the political incentive to be seen doing something. And for every dollar the Repubs can sneak past Clinton's go slower approach, SBIR will rake off about 2%. Jeff Bond should have a pile of money for Phase 2s that show palpable evidence of market pull. Palpable, not imaginary, backed with third-party validation of co-investment. And to get the good candidates for all that Phase 2 money, he has to have a big crop of new companies with new ideas and the entrepreneur's dream of multiplying $1M SBIR into tens of millions in profits in ten years. Merely good science need not apply.

Market 1998 Performance of BMDO SBIR Beneficiaries

Company Market Cap
Dec31 ($M)
Gain 1998 Profit($M)
Advanced Photonix* 8 -58% 0.4 API
Advanced Technology Materials 558 145% 5.3 ATMI
American Xtal Technology 147 (IPO) 2% 4.6 AXTI
APA Optics 41 -34% -2.0 APAT
AstroPower 77 (IPO) 60% 1.1 APWR
Autonomous Technologies 51 -10% -2.0 ATCI
Conductus 11 -67% -8.4 CDTS
Cree Research 608 155% 7.6 CREE
Emcore 165 41 -43 EMKR
E-Tek Dynamics 733 (IPO) 74% 17.9 ETEK
HNC Software 1043 24% 13.0 HNCS
Illinois Superconductor 13 80% -18.4 ISCO
Irvine Sensors* 39 77% -10.1 IRSN
Kopin 256 37% -1.3 KOPN
Nanophase Technologies 28 -83% -3.7 NANX
Ortel 102 80% -5.1 ORTL
SDL 559 184% 10.5 SDLI
SI Diamond Technology gone -100% who knows SIDT
SatCon Technology 51 -55% -0.7 SATC
Spire* 10 -79% 1.7 SPIR
Superconductor Technologies 30 25% -2.3 SCON
TOTAL $4600M 56% -$35M
(* already public at first BMDO SBIR.) "new" means 1998 IPO. In the pipeline: Implant Sciences. Not in the pipeline: several pretenders who want BMDO to believe they are market-driven, including SBIR mills. What do the numbers mean? The market cap measures investors view of future profits, the business risk of new technology. The profits measure whether the new technology can make money now.
Why market cap as the acid test of a company's efficient use of SBIR? What better cold-fact measure? Still, many companies whose technology won't stand market scrutiny will rationalize more government succor for the eternally potential commercial appeal that would never pass an economics exam. And most government agencies have become witting co-conspirators. Why only BMDO's SBIR winners? No one else cares whether the companies live or die as economic entities. No one else would use such data to rate proposers for Phase 2 money. No one else recognizes that if the economics don't work out then the government investment becomes mere welfare. No one else has ever been heard to mention such measures.
This BMDO SBIR portfolio beat the NASDAQ Composite which skyrocketed 40%. If the comparison were only for those companies where BMDO SBIR was a big help in the company's infancy, the gain would be 97%. ATMI, Autonomous, Cree, AstroPower, SatCon. Note: BMDO is looking for more ATMIs and Crees to get started. It will rejoice in two or three big wins out of every 20 or so new companies it funds. To get such a result, though, it looks for hard evidence that the proposing company has the right ingredients for success. Not many proposers have them.

The Others - SBIR Public Companies Not Supported by BMDO

Company Market Cap
Dec31 ($M)
Gain 1998 Profit($M)
Embrex 42 -5% 2.5 EMBX
Surmodics 112 new 95% 1.6 SRDX
ViaSat 81 new -29% 5.8 VSAT

---------- dateline 1998 -----------

BMDO's children as pioneers.
(Dec 24) BMDO was a pioneer in seeding VCSEL technology in its infancy in infant companies. BMDO started Vixel, Optical Concepts (now part of WL Gore), and Picolight, all of whom have made giant strides in bringing VCSELs into wide use. Those three companies were a prominent feature in the most recent review of the technology [H Jones-Bey, "Next generation technology awaits second VCSEL decade", Laser Focus World, December 1998].


A Mouse Gnaws the Dragon
(Dec 15) The SBIR dragon at BMDO denied a Phase 2 SBIR to a mouse company because the commercialization plan must have been loaded with wishful thinking. The company protested to GAO who said that BMDO did it wrong in making private sector investment the only criterion for declining the proposal. When BMDO re-thought its debriefing and got more evaluation, and still declined the proposal, GAO said that BMDO was prejudiced in its re-review. (No doubt: a poor proposal looks just as bad after ten reviews as after two.) Reading between the lines makes it sounds like the House Judiciary Committee was in charge of the protest: it finds sin wherever it looks. GAO didn't say that BMDO erred in using commercial potential as a prime indicator, only in apparently using a narrow definition of it as the only selection criterion. 
Strangely, GAO treated the Phase 2 decision as a Yes or No instead of a choice among competitors. The most beneficial result likely to arise from the case is that agencies could have to explain better how they decided not to fund a proposal. Maybe. Sadly, what is more likely is that agency decision makers will further hide behind committees and avoid telling the real basis for the decision. BMDO, which has a history of telling the blunt truth to proposers, will continue to do so but now in even more graphic detail. Proposers with delicate constitutions will have to pay the price of hearing the whole truth. The mission agencies, who don't want to use commercial potential as a real criterion, will now have even more cause to use only scientific and technical merit. If they do so, Congress can thank its own investigative arm for undercutting SBIR's ability to fund the new technology with the brightest future. Read the case of IPI v. BMDO
What did IPI propose? The title and city suggest another nice military software scheme. "Passive Multistatic Hitchhiking Array for Search, Track, and Target Recognition" from Huntsville, AL. The corporate officer presented was one of the best Contracting Officers ever to do SBIR - Bob McIntosh. Over the years, Huntsville companies won many SBIRs for their geographical and cultural proximity to the two big Army operations in HSV. Which says a lot about the Army's attitude to SBIR. But those HSV companies typically did not compete well in BMDO's Phase 2 because they could/would not make a credible case for any commercial potential. GAO's decision sounds like IPI did what its forerunners did - think up a nice sounding military software thing, get risk-taking BMDO to give a new company its first chance, and then rely on a military utility appeal for Phase 2. Actually, it might have won Phase 2 if it could have convinced a military program to pony up some earnest money. But with neither serious military interest nor commercial appeal, it became just another also-ran in BMDO's Phase 2 competition. When it couldn't win, it decided to go the legal route and complain of ill-treatment.

$160M for $350M. BMDO has had $160M of matching funds for $350M of BMDO SBIR funds for all Phase 2 SBIR since time immemorial. Actually time began in 1987 and no matching funds appeared at all until 1992 after $150M had already been spent on the warm-fuzzy theory that SBIR winners would do something after Phase 2. So, on average BMDO has had one-for-one match of its Phase 2 funding since 1992. That's one reason so many BMDO firms are doing so well in real life.

A Sep 98 story in Lightwave highlighted long-wave VCSELs by WL Gore (the Goretex company). But the story is an unwitting tribute to SBIR investments in VCSELs in the 1990s. Gore's VCSEL business was once Optical Concepts (Lompoc, CA) which started with four Phase 2 BMDO SBIRs 1992-1995. The other companies listed were mainly BMDO SBIR winners (HP and Honeywell excepted) at their early stages when a little money makes a huge difference: SDL, EMCORE's MicroOptical Devices (whose founder got his IR at what's now VIXEL Corp, Picolight (whose founder was also a founder of VIXEL).


Montana Says Go BMDO. The DOD SBIR includes 15 topics from (BMDO) which seeks to dramatically advance the state of the art in technology without regard to any specific present military requirement through the SBIR Program. The BMDO SBIR (and STTR) Program provides small businesses unique opportunities to push forward their cutting edge technologies. We encourage small businesses to take a look at the BMDO opportunity, and consider submitting a proposal to BMDO in response to the current DOD solicitation. The 1998 BMDO SBIR competition results are revealing and encouraging - including for small businesses in rural states. Consider the BMDO award/proposal numbers and corresponding percentages below from the DOD 98.1 competition for the nation, the EPSCoR region, and 5-state region (the EPSCoR and 5-state regions: Nation: 31.1%; EPSCoR: 24% (Awards in AL(2), KS, ME, MT, OK) 5-state: 100%, one to Montec Associates, Butte, MT) The award percentages are high for the nation and the EPSCoR region. And only one proposal was submitted from the 5-state region - and it won!!! We need more proposals!!! Jeff Bond (BMDO SBIR Program Manager) told us the seven states listed below have never received a BMDO SBIR award. We are on a mission to take Wyoming off this list in 1999!!! Alaska, Arkansas, Hawaii, Idaho, South Dakota, Vermont, Wyoming. Larry Farrar (Montec Associates, Inc., Butte, MT), a winner in the 1996 and 1998 BMDO SBIR competitions, tells below why he thinks the BMDO competition is a real opportunity for small businesses."The BMDO represents an exceptional prospect to obtain high-risk capital for a good idea. The opportunity is as genuine for rural states high-tech participants in the Department of Defense (DOD) programs, as it is for the participants in larger states. Often, small businesses that are located near DOD facilities have market advantages over rural state participants, have knowledge of specific opportunities and consequently win more often. However, the BMDO is not linked to specific projects within the framework of existing DOD programs and therefore, do not have selection bias similar to that existing with the line-organizations within the DOD. The BMDO SBIR solicitation offers a truly competitive opportunity for technology-based concepts that have generic DOD applications, especially those with commercial potential. I strongly recommend rural state high-tech small businesses to submit proposals in response to the BMDO SBIR solicitation topics. The evaluation and selection process in the BMDO program is truly a level playing field. Well, winners tend to like their sponsor. But one flower does not make a summer and BMDO still thinks as a national competition judge, not a political pork-barrel spender. Not so clean in some of the other agencies who bend to the wind of politics and listen secretly to appeals from "have-nots". [Quotes from Wyoming SBIR Newsletter by Chris Busch, U. of Wyoming Research Office]

Got a really good idea, a novel technology yet unproved, with a giant chance for a giant commercial market if it works, that needs an flexible arrangement for Phase 2 SBIR co-investment by the private sector? Try BMDO's SBIR. Science hobbyists with generic tales of the value of basic research - save your ink. But since the money is free, expect some stiff competition from companies with imagination and consultants.

BMDO GIVES SMALL BUSINESSES SHOT AT CUTTING-EDGE TECHNOLOGY WORK. Many of the technologies emerging from the BMDO's SBIR program are making their way into key acquisition programs. But more could be done. "Pushing technologies into an acquisition program is very difficult," said Jeff Bond, BMDO's SBIR program manager. The SBIR program does its best to make known to program managers across the military services which cutting edge technologies are emerging from SBIR. [Aerospace Daily, August 25] Such say-little reports are fillers for pubs like Aerospace Daily. Note that Bond talks about pushing technology, a typical approach of early R&D people who are constantly being badgered about "relevance" more as a budget competition device than a coherent approach. Nobody pushes SBIR products into military programs. In fact, SBIR deciders have to choose between immediate incremental utility of a predictable product (low risk, low gain) and improbable paradigm shifts (high risk, high gain). What most agencies seem incapable of is any decent economic or game analysis leading to an SBIR strategy with some structural rationale. Instead, it becomes a power struggle for the one item that bureaucrats prize - their annual budget. At least BMDO has an SBIR strategy even if it was not reached elegantly. Look sometime in one of these agencies for anyone with a degree in managerial economics running its R&D program.

BMDO's Phase 2 List
(Jul 10) BMDO posted a an interim list of its FY98 Phase 2 winners. 56 awards to 53 firms with 11 Fast Tracks. One triple winner - Nanomaterials Research (Tucson, AZ) which never met a problem for which a nanoparticle was not one answer. Some of the winners are familiar names: On-Line Tech (a subsidiary of AFR), TACAN, Radiation Monitoring, Irvine Sensors, F&S, ATMI, Advanced Device Technology, all of whom presumably did better than their competition at spinning a commercial tale. BMDO's overseer, Jeff Bond, says that the awards will bring in about one private sector dollar for every BMDO dollar. (Or if they fail that provision in their contracts, the BMDO money will not issue either.) 


BMDO Fast Track Winners - The 1998 fast 11
Aguila Technologies
(San Marcos, CA)
Revolutionary Epoxy Technology for High Tg MCM Substrates low cost, low viscosity, high-performance epoxy resins cured by cyanate esters for laminates for multichip modules (MCM) ... very high temperature performance, low dielectric constants, and moisture resistance. ... selected as on of the best inventions by Longman Cartermill Innovation Magazine, June, 1994.
Chemat Technology, (Northridge, CA)
[2 prior SBIRs]
Advanced Low-k Dielectrics for Semiconductor Industry new dielectric materials with ultra low dielectric constant. ... commercialize to reach $200M by year 2002, by working with Tosoh SMD, Inc. .. scale up to pilot quantity
Full Circle Research (San Marcos, CA)
[2 Prior]
A Precision Voltage Regulator for Wide Analog to Digital Converters rad-hard precision voltage regulators (PVR) with the stability under temperature and radiation required by space electronics
IC Tech
(Okemos, MI)
Adaptive Signal Conditioning and Calibration for Microelectromechanical Systems (MEMS) integrated voice processing device for real time separation, localization and recognition of speech. ... an array of micromachined microphones, circuits that sample, digitize and process the output
Microwave Technologies (Burke, VA)
[1 prior]
Development of a Compact Electron Beam Accelerator very compact radio-frequency (rf) .. employs a single short fg cavity to accelerated a low-energy magnetized pencil beam to energies that range from 2 to 10 MeV. ... halve accelerator cost
Optomec Design Company (Albuquerque, NM) Embedded Sensors via Laser Engineered Net Shaping highly accurate, complex parts directly out of powdered metal ... embed sensors within otherwise homogeneous metal structural components under a CRADA with Sandia NL (who invented it) ... parts are stronger and harder than would be expected from standard material samples, and they do not shrink or warp.. SOA review in Scientific American
Reifer Consultants, (Torrance, CA) Adding Product Lines, Architecture and Software Reuse to the Software Acquisition Capability Maturity Model (SA-CMM) develop prototypes and beta test them at a variety of commercial and government organizations
Sheet Dynamics (Cincinnati, OH) Adaptive Spatio-Temporal Control: a Practical Approach to Achieve Unprecedented Structural Vibration Control Performance, Robustness, and Reliability Spatio-Temporal Filtering (STF) ... practical and computationally efficient tool for controlling and monitoring the behavior of complex linear systems. ...applications in hot dip galvanizing, sparse array optical space telescopes, and Coriolis mass flow meters by Micro Motion
Sterling Semiconductor (Sterling, VA) Ultrahigh Quality, Single-Crystal Bulk Silicon Carbide large-area, micropipe-free SiC materials ...SiC device market will reach $205 million by 2005. SOA review by NASA.
Templex Technology Corp (Eugene, OR) Optical Random Access Memory revolutionary optical memory: Optical Dynamic RAM (ODRAM), ... 100GB storage units with entirely non-mechanical beam steering - thus providing random access times of microseconds rather than the milliseconds common in mechanically accessed magnetic disk storage
Teracomm Research (Boulder, CO) Terahertz Optical Modulator high speed fiber optic transmitter uses superconductors to greatly increase the transmission capacity of currently installed fiber optic lines ... modulating light 50 times faster than the state of the art
While a few sound like the techno-dreams of research houses, some third party put up real cash which is at least one reality check of market interest. On balance, the technologies have much broader market appeal than the SBIRs funded in most of DOD which want an immediate "contribution" to the Service R&D mission. Only when the Services see the value of using the private markets develop their new technology, will their SBIR programs return anything much on the investment. Even though few of these projects will succeed financially in the competitive marketplace, they are the least-bad way for a free-market government to meddle in market-sensitive R&D.

(May 29) BMDO which got 128 proposals from 95 companies, picked 22 Phase 1 STTRs (one per winning company). 67 companies proposed for the first time.

BMDO Funds 70% to Phase 2
(Jun 9) Is a 70% selection rate good? BMDO says it funded 60 Phase 2 SBIRs out of 85 proposals. Since many companies complain about low selection rate, BMDO must be doing something right? Ah, statistics! Yes, BMDO is doing something right - it is discouraging hopeless proposals that serve neither BMDO nor the company with clear signals about criteria and the competition. But one group would look at the ratio of 60 to 141 Phase 1 winners and say the selection was only 42%, about the national average. The companies' gain is at least a lot of ink not wasted in go-nowhere proposals. To compete in BMDO Phase 2 you need either a revolutionary idea too uncertain for commercial investment or something like BMDO's average of a dollar of private investment in Phase 2 for every BMDO dollar. No, better measurement of the kinetics of InP deposition on Si isn't a revolutionary idea.

What does BMDO's fifth failure to hit a bullet with a bullet portend for SBIR? Nothing much. Blame is quite unlikely to find its way to small high-tech innovative business. But the more failures, the more likelihood the republicans will stop trying to defend America from missiles by throwing money and commanding success.

BMDO 172 Winners
(Mar 5) BMDO lists (a quick competition) 172 Phase 1 SBIRs to 142 companies. Three companies won four (Nanomaterials, Radiant Research, and NP Photonic) and two companies won three (AstroTerra, ATMI). About 50 new companies with new technology. The rest include many of the usual suspects except that only one of the top five SBIR companies won one award. A smattering of the purely military stuff wherein the agency uses SBIR to avoid funding small business with its mainline R&D funds for its mainline R&D work in which innovation plays little role and have little impact unless they later somehow wangle Phase 2. 


So, you'd like to jump into BMDO's Surprises and Opportunities for the coming STTR (April 15). What did BMDO fund in that category last year, and were they the advertised "completely unique and unusual opportunity"? Apparently six such projects were funded. Three questionable projects: Applied Sciences got another try at doing something with its proprietary carbon fiber; TRS Ceramics pounding away at its favorite technology; Plastronics gets to try yet another YBCO deposition process. Three more innovative sounding projects: Electron Power Systems with an unconventional "battery"; Rotordynamics Seal Research with what might be better bearings; another try by Structured Materials for a unique material that would actually sell this time. Conclusions: 1)beauty is in the eye of the beholder; 2) reviewers prefer established firms; 3) anything is possible; 4) completely unique and unusual opportunities are either rare or unrecognized.

Old and new companies win. Optimism isn't dead yet.

Who are these companies? Applied Sciences (Cedarville, OH) grew from 4 employees in 1987 to 14 today on $3M of DOD SBIR plus $2.2M otherwise 1993-1996 (SBA published data don't go earlier), and since each $M of SBIR can buy one employee for ten years, the employees must have done nothing but SBIR.
TRS Ceramics (State College, PA) has grown from 2 in 1992 to 28 today on only $1.5M of DOD SBIR.
Plastronics is a New Mexico shoot-em-up laser company "founded in 1976 by a key laser scientist for the U.S. 'Star Wars' program" (which wasn't even a program until 1983). It has had no SBIRs in many years.
One-man company Electron Power Systems (Acton, MA) got its first DOD SBIR/STTR.
Rotordynamics-Seal Research (North Highlands, CA) got only its second DOD Phase 1 but somehow halved its employment in 1996. It has had NASA Phase 2s and has a Website that starts with a page of legal warnings and a picture of a shuttle launch.
Structured Materials(Piscataway, NJ) has had $3.7M 1993-1996 of SBIR/STTR for various exotic materials like carbon nitride and porous silicon. Which explains how all five employees were paid over the four years.

Boo-hoo, I want to propose a Phase 2 to BMDO but not only do I not have any venture capitalists to share the costs with BMDO, I could never find VCs interested in such an advanced technology. And besides, even if I could, they would steal my company. What can I do? The standard wail! Does BMDO demand cost-share? If by cost-share you mean private money developing government hardware, NO. If by cost-share you mean co-investment for a technology with a bright future for everyone including BMDO, MAYBE. BMDO wants proof of your technology's future far beyond your avid puffing. Every proposer loves his technology. Co-investment makes one convincing proof. In FY98 so far, BMDO has funded four Fast Tracks, for which co-investment is a must, out of nine awards. The other five MAY have co-investment but the published abstracts are too filled with pabulum to tell whether BMDO has actually drifted into regular DOD Phase 2s where any commercialization talk is just talk.

45% Fast Track
(Feb 13)Of BMDO's nine Phase 2 selections, 4 (45%) are Fast Tracks and all nine are firms with few if any Phase 2s. BMDO wants market-driven companies, not veteran R&D houses.

BMDO Speaks. BMDO wants high-risk, high-payoff technology where the technical risks can be reduced to conventional R&D level investment grade within two or three years. However, the real question will be "How are you going to commercialize this technology?" To compete well at BMDO, serious consideration is only given to serious commercializers in market-driven companies. ....
At Phase I we look for the innovations; the long shots; the novel ideas; the technologies that -- if they work, will provide a quantum leap in the developments used currently. If you can convince us that you have something that will provide a revolutionary step, not an evolutionary step, in the next generation of technology developments then we are interested.
The good and bad news about BMDO's approach is that you need an economics based story for commercialization - not the usual abstractions about a bright future. That means estimating your path to economic success: names, dates, and amounts. The good part is that having so estimated, you should know whether you are just kidding yourself.

Market Performance - 1997 - of BMDO SBIR Beneficiaries

Company Market Cap
Dec31 ($M)
Gain 1997 Profit($M)
Advanced Photonix* 18 -21% -4.7 API
Advanced Technology Materials 228 43% 5.1 ATMI
APA Optics 63 81% -0.2 APAT
Autonomous Technologies 56 125% -11.2 ATCI
Conductus 34 -7% -6.3 CDTS
Cree Research 238 106% 2.9 CREE
Emcore 117 new -8.2 EMKR
HNC Software 839 41% 13.0 HNCS
Illinois Superconductor 7 -88% -12.3 ISCO
Irvine Sensors* 22 21% -11.7 IRSN
Kopin 187 44% -11.4 KOPN
Nanophase Technologies 167 new -4.6 NANX
Ortel 184 -41% 7.8 ORTL
SDL 197 -43% -24.9 SDLI
SI Diamond Technology 3 -74% -5.9 SIDT
SatCon Technology 114 284% -6.1 SATC
Spire* 45 560% 1.7 SPIR
Superconductor Technologies 24 -21% -2.3 SCON
TOTAL $2395M +30% -$81M
(* already public at first BMDO SBIR.) In the pipeline: Quantum Epitaxial Designs, and AstroPower. Not in the pipeline: several pretenders who want BMDO to believe they are market-driven, including SBIR mills. What do the numbers mean? The market cap measures investors view of future profits, the business risk of new technology. The profits measure whether the new technology can make money now.
Why market cap as the acid test of a company's efficient use of SBIR? What better cold-fact measure? Still, many companies whose technology won't stand market scrutiny will rationalize more government succor for the eternally potential commercial appeal that would never pass an economics exam. And most government agencies have become witting co-conspirators. Why only BMDO's SBIR winners? No one else cares whether the companies live or die as economic entities. No one else would use such data to rate proposers for Phase 2 money. No one else recognizes that if the economics don't work out then the government investment becomes mere welfare. No one else has ever been heard to mention such measures.

------------ dateline 1997 --------------

BMDO Funds 60 Phase 2s
(Dec 2) BMDO funded 60 Phase 2 SBIRs out of 82 proposals in FY97. Sounds like good odds. Does that mean BMDO is easy? Far from it. Since BMDO typically funds 140 Phase 1s, that means that 40% of the Phase 1 winners didn't even propose. Why? When the criteria are clear, companies can decently calculate their chances and can avoid the hassle of uncompetitive proposals, even when every Phase 1 winner is invited to propose. Why don't more agencies do the same? 

BMDO's Match Rates
(Dec 11) BMDO clarifies its stats on Fast Track and sharing rates. FasTrackers had an overall match rate of 43 cents of private CASH for each BMDO SBIR dollar. Normal Phase 2s had an overall match rate of 93 cents (cash, support-in-kind, or company internal money) for each BMDO SBIR dollar. Jeff Bond, BMDO's SBIR honcho, opines that comparing FasTrackers' CASH with standard Phase 2s isn't fair, since the standard Phase 2 companies have so much more flexibility in their counting of matching investment. Which is one reason why Fast Track approvals are semi-automatic: hard money means more than soft money. Wonder if the Republican campaign finance posturers would like a hearing or two on that distinction? Wonder if any other SBIR agency comes close to such match rates? Hah! But they all have their excuses polished in sync with the matchless beneficiaries' pleas for MORE MONEY . Return to Index

What did BMDO Fast Track? What kinds of technologies did BMDO fund with its Fast Track money in FY97? Ten awards were made, 15% of all funded proposals. an add/drop filter for wavelength division multiplexing; a practical carbon nanofiber electrochemical capacitor; manufacturable and reliable oxide VCSELs; high specific C02 laser outputs from a device using QSource's Multiple Rectangular Discharge; a low voltage, video rate lasing pixel array for large scale projection displays; a photonic switching device; high-precision pointing and positioning transmission equipment; high-GHz to THz optical data links; full color monolithic GaN-based LED's; and GaN power MISFETs. Note the heavy playing in information technology. It's not because info-tech is BMDO's most pressing need, but rather that info-tech is one of BMDO's many needs that can be filled by the private sector once the technology is credible. That way BMDO lets SBIR do what SBIR does best instead of awarding SBIRs in accordance with this year's concept of the distribution of agency need. Other mission agencies could learn from the BMDO experience of averaging a dollar of private for each Phase 2 SBIR government dollar. Right, any day now!


BMDO's 1997 Spinoffs
(Sep 16) It soars and it wallows. It opens with a dull infomercial for the bureau and closes with a deceptive chart. In between, it has lots of lively graphic designs and stories spiced with bureaucratic drivel. BMDO's 1997 Technology Applications report has made one advance over its usual high standard - it finally reports some economic/market indicators on top of the usual technology-push talk.
The report's language varies from the dead bureau-speak of long words and abstractions and miles of "increasingly" and "enhancing", etc. And a bureau pop-word: "leverage". DOD loves it; government loves it; NTTC loves it, too. It means ...; well, it means we want you to feel good about what we're telling you. Eurocrats in Brussels love such jargon even more. One mark of forward thinking: lots of useful web sources means BMDO is emerging from its security shell.
Lots of technology push - a standard feature of government tech transfer reports- with little discussion of the sine qua non of commercial markets: COST. Nor any demonstrable grasp of market economics. But then, perhaps we shouldn't require that of a government program, even one of the best tech transfer programs.
Readers should note that the last graph of IPOs is cumulative, a unique way to report IPOs. And the $2.2M "IPO" for Displaytech greatly exaggerates the market appeal of a company with teens of millions of SBIR over its cliff. Reference IPO Central denies any knowledge.
Why Technologists Lose Credibility: "Innovative medical technologies are needed to help reduce the rising costs associated with today's health care" An old techno-medico myth! Better technology has increased medical costs as it dramatically bettered the quality of health care (for those who can afford it). It is a lot cheaper to let patients die undiagnosed than the other extreme of installing an MRI machine in every hospital to examine every symptom. It is a highly controversial socio-economic question whether national medical expenditure must be reduced and technologists and their apologists should avoid the question. Supply-siders (those who did not go over the cliff in Bob Dole's bus joke) argue that a new good elicits a demand which induces a market in which more is better. Interested readers could try Victor Fuchs, Who Shall Live?, Basic Books, 1974. Indeed, the report impeaches its own assertion by boasting that 300,000 patients have had skin improvements for "$250M in business revenues" and another $250M in laser equipment sales for Medical Free Electron Laser technology. The report is available from producer NTTC 703-518-8800. No web version yet on-line. 

Can't figure what BMDO's about? It's all secret? Nah! Read IEEE Spectrum's 43-page spread Ballistic Missile Defense: It's Back Sep 97. (Actually, it never left.) If you want to do SBIR for that mission, figure something that will help a lot and propose a way to get BMDO to start the development after which you use private investment to make a product that will appear on shelves everywhere where the future BMDO can buy it. No, that's not the usual DOD R&D approach, and don't expect the Army, Navy, and Air Force to think the same way no matter how much strategic sense it makes for their SBIR programs.

The BMDO SBIR Website has awakened from its comatose summer with a new face. Now that program manager Jeff Bond has a permanent Washington job, and looks back to his 16 months of shuffling between Huntsville and Washington, we'll look forward to his practicing his principle that sunshine is the best disinfectant. News and views may be coming in the form of regular commentary on the program and live data on who's winning and with what. BMDO had the first SBIR Website and was noted for telling the real rules.

Got a BMDO Phase 1 SBIR? Congratulations, but. Getting Phase 2 will be tougher than you think. Your love of the technology, even added to the technical monitor's love of it, will leave you far short in the competition. You will be competing with companies who are making a serious business out of their technologies. They are raising capital, engaging strategic partners who know the real business of the technology, and telling a captivating story of a future. (Well, some of them are less than captivating writers.) Whatever you learned in winning Phase 2 from any other agency can be the basis only of Chapter Two - The Wonderful Technology - of a multi-chaptered proposal. BMDO has actually helped some companies learn to be companies with its Business Focus Workshops where SBIR newbies get some coaching (ouch, that smarts) from business people.

What Did I Do Wrong?
(Jul31) Of 92 companies getting venture capital in New England in 1997, not one got a BMDO SBIR in my decade. Does it mock the assertions of Senator Kerry and SBA's Jere Glover about the value of SBIR? [R Rosenberg, "Fast Track", Boston Globe, Jul30]. Since after $844M of SBIR in New England, nobody draws VC investment, how can the beneficiaries claim that SBIR such an economic engine? Kerry wants present jobs in Massachusetts and Glover's job depends on inventing programs for small businesses. Although the present excuse for bringing it up is the re-authorization of minuscule STTR, the larger question should be raised in SBIR's 1999-2000 reauthorization debate. Notbloodylikely.

BMDO Winners Conference
(Jun 25) BMDO is having an SBIR Winners Conference July 10-11, Washington (for whose convenience?) The objective seems to be to teach Phase 1 companies how to compete for Phase 2 and to commercialize (a sine qua non for Phase 2 and for life after SBIR). For the $200 entry fee plus all expenses, companies can come and dance around each other looking for an edge in the Phase 2 competition in which half will lose. Those who don't come will worry that those who do will get an edge with the decision maker. The preliminary flyer from the Phase 2 decision maker said, Let me recommend that you consider participation. It'll be like freshman class orientation where the Dean says welcome, some experts will tell you how to study, and by the way there's only room for half of you in the sophomore class. If your invitation got lost in your last move, call 617-595-2920.

26 Starts for BMDO
(Jun 9) BMDO picked 26 STTR winners, one award each - a good strategy for maximizing the chances for a varied collection of Phase 2 propositions. About a third won for the first time (stats not yet reported). A few strap-hangers in the crowd who have proved themselves better at winning SBIRs than at commercializing. Radiant Research, Intelligent Automation, Bend Research, HYPRES, Displaytech, Applied Sciences - all with the same story "give us the money for our great technology and we'll sell something to somebody someday". BMDO has a history of rejecting such speeches. Abstracts available  

BMDO Abstracts BMDO's SBIR has started publishing the abstracts of its latest Phase 1 selections. Note that an abstract published does not necessarily mean that a contract has been signed yet. BMDO's decider and publishers do not write SBIR contracts. A scan of the abstracts shows a lot of old ideas still pounding away at things not selling and things unlikely to ever produce anything but knowledge. Lots of assumptions being recycled to a happily credulous government. They (company and government) defend themselves by citing the virtue of the concept and ignoring both history and economics. The effect is to push money to SBIR veterans for long term development - a goal not of SBIR but of the other 97.5% of R&D. Newcomers get the leavings, although at BMDO they are actually held in some regard AFTER the government experts argue for funding military projects. Any SBIR decider trying to follow the intent of the SBIR law has to battle military developers with little interest in what has a future. At least BMDO believes that sunshine is the best disinfectant and says what it's doing. 

What's BMDO Funding?
(Apr28) BMDO SBIR has now published all its Phase 1 abstracts (although some hyperlinks don't work). Assessment: a gain in influence by the BMDO people who don't think much of small business innovation nor of SBIR's objectives. Atop a host of innovations, BMDO passed out money for:

bullet endless modeling (Sensortex, Tetra Research, Reifer),
bullet fishing expeditions (SatCon Technology, East-West Enterprises),
bullet two is better than one (General Sciences),
bullet let's do red ones now that we can do green ones (IAI, IAP),
bullet somebody will buy one some day if we just keep spending government R&D money (Advanced Fuel Research, MER, Optron, Linares, UNIAX, HYPRES),
bullet more of a military thing that we're doing already (TG&C, Ultramet),
bullet perpetual research projects (Sentar, Maxus, IAI).
Such projects opt for predictable mediocre results by predictable R&D companies in which government perversely adds money when results don't look good. Which is great incentive for the company not to succeed. The good news is probably that BMDO's temporary part-time manager was able to hold such wastage to about 20 projects. The analysis can also be framed in terms alien to government managers - opportunity cost. On the plus side: no other agency has published abstracts yet. 

Then there's one proof-of-principal project (must have joined the education business).

189 BMDO SBIR Phase 1 Awards
(Mar 17). BMDO picked 189 proposals from 155 different companies. That's a 32% win rate. Half the companies had never won before. In a continuation of the Nelson-era's favoring new ideas from new places, there were 103 winning proposals from 77 previous awardees and 86 (40%) from 78 new companies. Seven of these new companies won two awards. The average award was $60,245 (enough for a sanity check, not enough for an R&D project) . BMDO received 590 proposals from 334 different companies. 140 of those companies were first time proposers who sent 179 proposals. For more stats, see BMDO's Website . The mid-March announcement says BMDO was decisive and public-minded. BMDO at least does not have management by committee and internal squabbles over allocations for awards by "importance" of individual bureaucrats and offices. Among the multiple winners was three awards to freshly IPO'ed EMCORE. Return to Index

Randy Frey of Autonomous Technologies (Orlando, FL) and Gene Banucci of Advanced Technology Materials (Danbury, CT) heaped praise on BMDO in their luncheon speeches to the National SBIR Conference for SDIO's (BMDO's Republican name) foresight in awarding SBIRs that made the now-public company. Frey liked the handshake deal on which he could take a matching money offer to early investors. Banucci advised companies not to become SBIR junkies; he's got the authority to speak on the subject having had 100 Phase 1s and 50 Phase 2s. ATMI is one of the best SBIR stories despite the heavy use. Its growth rate and profit growth justify the government's investment. Although is far from the highest return on any SBIR, among those firms getting a lot of SBIR it is the best. And Banucci repays the favor often by appearing in public to tell the story. The other big users must be too busy writing proposals or sensitive to criticism.

(Apr 2) BMDO's list of SBIR winners for 1997.

A varied lot including some old warhorses Foster-Miller ($60M+ and still dependent), Spire ($30M and lower market cap than when BMDO gave its first Spire SBIR a decade ago), SatConTechnology ( public with lots of government R&D), Ultramet (more hot rocket nozzles), Advanced Fuel Research (still plugging away after a decade on a little commercial result), Intelligent Automation (getting SBIR from lots of places), Irvine Sensors (public with another silicon brain), Creare ($30M with some success),General Sciences (bigger bang from old technology), Optron Systems (MIT professor still slogging away), AstroPower (great silicon solar cells but unproved optoelectronic materials), Crystallume (lots of CVD diamond in the 80s, went public and then bust), Implant Sciences (never met an ion implantation it didn't like),Linares Management (how many times can they tap the government for more GaN research) , MER (always a good sounding commercialization PLAN), Physical Sciences (a top ten SBIR consumer), HYPRES (just one more superconducting electronics handout and the market will turn), Cybernet Systems (we have a systematic plan for doing quality research).
These 20 or so awards which are decent research toward some military purpose for about $1.2M matter little unless they escalate to Phase 2 where they could then consume serious money. They just don't ever reach their promises of commercial impact and they keep coming back with the same story. Fortunately for them, and unfortunately for more innovative companies, the government prefers the devil it knows. Some went to companies who have proved themselves worthy of government investment: Nonvolatile Electronics, Picolight, ATMI, Brimrose, Theseus Logic, CCVD, Brewer Science, CoreTek. (Note: some firms in this class are clients of Carl Nelson Consulting Inc). Some went to new (at least new to BMDO) firms with new ideas who get a chance to prove or disprove themselves: Sterling Semiconductor, Templex Technology, Information Systems Labs, Munroe Machinery, Dirogo, Haugsjaa Engineering, Micramix, Array Vision Engineering, Aguila Technologies, Holographic Optics, Photobit, Symvionics, Sheet Dynamics . (Note: some of these are also clients.) Those who disprove could become regulars with a story; those who prove will graduate into the private market. BMDO has had a soft heart for first-timers and advertises its first-time statistics. Other agencies disdain statistics of almost any type.
The rest are 'tweeners: so-so companies with familiar names that find SBIR comfortable and propose stuff that will fill the gap between the best innovators, the newcomers, and the bottom of the deep money barrel. The 'tweeners and the warhorses benefit from a loss of corporate memory since the curmudgeon program manager of the last decade retired.

They're Back, The Veterans
(Mar 7) They're Back. Companies that gave up wasting ink seeking BMDO SBIRs are back at the trough. BMDO's list of Phase 1 proposers, which it (refreshingly) releases as a public trust gesture, shows SBIR champ ($60M from DOD alone) Foster-Miller with 14 proposals. SatCon Technology, a 1992 IPO company with a profitability problem, 9 proposals. Advanced Technology Materials Inc , a now profitable 1993 IPO, 22 proposals. Other old names- Advanced Fuel Research, Spire, MER, Optron, and EMCORE. Most of them faded in the 90s because they talked better commercialization than they played. About a fourth of the 400 proposing companies are first-time proposers to BMDO, a measure of freshness. We shall soon see whether BMDO falls for the veterans' stories.
Contrarily, the other DOD agencies don't reveal such statistics. No, nothing wrong with proposing a lot of new ideas because it's government's role to keep the handouts targeted toward the program's objectives. Government punishes small business innovation, though, by concealing its intentions so that old hands (with a low marginal cost of proposing) have an advantage. Check Army awards, for example, to Foster-Miller.Return to Index

BMDO News.
BMDO has posted two more weekly "reports" on its SBIR Home Page. See who's proposing what. With a temporary borrowed Program Manager, any such open report speaks well for an attitude of open government. Just look around for any other agency doing anything close. The pieces are vague to avoid public release of proprietary material or government evaluation, both of which are protected from disclosure even under Freedom of Information. The pieces also sound rah-rah technology-push that government technologists fall into the habit of as they continually argue for more budget. The rah-rah causes no problem unless the companies deceive themselves with their own hype since the markets will ignore government blather anyway and the government will pick a fixed number of winners. The problem in government-approved rah-rah comes when the companies tell a constituent-sensitive Congress that government has blessed the technology but needs more money to fund all the great innovations. It happened in 1992 and could happen again in 2000.


Two Role Models Report
ATMI Profit
(Feb 20) Advanced Technology Materials Inc (Danbury, CT) reported $3.3M profit for 1996 on sales of $46M. That's half again sales and six times the profit. CEO Gene Banucci said ATMI was getting to its strategic goal of having each business unit be first or second in its market - vaulting ambition for an SBIR grown company. Is the government getting its SBIR money's worth? For the last two years combined, ATMI has paid $500K in income taxes, the value of its first Phase 2 SBIR in 1986. If income tax were the ROI payback criteria, the government would never invest in any new enterprises. But then, the tax payback argument is never seriously used as a rationale anyway. If it were, income taxes from new permanent jobs should be considered also. SBIR people who want a model could hardly do better than ATMI.
Autonomous Technologies Loss <
(Feb 20) Autonomous Technologies (Orlando, FL) reported a loss of $9M for 1996. No great surprise for a medical company seeking FDA approval for a new surgery. Although CEO Randy Frey did not make victorious noises like Gene Banucci, he could be in Banucci's position in a few years. Frey also makes a good SBIR model for abandoning SBIR and launching into eye surgery with his laser radar tracking technology instead of beating his head against the DOD/NASA door for continuing subsidy. Neither agency was likely to buy enough of from such a small company to even break even. Frey got a reward for striking of in commercial direction when BMDO doubled his Phase 2 SBIR to match capital Frey raised in a private placement. AT went public last May and is trading about 25% below the IPO price (it was below 50).
SBIR companies wanting to see and touch these role models can do so in Orlando Apr 2-3. Both Gene Banucci and Randy Frey will be luncheon speakers at the National SBIR Conference.

Companies Commercialize Photonics
(Feb13) Yes, Small Companies Can Commercialize Photonics says one paper at Photonics West 97 (San Jose, CA). But the exhibit floor says it so much more eloquently by the booths of Deacon Research, Spire, Displaytech, Emcore, Geltech, POC, SDL, Sensors Unlimited, (all with Phase 2 BMDO SBIRs), plus Integrated Photonics Systems, 3D Technology, Rochester Photonics, and Kigre (all with Phase 1s). Plus Phase 2 companies speaking or walking around: Coretek, Opticomp, Radiant Research, and Templex Technology. 

BMDO Loses Technologist
Neil Griff, the BMDO Director of Directed Energy (big lasers), died Friday Jan 31 of a stroke. He was recovering from his third brain surgery for cancer. Neil was a pleasure to work with.


Two products advertised by BMDO SBIR commercializers: glass collimating lenses by Geltech (Alachua, FL) and Turn-Key Ultrafast Laser by Clark-MXR (Dexter, MI). Bob Hecht-Nielsen was named an IEEE Fellow. Bob built HNC Software (San Diego, CA) with a little help from SBIR to be the company with the highest market cap, $600M, of SBIR users.

------------ dateline 1996 --------------

BMDO's Public Companies Up 17%
For 1996 the market cap of public stocks with at least one BMDO Phase 2 SBIR was up 17%. Those who went public after the Phase 2 award were up 24%; all four already public went down a total of 52%. Three of these downers have had lots of SBIR from many agencies. 

Market Performance - 1996 - of BMDO SBIR Beneficiaries

Company Market Cap
Dec31 ($M)
Gain 1996
Advanced Photonix 180 + 30% API
Advanced Technology Materials 180 + 72% ATMI
APA Optics 35 -13% APAT
Autonomous Technologies 25 -50% ATCI
Conductus 37 +1.7% CDTS
Cree Research 98 -36% CREE
HNC Software 624 +36% HNCS
Illinois Superconductor 55 0% ISCO
Irvine Sensors 14 -85% IRSN
Kopin 111 -18% KOPN
Ortel 312 +113% ORTL
SDL 314 +64% SDLI
SI Diamond Technology 10 -78% SIDT
SatCon Technology 44 -27% SATC
Spire 7 -12% SPIR
Superconductor Technologies 22 -11% SCON
TOTAL 1889 +17%

A Bigger BMDO Pile
(Jan 16) BMDO SBIR got 602 Phase 1 proposals in its annual solicitation. (Thanks, BMDO for telling the public something of what's going on.) That's a third more than last year, Nelson's last as PM. No doubt some of the well-known names that Nelson discouraged from wasting ink with too modest and too predictable proposals have returned. Expect decisions by early March but don't call BMDO (because it won't answer your question) 703-693-1522 until April. The evaluation procedure? BMDO will get several technical evaluations of each proposal and then pick the best of the lot. Maybe 200 winners, maybe less, depends on how fast the quality drops off after the first 5% which are usually great new ideas. The rest are just decent R&D. (Nelson kept a high selection percentage despite rejecting the merely decent by resolving doubt in favor of companies new to BMDO to give them a chance to get started.) Thanks to the Republican pressure in an election year, BMDO has lots of money. If, however, the technical experts alone do the deciding, there will never be enough money to satisfy them (because they want BMDO SBIR to fund what they won't fund themselves). Return to Index

Some BMDO SBIR Winners
BMDO posted its list of FY96 Phase 2 winners. Of the 39 awards, 21 went to first time BMDO winners. Other revealing statistics like average match rate of private capital not given (yet) nor number of awards without matching. Maybe BMDO will open up and distinguish itself by its willingness to be held publicly accountable by measures devised by the public. Such openness would mark it as a reinvented government agency.
Although BMDO used to discuss measures of merit of its SBIR in its public speeches and in its press releases, and still reveals itself healthily in its Home Page and solicitation, it does not systematically reveal itself in performance measures. It might, for example, study the reporting of mutual funds for ideas. It could also ask the SBIR public for useful measures.
What measures would you like to see published regularly, by BMDO and the others. Some hints: fraction of awards going to first time winners or first time applicants, fraction of awards going to experienced SBIR firms, median size of winning firms, correlation of matching investment or non-government sales with cumulative SBIR money in a firm, mean and standard deviation of Phase 2 amount, correlation of SBIR amounts won and employee growth, etc. (Note that none of these metrics requires government to probe the company's commercial books.) You'll have to think beyond "Did I get what I proposed?" which is too personal for anyone else's calculations.
A larger goal of such reporting would be to move the agencies beyond shunting , that is, diverting its normal small company R&D into SBIR. Try writing Mr Talent, Chair of House Small Business Committee, or e-mail me. I'll post here any new measure suggested. 

What is the government doing, asked one company, when it won a Phase 2 SBIR for clearly and admittedly government-only technology that required private-sector matching.

BMDO cleared its summer backlog of weekly news items and returned to public view. Not bad. Considering that, unlike an open pub, it cannot reveal confidential material including its evaluation of a proposal, it strikes an informative balance. The company usually cheers positive comment but claims negatives as confidential. At times, it is as Nelsonian as government can be in public. The news particularly tackles questions of how a proposal touches the commercialization criteria: usually a dreamy assumption-filled haze about commercialization, the biggest assumption being that BMDO will fall for a vague promise and, if a little more sophisticated, the chicken-and-egg argument. And some of the perennials are still blooming: Thermacore and Physical Optics which win SBIRs by convincing a handful of government experts of the value of the technology as technology and as a greater good than crass commercialization. Unlike most SBIR programs, BMDO usually finds the argument inadequate. 

BigCo Invested
BigCo did what they promised, a broader teaming arrangement than first anticipated, both invested cash and committed internal engineering for development of our gizmo; the Navy has expressed a "strong interest" (don't spend your profit yet) and we believe we will receive a contract; BigCo has the rights to market for the military; we have all other rights. I'm running around raising capital and we are expanding our facilities including a new clean room (even speaking of this causes me pain, still scares me from building the first one). So says a BMDO Phase 2 SBIR winner. Whether it ultimately succeeds or fails is now out of government's hands; SBIR gave the entrepreneur a start. Dole's acceptance speech captured the idea - an opportunity, not a guarantee of result. The company remembers the earlier trial by ordeal, "You shook us a few times when we were preparing the BMDO Phase 2 proposal. We are stronger for it and appreciative." 

Latest BMDO SBIR News
S-s-sh. BMDO fell silent. No news posted on its Home Page since June 28. Explanations? Many possibilities, all inimical to open relations with the SB community. A good idea was too good? 

BMDO has started publishing its weekly internal report on SBIR (and occasionally on other new BMDO innovative technology). The most interesting items are the summaries of Phase 2 SBIR proposals, which have been dulled enough for public consumption (since I retired). Companies who proposed Phase 2 from 1986 to early 1992 will testify that many of the pieces were too horrifying for the public since they often speared what I considered dreamy assumptions. The pieces were published weekly within BMDO after the company had a chance to comment, but not veto, the draft item. No proposer ever said the piece was too dull. Like all opinion writing, some praised it and some damned it. Eventually it went also to the other SBIR managers in government. Now brought to you weekly (or so) by the new [temporary] program manager. Naturally, the pieces contain neither evaluative comments nor facts the company considers confidential . But, even sanitized, they do give a valuable public insight into what is on BMDO's plate. 

Anti-Missile Medicine
The technology of the anti-missile can also be the technology of medicine. BMDO's glossy and well-written brochure "BMDO's Technology Applications in Biomedicine" shows contributions by 35 SBIR companies and 29 non-SBIR institutions. Although the BMDO doesn't talk about the business aspects of the technologies, some of the SBIR companies are getting somewhere in pursuit of a future (Advanced Technology Materials, Autonomous Technologies, Micracor, Brimrose). SBIR prospects take note that the writing here is better than the average SBIR proposal in limiting the abstractions and telling the specifics in people-speak. Editor is Joan Zimmerman, joan@cobalt.nttcwo.org joan@cobalt.nttcwo.org of the National Technology Transfer Center 

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