Government Stories 2004 - 2005

Stories that earlier appeared in Nelson's News 
Note 1: Carl Nelson Consulting, Inc is not an investment adviser and may hold a financial interest or client relationship in companies discussed.
(Note 2: Carl Nelson Consulting does not endorse these companies or organizations or their activities.) 
Looking for other older stories? Visit the archives


You could be appointed an immigration cop.  Businesses battle immigration reform. Business interests are lining up against a proposed crackdown illegal immigration and companies that hire undocumented aliens. Congress is considering a program that would require employers to check social security or alien identification numbers against a government database, to stop hires of illegals using fake id's. But business lobbyists say they don't have much faith the government can make that plan work efficiently, the bizjournals Washington Bureau reports. Some business groups have also opposed the bill because they fear a crackdown will make it more difficult for them to fill their labor needs.  [Biz Journals, Dec 16, 2005]

SBA published its "final" STTR Policy Directive which tells the agencies the rules for running their STTR programs.  Proposers and contractors don't need it, but sometimes knowledge of the rules will help convince an agency not to act too arbitrarily. Remember that most of the people making the selection decisions have never read the directive and never will. Gilman Louie resigned as head of In-Q-Tel to start another VC fund.

It's Never Enough.  Defense and space projects account for most increases in the $135 B federal research and development budget next year, worrying scientists who fear that after years of growth the nation is beginning to skimp on technology that fuels marketplace innovation. [Andrew Bridges, AP, Jan 1] Research money is like free medical care, infinite demand. Insert more money, get more PhDs who want even more money so all can play. Not to worry, though, the people getting the money will spin tales of benefits for the economy.

Taking Public Money? The debate about how secrecy in the venture capital world has broken out again, ... [the Ohio Bureau of Workers' Compensation] is apparently planning to release the valuations of companies that these firms have invested in. If you're a company taking money from one of the institutions listed at the bottom of this post, you might want to sit up and take note. [Silicon, Dec 19, 05]

The long money DOD SBIR is now collecting Phase 1 proposals.  But you get NO advantage in being early. Just don't be late (after Jan 12) for which your proposal would suffer the ultimate penalty - trashed before reading.

If you're lucky (good) enough to get a DOD Phase II SBIR (hey, they have to pass out all that money to somebody), all the components now have Phase II enhancement which matches third party money up to a modest amount.  Terms vary on money and its source.  They have now all come round to what SDIO started in 1991 and soon expanded into a free-swinging, way flexible, matching investment scheme for technologies with wagerable potential for future customers. Unfortunately, the likely outcome of this enhancement program with emphasis on government program match will be to further concentrate SBIR money in the companies that do government R&D.

The SBIR Network moved to Boulder City NV overlooking Boulder Dam and the shrinking Lake Mead.  As a measure of SBIR's philosophy it says We will maintain an office in Annapolis, Maryland in order to stay close to the US Government customer base in the Washington, DC area

Utah's governor wants $62M mostly to build new labs at the two big state universities under the Utah Science, Technology and Research (USTAR) Initiative. [SSTI, Dec 12] Which raises a question: who should build new university labs?  NSF, federal political science (pork projects), state government, private money? If something is worth doing, is it government 's role do it? And is basic research in Utah likely to produce enough Utah economic activity to justify the investment? Will top scientists flock to a state under a large religious influence just to enjoy new labs? 

If one incubator, why not two?  Troy NY wants to copy the RPI incubator by opening another. This time one nanotech company and $5M are ready to create an incubator in the middle of the city's Russell Sage College (for women).  The 35-employee company Evident Technologies started life in an Albany incubator, moved to RPI's incubator, and now will move again. [story from Troy Record, Dec 9] Evident has had at least two recent DOD Phase 1 SBIRs.

Ran into SBIR's daddy - Roland Tibbetts - at a luncheon affair. He looks ten years younger than the last time I saw him. [Dec05]

Michigan embarked on a Capital Investment Program to provide up to $114 M  for capital investments in qualified equity, mezzanine, and venture capital funds that will create or retain jobs in Michigan companies. [SSTI, Dec 5] 

The Greenwoods report a hint that DOD will end the SBIR pre-solicitation contact opportunity because DOD topic authors/TPOCs are apparently being inundated with silly schmoozing.  The policy intended to replace hours of proposal reviewing and debriefing with minutes of clarification. The first thought of a bureau does not go to making life easy for the small company world; nor do the agencies see the small high tech community as the customer even though that is the only intelligent interpretation of the existence of the program.  The agencies don't need the SBIR law and the small business community is kidding itself that they get more or better business than they would without the law. I see only two benefits of the law: 1) really small companies with no knowledge of the agency get their proposals seriously read, and 2) Phase 2 winners get a sole source justification for follow-on government business so they acquire a good reputation and be more competitive in crowding out the really small newcomers. All the rest of the arguments by the SBIR advocates ignore the raw facts of federal agency operations. The Greenwoods have two excellent suggestions: keep your call short and don't do a sales pitch. Think of your elevator message, not briefing them into submission.

VC, Hero, Devil? Today's [Dec 6] Wall Street Journal carries a fascinating front page story by Bernard Wysocki of a pseudo-VC at NIH.  Dr. Fauci is drawing his share of controversy. Some entrepreneurs who haven't been showered with money talk of a "Fauci Club" of favored companies. Others say he is overstepping his bounds by funding rival entities and pitting them against each other for government contracts. In one case, the NIH gave materials from a supplier of one company to help jump-start research at a rival. One of his biggest bets -- on a next-generation anthrax vaccine -- has yet to pay off. The most fundamental question is whether the government and Dr. Fauci should be trying to influence what drugs and vaccines the marketplace produces He uses competition, funding grants large enough to do the job, and a sense of mission to hunt for vaccines, a product shunned by Big Pharma as having too much risk and too little profit. It is in many ways an SBIR-like program with real money and real objective.  He seeks to place bets on multiple companies in the hopes of hitting the jackpot and to dole out the NIH's money in multiple rounds, using milestones to gauge progress. And just like in SBIR, the companies who don't win awards fight to undermine the award giver. Every SBIR-crat should understand Fauci's ideas and be required to defend not adopting such approaches to developing products and processes with potential. 

Panel (of Nobel laureates and high-tech CEOs) Calls for More Science Funding to Preserve U.S. Prestige. Once again.  But The panel's sweeping recommendations may face a tough reception. The congressional Government Accountability Office reported last week that little is known about the effectiveness of current federal scholarship programs totaling $2.8 billion. And some science education experts worry that the higher education recommendations could create a glut of scientists ... Still, Senator Lamar Alexander (R-TN), who had called for the panel, says its proposals could garner support from many lawmakers who are concerned about U.S. jobs. [Science, Oct 21]  A typically unasked question: How much should the taxpayer pay per job created in jobs programs? Do science education subsidies differ from farm subsidies? And where is the money for every worthwhile program to come from? Scientists are like much of the public - acting like government money comes from a deity that ignores economics. The R&D base for SBIR is likely to copy last year when the political horse trading of appropriations is done.

The politics of jobs  (not the actual wages, just the talk) is of course misplaced for political simplicity. The real objective is standard of living which is too hard to quantify for politicians' speeches. A two-earner household making $70,000 from one job has a higher standard than one making $80,000 from two full time jobs. Which reminds one of the politician who complained publicly that half his constituents were below the median wage.

New York's Center for Economic Growth  claimed a $67M economic impact. And The second oldest incubator devoted to homeland security businesses is joining six other similar incubators to create the Technology Acceleration for National Security Network. The Watervliet Innovation Center, located in the Watervliet Arsenal, the nation's oldest cannon factory is allying with San Antonio, Anniston, Colorado Springs, Harrisonburg, Annapolis, and Atlanta incubators.

Shortchanged Science. Even if NASA finds the money and the will to do the research needed to protect the human travelers, the agency’s history offers little reason for confidence. Larry Young, MIT bioengineer, longtime NASA adviser, and one-time payload specialist astronaut in  training, has this to say about those prospects: “NASA always uses research as justification for its large manned missions, but once they are under way the engineering, political, and fiscal factors take over and the science constituency is often cast aside.” [Editorial, Science, Nov 25] Of course, AAAS is an advocacy group for unlimited science money with no interest in sharing the sacrifice that will be needed to get the federal finances into sanity range.

the Government may use the item to reverse engineer its design or may provide it to a competitor to do the same. Night Vision Corp discovered to its horror that the Phase III preferences to the Phase  II awardee in the SBIR law are advisory only. The AF took the delivered prototype goggles developed by NVC into a competitive procurement for production goggles won by the Phase 2 sub-contractor.  The judge struck down all NVC's arguments about "the AF owes us". Perhaps a better procurement lawyer would have told NVC that the government has no legal or moral  duty to give Phase III to the Phase II contractor and is free to conduct an open competitive procurement.  The SBIR advocates are of course apoplectic.  The whole story by SBIR Gateway The basic rule is still that when you take the government's money, the government can do what it pleases with your technology for government purposes.

The latest political bone thrown to the SBIR advocates is a proposed Commercialization Pilot Program whereby the DOD would push Phase II projects into mainline Phase III procurements.  The results would be reported to Congress with metrics that specifically include number of small businesses assisted and number of inventions commercialized. In other words, bean counting political numbers with no emphasis on total return. No matter, the advocates will settle for any bone thrown and then start a campaign for the next bone. Read the amendment

Why agencies don't like open calls for innovation.   "According to the United States Patent Office website, Boris Volfson has recently patented a "Space vehicle propelled by the pressure of inflationary vacuum state", which is essentially an anti-gravity propulsion device.  Ah well, every government innovation manager has to deal regularly with proposed proofs that physics is wrong. 

Science, as the explanation of natural phenomena, won in Pennsylvania when the town voters threw out the supernatural school board. In Kansas, though, the state Board of Education still thinks that science includes "non-natural explanations."

Create a National Institute of Science and Engineering, like the National Institutes of Health (NIH). Funding for the NIH has quadrupled since the 1980s, from $7B to $28B. "That's why we lead in pharmaceuticals and medical technology." Funding for science has been stagnant—about $5 billion—during that period. "I'd quadruple it and concentrate on nanotechnology, broadband and energy."  Thus spoke Rahm Emmanuel, House Democrat from Chicago (and former high Clinton White Houser), on new ideas for Democrats. Unfortunately for such ideas, everybody's got one that requires big money to a pet project, multiplied by 535 Congresscritters and a big boots Executivecritter. The bill would be astronomical while at least half of them want to cut the tax revenue that would pay for it. Also unfortunately, politicians have only one effective tool for what they see as problems - money. The combination of the blunt money tool and the pork barrel attitude is what led to mediocrities like SBIR which has still to show any net economic gain to anyone except the recipients of the handouts.  For more Emmanuel ideas for Democrats, read Joe Klein's Time piece.,9565,1129493,00.html

Want an edge with MDA SBIR? Locate in Huntsville, AL. The latest list of Phase 2 winners has 22 from Huntsville area, 25 from Massachusetts, and 40 from California. Why?  Government R&D service firms, sometimes called Beltway Bandits, cluster around the flagpole where schmoozing the funding source is easier.  Do the Huntsville bureaucrats have a regional bias? Does Huntsville have as large and good an innovation base as Route 128? Will a likely move of a larger portion of MDA management to Huntsville raise the disproportionate percentage even higher.  

Innovation declined. NIST does not accept  electronic submission of proposals.  The NIST solicitation is posted on FedBizOpps at and additional information is available on the NIST SBIR web site at The topics are the typical stuff written by narrow experts, not a call for high impact innovation by entrepreneurs who could put it into a marketplace. Perhaps the wannabe leader of national innovation needs a jolt of SBIR attitude and management instead of being a bureau playing safe.

Gotta spend, as if they had endless money. .a $30.5B energy and water bill that adds $740M to President Bush's budget ...Office of Science within the Department of Energy would receive $3.63B , $170M more than the president's request. Offsetting cuts are made in fossil-energy research and nuclear-waste disposal [David Rogers,Wall Street Journal, Nov 8] Good news for SBIR junkies anyway.

Politics before honor. The U.S. State Department has barred a Cuban scientist who helped develop a low-cost vaccine for children from attending a San Jose Tech Museum of Innovation ceremony honoring technological achievement. [San Jose Mercury. Nov 8]

The Greenwoods offer this SBIR proposal tip:  The idea in SBIR is to present your innovative idea in a very conventional way. Follow the writing instructions, fill in the boxes, just swallow your presentation imagination and do what they say.  Remember the golden rule: Who has the gold makes the rules.

Want to win Army Phase 2 SBIRs? Get a lot of prior SBIR experience. The Army 2005 Phase 2 list shows remarkable concentration in what is usually called "SBIR mills". Physical Optics 11 awards, Charles River Analytics 7, Coherent Technologies 4, Intelligent Automation 4, Luna Innovations 4, MER 4, of 265 awards including six Fast Tracks. Note that six Fast Tracks is only 3% and none went to any of the SBIR mills.  Those six companies  already had over 1200 DOD SBIRs. POC may be the SBIR consuming champion now that Foster-Miller has retired from the field. Only the SBA really knows and it does not publish such embarrassing figures as totals by company.

The political arm of the SBIR mills is having an half-day session today Nov 2 on Commercialization: An SBTC Briefing on New Developments in Phase III of the SBIR Program with emphasis on preventing contract bundling. SBTC's objective is to get more government money for Phase III contracts for companies who cannot make a commercial market of the government funded technology. 8:00 a.m.  First Amendment Room, National Press Club, 529 14th Street NW (13th Floor), Washington, D.C.

Senate Introduces Bill Creating VC Program to Stimulate Investment in Small Businesses  To stimulate equity investment in America's small businesses and create jobs, the U.S. Senate introduced last week the Small Business Investment and Growth Act of 2005. The legislation creates a new venture capital program within the SBIC program administered by the SBA, according to Senator Olympia Snowe (R-ME), co-sponsor of the bill, said in a press release that the legislation will ensure that entrepreneurs have access to venture capital and credit markets so they can continue to drive America's economic growth and job creation. She also noted that recent studies have shown the SBIC program provides essential equity capital to small businesses that would otherwise not be able to obtain financing on equivalent terms. ... Under the legislation, the SBA will receive a greater share of the profits of SBICs and its authority to declare that an SBIC has defaulted on its repayment obligations will be more clearly established. [SSTI, Nov 1]

Take the king's money, do the king's business. Now that several Silicon Valley start-ups have taken the money, they're having to pay the reaper. So a company like Dust Networks, which was based in liberal ol' Berkeley, takes $7M last year from In-Q-Tel and others to develop its wireless sensor networks, and this month announced they had a DARPA subcontract for the development of technologies for urban area military operations. [Silicon Beat, Oct 27]

When politicians dictate science, government becomes entangled in its own deceptions, and eventually the social order decays in a compost of lies. Society, having abandoned the scientific method, loses its empirical referent, and truth becomes relative.  [Bruce Sterling, Wired, Jun 04]

Want an SBIR job?  University of Missouri is looking for an SBIR Specialist  to help private sector and faculty grab SBIR money. Bonus qualification: access to VC people.

While the political halls echo with debate over immigration control,  a Senate committee Thursday approved a nearly 50% increase in special visas coveted by Silicon Valley companies to hire highly skilled foreign workers and boosted application fees to help ease the federal budget deficit. [Jim Puzzanghera, San Jose Mercury, Oct 21]

DATABASE: Follow the Money The U.S. government pumped more than $111 billion into research and development (R&D) in 2003 and an estimated $121 billion in 2004. Find out how much money each agency doles out, who gets it, and what they're spending it on at RaDiUS from the RAND Corp. Users previously had to pay to see the database, but RAND made it free earlier this year.  RaDiUS compiles all nonclassified federal R&D spending dating back to 1993. You can sift through more than 600,000 individual awards or organize them by agency, program, or project. At $59 billion, the Department of Defense was the largest funder in 2003, followed by the Department of Health and Human Services and NASA. Although access is free, you'll still have to apply for a "site license" and wait for a RAND employee to call with a username and password. Also note that the URL must include "https."

The Bush administration failed for the fifth year in a row to meet congressional goals for contracting with small- and minority-owned businesses, ... House Democrats said. The administration received a grade of "D" for attempts to contract with small, disadvantaged and women-owned businesses in 2004, according to a report released by Democrats on the House Small Business Committee. [Government Executive, Oct 20]

Griffin: Three NASA Decades a Mistake  Posted by David Appell at September 29, 2005 02:14 PM in Transportation.  NASA chief Michael Griffin has drunk the Bush Kool-Aid. This week he called the last three decades of NASA effort a "mistake": Asked Tuesday whether the shuttle had been a mistake, Griffin said, "My opinion is that it was.... It was a design which was extremely aggressive and just barely possible." Asked whether the space station had been a mistake, he said, "Had the decision been mine, we would not have built the space station we're building in the orbit we're building it in. Hindsight sure is a crystal clear 20-20, isn't it?  Griffin may actually be right--who really knows?--but how wise is it to say so--to disregard the collective work of most of the organization that you're now counting on? And there's more than a whiff of attitude here--sure, we got it wrong all these years, but don't worry, we have it all figured out now. That's more than a little condescending...when actually a lot of people think they don't have it all figured out now or if that $104B price tag to go to the Moon is really worth it. Before he dismisses the last 30 years of NASA effort, let's hear Griffin articulate a convincing scientific and technological reason why we're going back to the Moon--other than that our President says so. [MIT's Technology Review, Oct 3]

Stanford University's robotic "Stanley" won DARPA's $2M Grand Challenge by driving 210-km over the desert in seven hours, And unlike last year when no one got far from the starting line, four other vehicles also got there. One of four was a New Orleans insurance company with no prior experience in robotics. [Gray story from Wall Street Journal Oct 19]  Economically, Stanford spent $500K while DARPA spent $22M out of its $3B budget for "best effort" grants and contracts that have the perverse incentive that winning cuts off the money.  Dylan Tweney [MIT Tech Review, Oct 18] suggests more such prize contests. It's not a new idea: the English Parliament offered £20,000 in the early 18th century [when the pound was the world's premier currency] for a sea clock. When an aggressive Yorkshire carpenter did it without any help from the scientific community, he took 50 years to collect the money as the appointed Longitude Board of "priests and professors" kept changing the rules. Dava Sobel’s book "Longitude" tells the story and Arnold Wesker's play is currently dramatizing the story in - where else - Greenwich, the home of longitude.

[NIST] is promised $844.5 million, nearly 60% more than the White House's request, and including $140M for ATP, which provides "seed financing" for the development of generic technologies.The White House has strongly objected to the Senate funding the ATP. But Republicans remain badly split, [David Rogers,Wall Street Journal, Sep 15]  Free-market government is like balanced budget - a pleasant abstraction. Katrina has restored caring to the Congressional agenda. Who will pay the bills? Isn't deficit finance one of the world's great inventions? A approval rating of 40% for a second term president emboldens Congress to protect itself. 

North Carolina invests in federal grant mining. It will reimburse an eligible business for up to half the costs of an SBIR/STTR Phase I proposal, max $3,000. One grant per year per company. Other states have tried such schemes in the interstate competition for free fed money. I have seen no statistics correlating the money so invested with rate of SBIR grants to the state. And certainly nothing on permanent jobs created after the SBIR money runs out. But then again, SBIR is run by the fed as a jobs program anyway for companies doing federal R&D. 

in interviews with more than a dozen current and former CIA officials, congressional aides, venture capitalists that have worked with it and executives who have benefited from it, no one disputed that what began as an experiment in transferring private-sector technology into the CIA is working as intended. The Army, NASA and other intelligence and defense agencies have, or are planning, their own "venture capital" efforts based on the In-Q-Tel model. "On a scale from one to 10, I would give it an 11," said A.B. "Buzzy" Krongard , the CIA's former No. 3 official and a former investment banker. "It's done so well even Congress is taking credit for it." [Terence O'Hara, Washington Post, Aug 15] Direct to Phase 2?  Why hassle with competition and with Phase 1 when you are the only company exploring the innovative concept? Get yourself a dish of pork. Renaissance Petroleum Technologies (Auburn, AL) got its Congressman to insert $250K in the big Energy bonanza bill to study "cold-cracking" of hydrocarbons. What is the process? The Congressman says he doesn't know either.

the House and the Senate remain far apart on funding levels for key R&D programs with little chance of resolving their differences before the October 1 start of FY 2006. Although funding for federal research would fall behind inflation in the House proposals, the Senate proposals would allow for significant increases in research spending. The Senate gains could be ephemeral, however, since the House is unlikely to accept the extra Senate dollars in final budget negotiations this fall.

The report, Tapping America's Potential: The Education for Innovation Initiative, identifies several troubling indicators that the U.S. is losing its innovative edge. For example, the percentage of students planning to pursue engineering degrees declined by one-third between 1992-2002, and funding for basic research in the physical sciences as a percentage of the gross domestic product has declined by half since 1970. [SSTI, Aug 8]

Politicians Are Politicians.   The nonpartisan Citizens Against Government Waste says the number of projects has risen 873% since the GOP captured the House in 1994. Which is why SBIR lives on. 

the key finding:  A precedent-shattering proposal to give large venture capital firms greater access to the federal government's top research and development program (R&D) for small companies is opposed by 90% of the most affected R&D companies.  About the Survey The SBTC survey  was sent to a list of 535 SBIR award winners at NIH during the past two years ... Seventy companies, representing about 13% of the sample, responded to the survey.  So, the 90% who feed at the trough don't want any more competition than the 10% who actually would do something commercial. The issue is probably moot since the government shows little sign of favoring commercializing companies anyway, with or without VC partners of any size. Congress still has the decision choice of fostering national economic gain from SBIR by changing the rules about how commercial potential is evaluated and weighted. If it wants to continue funding life-style companies doing government work for temporary jobs, it can leave SBIR alone and blather about helping the small business engine of American innovation. Good politics, dead economics. 

About $3B in tax breaks would go for renewable energy source, mostly to subsidize wind energy. It is hard for non-nuclear renewable tax credits to go to anything other than wind. The other options all cost way too much. [, Jul 28] Take money from the taxpayers, give it to wind farm builders, with a handy rake to the politicians making laws to re-distribute wealth. People doing R&D to make newer, more efficient, power sources get little from the energy bill which rewards existing businesses. Who in turn will reward the politicians with campaign contributions for re-election. 

From more than 600 entries statewide, judges have chosen five finalists for the first annual Minnesota Cup, a contest to encourage innovative business ideasArcswitch of St. Paul, which devised a method of switching and attenuating fiber-optic signals; Consumable Media of Minneapolis, inventor of a self-destructing DVD that becomes unreadable after a few play;  ERBUS of Chanhassen, maker of a mobile emergency unit that supplies power, purified water and communications in disaster areas;  Type 1 Tools of Minneapolis, a maker of educational tools that help people with diabetes manage their diet and lifestyle; PICC STAT of Fridley, a provider of specialized catheter and intravenous services.The winner will receive a $25,000 prize and a package of professional services including legal, marketing and financial advice.The winner will be announced Sept. 8.  [John Reinan, Minneapolis Star Tribune, Aug 3]

Need a strategic plan beyond the next two SBIRs? Michigan State has a road show advertised with the usual hype. 

Army gags blog-o-soldier  .. Clark was charged with violating two rules that prohibit soldiers from releasing or "encouraging widespread publication" of classified or specific information about troop movement and location, soldiers who have been attacked or hit, and military strategy, ..  The military has not specified which portions of Clark's blog broke the rules and did not respond to requests for clarification about its policy on blogs maintained by personnel.... Clark's own site, which describes him as a kindergarten teacher and former Democratic candidate for Arizona governor, is now devoid of content, ... said: "He has been asked not to comment, and is doing so. Please understand that he is worried about folks back at home smearing his name. When he is done with active duty, the story will come out."  [Ann Broache,, Aug 3] Even though the Army has been given more job than it has soldiers for, it shoots its own recruiting drives by suppressing the native liberty of its citizen soldiers that the National Command Authority has dragooned into its foreign adventures. There was a reason for a small standing Army as an foundational  national policy. 

Start-ups Pose Hurdles to University Tech Transfer   Efforts to transfer university inventions to the market continue to be a difficult proposition, with less than a third of disclosed inventions resulting in license. Start-ups garner only one in eight licenses.  In University Invention, Entrepreneurship, and Start-Ups, authors Celestine Chukumba and Richard Jensen develop and test a multi-stage game to examine the factors leading to university start-up formation. The economists posit that start-ups occur when development costs remain low due to venture capital contribution, inventor involvement and fewer opportunity costs than in an established firm. The model considers start-ups likely when the technology transfer office determines a high cost of finding a licensee. In these cases, the office shelves the disclosed inventions leaving inventors to pursue start-ups on their own.Using existing data and multivariate regression, the authors find:

bullet Older technology transfer offices successfully sign more licenses in general.
bullet Higher quality engineering faculty led to more licensing in general and start-ups, particularly.
bullet Start-ups are more likely from universities in states with larger levels of venture capital.
bullet Start-ups increase when the stock market value experiences an upswing.
bullet The size of tech transfer offices has no effect on start-ups, although larger offices sign more licenses overall.
bullet Universities with higher licensing royalties have fewer start-ups but more licenses. University start-ups decline with higher interest rates and higher rates of return for venture capital.
bullet High levels of industrial research funding and the presence of a medical school at a university have no impact on start-ups.
In the working paper circulated by the National Bureau of Economics Research, Chukumba and Jensen conclude that university innovations may be too nascent to attract venture capital, build new start-up companies, and lead to commercially viable products.University Invention, Entrepreneurship, and Start-Ups is available at This paper and more than 1,000 additional TBED-related research reports, strategic plans and other papers can be found at the Tech-based Economic Development (TBED) Resource Center, jointly developed by the Technology Administration and SSTI, at [SSTI, Aug 1]

Small Business Developing Long Distance Non-Lethals  DHS SBIR said it is seeking untethered electromuscular disruptor devices that are inexpensive, safe, lightweight and portable. Awards for stun gun technology have been granted to  Midé Technology Corporation, UHV Technologies, (SBIR big consumer) Physical Optics, and Intelligent Optical Systems .[National Defense, Aug 05]

Raising Science Walls. The paranoid, might-is-right, our-way-or-the-highway Bush administration wants ever more rules restricting foreign access to US science or US territory. One set of proposed rules would constrain interactions between US citizens and UNESCO that might well limit access to the international scientific and cultural body by US experts. The official line:  Advance consultation simply means that if UNESCO comes to us with a list of potential partners, we might offer additional names to help them broaden their horizons.  That is, we'll send you a politically safe house scientist.  Another set of rules published in the 12 July Federal Register would wall off university labs from foreign nationals even in unclassified DOD research projects  [story by Yudhijit Bhattacharjee, Science, Jul 22]  In other paranoia news: Sinophobia, the usual Congressional suspects bemoaned Chinese bidding for US assets while their constituents buy Chinese made goods at Wal-Mart and pass energy give-away and deficit financing bills that do nothing to stem the flow of dollars into Chinese coffers that have to be used to buy something American. Part of that something is US companies.

GAO Punts Again.  Assessing the Performance of the SBIR Program Remains a Challenge, says GAO's most recent report on SBIR. GAO-05-861T, Observations on the Small Business Innovation Research Program.  The report does re-hash that SBIR met its goals, which is no big deal since the goals were written so broadly and softly that merely pushing the money to qualified companies would have sufficed.  GAO treads lightly on SBIR because the story is politics, not economics nor efficiency. And Congress has passed up several chances to clarify the economic and efficiency goals in favor of mushy stories about small business in election years.  

Army SBIR Commercialization.  The Army eventually copied the SDIO idea of extending Phase 2 SBIRs when a third party would contribute matching funds. For the Army, like the Navy, commercialization means mostly more government money. The Army's list of Phase 2 extensions  shows about 125 awards with $75M from partners. Of those totals 20 partners were private entities (mostly military contractors) for something under $5M. That's about 90% government commercialization which satisfies the official definition but provides little economic fuel for the national fire of competitive innovation. The Army's program description doesn't say when the matching started for the average of about 170 Phase 2s a year. If the base is, say, five years, then about 15% of Phase 2s find matching funds and an Army interest in continuing the work. That's not a high rate considering that the Army generally funds projects of immediate interest and expected value to the Army. And $5M private funding after $900M of development work is of no consequence to US economic strength.

War Is Good Business.  Sellers of armor have been in demand like in no other war as troops in Iraq motor around in a hornet's nest. The conventional scenario of peaceful civil restoration after a decisive victory didn't come true as the war planners dreamed. And while those war planners try to recover, they order up as much armor as the system can supply and the in-country mechanics can attach to people and vehicles. Which is why Ceradyne made a pile last quarter and why the stock is 15 times what it was six months before the war started. Ceradyne is a 300-employee size company with five Phase 2 SBIRs 1999-2002.

New England Sliding. Down from second to third place in the VC volume derby on a 35% drop for the second quarter. New York and SoCal moving up. [story by Robert Weisman, Boston Globe, Jul 26]  My guess why? The residue of the computer industry that formed around DEC, and that blossomed into optical info tech, has lost the critical element of a large high tech industry like HP and Apple in Silicon Valley. Not that NYC has such things, but NYC is still the home of $$$$$ in fortunes not made in info tech. Defense companies like Raytheon do not indulge in the bleeding edge technology and are not a continuous source of high tech startups with market driven technology. Biotech is fun, and a possible future winner, but VCs have been disappointed to find how long it takes to make profits from biotech. 

$18B over two decades and $2B more of SBIR this year, says Ann Eskesen. That's a ton of taxpayers' money that warrants an accounting of at least how it did something markedly better than what would have happened if the program had never been invented. Paying for a bunch of jobs is mere welfare. One way to force serious accounting is to shift at least a portion of SBIR from autopilot to annual appropriation where it has to compete with other government demands for money.

How's the rest of SBA Performing?  (Note that SBA shouldn't get the blame for SBIR mediocrity since it makes no funding decisions.)  OMB's rating system for government programs - PART Program Assessment Rating Tool - recently rated several SBA programs: Business Information Centers results not demonstrated, SB Development Centers moderately effective, 7(a)Guaranteed Loans adequate, SB Investment Companies adequate.

Minneapolis got bids in the $15-30M range for making a municipal wireless network for residents, visitors, businesses and employees in late 2007. [Steve Alexander, Minneapolis Star Tribune, Jul 27] The public wireless revolution means to break the stranglehold of monopolistic telcos who have no incentive to create competition for their existing huge capital base. Got a new technology? Think about the power of the losers.

The Pentagon is toying with the idea of gutting two AF pet rocks - the F-35 Joint Strike Fighter and the F/A-22 - as it adapts to the national command strategy of putting terror first. Not to worry, too many local jobs would be lost for the politicians to bite any such bullets.  They will come up with another version of "you cna have everything you want, and not have to pay for it."  Unfortunately, the very idea that 5000 guys in mountain caves can threaten the US national survival is equally daft, says David Rothkopf in his new book Running The World: the Inside Story of the National Security Council and the Architects of American Power . Rothkopf offers a scare story to those who think that the world's most powerful committee that works completely in secret provides corporate memory and stability to the shifting sands of Washington politics.

we turn our backs on a proud tradition of technology innovation Vint Cerf complains [Wall Street Journal, Jul 27] of shrinkage in government R&D funding.  The U.S. is already lagging behind in R&D funding. Our total national spending on R&D is 2.7% of our GDP, and now ranks sixth in the world, in relative terms, behind Israel (4.4%), Sweden (3.8%), Finland (3.4%), Japan (3.0%) and Iceland (2.9%). The federal government's share of total national R&D spending has fallen from 66% in 1964 to 25%. Whether less government R&D is a blessing or a disaster depends on your view of where America's wealth comes from - a complex question not likely to be clarified by glib partisan-serving political debate. It's far to easy to reach for government spending as a remedy for a long range economic dilemma.

instantgames writes "According to a working paper of the National Bureau of Economic Research, rapid development of a science and technology base by populous Asian countries soon may threaten the economic position of the United States. Not only is the U.S. losing ground in high technology exports, but its very capacity to develop new technologies is declining rapidly with respect to the rest of the world. According to Richard Freeman, the paper's author, the sheer population of Asian countries may allow them to train more scientists and engineers than the U.S. while devoting a smaller share of their economy to science and technology." From the article: "The phenomenal growth of China's industrial base has been widely publicized, but Freeman focuses on what is perhaps the more important long-term indicator of a nation's prosperity - its re-investment in science and technology education. "  [, Jul 26]

Incubators Make Press for Politicians. The Appalachian Regional Commission "invested" $35M in an  Entrepreneurship Initiative from which it has made 108 grants totalling $17M for business incubation projects. A recent report says that 1,300 businesses have "graduated" and that they helped create 38000 jobs. But only 28%  of the respondents considered themselves financially self-sufficient , 20% rely on external contracts and operations-based revenues , and the balance of 52% rely on subsidization that averages 53% of these incubators' budgets.  The report also sheds light on other key issues: 30% have too little leasable space available to support the overall cost of services and facilities; 57% charge below-market rental rates; two-thirds of the incubators require tenants to graduate/exit after a predetermined time limit is reached; and 54% offer no placement or relocation assistance to graduating tenants. The one measure of economic success says that the program has led to the creation of 24,500 new jobs by companies that either have graduated from the incubators or are still residing .   A Survey of Business Incubators in Appalachia is available at:  [SSTI, Jul 25]  On balance, the politicians took credit for contributing taxpayers' money to pay people to invent jobs most of which would have no future when the subsidy stopped. Just like SBIR whose champions laud the jobs "created", which is baloney since every small business job in SBIR was shifted from other small businesses. [The percent of DOD business going to small companies has not substantially changed over SBIR's life.]

If you're an SBIR company looking for a partner with an eye on the future try one of the MAGNIFICENT SEVEN companies that  invest in the future, have healthy ROE with market cap over $500 million, and stock over $5, and invest more than average in R&D:  Affymetrix, Biosite Diagnostics; Dassault Systemes;  Energy Conversion Devices ; Kos Pharmaceuticals; Maxim Integrated Products; Silicon Image.  [Michael Kaye,Business Week, Jul 22]  If you're an SBIR company just looking for government R&D work, there are lots more government agencies looking for you that looking for serious innovators.


The latest congressional budget plans would leave most nondefense R&D programs with flat or declining budgets for more than a decade, and next year even biomedical and homeland security research would decline from historical highs. Defense R&D would continue to set new records, but defense funding of basic and applied research would fall behind. [AAAS, Jul 20] Full analysis: Unless you're an R&D policy wonk, you won't care. If you are a hoping SBIR proposer, your chances are not going to get any better because the agencies will not have more SBIR to pass around.  On the other hand, unless you are right on the cut line for acceptance, more or less money won't matter either. Your problem isn't the budget, it's all those other companies who propose better stuff or have learned to schmooze the agency tech people. One of the reasons the SBIR mills become mills is that they learn to speak the agency's language and know the agency people.


Oregon has a new scheme for technology investment  in university commercialization - state tax credit for investors - that will flow jobs and millions in state tax revenue.  Eventually. One home-cooking catch:  grant applicants must remain within the state for at least five years following receipt of the grant, or repay the grant plus interest   Universities that license the inventions are required to return 20 percent of the royalty and licensing fees to the state treasury until the tax credit is recaptured. [SSTI, Jul 18]

NASA says it will fund 300 Phase 1 SBIRs from its current solicitation that closes in Sept.. Max amount $70K which will probably close to the average award since in government a ceiling becomes a floor. When the agency signals no flexibility, proposers go for the most possible money with earnest pleadings how $70K is barely enough. And the political advocates of SBIR, who represent mostly the SBIR mills, holler that award amounts should be vastly increased. Their pleadings never discuss the effect of more for some at the expense of having fewer awards to new and untried companies. 

Instead of grants, how about prizes? Frank Wolf (R-Virginia) suggests that NSF institute prizes for the best research in various fields. Think of the taxpayer money and the trees saved by not administering grants and contracts. DARPA's doing it with desert robot vehicles. NASA has prizes: for getting oxygen from moon rocks , tether strength, and for beaming power. 

Invent a Plant. On the site of a former hat factory in Danbury, a stand of genetically altered cottonwood trees suck mercury from the contaminated soil.  in California, transgenic Indian mustard plants soak up dangerously high selenium deposits caused by irrigation. ... After several years of growth, the trees will be cut down and incinerated. ... Applied PhytoGenetics Inc., the biotechnology company that Meagher [the Danbury tree guy] helped to launch, has planted its modified trees at a polluted site in Alabama   [AP, Jul 4] Which will merely move the mercury from Danbury's ground to the air. Think of a way to capture the mercury and hold it in a safe place, or better still, recycle it for whatever industrial processes use it at a cost less than mining it. The basic problem is conservation of elements which don't transform into any other element outside nuclear reactions.  

No fury like a department scorned. The military adopted the QRS-11 gyrochip, originally conceived of as a commercial product, for use in a missile system primarily because the technology was so affordable.  Good news and bad: DOD adopts a commercial item and then declares it military critical technology that requires a license to export. When Boeing sold 737s to China with the gyro installed, the State Department objected but the White House OK'ed the deal,  Now State wants to sue Boeing for dissing it after getting a legal opinion that State had no legal jurisdiction. [story from Seattle Times, July 6] 

So slow and arduous that it's too soon to judge whether DOD's Technology Transition programs are doing any good, says GAO's review. Then again, there's no technology pull quite like a hot war. . In the absence of Afghanistan and Iraq in the last three years, the process would no doubt have been so even slower and arduouser. The GAO report focused on military transition for which it recommends more metrics. 

SSTI says it has a compilation of the FY 2003 SBIR proposal and award statistics by state, tech-based economic development programs - specifically SBIR assistance and outreach efforts - now have the requisite data to evaluate conversion trends for most agencies during the four-year period 2001-2004.  That's good political stuff but no useful measure for any future proposer. It is more a measure of how well the agencies clarify what they are looking for. A low hit rate means a fuzzy agency message. 

The Spindle City is home to more than 100 mills. In their heyday, the mills employed more than 30,000 locals and led the textile industry in the early 1900s until the Great Depression left the mills vacant and ravaged the city’s main source of income. Now, a century later, it plans to re-emerge as a hotbed of - you guessed it - biotech. Just like seemingly thousands of other US cities. What does Fall River MA have as a competitive advantage? A world class university or two, a world class industrial company or two in biology, a mobile pool of specialized technical workers???? “Everyone and their grandma want this industry,” said Tanya Shnaydman, an industry development analyst for the Massachusetts Biotechnology Council. [story by Patricia Resende, Mass High Tech, Jun 27]

The Center for Democracy and Technology has created an online database of Congressional Research Service reports that anyone with an Internet connection can now tap free of charge.

The Iowa Way to Treat You (if we treat you, which we may not do at all). $500 million over 10 years to support tech-based economic development and other economic development initiatives with the Grow Iowa Values Fund. Universities will receive $5 million per year for capacity-building infrastructure in areas related to technology commercialization, entrepreneurship and business growth, and $7 million will support community college training and retraining programs.  We shall see if the legislature can keep putting up $50M a year with few hard results to sell at election and budget times. [Iowa commentary by Meredith Wilson in the delightful Music Man]

Texas sees the accountability problem as In addition to the $100 million for ETF, the legislature also approved $180 million to replenish the governor's Enterprise Fund, which has been criticized for its lack of accountability and structure. [SSTI, Jun 13]  But then Texas 20th century prosperity was built on the accounting shenanigans of the oil discovery and extraction industry. 

NASA's Dream Machine. When you have $4 million for a space mission that would cost NASA more like $60 million, ... hire some of the underemployed, bargain-basement Russians; use castoffs. For your rocket, you try an old ICBM; then you cross your fingers. ... If all goes as planned, that ICBM will blast out of a Russian nuclear sub deep in the Barents Sea on Tuesday with a payload out of science fiction: a solar sail called Cosmos 1. [Sharon Begley, WSJ, Jun 17] Good stolid NASA, an expensive agency in a rich society. Doing things the NASA way means solid reliability from conservative engineering and multiple redundancy which won't work if the object is a commercial venture of any kind. Actually, NASA has an eight year old  small scale alternative called NASA Institute for Advanced Concepts where the technology exploration decisions are made outside NASA but with a little NASA money. With an SBIR structure of Phase 1 and Phase 2 it explores ideas too wild for the NASA-crats. The latest crop funded 12 Phase 1s with titles like Lorentz-Actuated Orbits: Electrodynamic Propulsion without a Tether. What the website does not seem to address is the classic SBIR problem: how will technical success move forward into real life? Phase III and beyond. The seven person rotating term science council has a former director of BMDO and is chaired by a science fiction museum curator. 

About 90 Washington area companies showed up at an SBA hearing to plead for a favorable SBA definition of small business. The VC supported companies also came to argue that VC control does not automatically make them big businesses as envisioned by the SBIR program. Existing SBIR beneficiaries want to exclude competition from real innovators. It's controversial because America's business size not only spans the entire spectrum from one to hundreds of thousands, many company's size change over a relatively wide range as business fluctuates. Business employment has also become less well defined as more work is outsourced both domestically and internationally and businesses reduce their supply of health and pension benefits. The usual argument ensued and the question will ultimately be settled by the Congress as the political matter it is. 

unless one is willing to assume large spillovers, the inclusion of R&D in macroeconomic models will have little effect on economic forecasts or policy simulations.  The Congressional Budget Office finds that the benefits of adding R&D to macroeconomic models probably do not exceed the costs of doing so. Note that they do not argue with the idea that R&D feeds productivity, only that the data are too diffuse and uncertain to be useful in projecting future economic growth.  

Hide It in "National Security". The controversy dates to 1997, when the Pentagon conducted what it said was a successful test of an infrared missile sensor over the Pacific Ocean. A team including Lincoln Lab scientists later evaluated the results and deemed them ''basically sound."  But [Theodore] Postol, known for work exposing problems with the Army's claims about the Patriot missile during the Persian Gulf War, did an analysis and concluded the tests were so flawed that the Lincoln Lab scientists could not have believed the data they evaluated were valid. Government reports later said important elements of the test failed, but they did not address Postol's allegations. In early 2003, MIT concluded that a full investigation of Postol's allegations was warranted. But then the Missile Defense Agency classified all the information relating to the allegations -- including MIT's own initial inquiry -- and refused to grant ''need to know" status to MIT investigators, even those with the appropriate security clearance.  [Marcella Bombardieri, Boston Globe, Jun 18]  If three prominent independent scientists and MIT cannot find a truth, think what a small SBIR company couldn't do if and when a dispute arises about data that could be embarrassing. Picture the FBI knocking on (or knocking down) your door and walking off with what you think are your data. Want an investigation? By whom?  The king's lawyers investigating the king's men doing the king's business?  Oh yes, remember that SBIR money is free. 

A Prime Bright Spot. Boeing, Raytheon, Lockheed, and ATK all made speech about how their DOD prime companies have discovered SBIR although they say they are still new to it. The most enthusiastic talk came from Raytheon Missile Systems Division who describes itself as a high tech company. ATK should have the best inside advice on how SBIR works because the company includes Mission Research which was an SBIR mill. In principle, SBIR might benefit most if DOD and the primes cooperated on managing SBIR since the primes will be doing most of the buying of the technology the small companies have to offer. The Army does NOT buy what it thinks are the best (or most politically favored) fourth tier components and then hand them over to Raytheon to insert in missiles being developed. That would be the ticket to absolve Raytheon of responsibility for system reliability. But cooperation is easier said than done in a competitive procurement environment where Raytheon competes with Boeing and others for DOD business. The names of the company speakers:  Boeing - Richard Hendel; Raytheon - John Waszczak; ATK - Earle Rudolph; Lockheed - Mario Ramirez. 


OnPoint Technologies, joined by Intel Capital and existing angels, put at least $9M (says LA Times, Oct 25, 04) into Zinc Matrix Power for portable rechargeable alkaline zinc based batteries. OnPoint is the Army's In-Q-Tel (why should CIA get all the press?) as a VC with Army funds in an experiment. The Army says it is limiting its two year old experiment to soldier portable power. But if the scheme proves a better source of new technology than its conventional R&D or its bureaucratic SBIR, maybe the Army will expand the experiment. The arrangement has tentacles in that the Army contracted MILCOM Technologies to manage OnPoint with an initial endowment of $25M.  OnPoint's website shows Army investments in A123 Systems, PowerGenix Systems , UltraCell , POWERPRECISE Solutions (now under contract to deliver 10,000 battery packs), and Integrated Fuel Cell Technologies. An Army spokesman this week said there was only currently only one active investment. Matt Marshall in the San Jose Mercury News Jun 10 reports that OnPoint participated in a venture in Nanosolarwhich includes a Japanese corporate investor).  None of the companies show up in the Army's list of SBIRs which suggests either (or both) the Army SBIR isn't venture oriented or the VC's don't think like the Army.  The Army predictably had a lot of conventional objections to a VC project. But not all private sector actors think it is a good idea that government wallow into private equity, e.g.  Barry Ashby - Washington Editor of Industrial Heating  Meanwhile, the Navy seems to be still studying the matter as directed by Congress when in 2002 it authorized the Army's project. 

A bright SBIR spot appeared at the NAS hoedown this week. Richard McNamara, the big boss of the $6B a year Navy submarine development and procurement told how he has come to believe in SBIR as a source of new solutions to his old problems.  Not for him the lemonade approach to SBIR. An opportunity, not a tax. He claims 15 great companies in his stable on whom he has showered most of $860M in Phase 3 awards, a number than will probably cross the $1B mark this year. Don't use SBIR to solve today's problems, use it solve tomorrow's problems, he says. He even likes SBIR so much that he goes hunting Phase 1s in other agencies to adopt as potential solutions for his problems. Thus can an agency to go directly to Phase 2. Although McNamara's approach is ultimately selfish, and does little for national economic gain (since no more money gets spent or invested than would have been spent anyway), it at least gets a few new companies into Pentagon procurement and introduces the prime contractors and their suppliers to competition of ideas, one of the SBIR law's stated objectives. A smart company would respond to such success by pushing more such business into that division; not so a Navy that believes in "fair" allocation of SBIR funding. 

Showing the richest in a country says little about the average condition. And showing the "best practices" of SBIR in the agencies also says little about measures like ROI or a net gain over not having the program at all.  The ongoing study mandated by the 2000 re-authorization has had two day-long conferences where the "best practices" are showcased. The second conference by and at the NAS on June 14 showcased Phase III. It was a typical bureau show that emphasized process rather than accounting. NAS does have a ticklish problem in being required to "evaluate" SBIR without endangering the political environment that wants a favorable report so that the handout to small business can continue. Nevertheless, there were some interesting bureau approaches that could foretell a better SBIR at least for those companies who do stuff that only a government could love. 

If Only We Had More Money.  Officials at the Department of Energy are testing the waters for what some are calling a "Manhattan Project" for solar energy. Despite decades of progress in solar cells and rising gas prices, electricity produced by the devices still costs up to 10 times as much as that produced by fossil fuels. DOE currently spends $10 - $15 M a year on basic solar energy research, such as efforts to discover novel semiconductors that harvest sunlight more efficiently. If DOE officials get the go-ahead from congressional appropriators, that figure could rise as high as $50 M a year,  [Science, Jun 3]  And who will print the new money? Hey, every government official has a great vision for what could be done with more money. 

The reason outsourcing has become such a hot political issue is that all those skilled workers have suddenly found out that being educated and skilled in the global economy is no protection if someone can do your job for $10 an hour while you require $80.  [Tom Friedman, New York Times] By the way, the same economics rules R&D. Private R&D sponsors have the option of seeking the most efficient source, and any marked improvements in foreign R&D efficiency should create a drop in private domestic funding and the great jobs that go with it. Those firms and individuals relying of government funding will be temporarily insulated from the winds of change, but the competition will increase for that honey pot as more R&D do-ers hit the bread line. And the more the government continues funding incremental and purely military or space technology, the less spillover of government R&D into the competitive marketplace of American goods and services. 

Bleeding Money.  Surgeon Steven Gould has spent the last quarter of a century developing a blood substitute that might be as safe and effective as O negative, the universal donor type. Chances are he'll never find out because he can never seem to get enough human subjects to prove a clinical benefit. Northfield Laboratories, the company he cofounded in 1985, has posted $140M in cumulative losses without selling a drop of the stuff. Where did he get the money? From investors who believed that approval from the FDA was just around the corner. [Evan Hessel, Forbes, Jun 6,05]  After an Army grant in 1979 (pre-SBIR), DOD abandoned it in 1984 in favor of a big firm's ideas on artificial blood. The trouble is that clinical trials don't prove any advantage that doesn't harm too many subjects. The military still wants long shelf life blood that would get the wounded from the battle to a sophisticated hospital. 

A New Critical Criterion.   SBA has floated a proposal to modify the SBIR Policy Directive to require each agency to give priority in the SBIR program to manufacturing-related R&D. The public can comment on RIN 3245-AF21 at The Federal eRulemaking portal: or by e-mail at IF the mission agencies take the idea seriously (they can find a way not to if they choose), more topics would have real commercial potential. Full info, which applies to agencies,  in Federal Register

Let Slip the Dogs of Science. President Bush, the darling of the dark-side conservatives, condemns science that creates clones. This time Korean science. He also promises to veto (it would be his first) a Republican bill that lets slip the dogs of US stem-cell science. The  majority of the Congress doesn't want to be accused of losing US science on a cutting edge issue to foreign competitors, while the members representing the minority hyper-religious Bible belt have to sound like 19th century opponents of Darwin. The ugly fact of globalization is that they cannot have their religious purity and maintain the US lead in the sciences. What can be done will be done, if not here, then elsewhere. 

If Goliath  Didn't Have It, We Don't Need It Either. From satellites and destroyers to infantry cannons and armored vehicles, the House committee opted for established programs over riskier, high-tech initiatives championed by the Pentagon. Some of the largest cuts are aimed at the Army's Future Combat System, ... also sharply curtailed the Air Force's two highest-priority satellite-development programs, cutting roughly half of the combined $1.1B request and requiring a whole new plan for both. [Andy Pasztor, Wall Street Journal, May 19] No women near combat neither. The same conservative Republicans, who now want to kill the time-tested filibuster that served them so well when they were called conservative Democrats, want an Army of men with swords and shields (or at least no newer equipment than they already have).  

$1M for Innovation Talk.  Representative Frank Wolf (R-VA), chair of an appropriations panel on several science agencies, appropriated $1M for a conference - the Innovation Summit - on what ails US innovation and technical competitiveness.  Stand by for blather. 

Space superiority ... is our destiny, ... our vision for the future,  sayeth the Air Force in its umpteenth try to weaponize space.  With no Russians to counter with weaponization of their own, the USAF wants to establish a dominance. US policy has been that our doing it would unleash another ugly expensive arms race with unknown consequences. But then, the people who gave us Iraq have a way with friendly assumptions. Nor is the USAF responsible for the national financial sanity. 

Hush Puppies and Venture Dreams.  The Southern Growth Policies Board cooked up a a multi-state task force - VentureSouth - to attract more VC money to Dixie. Just as soon as they stop fighting the Civil War and the lights of bio-science. They cannot have a religion-dominated system and get moneyed people to believe it is a stable economic environment conducive to science-based business. Why would a bio-investor role dice with unpredictable laws? Why would world-class scientists live in a place where religion trumps science? For information on who's in and how to join 

This change, while occasionally discomforting, is very healthy, said DARPA's Director as he explained a shift from computing research to other areas while NOT reducing the total university research funding as he claims that basic research funding has more than tripled, from $55M in 1999 to $170M in 2005. But David Patterson, president of the Association for Computing Machinery, counters that DARPA has essentially pulled out of funding long-term computing research at US universities, leaving a significant gap in the federal research portfolio that no other agency has yet stepped forward to fill. [facts and quotes from MIT Tech Review, May 16] A rational government observer could note that government programs should only be funding R&D where there is market failure such as research too risky for private sources. But the huge rewards to info-tech in the past two decades suggests that private firms like Microsoft have stepped up to basic research in computing. 

Cut Everything and Nothing. "If we're seeing DARPA move away from basic, long-term research, then that creates a void. We've got to have someone fill that void,"  said Rep. Sherwood Boehlert ... "Had DARPA done this during the Vietnam War, I don't know if we'd have an Internet," said Patterson. As always, Congress is for cutting the budget as long as no program suffers. Today May 12, the House Science Committee is to hold a hearing to ponder whether NSF should fill the hole left by DARPA's shift to more applied work. 

SBA Takes to the Streets with a series of public hearings in June across the country on small business size standards. Seattle to LA via Portland ME. Pre-register in advance with SBA for your turn to speak, only pray make it more than a simple plea for a monopoly on a political handout. Congress, if it has any economic brain, is torn between plain pandering and an economy slowly leaking jobs to lower cost and technically competitive foreign entrepots. 

An SBIR Blog. The Zyn SBIR Gateway  will be opening the SBIR BLOG in late May for Questions & Answers on items of interest to the SBIR/STTR community. Users will be allowed to post questions and comments. Ann Eskesen's SBIR blog "I Have an SBIR Question" of a decade ago will now be tried by a new player. Blogs are vogue talk shops with no editor to enforce consistency and fact. 

If you ever wonder how so many SBIR companies win lots of awards over a long time when it is absurd to presume that they could be that fertile with really innovative ideas. They got to be SBIR mills for a reason.  "you don't go to Brussels looking for money for your research. You go there to help the European Commission solve a problem that they have identified." It's not enough, say, to show that you're an expert in detecting low-level toxic compounds in water, McCarthy explains; you have to know the politics, economics, and business of water quality and show how your research will result in the prototype of a new sensor that Europe needs to clean up its water. [Martin Enserink, Science, Apr 15] 

TOPEKA, KS. Alarmed by proposals to change how evolution is taught, scientists and teachers are mobilizing to fight back, asserting that educational standards are being threatened by what they consider a stealth campaign to return creationism to public schools. [Peter Slevin, Washington Post, May 5] Will they also have "intelligent" chemical reactions and orbital mechanics? If such states want high tech growth, why do they think that high value scientists would locate in such an anti-intellectual climate?

Oklahoma, North Dakota, Ohio, Rhode Island are four among the fifty who try to create good jobs by directly investing (spending) in R&D and centers of excellence and the like. [SSTI, May 2]  If they all do it, none will increase its competitive advantage and the only winners are the consultants. They might all take a national perspective and provide for the basics that make good business climates - secular education, secure communities, honest taxes, etc.  The states can learn from the experience of SBIR that government direct investment in technology produces jobs that last only as long as the government handout. If it were otherwise, SBIR would be pushing a report that great economic gains resulted from spending a billion a year.  

Don't Cut My Department. Part of the problem, [SECENERGY Bodman] said has been a decade-long slump in funding for the Energy Department's Office of Science, which finances the work of 18,000 researchers at government, university and industrial labs each year. This year the Bush administration recommended that the office's funding be cut to $3.46 billion from $3.6 billion. Mr. Bodman, a former professor of chemical engineering at the Massachusetts Institute of Technology, said he understands the budget required "tough choices," but he thinks the issue should be re-examined. [John Filaka, Wall Street Journal, May 2]  Maybe the professor and science lover doesn't quite get what the establishment wants from Energy: more control over fuels extraction, less inconvenient competition from abroad, lower taxes, less government (except for tax breaks). 

What are Your Odds? Hard to tell since it depends mostly on where you stand in competition with other companies in your field who also propose SBIR.  The very best companies don't need government handouts and the ensuing entanglements with federal practices.  Although proposal stats won't help you know, For FY04, SSTI has aggregated Phase I award, proposal and award-to-proposal conversion percentages for all 50 states and the District of Columbia for 10 of the 11 participating agencies. (The Commerce Department's National Oceanic and Atmospheric Administration refused to provide proposal statistics.) The table is available at:  Such stats are useful for political and bureaucratic purposes only. 

After gobbling up 57% of government R&D in 2005, DOD may well get yet more in 2006. Homeland Security will get as much as it can absorb but focused on fixes next week. MIT Tech Review furnishes some stats: R&D spending will be about 2.6% of GDP; high tech exports will be 32% of all manufactured exports; 25% of the US will have cable TV; half the country uses the Internet and have mobile phones. 

A half-century ago, we could count on the private sector to finance crown jewels like Bell Labs and do a great deal of the basic research that made America the world’s leader. No more. To be sure, Silicon Valley still steps up to the plate, and our pharmaceutical industry does nearly all the cutting-edge drug research for the world. But much of the information-technology and drug research has been heavily subsidized by the federal government. And other heavy-handed government policies may drain pharmaceutical company revenues enough to cut their research and development.  The foolish fiscal policies that keep big entitlements off the table, won’t consider revenues along with spending, and have turned the one-sixth of the budget that is discretionary into a vicious, zero-sum game, are truly eating our seed corn in this critical area. Somebody needs to get the White House to wake up, and Congress to understand what it is mindlessly doing.  [Norman J. Ornstein, AEI, Apr 20] It's a man-bites-dog story when AEI advocates more government spending on other than defense.  

If it's good for me, it must be good for the nation?  Do tax credits pave the way for more investment in R&D and equity investments in new enterprises? Or, do they reward companies and venture capitalists for investments they would have made anyway?   For tax credits, say SBIR.

Everybody's got a great federal budget idea: cut somebody else. Former SECDEF Bill Perry and DEPSECDEF John Deutch want to protect DOD early technology funding. So they say in a New York Times op-ed piece Apr 13. Their problem is that the green eye-shaders want to see concrete measures of effectiveness and correlation between funding and results, which is not reasonable for early funding.  Ya just gotta have faith that such work will invent the future! How much is enough? No one knows, but more is usually better in the right hands (which is another question about DOD's management of early technology). 

some hospitals are now pushing to cut costs in an unusual way ... gain-sharing, a practice that permits hospitals to financially reward doctors who collaborate in efforts to lower costs. As part of these efforts, some hospitals are trying to limit the number of medical devices they use for certain procedures ... Despite concern about collusion, HHS has OK'd Four of the agreements cover devices used in cardiac surgery and in catheterization labs, including popular implantable defibrillators, pacemakers, vascular closure devices and heart stents  [Janet Moore, Minneapolis Star Tribune, Apr 4] There never was a free lunch: lower health costs mean lower sales of medical gadgets, and then less R&D money floating around for new procedures and gizmos. 

Why so much coastal SBIR?   a preliminary list of the universities receiving the most patents in 2004. The top three are the University of California, 424 patents; the California Institute of Technology, 135 patents, and the Massachusetts Institute of Technology, 132 patents.  [Minneapolis Star Tribune, Apr 4]  The kind of people who do competitive innovation cluster around, and become part of, centers of excellence. And as long as SBIR is merit-based, whatever the criteria (scientific or sci-commerce combined) the government will find companies in these centers to have the best ideas, the best people, and the best links to whatever tools they need.  If the flyover states want a bigger share of the pie, they will have to convince their senators to convert SBIR to yet another pork-barrel.

The government will pretend to be vitally interested in Beyond Phase II: Ready for Transition,  by sponsoring an invitation-only conference in San Diego, July 11-14  of  scientists, engineers, and technology decision makers.   Info The core problem is that the mission agencies that control 75% of SBIR money won't tilt their funding to market potential projects.  They prefer to spend their money on their work and then blame the company for lack of commercialization. Such conferences are little more than theater to show Congress some defensible activity in lieu of accountability and economic performance measures.  But then, living in Washington gives one a jaded view of political theater. 

Relevance, Home Cooking, and Secrecy, Again. [DARPA] which has long underwritten open-ended "blue sky" research by the nation's best computer scientists - is sharply cutting such spending at universities, researchers say, in favor of financing more classified work and narrowly defined projects that promise a more immediate payoff. ... Many grants also limit the use of graduate students to those who hold American citizenship, a rule that hits hard in computer science, where many researchers are foreign. ... [Director Tether]  testifying that secrecy had become more essential for a significant part of the agency's work. [John Markoff, NY Times, Apr 2] Relevance goes in cycles in DOD; attempts at secrecy for unclassified research  usually lose when Freedom of Information is invoked. 

The People Speak.  best new blog; D.C.-based Wonkette ( got the nod for best political blog (that makes it official: politics is basically snarky gossip); while Gizmodo ( took top honors for technology writing.  Web log of the year went to Boing Boing (, a tech-savvy site about "wonderful things" jointly written by several people. Best "meme," or new idea, about Web logs went to Flickr ( for pioneering a photo-tagging system that makes image-sharing more social. Winners were chosen through public voting at the official Bloggies site (  [Leslie Walker, Washington Post, Mar 20]

Bush's ambitious strategy for space exploration is forcing wrenching changes at NASA, putting thousands of jobs at risk, threatening closure of facilities across the country and sharply altering the way the agency does business.  [Guy Gugliotta, Washington Post, Mar 16]  Yeah, so what's new?  Since there is no national consensus on NASA's mission, no one should be surprised that its organization will be political. Bush has a pie-in-the-sky idea of human exploration of space. But for what objective that merits national deficit spending? Glory? Commercial spillover? Advancing science? Bet that Tom Delay's Houston and Republican swing state Florida lose few jobs as the vested interests battle over money.  Don't bet either that the politicians won't just kick the can down the road so they don't have to cut any jobs - Washington's favorite pastime. After all, there's always an election this year or next. 

Minnesota has a new SBIR gathering program.  Goodbye, MPI; Hello, Department of Employment and Economic Development (DEED) within which Betsy Lulfs will handle.  Pat Dillon, who had been the Minnesota's SBIR person and then Director of MPI (which the state starved for the last two years), is the new facilitator for the Defense Alliance of Minnesota (DAM).which will help gather  defense business. [story from SSTI, Mar 14]  States may have recognized by now that most of the SBIR money goes to companies and projects that have little to offer the state except paying for temporary jobs. 

Everything Matters. Ohio has had a long tradition of providing tax breaks to ailing big industries, which in turn puts a greater burden on smaller start-up companies that could have greater growth potential. The state also has the highest taxes on business inventories and equipment in the nation, which is especially hard on smaller companies because they often end up holding inventory for bigger companies that want just-in-time delivery. ... The state can build on its inherent strengths, including its Midwest location. Shipping, mainly over highways and through ports on Lake Erie, is booming because the state is centrally positioned in terms of trucking goods to the Northeast and Southeast. To attract drivers, trucking companies are raising wages. Logistics companies are sprouting up. Northeast Ohio has top universities and health-care facilities, notably the Cleveland Clinic.  [Clare Ansberry, Wall Street Journal, Mar 14]  If Ohio, a microcosm of America, is unhealthy, how is America healthy? Should we export day-traders and raise subsidies for cotton while undermining national science teaching with creationism in Kansas?  If the politicians slant government policy toward the red states, the loss of production from the blue states will undermine the national wealth creation. 

NASA's New Chief. Mike Griffin had his hands on SBIR and on VC money before he finally ended up with nomination for NASA Director. At SDIO he did not micromanage SBIR from his technology chief spot; he let Dwight Duston and me interpret the law and devise the investment strategy. Although in those days it was a lot easier for SDI managers to ignore SBIR: the take was only 1.25%, everybody in SDI had plenty of money for their pet rocks, and the SDI Director Jim Abrahamson believed that spin off was part of SDI's political attraction. Although he left for greener pastures before the investment starting paying off in the early 90s, he should get some substantial credit. As president of In-Q-Tel recently he saw how hard it is to push new technology onto a conservative bureau (CIA) even when the bureau provided the investment money. I wonder how the bureau would have responded if every branch chief had some shares of the stock in the companies where the technology worked as intended. He will have his hands full trying to get to space beyond orbit when the nation cannot even afford its normal government programs at a tax level the populace will support. 
The general keeps tripping over the welcome mat in his office on his way to review the new technology. Or so it seems every time a missile defense test fails to get started because some "low tech" piece malfunctions. Now the AF general appoints a Navy admiral to overcome Murphy's law and to ride herd on test prep. Says the general, "The hard things about missile defense we are accomplishing, The easy things are what we're having trouble with." . Rear Adm. Kathleen Paige formerly led a Navy ship-based anti-ballistic missile system that knocked down five out of six. Maybe she's luckier than AF generals. Unfortunately, the failure of the low-tech stuff prevents learning much about the high-tech stuff which should be much more likely to fail under stress. [facts from Bradley Graham, Washington Post, Mar 11] Meanwhile the White House must be fuming, "Can't anyone over there count down?" as its wager looks sick that it could install the untested system and bet on pre-planned product improvements to make a political showpiece into a reliable defense. 

USAF apparently ended its internal struggle by releasing the frozen $175M of SBIR money  When questioned by SBIR Gateway, the Air Force offered no reason for withholding half the SBIR funding. Let's guess a turf battle. SBIR is one program where the agencies get no sympathy from their Congressional oversight committees since the funding is a matter of politics, not policy. 

Big thinkers of Minnesota, ... The governor wants to know if you're cooking up the next Medtronic. Gov.Pawlenty announced the first annual Minnesota Cup, a competition for breakthrough business ideas. Sponsored by the University of Minnesota and backed by a roster of business leaders, the contest will award $25,000 in seed money plus free professional services to the idea judged most original and commercially viable. ... open to all Minnesotans -- students, tinkerers, small-business owners and corporate cubicle-dwellers. Applications will be accepted online through May 6 at   [John Reinan, Minneapolis Star Tribune, Mar 10] That's the sort of thing that SBIR might have become if the innovation-phobic agencies had not been kept from degrading it into mostly routine R&D support work. 

DOD Can Move Fast.  could DARPA's famous brainiacs concoct an inexpensive system to spot incoming bullets instantly and pinpoint where they came from? If the system saved just one life, it would be worth it, ... In 60 days? And deliver 50 working units?  .. BBN and DARPA inked a rush contract on Nov 17 and 40 units were delivered to Iraq in early March. First use uncovered the usual glitches from real world conditions, a redesign, and new Boomerangs on the way in January.  [story by John Carey, Business Week, Feb 14]  The bureaucracy of contracting applies only when the department can afford to wait until a proper contract is agreed. When bullets are flying, speed trumps formality. 

Paranoia. And we would have gotten away with it too, if it hadn't been for you meddling VCs... Of the more than 20 amicus briefs filed in support of peer-to-peer software vendors facing a U.S. Supreme Court showdown with the movie industry later this month, there are quite a few that stand out, but this was the one that really caught my eye. Penned by the National Venture Capital Association, it really cuts to the quick of the whole sordid debacle and shows the entertainment industry's suit for what it really is: an effort to hamstring innovation. "Grokster and StreamCast are just stalking horses for the real targets of the motion picture studios and the recording companies," the association explained in its brief. "They want to force fundamental, and hugely expensive, changes in the software and hardware that constitutes the Internet, by imposing an obligation on providers to design and engineer their systems to block unauthorized file sharing. Such an open-ended standard of liability would be a proverbial Pandora's box." Amen. [, Mar 2]

Tang Redux.  Simply Out of This World.  Funded by the NASA, the Space Alliance Technology Outreach Program facilitates use of U.S. outer-space research by private industry back here on planet Earth. Among the claimed tech-transfer successes that the program lists on its Web site: quick-drying adhesives to make life rafts; filtering of water to clean paintbrushes; a cooling system for boats; a technique to reduce mildew; development of nose filters; a gizmo to trim and light a wax candle; and a better way to ship aquarium fish.   [Tatania Serafin, Forbes, Feb 28] 

Bullets and Bombs.  Federal tech spending is soaring, but military and Homeland Security projects are still taking up much of the money — bad news for some tech firms. Projects that can have a short-term impact on anti-terrorism efforts or the war in Iraq are taking precedence over more traditional initiatives, such as e-government and infrastructure upgrades, some tech executives say. “The spending is focused on bullets and bombs,” says Tim Wudi, chief marketing officer for security firm Saflink.  [Michelle Kessler, USA Today, Feb 28] Not surprising that a free-market authoritarian government favors spending on "national security". 

Another Arrow Thru George's Valentine.  MDA said that since there was no trouble with the fuel injection, the failure of the car to start was no cause for alarm. Preliminary indications pointed to a problem with the missile's ground support equipment, rather than the missile itself, which was good news for the program, said Rick Lehner, another spokesman for the agency. "There is no indication that there is anything wrong with the actual interceptor," said Lehner. MDA's boss also noted that even though four of nine tests failed,  the system could offer some limited capability to protect against a ballistic missile attack.  And maybe the North Korean claim to nuclear warheads well matches the US maybe ability to knock down a maybe North Korean missile.  Perchance we will never find out the whole truth. 

For those interested in technology-based economic development, you'll be hard-pressed to find any good news in the President's Budget Request for FY 2006 unless, that is, you're hoping to go to Mars or heavily involved in homeland security.... What is striking about this year's budget request, though, are two general themes: 1) cutting community and economic development spending, and 2) the lack of any type of strategic response toward building tech-based economies across the United States. [SSTI, Feb 14] It's not surprising that a business-supported president disdains federal spending for private economic development. And the idea that direct government support will make better companies has a lot of support from companies and state governments who get the money. And since politicians are not good at solutions other than handing out money, guess what they favor as policy. And since the politicians don't pay the money, they only spend it, they have little incentive to say no. 

Start-ups as Job Engines. Just not US jobs. Nearly 40% of start-ups in a new USA TODAY study employ engineers, marketers, analysts and others in jobs created in India and other nations. Russell Hancock, CEO of an influential group charting Silicon Valley's future, called the findings “amazing.” The study found that many U.S. start-ups, speeding the pace of globalization, now bypass the USA for nations where customers and cheap labor are plentiful. [USA Today, Feb 11]  Which provides another opening for SBIR advocates to bar VC ownership for beneficiaries since VCs are actively sending start-up jobs overseas.  Which is normal since VCs are not government, they are enterprises for profit. Better an economically mediocre company paying for temporary American jobs than an efficient job creator making jobs elsewhere? A short sighted view worthy of 18th century mercantilists.  

Air Force Budget Games. The AF has cast SBIR winners into limbo by withholding the money allocated to SBIR  Which probably means that a bright bureaucrat has decided that regular AF stuff is more important than SBIR and should therefore get funded before SBIR. All the agencies feel that way but still have to do SBIR in the legally mandated amounts. That bureaucrat will soon be hearing from AF General Counsel that SBIR funding is MANDATORY. Maybe some of the MDA anti-SBIR crowd has shifted to the AF. Patience, Congress will not allow the diversion of political pork into mainline programs. 

New NSF Web Site Address for "an attractive new look".

In-Q-Tel (the CIA's venture arm) romances Cambrios, which hopes to use biology to create new manufacturing processes for things like liquid crystal displaysand finding inexpensive ways to manufacture Radio Frequency Identification (RFID) tags. [Silicon Beat]

“As Republicans, we used to ridicule Democrats for spending. But now we're in power, and we've perfected the practice,” says Rep. Jeff Flake, R-Ariz., a critic of congressional spending practices. Today, Bush will propose cutting or eliminating more than 150 programs, including the Advanced Technology Program. Brian Riedl, a federal budget analyst at the conservative Heritage Foundation, calls it a “corporate-welfare handout.” Riedl notes that the technology program was created in 1989, when the United States was worried that advancing Japanese technology would relegate the U.S. economy to second-class status. So the government decided to follow the Japanese model and increased its support for private corporate research. Since its creation, Riedl says, the technology program has cost U.S. taxpayers more than $2 billion. More than 40% of the money has gone to Fortune 500 companies such as IBM, General Electric and General Motors. Riedl says they could have afforded to finance the projects themselves. David Peyton, director of technology for the National Association of Manufacturers, cites several high-tech products created with the help of ATP funding, such as the world's first digital mammography machine and the world's first laser-guided boring machine used to make engines. He says much of the research might not pan out, so it wouldn't be funded without federal help.  [USA Today, Feb 7]

Death and Resurrection. Bush is again proposing to kill ATP. Congressional Republicans, for all their blather about the wonders of private markets, haven't the nerve to carry out the execution. In part because most budget analysts say that such moves cost more politically that they help with the giant deficit problem. Taxes, public pensions, and Medicare are the deficit game, and the shrink-government game. 

Bush also wants to kill FAST which hands a little money to SBIR have-not states to pretend they are serious players in new technology. The Senate dynamics will probably rescue it. 

In the area of missile defense, the 2006 spending blueprint includes a $1B reduction from previously projected funding levels, to $8.8B , and envisions comparable cuts in following years. Admiral Robert Willard, a senior Pentagon planner, said the missile-defense cuts reflect elimination of "some of the optional" technologies. [WSJ, Feb 8]

Keep Those Dixie Toys. The Bushies' sine qua non base, the Dixie states, don't like the idea that many of Dixie military products aren't high on DOD's priority list. Cut taxes and make war, they say, while buying more of our planes and ships that the military services don't even want. Don't worry if you're a supplier of goods and services to those Dixie programs, politics will save them and your children will get the bill. 

From Toys to Bodies.  The Pentagon's recent proposal to slash major weapons funding by billions of dollars is a harbinger of even deeper cuts, particularly to the shipbuilding budget, senior defense officials say. The move reflects a major shift in the military's thinking about the kinds of weapons needed for future wars and it could hit big defense contractors especially hard. ... "What we should see in the future is a shift in the defense budget from capital-intensive weapons systems to labor," said retired Vice Adm. Arthur Cebrowski, who heads the Pentagon's Office of Force Transformation, [Wall Street Journal, Jan 25] Now that Iraq has proved once again that war needs people on the ground and a lot of money, DOD has to face that the nation does not have an unlimited appetite for military toys.  Which is bad news for the community of military R&D for advanced gadgetry for planes and ships.

Massachusetts, California and Colorado are the three states best poised to capitalize on nanotechnology, according to a study released Tuesday by Lux Research, which studies the industry. State governments collectively poured an estimated $400 million into facilities and research aimed at prodding the development of local nanotechnology industries in 2004, the study said. The federal government spent about $1 billion on nanotech projects in the same year. [Michael Kanellos, CNET, Jan 25]


If we only had a grand, we could be a millionaire.  Not unlike Nathan Detroit's dilemma in Loesser's Guys and Dolls, the DOD will ask Congress to put up $100M for an Industrial Base Investment Fund which would put money into DOD's endless lip service about military "commercialization".  The fund wants to insert innovation that the military services will not buy for themselves. To do so, it would use separately and annually appropriated money to buy new technology for the service. An interesting idea that is unfortunately likely to founder on the rocks of military bureaucracy and to ignore the potential of the private sector in developing military technology. 

Military services would propose stuff they want as long as they don't have to pay for it.  Money would also go to US companies (the political angle) developing critical technologies that exist elsewhere in the world and threaten the U.S. military. Sounds great, but it would be another DOD weapons program for which $100M is far too little.  A DOD office would have independent money to manufacture new products that would then be used by the military services who would in turn have to fund the logistics stream that would support the stuff for the rest of its life and cost many times $100M. The apparent free lunch for the military program that "wins" a grant would cost many times more and would eventually come out of the hide of the service. Separating procurement and logistics would also distort the services' life cycle planning.

The idea of "new" money is another illusion because total DOD funding is basically set as a percent of GDP and the new money would be found by taxing the budgets of the services, just like SBIR. And just like small companies are shunted from mainline R&D programs into SBIR, the new technologies would be shunted from service mainline programs into this set-aside pool. A great game would soon develop. 

And why would the annual appropriation keep flowing? Who would be the champion with a vested interest? OSD folks move in and out and the military services will argue that they can use the money better. 

A much smarter idea for small money is to seed early technologies that would attract private investment for their full development which would then provide the technology at market prices which the military could adopt and adapt for military advantage. Which is what SDIO/BMDO used to do with its SBIR. Read more about the scheme in Manufacturing & Technology News.

The Council on Competitiveness also has an innovation plan. Investment:  Stimulate radical innovation by reallocating 3 percent of all federal agency R&D budgets toward "Innovation Acceleration" grants that invest in novel, high-risk and exploratory research; energize the entrepreneurial economy by establishing 10 Innovation Hot Spots at regional locations across the U.S. over the next five years; reduce the cost of tort litigation from 2 percent to 1 percent of GDP; create safe-harbor provisions to promote voluntary disclosure of intangible assets while aligning private-sector compensations and incentives to reward long-term value creation; and boost seed capital to energize the entrepreneurial economy.  Infrastructure:  Develop new metrics to understand innovation performance and aggregate into a biannual national innovation scorecard; build quality into all phases of the patent process; transform the patent database into a searchable tool to mine the landscape of ideas; strengthen America's manufacturing capacity by establishing advanced centers for production excellence, including shared facilities and consortia that incorporate standards for best practices; and build a 21st century network infrastructure with healthcare as the test bed.  Talent:  Educate the next generation of innovators by pioneering an extensive portable graduate fellowship program to give control of educational choices back to students; align federal and state skills needs more closely with training resources while fostering stronger ties and partnerships between academic institutions, industry and government to serve regional interests; establish tax-advantaged lifelong learning accounts for employees to promote continuous learning and new skills; improve health and pension portability; offer tax credits for skill-based learning; and reform immigration policies to attract the best and the brightest S&E students and graduates. All decent ideas in isolation. And where's the money to come from as budget deficits rise and we cut taxes even more to stimulate all the things that supply-siders say that lower taxes stimulate? Don't ask; everybody's got a national dream. [

Pennsylvania also wants to manufacture, manufacture, manufacture. The Gov has a plan - don't they all- with three steps to increase business capital for manufacturing 1. Explore opportunities for new pension investment in manufacturing by working with the state and public school's employees' retirement systems (that is, divert pension investments from the most productive to state political goals like companies who put their employees' pensions into company stock); 2. Strengthen linkages between venture funds and manufacturers (OK, talk is fine); and 3. Aggressively pursue federal grants for small business innovation research and technology transfer programs (federal money including pork programs is a free lunch).  [facts from SSTI, Jan 10]  More information from the Gov.

More R&D. A 6% rise in federal R&D spending will be offset by a below-inflation rise by corporations. That's good news for SBIR junkies but bad news for the American economy for those who believe that American growth and prosperity depends on a steady flow of new high tech advances. Unfortunately for the economy, neither DOD nor private companies care about contributing to the economy. Each looks out for its own narrow interests. Ironically the SBIR junkies proffer the growth argument to justify a sheltered handout which they in turn want to ignore economics. The great overseers in Washington also look to their own political interests with the result that the American tech economy has to fend for itself. OK, that's capitalism in action with a tax extracted for political purposes. 

The Greenwoods offer this tip for DOD SBIR:  As a rule, DOD does not fund a project
unless it sees itself as the primary beneficiary of the outcome (and in the case of Army, Air Force and Navy, the primary beneficiary is the component which is funding the Phase I).  Don't make the DOD reviewer guess whether you know this-state as specifically as you can how and where DOD will use your innovation in Phase III.    And give them every reason to believe that you know, at the end of Phase II, how to get this innovation into their
One implication is that experienced proposers who already know how the military service works often have an advantage. Which explains why so many awards go to SBIR-mills. How to equalize your chances?  Pump the people overseeing your Phase 1 while you have their attention. 

But an emerging technology fund is different. Some scientific ventures are so risky yet so important that only a government can afford to back them. They often generate practical benefits far beyond the initial research. So  says Loren Steffy (Houston Chronicle, Jan 7) about the proposed Texas Emerging Technology Fund which would use half the money for collaborative efforts between universities and private companies to create "regional innovation centers, " , $75M to match federal research grants (presumably including SBIR), and $75M to attract some of the world's top researchers to Texas universities. Before they approve the fund, lawmakers should put in one final safeguard: Take it out of Perry's control. Giving elected officials indiscriminate access to big piles of money is a bad idea. All "emerging technology funds", SBIR included, have the same problem, capture by competing interests that can always use money for other projects. And with only long term payoff in prospect, no matter how eventually large, politicians and agencies cannot stand to wait while they spend from a tough budget. If it is to succeed at its announced goals, it needs patient capital and some managerial incentive to succeed economically. 

Last Voice Gone. The last DOD voice for a dual-use SBIR has resigned for greener pastures. Jeff Bond made dual-use work for as long as he was allowed in BMDO/MDA and then advocated for it as DOD Program Manager (a largely toothless position) after the bureaucrats captured the MDA program. SBIR Gateway News characterized him as well-liked and controversial. But controversy always accompanies a bureaucrat trying to actually make something happen in a world of grey, safety-conscious sitters.  The new winners are the small manufacturers who now have an advocate and helper at the Association of Manufacturing Technology, a McLean VA lobby shop that advocates (among other things) that the USG Adopt a sound manufacturing technology policy with a focus on government R&D programs. The unwitting loser is DOD which rejected dual-use in SBIR (lip service notwithstanding) except for some White House attention in Clinton I as the post cold-war defense drawdown panicked the politicians of both parties. DOD still believes in autarky - it will have its own dedicated industries and demand that Congress fund single use development. 

--------- end 2005 ---------

SBIR 2004 in Review for policy wonks.

ATP says it will not have a competition for funding high-risk R&D in FY05 because the consolidated appropriation funded only existing projects. Gotta start cutting the deficit somewhere and high-risk R&D in large companies has little political clout. Regular corporate welfare like invisible tax breaks and gutted regulations draw more campaign contributions. 

Need Purple Prose for your passionate plea for SBIR money? Try some of the language from a lobbying association for the eyes of the few technocrats who look beyond their immediate technical problem. Start with the Great Depression and advance to a US Department of Manufacturing as does the Association for Manufacturing Technology in a Purple Paper on a federal role in the manufacturing crisis. Actually, if you look through the purple haze to the presented facts, you will find a few useful ratios that might support your claim. You could at least adopt the idea of figures-of-merit  on impact of your technology if it works, such as dollars of economic activity $1.43  generated per dollar of US manufacturing. 

THE NATIONAL NANOTECHNOLOGY INITIATIVE has released its strategic plan. [instapundit, Dec 20] 

Cut That Guy Behind the Tree.  Don't cut you, don't cut me, ... The handout politicians have a problem of finance and credibility: income 16% of GDP; spending 20%. And every recipient is a worthy cause (to the politician). "This cannot afford to be a guns-and-butter term," says the Senate Budget Committee's chairman. "You've got to cut the butter." [Wall Street Journal, Dec 21] Unfortunately for the butter recipients, butter makes up only 18% of the $2.3T federal budget, and one of them is science research, the cutting of which would translate into auto cuts for SBIR. All science, except DOD, will be in the cutting room. Eventually, the party moguls like DeLay will protect their constituents at the expense of the non-moguls and dirty Dems. It will not be pretty as deficit abstractions turn into actual spending details.  On the other hand, they might just treat this deficit forecast like the others and kick the can down the road by concocting a story of why each spending is "critical". 

Tang Magic Dissolved. Not only has NASA lost the image of the inventor of Tang, a public panel says its Tech Transfer program is going in the wrong direction.  Four consecutive years of attempting to eliminate or minimize NASA's technology transfer activities are beginning to take a toll on the space agency's effectiveness at commercializing federally-supported technology, based on analysis from the National Academy of Public Administration (NAPA). [SSTI, Dec 20]  NASA switched to serving itself by emphasizing bringing commercial technology into NASA instead of transitioning new technology for private sector benefit. Spin-in beat spin-out.  Not too surprising when the NASA bosses get no benefit, other than an occasional "attaboy" from a politician, for helping the US economy and standard of living. SBIR's lack of economic impact stems from the same approach of agencies' helping themselves first. Read the report

Heard That Before. BUSH claims he will send up a disciplined federal budget that will halve the deficit in five years. The kid spilled five gallons of milk and promises to clean up half of it in five years.  Sounds great in the abstract by the great strategist with the clean hands. But presidents only propose; Congress disposes. The devil is in the details where Congress is subject to a thousand pressures for spending, or rather not cutting existing honey-pots.  Look for more smoke and mirrors and no cut to SBIR. The only ones to get cut are those with weak politics, not weak cases, as David Stockman long observed. Thus works representative democracy. 

legislators cut state support to the University of Minnesota and the Minnesota State Colleges and Universities system (by almost $377M in the past year and a half.  These budget problems are expected to last for at least the next few years. [Jamshid Vayghan, Minneapolis Star Tribune, Dec 20] State legislators love to talk about innovation until they have to fund the sources of it on a grand act of faith that universities will produce the means of the state's economic growth. Politicians love handouts but hate uncertainty and taxes. More direct funding of innovation. although with much uncertainty in the best bets, could come from federal programs like SBIR. As long as the federal agencies fund entrepreneurs and not just ordinary scientists, however smart, doing ordinary development and defensive research.

See a need for a great new technology program? Make noise for how it will help business competitiveness for as Brad DeLong quotes Tim Noah: Bush doesn't like to cut spending; he likes to say he likes to cut spending. In truth, Bush spends just as freely as a Democratic president would, if not more.... Bush's hypocrisy about government spending is so naked that a whole new ideology, "big government conservatism," had to be invented in order to explain it away.

Examining the Economic Impact of SBIR - By Invitation Only. Ann Eskesen's Innovation Development Institute posits a Washington April 5-8 get-together. The conference organizers will have to be careful to invite only house-broken SBIR cheerleaders to avoid embarrassing questions by the economically minded with real criteria on investment. 

The AAAS analysis of R&D in final FY 2005 appropriations is now available. The record-breaking $132.2 billion U.S. R&D portfolio, up 4.8 percent, gives most of the increase to defense. The National Science Foundation (NSF) budget declines by 2 percent overall with education and human resources programs falling by 10 percent. The National Institutes of Health (NIH) budget is up just 2 percent, well behind the projected inflation rate for biomedical research. The Department of Energy (DOE) will see an increase of 2.8 percent. Read the full analysis, including historical trends, highlights of agency R&D portfolios, and impact on science and engineering disciplines in the AAAS publication, Congressional Action on R&D in the FY 2005 Budget , scheduled for release the week of 13 December:

To avoid continuing degradation if US scientific capacity, the Washington-based Council on Competitiveness recommended expanding education scholarships and fellowships, changing immigration laws to permit more foreign students to come to the United States, making health benefits more portable, increasing research spending at U.S. agencies and reducing the costs of lawsuits against companies. [Ted Britis, MIT Tech Review, Dec 16]

The Innovation Project  One economic subject that has been a low priority for the second Bush administration, BusinessWeek writes, is federal spending on scientific research and development. The magazine notes that while government R&D spending amounted to 2% of gross domestic product in 1965 -- eight years after the launch of Sputnik set off U.S. alarm bells -- it currently hovers at around 0.75% of GDP. The Washington-based Council on Competitiveness today is warning that the U.S. risks losing its technology edge and economic vitality to such emerging tigers as China and India, BusinessWeek reports. The council's report calls for the creation of a cabinet-level innovation czar and a national innovation prize to spur scientific and commercial creativity. It wants a shift of federal R&D funding toward riskier, long-term projects and the establishment of research grants set aside for younger, less risk-averse scientists. [Wall Street Journal, Dec 15]

SMEs and entrepreneurs appear to have a comparative advantage in this new knowledge-based economy by nurturing innovation and bringing innovative products to the marketplace.  Also, Audretsch points to the difficulty in predicting the influence of knowledge on economic growth due to its uncertain asymmetric nature. He also cautions that knowledge will not automatically spill over and create greater commercialization. David Audretsch of Indiana University concluded that Public policies should seek ways to promote entrepreneurship in order to boost economic growth. [SSTI, Dec 13]  But alas there is always a gap between what's good and what's done by government acting on government incentives rather than economic incentives. Which is why we have handout programs that produce little except applause from the beneficiaries. 

Technology, aerospace, value-added agriculture, energy, advanced manufacturing and tourism. North Dakota has a dream that investing $50M of borrowed state funds in Centers of Excellence on each of the North Dakota 's college campuses. To make it big enough for a measurable impact, the governor foresees 2-for-1 matching by federal and private funds. [SSTI, Dec 13] ND has the same dream that the founders of SBIR claimed to have - that pouring government money into technology will produce domestic economic gains. SBIR proves however that unless the program is run by people with an interest in economic success, the money will be drained off into breakfast bowls that benefit only the bowls' owners. 

Texas, Too, Only Bigger. Gov. Rick Perry will ask the Legislature to reinstate the Texas Enterprise Fund at $300M and create a $300M emerging technology fund to help create jobs, he said at a press conference Monday. [Houston Chronicle, Dec 14] 

SBA Punts on VC Ownership.  SBA decided not to decide whether to admit companies owned by VC firms larger than 500 employees. It asked for more public comments, which are not likely to produce new arguments or facts and thus merely delays any change to the proposed new standard. Which is proper for SBA since the question is political, not regulatory. The present law clearly (at least to me) excludes company ownership by large concerns including VC firms. The opposers correctly argue that SBIR could become a playground for large company R&D shops in any federal agency that cared about real commercialization and economic impact. But since the agencies don't much care anyway, the impact would be small. Congress will still have to decide whether it is better for the country to have more VC investing in new technology or limit its handout programs to the political constituency regardless of any economic impact.  Representative politics being what it is, the highest bidder will get what it wants. Details at the Federal Register website:  Comments by Feb 1: Subject:  RIN 3245-ZA02 through the Federal eRulemaking Web Portal:

Too Much of a "Good Thing". Nuclear power, supersonic transport, and moon shots were targets of government booster funding. Where are they now? Terence Kealey [Wasting Billions, the Scientific Way, The Sunday Times, October 13, 1996] noted that government adopted the myth that more government funded science breeds national economic gain. But government does not respond to market incentives; it responds to votes. And thus it will never make the right decisions about what to fund and by how much.  Seed programs like SBIR was intended to be (before being captured by the federal agencies for their mission purposes) a little money in fertile places for entities open to new technology and new methods. 

Paranoia Runs DeepHigh-technology exporters are alarmed by a recent U.S. Appeals Court ruling that threatens to sharply expand the number of products that need to get Commerce Department export licenses for security reasons. ... The ruling, backing the U.S. government position, comes in a 1990s case involving the shipment to India of a control panel for a small industrial press for shaping materials. The government contended that even though the press was legal, the control panel also was designed to work with larger presses that are suitable for making parts for missiles or nuclear bombs. It said it was illegal for the manufacturer to ship it without a license. [W Bulkeley, Wall Street Journal, Nov 24] The usual debate between Defense that would ban all international trade in useful goods and Commerce that would allow all. Presidents earn their perks by deciding between business supporters and security think tanks. 

NASA named 290 Phase 1 SBIR winners from 2149 proposals. Some of the usual suspects naturally won several projects. Physical Optics(5, all with the same PI), Intelligent Automation(5, all with the same PI), CFD(3), Continuum Dynamics (3), Cornerstone Research Group(5, all with the same PI), Eltron (3), MER (5), Metron Aviation (3, all with the same PI), Orbital Technologies (4), Umpqua Research (3, all with the same PI). These companies have already had at least 1400 Phase 1s which together with the Phase 2s total at least tons of millions of dollars. OK, something like $500M.  What has the national economy to show for the $500M beyond supporting jobs for the company employees for the life of the contract?  

Wisconsin v. California.  Gov. Jim Doyle announced last week his plans to invest nearly $750M in state funds to support biotechnology, health sciences and stem cell research. Said Doyle, "Wisconsin can’t match California dollar for dollar, but California can’t match what Wisconsin already has - including the best scientists in the world and first class research institutions" [SSTI, Nov 22] And where will the money come from? Where federal money comes from - taxpayers through a vote-hungry legislature. Do states have a good track record in investing state money in such enterprises? Good luck finding definitive data. 

Pork in the Pie. The final roll-up omnibus appropriation continued funding for the market intrusion programs. ATP gets $136M (says AAAS) and MEP gets $109M (says SSTI) despite Republican dogma that these are corporate welfare programs that actually distort the private markets. When votes are at stake, principles take second place.  SBIR is not affected since no appropriations are required and tax cuts don't extend to agencies' R&D budgets.  

The Army gets the newest and best stuff in the troops' hands double-time with a Rapid Fielding Initiative team that issues the most technologically advanced equipment available - boots and gloves to sunglasses and improved helmets. It's a stovepipe system which is easier for something new to enter. 

NIST put out its SBIR solicitation  closing January 28 with a claimed emphasis on manufacturing - the political subject du jour. The 34 topics make an odd collection of vague and highly targeted subjects reminiscent of DOD's search for particular solutions to problems perceived by individuals in the department. No call for the most innovative ideas in several broadly defined manufacturing areas. So, try to talk to the topic authors who are looking for some specifics and not necessarily for the best ideas. Although NIST prohibits talking to such people (you can talk to anyone you want but they can't talk back), there is a discussion group for publicly asked and answered questions. Unfortunately for you, NIST doesn't ID the authors, pretending the topics came from some grand economic analysis. Bureaucracy inaction! DOD has a more enlightened policy of naming the authors so companies can find out whether they are even in the same ballpark before investing in a proposal. NIST apparently believes that proposals have no cost. 

Massachusetts faces several years of lackluster job growth unless innovations spur the state's listless economy, according to an economic forecast. The forecast, released yesterday by the New England Economic Partnership, estimates that Massachusetts won't come close to recovering all the jobs lost in the recent downturn until 2008. By the end of 2005, the state is expected to gain about 43,000 jobs, but that is only one-fifth of the more than 200,000 jobs lost after the technology bubble burst in 2001.  ... UMass's Michael Goodman says the state can foster innovation by stepping up efforts to attract federal research grants and venture capital; commercializing technology developed at Massachusetts universities; and lowering the cost of living, particularly housing, which makes it difficult to attract educated and skilled workers.  [Robert Gavin, Boston Globe, Nov 11]  Attract fed money and lower the cost of living - how nice. Maybe have Microsoft re-locate to New England too. What ever happened to good old Yankee ingenuity and prudence, the Protestant ethic, saving money to form a pool of capital, starting small and growing by re-investment of profits, deferring the good life until you've earned it? The cost of living could be lowered by reducing the average size of living space which has grown a lot in America in the last few decades. Smaller vehicles too. Big talk about big houses, big cars, big America, and big federal subsidies borders on "all hat and no cattle". 

If you're a high-tech entrepreneur, CEO or venture capitalist, Bush's re-election and his promise of tax reform and Social Security changes should put more cash in your wallet.  [Chris Nolan, eWeek,Nov 4] Which sounds great until you realize you're using your child's credit card to buy luxuries for yourself. 

Minnesota Honors Innovation in emerging companies. Finalists for the Tekne Awards were:  ADVANCED MANUFACTURING  Control Products; Donnelly Custom Manufacturing; Protomold(won); BIOTECH - Algos Therapeutics, Biopolymer Engineering, Medisyn (won); INNOVATION - NVE (won); IT - Agiliti, Compellent Technologies, ProVation Medical; MEDTECH - Incisive Surgical (won), Minnetronix, SurModics. Established companies, like 3M, get prizes too. If you want a high tech friendly environment in the nation's healthiest state, try the Twin Cities. You will have to withstand -40F and voracious mosquitos and cars hauling boats all over the roads, although not at the same time. 

Why U.S. Contracts For Small Businesses Go to Big Companies. Several weeks ago, the Center for Public Integrity, a nonprofit, nonpartisan research group in Washington, released a report saying that 30% of all defense-contract money reported as going to small businesses and special minority-owned businesses ended up with top defense companies in 1998 to 2003. ... A Civil Rights Commission draft report in 1986 said 20% to 25% of federal set-aside contracts were going to bogus minority fronts. ... if a business was certified as "small" when its original multiple award contract was signed, then it was often treated as a small business for years after it outgrew the contract's size standard. ... many small-business owners express frustration with this practice but are reluctant to speak out for fear of jeopardizing future contracting opportunities both on their own, and also as subcontractors to bigger companies. ... the SBA says it doesn't routinely check to see whether companies on its list are truly "small." Part of the problem is manpower: More than 180,000 companies are on the list and the SBA has only two employees helping maintain it. ... The SBA says it has received 1,408 size protests since 2002; about a quarter of the protests' targets were found to be unqualified as small businesses. [Gwendolyn Bounds, Wall Street Journal, Nov 9]  There never was a free lunch. Cutting federal agencies to save tax money means that the too-many laws cannot be executed and enforced. Actually, the politicians don't care as long as they get the credit for passing the law and cutting the taxes. Most of the civil servants are glad to take the salary even if they are assigned the blame for lax enforcement. 

We Want Cures. NIH is starting a policy of favoring research that can translate results to patients. Says J Kaiser (Science, Oct 29) Clinicians welcome these revisions. They align better with the American penchant for instant gratification. DOD calls its policy "relevance". In principle, the change should not affect SBIR since innovation does not cover basic research. In practice, NIH and the others write their own rules for SBIR as allowed by the law's devolution of unilateral decision making to the agencies. 

Mr SBIR Died.  Ever since Jimmy Carter appointed Milt Stewart as the government's first chief advocate for small business at the SBA, Milt advocated. After the Reaganites took over in 1981 he founded a lobby outfit, the Small Business High Technology Institute, and pestered Congress for what became SBIR in 1982. Long efore that and before he even got his law degree in 1952 he served as research director for the U.S. Commission on Civil Rights, which produced a 1948 report titled "To Secure These Rights." The report defined the nation's civil rights agenda for the next generation.  [Washington Post, Nov 7] From SBIR's inception he lobbied, organized, and pestered Congress to make it bigger and better, mostly bigger, since Congress was not willing to make it better by imposing investment criteria on the federal agencies.

starting with meaningful spending cuts that will halve the $400 billion-plus federal deficit. Since Bush and the Repubs have to pay off the big contributors with tax cuts for business and the wealthy, and they have to pay for Iraq (which may never end), they must axe some sacred cows. Or else just keep running up the national credit card until the foreigners stop sending money and interest rates skyrocket to pre-Reagan levels. Or they start printing money and inflation rockets. They might start with corporate welfare handouts like MEP and ATP. They have to start somewhere by disappointing somebody!

Having won on holier-than-thou and a free lunch, the Republicans still face the deficit. But why should they rush in with unpleasant remedies? Barring a financial-market crash that panics politicians into action, the answer may turn on whether conservatives come to see deficits as a moral, rather than purely economic, issue. There simply aren't enough Republicans on Capitol Hill who buy the economic arguments about the harm deficits do. [David Wessel, WSJ, Nov 4] Significant deficit reduction requires bipartisan support on the Hill, which does not exist (e.g., witness the recent corporate tax reduction bill). [, Nov 4] Worried? We bring it on ourselves by electing politicians who promise us what they cannot deliver - cake today and cake tomorrow

Looking for State Money?  Voters in five states OK'd propositions for state-funded econ tech development.  Arizona -- Proposition 102, allowing university tech transfer authority, failed;  Arkansas --  allowing state to issue $500 million in bonds for economic development, passed; California --  $3B for stem cell research passed.; Rhode Island -- authorized $50 million in bonds for a biotechnology center;  Utah -- allowing university tech transfer authority. [SSTI, Nov 4]

Fewer handouts. Tax cuts and free markets may sound great, but coupled with a rising national debt they mean less room for handout programs for tech, or anything else. Despite the electorate's voting for moral values and a free lunch, the free lunch can only be a mirage. And since California will also discover that it does not have the means for a $3B research program on stem cells, look for a loud start that degrades to a whimper as the Legislature fails to see any short run economic return. 

NIST invites comments on a guideline recommending minimum safeguards and countermeasures to protect the confidentiality, integrity and availability of federal information and information systems that are not national security systems. Comments on Recommended Security Controls for Federal Information Systems (Special Publication 800-53) may be sent to through Nov. 30. A copy is available at

Big Ideas, Tall Barriers. The nearly $10 billion spent by the U.S. Energy Dept. on nuclear fusion research has borne little fruit. ... on a horsepower basis, fuel cells cost five times as much to make as internal combustion engines. And the fuel tank in today's prototypes takes up the whole trunk. although Researchers have already cut fuel-cell manufacturing costs by 95% since 1990. ... Pebble-bed modular reactors  still produce nuclear waste that would remain dangerously radioactive for ages. ... Improved technology can't overcome the depletion of [methane] fields. ... Energy-short Japan and India are also digging into methane hydrate. Researchers hope to hit pay dirt by 2025.  [Michael Arndt, Business Week, Oct 11] 

Watch Their Hands, Not Their Mouths. One reader complained that I did not wag my finger hard enough at MDA's abandonment of disruptive innovation bets, once made by SDIO/BMDO/Star Wars/the  technology hope machine, into mere mainstream management of the mundane. Partly true, although the proof is in the pudding. Many MDA projects, whatever their intent and actual contract requirements, actually sound like useful innovation. For predicting what the SBIR agencies are actually doing, never believe what bureaucrats say; judge them by what they do. Lists of funded projects are hard data; words from the managers are mere words. Even if they mean the words, nothing good happens unless they fund the right kind of technologies and companies  For commercialization, believe only your eyes, for techapp/commercialization offices that make much happy speech have no influence over selection of projects. Their job is to make lemonade and noise. 

"You learn the hard way not to send high-risk proposals to NSF or NIH, because they will get dinged by reviewers. Instead, you're encouraged to tone down your proposal and request money for something you're certain to be able to do." ... [NIH Director] Zerhouni is concerned that scientists don't even bother to submit their best ideas to government agencies anymore. [Jeffrey Mervis, Science, Oct 8]  Optimists spend their money and time making technically risky proposals to government which cares nothing about the company's cost of useless proposals. Only a few places in government want to hear about disruptive innovation (MDA was once one) as government prefers to have innovation pressed on it from the outside, like, say, the PC. 

Selling Warmth Instead of Light. A great irony of Greater Phoenix is that a place built on innovation is such a minor innovator today. Somewhere we went from inaugurating master works of technology - this was the site of the first large federal reclamation project - to being a bland matrix of lookalike houses and shopping strips. As the world economy is based ever more on creativity and technology, our economy is more and more narrowly focused on construction and real estate. ... Passing Proposition 102, which allows universities to commercialize their research better, is an essential step. Innovation centers tend to be built around strong universities. But there's no silver bullet. We need several Speedloaders of silver bullets. [Jon Talton, Arizona Republic, Oct 24] Still, Russ Wiles notes that Arizona ranks as a fairly friendly place to do business, according to the nonpartisan Tax Foundation that graded Arizona as the 19th-best state for various corporate and individual tax measures. In a note that taxes are not the driver for innovative companies, South Dakota finished first for tax friendliness, followed by Florida and Alaska. Hawaii placed last, slightly ahead of New York and Minnesota. 

China is well on its way toward replacing a big part of its 1 billion bicycles with cars. Manufacturers produced only 220,000 vehicles in 1999. Last year they produced more than 2 million, an 81 percent increase over just the previous year. With 24 million cars operating in 2003, the People's Republic is projected to have 60 million private automobiles by 2010 and 130 million by 2020. If those straight-line projections -- or anything like them -- work out, oil for transportation alone will account for half of the total consumption. [Asia Investor, Oct 22] And surely those cars will need cheap  innovative technology to reduce fuel consumption per mile even to American standards. 

Another Apple PieInvoking the invention of flight and mankind's first steps on the moon,  Kerry pledged to invest in technology and innovation ... In addition to stem cell research, Kerry wants to invest in manufacturing and biotechnology, spur automobile innovations and urge students to go into science with education benefits. [AP, Oct 21] Oh, great, something for everybody. Except, who's going to pay for it? Who's going to manage it intelligently? Kerry actually knows something about SBIR from sitting on the Senate committee with what passes for oversight. How will he keep the hand of government from distorting or discouraging private investment in the same fields? Oh, never mind, the potential recipients will cheer while the taxpayer should worry about encouraging the government to pass out money to constituent groups and battleground states. 

Paul Graham has posted a new essay titled 'Good Bad Attitude' talking about the hacker attitude toward rules and government regulation of Intellectual Property. Choice quote: "(Hackers) can sense totalitarianism approaching from a distance, as animals can sense an approaching thunderstorm." [Slashdot, Oct 20]  Hacking is like other innovating; it frightens the horses of government

Two: Make government spend money. "What's needed is the equivalent of a GI Bill for creativity," [Prof Richard] Florida says. He doesn't mention it, but this is precisely what's going on in California, where the state's high-tech community has gotten behind a ballot initiative that would pump $3 billion to support stem cell research into the state's colleges and universities. ...Anyone who is interested in the intersection between economic growth, politics and policy in the coming century should read "America's Looming Creativity Crisis" by Richard Florida in this month's Harvard Business Review. [Chris Nolan, eWeek, Oct 20] Note that Florida advocates government spending money, not merely burning it. SBIR has been a 20-year opportunity to do what Florida recommends. Unfortunately, most of the money has been burned in safe projects with little chance of spurring economic growth. Someday, somehow, the federal agencies could come to invest SBIR wisely, but not until Congress forces them. 

Virginia passed out its first Small Business Research Commercialization Awards at its 10th annual SBIR conference.  To the "top six" Virginia companies getting SBIRs: ObjectVideo, Luna Innovations, ContraVac, Athena Technologies, Cinea, and HyperSizer. [story by Shannon Henry, Washington Post, Oct 21] Henry's piece trumpets the usual few success stories and ignores any larger examination of whether Virginia, for one, is getting its tax money's worth from SBIR. While it's easy to do the political calculation on percent of the money going to Virginia, it is a lot harder to show that the money did anything that would not have happened anyway. Or that the money went to Virginia's best bets for ROI. Never mind, one objective was achieved in the election season: Virginia's new secretary of technology, Eugene Huang, gave a brief congratulatory speech and posed for photos. 

but Galesburg is not done with Maytag. When Maytag ditched a factory and 1600 jobs in Galesburg IL. the town is suing for broken promises after a decade of tax breaks and union concessions to keep Maytag home. In in Putnam County FL the same disappointment when Sykes Enterprises closed its call center. [story by Timothy Egan, New York Times, Oct 20] When private enterprise takes a public subsidy, expectations rise even though eventually private economics will dictate the firm's actions. Loyalty does not extend to losing money. 

Public Money for Private Firms. So, what's new? Massachusetts lent Acusphere (Watertown, MA) $2M (of its $25M emerging technology fund)  to help renovate a Tewksbury building as a manufacturing facility. The fund, which targets transition from research to manufacturing has the usual ideal of bribing firms to bring more jobs to Massachusetts. [Boston Globe, Oct 19]  Do such "investments" pay off for the public? Good question. They apparently do pay off for the politicians who enact them. 

Governments may not have been particularly skilled at picking innovations, but for centuries they were the only social institution that could command enough resources to really foster innovation effectively. [H R Varian, reviewing Mokyr's Gifts of Athena, Journal of Economic Literature Vol. XLII (September 2004) pp. 805–810] One of government's weaknesses in fostering innovation is the competition for handouts which instead fosters inefficient allocation of R&D capital. Politicians invent handout programs with attractive labels like SBIR which then allocate the funds on criteria other than economic efficiency. Criteria like "fair" geographic distribution, compliant companies, safe "research", support of Navy missions. The beneficiaries then fight to impede any economic evaluation of such programs because the program's faults would become far too obvious. 

As a problem solver, Deep Blue does not have its own budget, [Rear Adm. (Sel.) Michael ]Mahon said. “I do not have the resources, but I have access to people who do,” he said. If the problem is serious, there usually is no problem receiving the money for certain technologies, he added.  [Roxana Tiron, National Defense, Oct 04]  SBIR hopefuls note: if yours is THE ANSWER for the Navy, money will be found, outside SBIR which is usually too slow for such great ideas. Just don't believe your own hype or expect the Navy to believe it without some compelling proof. Deep Blue is a Navy team searching for innovations on both sides of the terror war and handing the fleet useful technologies. 

Conservative Energy SBIR Open. Energy's annual SBIR competition closes December 13. The DOE cautions that proposers must have a Dunn and Bradstreet Data Universal Number (DUNS) before submitting a proposal. A DUNS number is free by calling 1-866-705-571 but actually getting the number may take a lot longer than you think. It's another establishment scheme to limit new ideas from new companies in a bureau that has long boasted of  its procedural efficiency in SBIR. 

Army Values Experience. The Army's list of Phase 2 SBIR winners shows the typical mission agency love of incremental improvements by safe companies. Two companies won seven awards each (Physical Optics and Triton Systems), five awards each to Aptima, TIAX, CHI Systems, and Creare, three each to QDot, Intelligent Automation, and two each to several companies. Long time SBIR observers will recognize many of these names as the companies who have made a good living out of doing SBIRs. Because they are private companies, neither they nor the government they have to fess up to any economic failure of the government's investments. Besides neither the companies nor the agencies nor the SBIR program advocates want to disturb the cozy triangle. 

The Democrats complained that cutting ATP would be a big loss.  the ATP has had a number of successes in preserving critical technology sectors in the United States and facilitating a leading U.S. position in others. ... The total cost of ATP funding to date has been about $2.1 billion. Preliminary results of a 2003 ATP survey of more than 350 companies indicate that actual economic value resulting from ATP joint ventures now exceeds $7.5 billion. Benefits from just a few projects analyzed to date are projected to exceed $17 billion when those platform technologies are fully exploited by the industries involved. That is an impressive social return on a modest government investment. [JEFF BINGAMAN, ROBERT M. SIMON, ADAM L. ROSENBERG, Issues in S&T, Spring 04] Typical political argument: we put some money in and something came out whose "value" exceeded the input. It's a  simple game of finding some measure that yields a number greater than the input. Unfortunately, the way politicians abuse economics, it usually proves nothing. Real capitalists don't look at it that way and we would do well to hold the politicians to real investment standards in evaluating handout programs like ATP and SBIR.  

Innovation President? ... Kerry has his own pro-innovation tax plan -- eliminating all capital-gains taxes for long-term investments in small businesses. It has potential and sounds like a policy Bush would approve of. Kerry's health plan also focuses on small business. It takes much of the financial burden of providing health care to employees off the shoulders of small-business owners. And it might free money for more investment. At the very least, he's thinking of helping small business.... OVERALL Slight advantage: Bush, although both candidates love innovation. That's not bad for America. [Business Week Daily, Oct 4]   Innovation is not a topic for public debate in a general election - too complex for the average voter. So, the politicians will be for it while avoiding any discussion of details. 

It also could destroy the character of SBIR wails the SBTC over the still alive prospect that Congress would open SBIR's door to VC-owned companies. Actually, re-making SBIR's character would be great for its economic prospects but bad for the simple political goal of sequestering part of the federal R&D program for mediocre small companies. Until SBTC stands behind a valid economic evaluation of SBIR, their noise is just constituent benefit politics. 

Rutan Did It Once, and needs only to repeat the first flight to earn (just try to collect from the government) $10M prize - straight prize, not merely a work contract. SBIR agencies who are always carping that they cannot get top flight results from small companies might take a lesson. With a big enough reward, not another government contract, the innovators may invent just what the agency says it needs. The government already has a vehicle for such ventures - the incentive fee contract where profit is determined from a pre-set formula that depends on performance achieved. Give XYZ Corp a Phase 2 SBIR for $300K with a profit of $500K if it demonstrates x dynes of thrust per kg of rocket motor. Or give two or three different companies the same chore with a $1M to the one that gets the highest performance over some minimum high threshold. If they want to get innovation, they have to give some. 

"War On Whatever" Mentality. A lone genius might find a disease-causing gene, for example, but turning that into a cure requires biologists to figure out what the gene does and chemists to work with them designing drugs to block that action. Even the NIH, the primary funder of basic biomedical research in the U.S., is beginning to put more weight on translational research as part of a "road map" unveiled in September 2003. In addition to funding projects scientists dream up on their own, the NIH is setting more of its own big goals and directing scientists to work toward them. There isn't any assurance that the new strategy will work. [Sharon Begley, Wall Street Journal, Sep 29] In DOD research, it's called relevancy. In NIH, it's back to the War on Cancer approach so loved by politicians with a daily need for a sound bite. The idea is that any research finding will be immediately communicated to the others on the "team" so that they, in principle, can launch into exploitation. What's gone would be two aspects of competition: publishing the idea with recognition in a prestigious journal, and guarding the intellectual property rights. Now who gets the Nobel and who the profits? 

Do, Measure, Tell.  During the states' fiscal crisis, a number of TBED programs were eliminated, while others survived. SSTI staff spent a fair amount of time analyzing what the survivors had in common, and we boiled the results down to three items that successful TBED programs have in common. While it may seem simplistic, the three commonalities are:  1. They do a good job, 2. They measure whether they're doing a good job, and 3. They tell people they're doing a good job.  Measure what you treasure. SBIR's major failing is not measuring its "effectiveness" or "cost-effectiveness", instead relying on political screaming to keep the handouts coming to small businesses that do federal R&D reasonably well (although not well enough to win contracts in open competition). The federal agencies who run the program don't know whether they are doing a good job, don't want to measure, and don't even want to advertise they are doing a good job because that would just encourage a program they hate anyway. 

Business Matchmaking, launched in 2003, is a series of SBA-sponsored regional events that bring corporate and government buyers face to face with small-business owners of all kinds. Business owners have landed more than 20,000 one-on-one appointments, of 15 minutes each, with key government and corporate officials from 300 major corporations and agencies who are ready to buy.  According to SBA insiders, Matchmaking has been so successful, the program will be expanded next year to include more regional small-business small business events and new access to opportunities online 24/7. This year, events were held in Florida, Southern California, Texas, Pennsylvania, Ohio, Illinois, Michigan and Washington, D.C. ... is a new SBA site that aims to connect businesses with federal agencies. [Arizona Business Gazette, Sep 28]

Congress seems on the verge of letting VC-owned small business compete in SBIR without public hearings (that would be mostly whining anyway). The real lobbyists that have something to offer would win over the SB lobby that has little to offer. SBIR Gateway's so-called poll got 78% of opiners against the change whose effect is still pure speculation because it is not at all clear that the federal funding agencies would give much favor to commercial potential anyway. SBTC pleads for small companies and any other vested interests to squeal at Congress which now has no time for small potatoes before closing shop to go campaign.  

Bills Coming Due.  is the Fed really down to the choice of higher US domestic interest rates or higher crude (and perhaps broader global commodity prices) prices ahead? Either way, the Fed appears over a barrel. Neither choice is pleasant and neither offers an acceptable outcome as far as the US economy is concerned. Much higher crude prices ahead risks perhaps at best a stagflationary outcome for the US. As we described in the tables above, already the current interplay between crude prices and the economy is beginning to look a whole lot like the 1970's. Significantly higher interest rates ahead would risk a credit contraction in the US economy. A contraction in the very same financial structural underpinning that has supported US economic growth during the current recovery period.  [The Contrary Invester, Sep 04] The steadily rising government and trade deficits are a form of improving your standard of living by putting more on your credit card. Eventually, your credit rating goes down and you pay higher credit costs which reduces your standard of living (unless of course, you put even more on the credit card). The US political system keeps ignoring the rising and inconvenient problem of the bills coming due. Spend, spend, elect, elect. On election day you get to   pick between two free-lunch fantasizers.

While the candidates are making promises for which there is not enough money in the whole world to pay, next FY's DOD R&D will go up another $4.3B as soon as the required authorization bill passes - sometime. And even though a lot of the increase is pork - earmarks to favored constituents-  SBIR gets to tap 2.5% of the extra-mural spending. Gory details 

Laser Eye Surgeons Attract Lawsuits.  The technology that grew from NASA and SDIO SBIR funding for spacecraft docking in the early 90s has hit a legal snag. The original inventor, Autonomous Technology, went public and soon sold out to Nestle a subsidiary of which sold some allegedly problem machines to a British eye clinic. Now the Brits who got bad surgery results are suing everybody in an American court. [The Times (London), Aug 28] For the moment it's not at all clear what caused the post-surgical eye problems. 


A USDOC Assistant Secretary and IBM's CEO were among the talkers at RPI's confab on innovation that showcased tech innovation in the NY's Capital District  .. A state official opined that "We've reversed New York state's image as a place hostile to private industry. .... Much of the (economic expansion) has taken place right here in upstate,"  RPI's prexy Shirley Ann Jackson said Nearly 30 companies currently rent space in the RPI tech park in North Greenbush, and many more newly spawned companies are giving birth to the next round of technological breakthroughs. [Troy Record, Sep 9]   New York might be a model for industrial retrenchment. Until WW II, upstate NY was a place of industry as a part of the industrial belt extending from Boston to Minneapolis. But NY and America lost many of the industries to post-war competitors in steel, chemicals, shoes, typewriters. Sadly, the federal government is missing an opportunity to create new industries by catering to present interests (present jobs have a lot more political clout than future jobs) and handing out what could be seed money in SBIR to mundane R&D activities in direct support of parochial agency interests. Will they ever wake-up? They might read accounts of Britain from its 19th century peak after the Industrial Revolution to its nadir in about the 1970s. 

Competing Constituencies. Congress still has to decide whether to let VC-backed small biotech companies compete for SBIR money. The SBIR-junkies represented by SBTC don't want such competition for their pot of politically won money. The junkies cry that the VC-backed companies will take too much of the money, as if the government cared about commercial potential anyway.  SBTC said (on Apr 28) that it is working with the National Venture Capital Association, as well as a number of Senators, Representatives and Capitol Hill staffers to find a solution to this problem which meets the needs of everyone. We have made some progress in recent weeks, and we are hopeful that we will make some more in the coming weeks. The issue may come to a vote in the U.S. House of Representatives within a month. SBTC will send out an “Action Alert” as soon as we know whether we can support the legislation. Which means that they have to compromise because could not kill the idea outright, probably because the VC-backers have political clout too. The free-lunch fantasies coming from the presidential and Congressional campaigns suggests that more government money will be promised for everyone and the bill sent to the future.  

Just because you're paranoid doesn't mean THEY are not out to get you. Not Andy Grove, but a reasonable estimate of Frank Gaffney's Center for Security Policy. According to Reuters, "Iran says its missile program is purely for deterrent purposes." But this same news report noted that "six of the sand-colored missiles, bearing slogans which said 'We will stamp on America' and 'We will wipe Israel from the face of the earth,' were displayed at an annual military parade last September."  Gaffney's power through strength approach extends his days in the Reagan administration to the neo-cons that dominate the Bush administration. His continuous talk of weapons keeps alive the funding for missile defense and the push for deploying something, anything, that looks like a missile defense. Which results in a continuing profusion of money for MDA, a percentage of which must by law, a political set-aside law, not a Defense law, go to SBIR. The two present problems with that bounty is that MDA seeks way to reduce SBIR funding and steers the money away from disruptive technology into run-of-the-mill DOD support technology. 

NIH will give LARTA $2.5M to help SBIR companies commercialize. Companies will receive individual mentoring from customized teams of industry experts and other business advisors. These teams will advise companies on how to take products to market, protect and license intellectual property, acquire capital, assemble management teams, develop marketing plans, set up clinical trials, and find acquisition opportunities. Larta will establish field offices to help implement the program.  And how will NIH decide whether LARTA is doing a good job? Maybe measuring happy words from the companies who want to be in position for future handouts? Economic ROI for the SBIR? NEVER! 

The SBIR political arm reports that the House Armed Services Committee, has officially directed DoD to strengthen its acquisition of research and development from smaller companies.  To do so, the Committee wants DoD acquisition program managers and prime contractors to make significantly more SBIR Phase III contract awards. Thus the political push continues to force-feed small business to the DOD after neither SBIR nor post-SBIR competitive favoritism has made enough of a dent in Pentagon procurement to satisfy the small business pushers. The SBTC claims a major breakthrough in Congress’ awareness of the growing success of DoD Phase III SBIR awards. Well, maybe. It is an election year and Congress loves to sidle up to small business, like they do for the "family farm". Meanwhile, DOD will have to write yet another meaningless report to Congress on top of the multi-story pile it already writes every year. Will this latest push produce more contracts than would have happened otherwise? I doubt it. DOD will still buy what it thinks it needs from suppliers who DOD thinks can deliver the right product at a reasonable price. If they did otherwise, the HASC would be on them for dumb procurement (except for the dumb procurement in the Congressional districts of HASC members).

More Money.  The SB Tech Coalition has a fresh idea for Congress - more money. In testimony before a House Armed Services sub-committee, three SB CEOs pleaded for matching Phase 3 money as an "incentive" for DOD Phase 3 action. Then six more CEOs told their "success stories". After noting a success that  An informal survey found that DoD Phase III contract awards have risen every year from $30M in FY 1998 to $342M in FY 2003, they asked the HASC to pony up $2M for R&D and $5M for procurement to match mainline DOD program funds for Phase 3 contracts. Unfortunately for their idea, the two sources for such money will surely object. The HASC already has an appropriation problem with a growing deficit that the president wants to make worse with extended tax cuts, and diverting money into such Phase 3 from the standard SBIR, which the HASC would probably support, would bring howls of protest from other small businesses who haven't been so cozy with DOD. Half a billion a year and a contracting concession isn't enough for this crowd that always has an idea how more money can be lavished on a program that has little economic return to show for 20 years of investment (handouts).  Chairman Weldon's opening statement gave no hint that the purpose was to receive a request for more money; it looked to be a political opportunity to support small business motherhood for the coming election.  The testimonies.  Does more money make sense for SBIR?  Hardly, since there is no compelling evidence that the results after 20 years are any better than would have happened if SBIR never existed. Billions have been spent by DOD alone (half the total program) with no noticeable economic gain for the economy in general although there has been a recent pickup in post-SBIR DOD contracts to SBIR companies. But DOD always had a few percent for small companies, a number that SBIR has not noticeably enlarged.  Particularly the Navy has learned to push SBIR money to service companies in a move to get the SBIR money back into Navy programs from whence it was taxed.  Whether much innovation is involved is a matter for the eye of the beholder.  For all the agencies, SBIR is a zero-sum game: every SBIR dollar is subtracted from other programs. What the Coalition wants is for Congress to now appropriate specific money for SBIR, a change from the zero-sum game to the competitive appropriation game. A dose of their own medicine, good and hard as HL Mencken advocated, would convert the whole of SBIR to a program requiring annual appropriation. Its certain death would follow.  

Who Would Be the IT President? "We need to open the floodgates of entrepreneurship and venture capital by eliminating capital-gains taxes for new, long-term investments in small businesses," Kerry said in last month's speech. "The jobs of tomorrow depend on discoveries today, so we also need to extend the research and development tax credit." ... "President Bush is in favor of a tax environment that rewards risk takers, a regulatory environment that's balanced between end users and technology vendors, and an intellectual-property environment that protects assets," says Raul Fernandez, a member of the President's Council of Advisors on Science and Technology and CEO of ObjectVideo Inc., which makes video-surveillance software.  [Larry Greenemeier, Information Week, Jul 19]  And they are both in favor of a free lunch by having more handout programs than tax collection programs. 

Help the South Help the Nation.  Wanted: all managers in private-sector research and development (R&D) facilities. The Southern Growth Policies Board is conducting a nationwide survey to gain insight into drivers and policies of industrial R&D. The survey attempts to illuminate university-company relationships. If you are a manager and can spare 10 minutes of your time for the online survey, visit the survey at Questions may be directed to Scott Doron, director of the Southern Technology Council, at

Government by Lottery.  SBIR proposers might reasonably  believe that the government selection process is little better than a lottery. Now the government, in a non-SBIR program is actually reverting to a lottery to pass out 50,000 awards to 500,000 eligible candidates. HHS says it will give "50,000 lucky individuals" chosen in a lottery up to a 16-month jump on Medicare prescription drug coverage, paying for costly medications for cancer and other illnesses this year. That's less than 10% of the estimated eligible recipients. It's all part of the huge misunderestimation of the deficit caused by simultaneously cutting tax rates and passing misunderestimated medical handout programs. Don't they ever learn that health programs are like SBIR - unlimited demand for a free good? 

Kill the Porkies.  The libertarian CATO Institute (less government is more liberty) has a new policy paper that names all the programs that should be eliminated because they are wasteful, better done privately, or the domain of the states. Among the long list are ATP, MEP, and SBIR as programs that merely substitute government funding for private R&D funding. The author cites a GAO study that most ATP granteees never even looked for private funding, and Wallsten's paper on SBIR companies' reducing their own R&D spending with every SBIR dollar. [Chris Edwards, Downsizing the Federal Government]  The good and bad news is that there is NO CHANCE of killing these political pork programs in a representative democracy. We love our handouts especially from presidents who tell us we don't have to pay for them. 

Costless Handouts? The pols bandy a broadband tax credit to spread a technology that is spreading just fine with purely private sector money. Tax credits are a way to hand out money apparently without spending money. The downside is that endless tax credits complicate the tax structure and get government into micro-managing the economy. 

Don't Cut You, Don't Cut Me, Cut That Guy Behind the Tree. the House subcommittee for Commerce, Justice, and State appropriations last week decided to fund the Manufacturing Extension Partnership at $106M in fiscal year 2005  Right wing government cutters just cannot bring themselves to cut a program that hands out money to middle and upper class folks a substantial percentage of whom will vote later this year. "Shrink government" applies only to Democratic constituencies. MEP is a small money corporate welfare program with little noticeable impact, but it is, like SBIR, a vehicle to hand out money and be on the record for manufacturing and motherhood when jobs is a political question in an election year. Where will the money come from? From the delicious scheme of borrowing several hundred billion dollars a from foreign lenders to pump up the national economic activity and give the impression of prosperity. When will the bill come due? Isn't it  a nice day for kissing babies. 

Tell them what they ought to be seeking. The AF materials and manufacturing folks are calling companies to talk about their planned SBIR topics for 2005. Dayton July 13-15.  If you have hot stuff, it may not be too late to get them to invent a topic that will accommodate your idea. The AF bureaucracy can move fast and adapt its plans whenever it sees enough incentive. Otherwise you can see and smell the topic writers. Info

What you may want/need before your Phase 3 SBIR ship comes in is a friendly politician to insert pork money in the federal budget earmarked for you. Since you are unlikely to be a noticeable campaign contributor, you may need the services of the right kind of beggar - a lobbyist. One lobbyist (no endorsement implied) claims a lot of success with Phase 3 SBIR which don't need further formal competition for a government contract. Strategic Marketing Innovations whose head has a materials history and one of the newest members of the team has SBIR and MEP experience. 

Grand Challenge 2005. DARPA will do another desert race for smart vehicles. Participants’ Conference  August 14, 2004 at the Anaheim Marriott. Details. Last go-around only a few entrants made it out of the starting gate and nobody, but nobody, got very far. Read an entertaining Slashdot blog.   Who knows, maybe you have just the gizmo that the institutional entrants (CalTech, Stanford, Mellon, etc) need. 

NIH says it has $630M for small business. Unfortunately, it also has some peculiar requirements and attitudes. Fortunately, it has its own SBIR conference with perhaps a chance to pierce the veil.  June 23-24 in NIH's home campus in Bethesda MD. 

HHS Wants to Know how to get more innovation. It is forming an internal task force to weigh new ideas and promote new solutions. The public can send suggestions until Aug 23 to It might start with overhauling its SBIR by centralizing at least a portion in an office with an economic agenda to squeeze something useful from R&D. 

Federal R&D Dives Despite Infinite Demand for a Free Good, Maybe.  Gloom and doom, again, for takers of federal R&D money. Or so say the readers of the proposed federal budget. In an exchange at the annual AAAS symposium, Daschle faulted the U.S. Administration for “abdicating its responsibility” to fund science at a level that cutting-edge research demands. Presidential Science Adviser John H. Marburger III countered, pointing out that R&D funding under the proposed FY 2005 budget represents a 44 percent increase compared with the past four years.  But the doomsayers overlook that once again it's an election year (actually, election is every two years anyway) and the porking politicos will NOT be cutting off anybody who votes (or contributes). Close out ATP when W's father couldn't do it either?   Whack $660M from DOD research in wartime? Cut Energy Science when gas prices soar and the politicians pine for the tooth fairy of "energy independence"? Cut weather research after "The Day After Tomorrow" disaster film? The vested interests have their ways of keeping the largesse flowing, especially when the politicos can run a deficit with few immediate consequences while they cut government income. After the efficient free-market government advocates finish pontificating, they will get down the to serious business of paying everyone off. [Scare story from LARTA]

DOD says it funded 1882 of 15000+ SBIR Phase 1 proposals last year. Why do so many companies spin their wheels in a low hit rate quest for free money? Most way over-estimate their chances by underestimating the nature of the competition. If you do not KNOW that you have the best thing going on the subject, or an inside line on the agency, your chances are way less than the average hit rate of about 12%. 

Has ATP Done Well? A new report from the Advanced Technology Program (ATP), A Toolkit for Evaluating Public R&D Investment, provides useful information to anyone interested in evaluating publicly-sponsored research and development (R&D) programs. While the report focuses on more than 40 evaluations that have been performed for ATP, it offers one of the most comprehensive and understandable overviews of evaluation methods and applying those approaches.  Unlike SBIR, ATP hires economists to study both the ATP philosophy and the economic results. In the words of this report (an evaluation of evaluations), 

Election Year Platitudes.  “Secretary Ridge and I are delighted to be partnering with these small businesses to find new technologies that will allow us to better protect the homeland,” said Dr. Charles McQueary, Under Secretary, Science and Technology.  “We know that these awards are the first of many we will make under the Department's SBIR program.” .... “The SBIR program is a shining example of our commitment at DHS to work with the small business community,” said Kevin Boshears, Director, of the Department of Homeland Security's Office of Small and Disadvantaged Business Utilization (OSDBU).  “We look forward to our continued partnership with the Science and Technology division as we promote small business inclusion in both our procurement and R&D programs.”  Before they have awarded the first Phase 2, they already know that SBIR is a shining example - of something. When will we on the outside know the real DHS criteria? Not until they have made many awards and we have pawed through the fluff of the winners and the bureaucrats. 

Shrinking Government.  NIST says it will have to lay off (or buy out) government workers to get its expenses down to its budget. Maybe 100 workers. Usually such layoffs don't happen until it has exhausted its cutting of outside contracts awards, which means that you should be wary of depending on NIST funding for anything, even contracts already in place.  Shrinking NIST goes with the Bushies' idea of free-market government that does not pick winners as in MEP and ATP. Maybe NIST would revert to its original role as the National Bureau of Standards before funding commercial R&D got popular. 

A New York Times article today sounds an alarm over the US falling behind in science and innovation, especially in the physical sciences. ... Europe and Asia are forging ahead in scientific publications in physics and science and engineering doctoral degrees granted and are quickly gaining ground in patenting and Nobel prize winnings. And it warns that politicians and the public are oblivious to the trend and its implications for jobs and overall competitiveness.  Couple this with the decline in the number of students going into undergraduate computer science/engineering in the US (blamed in part on offshoring by the Computing Research Association that did this survey), and it makes you wonder if in 20, 30, or 50 years, we’ll be looking to places like China as leaders in innovation.  This trend raises a number of questions: How valued are math and science in U.S. elementary and high school education, and by American culture compared to other countries? Does government spending on R&D (still at record levels in the U.S.) translate into actual results?  [MIT Tech Review, May 5, 04]  Has there been a long-term decline in numeracy in the population that leads to a decline in vocations to numeric careers like science and engineering? Does the over-riding concern for the pork barrel aspects of government R&D funding prevent accountability and guarantee mediocrity? 

Not so quick after all. The Navy cancelled its let's-get-it-now SBIR Program Quick Response Topics that would have closed June 2, and included it as an add-on to the small June 15 DOD 04.2 solicitation. Too bad, it would have been interesting to see if the Navy could indeed adapt to a quick response and get something to help a present hot war.   Unfortunately, the solicitation gives no clue that proposals in these topics will get anything but the usual process. The Navy could have said something like: accepted proposals will get an immediate telephonic go-ahead with contract formalization to follow, or there is no fixed cost ceiling for these Phase 1 proposals and the Navy may accept a proposal at a lower than requested cost with a take-or-leave-it adjustment to the scope of work, or proposals will also be judged on whether the company can deliver quick Phase 1 results for a small cost. Something, anything that sends the message that time matters. After all, it is only three topics and the mission is urgent. It should not be hard for the Navy to tell which proposals, if any, can do the urgent and necessary. 

Yaddah, yaddah, yaddah, jobs, jobs, jobs. It's the silly season to pretend that government programs will save or produce jobs. The Kerry campaign promises $200M for three new, albeit modest, proposals: starting a government-backed investment program to help create manufacturing businesses; doubling funding for an existing program to prod small and medium-size businesses to adopt new technologies; and restoring funding for the ATP.  The Bush campaign, of course, promises that new tax cuts will re-vitalize jobs. We have a long history of so-called government investment schemes for "jobs, jobs, jobs," with little to show that any of them actually produced any jobs that would not have happened anyway. SBIR is one example of how little is achieved with such programs. SBIR cannot show any economic benefit, and any jobs it paid for would have come from equivalent jobs at companies who would have won contracts for the same services. ATP, which in principle ought to have real results since it only "invests" in commercial technology is still an economic muddle and a classic case of government picking winners in a capitalistic economy. Come on, politicians, give us stable laws and banking, fraud-free markets, and good education, and the economics will work itself out just fine.  But then, we get the government we deserve

Big firms still aspire to make truly great breakthrough inventions—products that will underwrite their profits for at least a decade. They are, however, coming up with such inventions less and less often, even though many industries, notably pharmaceuticals, continue to spend vast sums trying. Indeed, for most of industrial history, small firms have been responsible for the bulk of breakthrough products. America's Small Business Administration claims that the pacemaker, the personal computer, the Polaroid camera and pre-stressed concrete all emerged from small entrepreneurial outfits, and those are taken only from the list of items beginning with the letter P. .... as history has shown time and time again, a bevy of in-house scientists gives no guarantee that their output will protect their employer from technological change.   [The Economist, Apr 24]  Does the government have the same defensive attitude? Of course, all bureaus think alike. Does it use the tiny SBIR as a vehicle to discover its way out of the incrementalism trap? All bureaus think alike. Is a different shape flak jacket like a different shape corn chip? All bureaus think alike. 

It's Election Year. President Bush  promised to boost broadband access to the Internet (with tax breaks, of course) , highlighted federal grants to develop hydrogen as an alternative fuel and set a 2014 target date for all Americans to have their medical records in a portable, electronic format. [LA Times, Apr 27]  Even free-market oil champions promise goodies. Actually putting up new money to fund the promises? Don't ask unless you like smoke and mirrors. Before returning to Washington from Minneapolis, the president attended a $1-million fundraiser for the Republican National Committee. 

Austin was one of the country's fastest growing metros during the 1990s, with job growth rising 7% per year. ... The technology bust hit Austin hard. The manufacturing sector lost 28,000 jobs 2001-2003 shrinking in importance from 12.3% of employment to 8.7%.  [Fed Rsv Bank of Dallas, M/A 04] So, what should the federal government do to help Austin recover? Nothing? Life gives and life takes? Booms lead to busts? Possibly, the ultimate capitalistic approach of hands-off the economy. Or it could use real innovation potential as the main criterion for SBIR, which would push more money and opportunity into the entrepreneurial companies in the San Antonio-Austin area and put more zest into the whole American economy. It should NOT, repeat NOT, use regional geography as a criterion. Austin has no more right to federal help than Helena, Syracuse, or Tifton. 

Got a cheap titanium idea? Try DOD which just let a $12M contract with Titanium Metals (not an SBIR firm) to refine a new British process. [Business 2.0, Apr 04]  Why do you suppose the idea didn't originate in a DOD SBIR firm instead of Cambridge University? Could it be that DOD hates risky ideas for SBIR? It would rather buy on the world market that develop new ideas at home. After all, if you are a bureaucrat, your career will last a lot longer with a 99% success rate on a 1% gain than a 1% success rate on a 99999% gain. 

The Kansas Economic Growth Act plans to splurge (oops, invest) $500M on biotech and entrepreneuring starting with recruiting 25 eminent and 35 rising star scholars at state universities. (Maybe the prospective science stars will take one look at Kansas's track record with creationism and decide that religion trumps science in Kansas.) In a marvel of economic prediction accuracy, it anticipates $593.1M in future revenue. (Maybe significant figures are religion-based also.) What is calls major initiatives are Angel Investment Tax Credit, Kansas Center for Entrepreneurship, Kansas Community Entrepreneurship Fund, Kansas Downtown Redevelopment,  and Enterprise Facilitation. [source, SSTI, Apr 19]

Among the ideas [Kerry]'s likely to propose: a national broadband strategy to promote superfast Web connections, tax breaks for investments in startups, and more federal dollars for research that can foster lucrative commercial spin-offs. His goal: Woo techies -- and draw a sharp contrast with President George W. Bush, who many in techdom say hasn't lifted a finger to help them. ... Kerry backers [say] "The only problem Bush solved was the traffic in Silicon Valley,"  Bush supporters say those attacks are off target. "The success or failure of technology is not decided by activism in Washington," says former Bush Administration official Bruce P. Mehlman. [Catherine Yang, Business Week, Apr 19]  Whether you're pro Bush or anti-Bush doesn't matter much for SBIR. Neither Clinton nor Bush has the gall to direct the agencies to actually make SBIR economically accountable. The Clintonistas did at least instigate Fast Track at DOD under the leadership of Jon Baron and Paul Kaminski. Without forceful White House leadership, which is NOT gong to happen, the agencies will muddle and serve their own interests as they have for two decades. . 

The CIA is on the prowl for a few innovative academics.... "We're looking for terrific research that needs some help moving to the next stage," says Gilman Louie, president of Arlington, Virginia-based In-Q-Tel.  CIA officials founded In-Q-Tel 5 years ago to obtain cutting-edge technology from small, young firms traditionally reluctant to work with the federal bureaucracy. [As reluctant as the bureaucracy to deal with small private entities.]  It has since supported more than 50 companies, typically spending up to $3 million per project. Tapping its roughly $35-million-a-year budget, the company is now reaching into universities, too.  ... One approach is seed money--essentially grants of up to $300,000--to accelerate on-campus work on ideas that aren't quite ready for commercial development. Another is as a "matchmaker" that helps academics license their discoveries to a company already working with In-Q-Tel. For particularly promising inventions, In-Q-Tel will help create a start-up company to develop the product.  [David Malakoff, Science, Apr 2]  Any innovative agency could do the same thing with its SBIR. Just don't expect innovation from agents who have no reason to accept change willingly. 

Me, too. Since TSA and the Navy are developing a odor sniffer, EPA wants to develop the same thing.  After a $1M TSA SBIR and  navy SBIR, Implant Sciences will get an EPA SBIR to start over developing the same odor-sniffer idea. Which is EPA's way to use SBIR for mature ideas that just need re-engineering to adapt for a different use. Innovation? Was already proved and developed by TSA and Navy. SBIR should be used to get new ideas started at the stage where the technical risk is too high for private investment. How about using that money for risky new ideas by risky new companies in Albuquerque and Ann Arbor and Atlanta? 

Incoming RPG - Kill It! Now! The Navy is appealing for quick kills with a special SBIR solicitation to close June 2 on Technologies to Defeat IEDs, RPGs, Mortars, Rockets, and Missiles (even rocks, maybe).  Full solicitation; yes they need full proposals. A sweetener: the few, the proud, the killers can get $1M in Phase 2.  BTW, if you have a killer idea, don't wait for the slow moving SBIR. Call the Navy today!  And the Army. They can always find instant money for things that will defeat enemy weapons on a present battlefield.  Don't bother re-cycling old ideas; they've already heard them - twice.  Note: this is NOT the regular DOD spring solicitation that closes June 17. A practical warning: if it ain't great, they won't buy it.  They have no imperative to spend any money on this purely opportunistic solicitation; they can spend it on the regular solicitations for the usual junque they buy. 

"Me, Too" Politics.  “Our state faces many challenges, but perhaps none more important than maintaining our leadership in innovation and high technology,” said U.S. Sen. Patrick Leahy, D-Vt., in a statement. “The Vermont Center for Emerging Technologies and the other Vermont incubators will tap the technology potential that we have in Vermont and transform that into jobs.” [SSTI, Mar 31] Why shouldn't Vermont have an incubator called Vermont Center for Emerging Technologies, especially when it will be funded with $1M of federal money? And how will it be evaluated for either efficiency or effectiveness? No doubt the same way SBIR is evaluated, by political claims of goodness. Since it is a pork grant anyway, why bother evaluating it? 

Minnesota has one of the strongest "high-technology economies" in the nation, and the state is the only Midwestern state to make the top 10. The latest reading by the Milken Institute pegs Minnesota as No. 8 in the nation in science and technology prowess. ...In garnering awards for "technology transfer" -- turning university research into the building blocks for real-world products -- Minnesota ranked 17th, up from 27th in 2002....  Minnesota also saw major gains in small-business innovation awards from the U.S. Small Business Administration -- lifting the state to 22nd in the nation, up from 36th two years earlier.  [Minneapolis Star Tribune, Mar 31] Which says that university tech transfer and SBIR are way over-rated for their ability to lift a state's place in the competition. The real power comes from attracting enterprises like Mayo Clinic, Medtronic, Boston Scientific, and the main-frame computer business in the 60s. 

Maine to Throw Money at "Commercializers". Maine has set up a $1M (so far) fund for companies with commercializable technology that has already been funded by another Maine program - MTI. That is, having funded a company with a story, it will now double its bet when the story doesn't come true as projected - a recipe for mediocrity unless ruthlessly managed. Just look at SBIR's track record in throwing more and more money into companies with technology whose success is just around the next corner and just needs one more helping of money.  At least Maine requires a smell test of co-investment by third parties.  Information 

Homeland Security SBIR started off with a whimper.  Although the list of Phase 1 winners from Homeland's first SBIR foray has few of the SBIR-junkies, neither does it have much that sounds like paradigm-shifting innovation.  Like an Army at war, it wants working gizmos, NOW, and funded a lot of ideas that sound like another adaptation of a technology the company has been regularly peddling.. Some day maybe, we'll find out how Homeland SBIR decisions are made, and then be able to target proposals intelligently. If Homeland wants to cut its workload of pawing through piles of proposals, it could be forthcoming with a useful description of what it is looking for - what kinds of technologies, in what state of maturity, and from what kinds of companies.  Don't expect such clarity from any federal agency. 

LARTA offers its Sand Dollar Report 2004, an analysis of the venture capital industry in Southern California, for sale. 

States must develop a supportive environment for entrepreneurs to prosper in an increasingly competitive global economy, according to A Governor’s Guide to Strengthening State Entrepreneurship and Policy, a recent report from the National Governors Association’s (NGA) Center for Best Practices.  Instead of developing competitive cluster-based models, the report observes, most state economic development efforts continue to be organized around traditional business retention and incentive-based industry recruitment programs. This approach leaves entrepreneurs to “fall between the cracks” of programs designed to support less agile business models, NGA says. ... Meanwhile  The Technology Administration (TA) has released the fourth edition of its guide of state science and technology (S&T) indicators. The Dynamics of Technology-based Economic Development provides an updated collection of data on the technology infrastructure of states, such as high school and advanced degree graduation levels, R&D investment and the numbers of patents issued. [SSTI, Mar 19] 

The Conservative Army. The Army, once again, relies on its officers and soldiers to fix its mistakes. With the usual fixation on fighting the last war better, they ditched plans to buy armored Humvees. The Iraqification mess forced the soldiers to improvise armor protection from Kevlar blankets and scrap steel. Now there's a rush to buy scads of armored Humvees as casualties mount and soldiers write home. The good news is that the Army's logistics chain is so big that the means to adapt can always be found by clever soldiers. The bad news is that the conservatism still extends to Army R&D, especially its SBIR, where innovation is something to be adapted later rather than sooner. [facts from Greg Jaffe, Wall Street Journal, Mar 19]

ATP will do a show and tell in Baton Rouge March 26.  Proposals due April 14. Other regional ATP events.  A glance at recent ATP awards says they are actually funding smallish companies for ideas with real commercial potential. SBIR junkies who want government to pay all the bills need not apply because sharing is required. 

Government nose under the tent.  Utah is pursuing a constitutional amendment to let the state (universities) take equity in private companies in return for intellectual property. Once politicians get part ownership, can they resist twisting private economic incentives into public incentives?  Ask the big companies who are getting hammered by CalPers. 

DARPA's tech innovation worked fine even though all the patients died - many entrants competed for a $1M prize to anyone who could get a robot vehicle from Barstow to Vegas. But even without an outright winner, there may be rewards of other kinds for those who compete. There are plenty of people in industry and the military who want to solve the autonomous-vehicle problem, says Ms Walker, and they will be watching the race closely. [The Economist, Mar 11] Maybe SBIR could learn a lesson in how to get innovators fired up. A prize instead of a paycheck. DARPA spent $13M on the Grand Challenge. [Some of the smartest money it ever spent] It estimates competitors laid out a total of four to five times that amount developing their entries, which rely on global positioning satellites as well as a variety of sensors, lasers, radar and cameras to orient themselves and detect and avoid obstacles. Most of the vehicles Saturday made it less than a mile before stalling, overturning or running off course. [Associated Press, Mar 14] 

How About Three Strikes and Out?  The U.S. has no choice but to emphasize what it does best in this coming rivalry -- and its most important strength is innovation. Commercializing innovation is America's core competence. We do it better than anyone else. But faced with other potential innovators on the global scene, we have to start doing it even better. So it's time to do away with ideology and pretense. While it may be folly to pick specific winners and losers, the federal government has a key role to play in fostering basic research and development.... It's time for Washington to focus on innovation, not protectionism, as the way to ensure jobs and prosperity in America. Venture capitalists are eyeing five possible areas for break-away innovation. The Business Week (Mar 22) editorial goes on to name five tech areas where government could actually do something useful: energy, broadband, biotech, nanotechnology, and health care.  Ditching the protectionism should apply also to SBIR which has become a protection program for mediocre businesses that cannot compete in the real world and thus funding them gets us nowhere on the road to commercializing innovation. For example, if a company has had three (pick your own number) Phase 2s in a technology, it's time to force it to get real and get out. Giving it more money merely incentivizes dependence and development failure. 

Science Park Myths. Scott Wallsten is once again in the face of conventional wisdom. This time he says that science parks do little to improve regional development. Politicians and governors love science parks because it is something quick and visible in search of a solution for tech economic success happening somewhere else. Legislatures can appropriate money and/or tax breaks, the one thing they do really well, and claim they are solving the problem of inadequate economic development. A few years ago, Wallsten found that much SBIR hype was hooey.  One feature that matches SBIR pseudo-analyses is that the only vaild measure is how many companies or how much economic development happened that would not have happened anyway. And unlike SBIR analyses and regional political victory claims, Wallsten uses econometric data The AEI/Brookings study

Not so long ago, almost every state wanted a "silicon" of some sort, a forest, a prairie, or even just an alley. Next, their longings turned to "bio." Today, everybody wants "nano."  Nanotechnology is the latest rage among states and regional groups looking to revive battered economies. Nanotech research centers are sprouting on university campuses from Atlanta to Phoenix to Fargo, N.D., and states are spending hundreds of millions of dollars to get in on the ground floor of what is alternately described as the "next big thing" and "next industrial revolution."  [Robert Gavin, Boston Globe, Mar 8]  Companies who rely on such state largesse run a huge risk of early abandonment. Legislatures don't have long-term minds. 

Election Year SBIR Order. Since manufacturing jobs are a political touchstone, the White House has published an executive order to have all departments focus on manufacturing in SBIR. to the extent permitted by law and in a manner consistent with the mission of that department or agency, give high priority within such programs to manufacturing-related research and development to advance the policy. But the effect is likely to be nil on re-election since the aircraft carrier of the government programs can't turn sharp corners. No matter, it gives political bragging rights on concern for motherhood. Politics always trumps policy.  It is actually a good long term policy but one that is mostly ignored by the agencies who favor knowledge over innovation and are likely to continue to do so.  

When Government Owns Equity.  Minnesota's investment fund, one of the largest shareholders in a Big Pharma company, is using that equity to influence the company's business. The long-standing American idea that business and government are different spheres gets subordinated to political needs to satisfy voters' economics. Minnesota wants to stop Big Pharma from cutting off supplies to pharma retailers who sell to Minnesota residents at Canadian government subsidized prices. Such entanglement is why the federal government doesn't take equity in SBIR firms in return for investment capital (in those few firms that actually do government-funded R&D as capital investment). The added downside is that the retirement fund deviates from its fiduciary investment responsibility into public policy making at the expense of the state employees. 

A Little Delaware Money.  Delaware is putting up a little money for start-ups in a state that hauls in money by the truckload being legally friendly to corporate management.  It will create a $1.5M Technology-Based Small Business Seed Fund to give $50K to start-up tech firms for  lab equipment, working capital, lab and office space, patent filings, or prototyping. Plus $3M in venture fund. Plus $1M for an incubator. Plus $800K in Clean Energy Performance Grants to attract manufacturers of clean energy technology (too late for AstroPower). [SSTI, Feb 27]

Take to the Streets to Demand More SBIR so everyone can benefit?  March on Washington. It 's so French. Sauvons La Recherche says the banners. Hundreds of lab directors have threatened to stop doing admin duties, re-activate 550 jobs abolished for outsourcing, an Internet petition with 42,000 signatures, a string of broken promises, "the science community has no confidence in what the government says."  Well, at least the latter could apply to governments everywhere including USG support for real innovation in SBIR. [story from Science, Feb 13]

If you want to play real politics to get government contracts, the game costs money. You can snuggle up to your local Representative, or more remote Senator (the bigger the state the more remote the Senator), or you can hire a Congressman's daughter. For Defense, for example, consider Karen Weldon. Karen Weldon, an inexperienced 29-year-old lobbyist from suburban Philadelphia, seemed an unlikely choice for clients seeking global public relations services. Yet her tiny firm was selected last year for a plum $240,000 contract to promote the good works of a wealthy Serbian family that had been linked to accused war criminal Slobodan Milosevic. Despite a lack of professional credentials, she had one notable asset — her father, U.S. Rep. Curt Weldon (R-Pa.), who is a leading voice in Washington on former Eastern Bloc affairs. [Ken Silverstein, Chuck Neubauer and Richard T. Cooper, LA Times, Feb 20] Weldon also never met a weapons system he didn't like. He probably won't (can't) help with SBIR but he could help with Phase III deals where appropriations (a little extra money earmark in the DOD budget) are required. . 

Meanwhile, Minnesota interests want the budget-strapped legislature to pony up $70M to create what they say will be 4000 biotech jobs and many hundreds of millions of dollars in economic activity. Oh sure, say the legislators, where have we heard this story before? 

Political science battle. The Bushies rush to counter complaints by "prestigious scientists" that science policy is more  politics than science. OSTP's head Marburger calls the Union of Concerned Scientists 37 pages of examples more political than scientific. Only more money will temporarily quiet scientists who have an infinite demand for a free good.  

the fight against al Qaeda has poured $135 billion into defense-related technology just since 9/11. Some of that cash is nurturing a new crop of startups building innovative intelligence tools, communications gear, and advanced weaponry. [Paul Kaihla, Business 2.0, J/F 04]  Four companies mentioned: security consultant Blackbird Technologies (Herndon VA), wireless broadband Rajant (Wayne PA), IatroQuest (Quebec), and Ionatron (Tucson AZ). None of them show on DOD's SBIR list. Ianatron's employee count is classified, it's funded by an angel, has a website with only a Contact Us page, and reportedly has developed a ray gun to disable vehicles. Of course, all that could be a cover for a product that is all viewgraphs. On the other hand, if the product really does do the job, DOD would not go through the painfully slow and limited SBIR to get  it.  SBIR is for ideas that the agency only wants to dabble in. 

Hold That Tide! While in Georgia that typically refers to UAlabama football opponents, now it means that Georgia wants to pass a law stopping the globalization tide at the Georgia coast. State legislator Curt Thompson has introduced a bill in the General Assembly that would ban the state government from outsourcing its call centers and other operations overseas. [Atlanta Business Chronicle, Feb 13] It's yet another political response to free-market capitalism, which in the 19th century helped put Georgia in the Civil War, as Atlanta ISP company EarthLink shifted at least 1300 jobs across the seas. Ah well, it's an election year and no politician loses votes beating up on outside competition. SBIR hopefuls take note: some federal agencies are not far distanced from the tide-holding attitudes. Make your proposal ease the technocrat gently from the present to the future. 

The libertarian Cato Institute warns against too much government support of nano-technology - the current darling of political technology.  Dangerous, uninsurable ventures will rightly scare off investors. But government domination and subsidization of frontier scientific research can take it out of the realm of insurability and even provide immunity, such as that provided by the Price-Andersen Act, which limits the liability of nuclear power plants. More worrisome, today's military and homeland security emphasis on nanotech can have significant implications for nanotechnology's evolution and for the public policy stance taken toward it. Homeland security legislation already indemnifies some companies from liability when their "security technologies" fail. Taken too far, government control of nanotechnology can mean a liability market may never emerge. If one is concerned about nano-safety, subsidies should end, and the private sector should pick up the tab and the responsibility. [WAYNE CREWS
Director, Technology Studies]  Thanks to Instapundit blogger for pointing to the story.

Pat Dillon, long time SBIR expert at Minnesota Project Innovation has become executive director. She is seen at every SBIR conference.  

Innovative small firms abound.  the late 1990s into 2000 was a very good time for highly innovative small firms. They increased their presence among the nation’s most innovative firms from 33% to 40% during this period. In addition, we have found that in certain key technology areas /industries:  small firms are an attractive destination for elite inventors;  large and small firms rely heavily on small firm technology;   we see increasing numbers of highly innovative small firms. SBA's Office of Advocacy released a report Small Firms and Technology: Acquisitions, Inventor Movement, and Technology Transfer which examines the role of small firms in tech advances. The main indicator was patents rather than profit or ROI presumably because patents are public data.  Since SBIR was not an item in the study, no conclusions can be drawn, EXCEPT that since technology and small firms are alive and well, where is there any compelling rationale for forcing federal agencies to set aside 2.5% to nurse them? Advocacy undercuts its SBIR arguments by showing that small business is well rather than sick and in need of government succor. Indeed, the SBIR succor has had no demonstrable effect anyway. Will the report be used by the agencies in picking SBIR winners? NO, since it is unlikely that any SBIR decider will ever read it. 

Political science. The Dems have a website Politics and Science that hopes to uncover an ongoing record of interference with science by the Bush Administration 

Defining Commercialization Down. The political arm of SBIR - the SBTC - has a task force to "assist" the NRC's SBIR evaluation by diluting every economic commercialization measure and substituting softball measures.  The task force is led by the CEO of a science-for-hire firm that drinks often at the SBIR well. SBTC disdains VC funding, makes no mention of ROI by any measure, doesn't want agencies to force SBs into an "unrealistic business model", never mentions past commercialization as an evaluation metric for future prospects.   In an interesting twist SBTC also complains that the agencies channel ever-larger proportions of their small business technology acquisitions through [SBIR]. In other words SBTC represents a narrow class of SBs who want SBIR spent on companies that do science-for-hire (and presumably pay dues to the coalition).  They needn't worry: the agencies aren't likely to pay much attention to whatever NRC concludes nor change their SBIR model of a social set-aside from which they will extract as much as they can back to the programs that were robbed to pay for it. SBIR hopefuls who believe the talk about government funding disruptive innovation should re-calibrate their ideas about what to propose. 

SBIR Advocates Squeal over SBA Shuffle. When SBA re-assigned Maurice Swinton to another job for no apparent reason (bureaus do things like that), the SBIR champions complained that Maurice was the best SBIR administrator ever born (or words to that effect). But the effect on SBIR's getting results that OMB might accept as "demonstrated" does NOT depend on the quality of the SBA policy overseer. It depends on the agency's selection of new technology in entrepreneurial companies, not in merely serving their bureau's immediate interests. But that won't happen until Congress demands results instead of handouts.  SBIR Gateway urges everyone to scream to Congress.  

OMB also whacked the Commerce Department's SBIR for "results not demonstrated", a serious whack for a tiny $4M program since Commerce is presumably the prime agency for commercial technology. SBA also took a whack for spending $14M to administer a program that passed out only $475K in grants for business info centers for small companies.  See what government programs got a grade from PART. The other agencies missed getting whacked for their SBIR results because no grades were issued for them. Note that bad "results" will have no effect on SBIR since, like all pork programs, it is protected by politics and not by any ability to produce good results. 

OMB whacked DOD SBIR with a "results not demonstrated" stick in FY05 evaluation called Program Assessment Rating. The main whack is that DOD keeps funding companies that repeatedly fail to sell products in the marketplace. It also said that DOD overestimates even the meager results by counting further SBIRs as commercial success. [story from Federal Technology Watch, Feb 9]

Politicians love nano-fad. The president's budget recommended a few tech items. Nanoscale science and engineering (NSF) up 20%; .Clean Coal Power Initiative (DOE) up 60%; ATP zeroed; six new Science and Technology Centers and two new nanotechnology centers (NSF); Technology Opportunities Program (DOC) zeroed; Technology Opportunities Program (DOE) halved. [data from SSTI, Feb 6]  Remember thought that these are just the Prexy's going-in position  mostly driven by a need for electoral claims of virtue. Reality legislating will restore most cuts while passing out as much money as possible to every decently represented interest. 

We Can Never Be Too Rich.  Massachusetts is falling behind in the race to attract federal research dollars, according to a "technology road map" that is set to be unveiled by state business leaders this morning.... In particular, the road map suggests, competing states have been quicker to form government-industry partnerships and have made greater investments in their public university research bases. ... the director of the state Department of Business and Technology, said the $100 million allocated by the Legislature would be used to match federal research grants, build public-private alliances, and improve research facilities.  [Robert Weisman, Boston Globe, Feb 6]  Does MA think that government dollars is the key to economic success even with a conservative government that pledges (but never tries very hard) to shrink government?  Maybe MA would be better served by having top quality of life that attracts smart and entrepreneurial people with choices. Although it cannot do much about the winter weather, the state government can arrange attractive tax structures, public schools, public safety, and honest politicians. 

Want good state help with SBIR? Start your company in Minnesota where MPI has been helping companies with both SBIR proposing and business advice for many years. Unfortunately, the state budget problem led the governor to cancel MPI's funding, but has now relented to at least match the federal dole to state organizations. That's at least a total of $200K a year for Pat Dillon who has been giving good advice for a long time. Says Larry Werner in Feb 5 Minneapolis Star Tribune, her agency has helped secure more than $250 million in federal grants for small Minnesota companies. Hundreds of millions more came to Minnesota small businesses in the form of sales to the federal government through MPI's Procurement Technical Assistance Center, which was absorbed by the Metropolitan Economic Development Association after the MPI funding expired last fall.

As of the beginning of the year, the United States Patent and Trademark Office has changed its fees. For a full list of the fee structure visit

A war that is serious enough to lock up citizens as enemy combatants is somehow not serious enough to get a budget estimate. The President's proposed Defense budget boosts R&D a little but defers estimates for war operations until (they hope) after the election. 

"effective" cuts no ice in politics. OMB rates substance-abuse prevention and "ineffective" but the president's budget proposes spending 3% more next year. Meanwhile, he would kill the $170M advanced-technology program which OMB calls "adequate."  Oh. don't worry, the budget is just a political document and a framework for Congress to do whatever it wants. The pork programs will continue with whatever rationale sounds good. 

Michigan Dreaming. The governor of Michigan offers a deal for matching SBIR awards, saying that Each matching state dollar we provide through the [Emerging Business] Fund will allow these companies to obtain eight dollars in federal SBIR funding. Altogether she promises half-a-billion dollars for VC and other funds in a mission to grow the economy to diversify and grab the attention of entrepreneurs. ...  New ideas can create entire new industries almost overnight.  [story from SSTI, Jan 29]  History says that the state will not have the fiscal tenacity to keep pouring money into longish term projects, especially to match SBIR funds which mainly go to projects that serve only the federal government. Other states have tried VC funds and found them wanting. There is lots of evidence that government, including federal, cannot pick winners and should rather focus its efforts on providing the nourishing environment for tech business - good universities, good schools, good weather, and good large businesses.

As Elting Morison has shown in his classic study of the prolonged delays by US Navy in adopting continuous aim firing, militaries in general are resistant to technological innovations that might alter their stable and highly structured social dynamics. [MD Gordon's piece on the creation of Russian smokeless gunpowder, Technology & Culture, Oct 03]

...... A Whole Lot is Better.  Drawing on a long career in science journalism, Daniel Greenberg cogitates in Science, Money, and Politics on the current state of national science policy. In particular, he focuses on the process by which American scientific research (mostly basic and academic) feeds at the public trough. Greenberg believes that science stands nearly unique among American endeavors in its lack of oversight despite the enormous public investment bestowed upon it. His central argument is that after World War II the American scientific establishment became singularly successful in securing ever increasing public funds for basic research, but that it did so at the steep price of eroding ethics and a diminished presence in public life.   SBIR advocates follow the same line - there is no such thing as too much. The SBA once took the line that every technically acceptable proposal should be funded. As the Army used to say, if a little bit is good, ....  The old Army had a practical limit - how much a soldier could carry. 

Manufacturing Shell Game. Stung by a continual drumbeat of 41 straight months of job losses in manufacturing, Bush has a plan - the talk and shell game of the street hustler. Various administration faces says various things about whether there will be any new money for MEP. One element cites "a newly coordinated MEP." whatever that means. After all the conservative blather about corporate welfare, it is an election year for a president who has shown little spending or political restraint  Another element is a "recompetition for all MEP centers, with a focus on effectiveness and cost-efficiency.", again, whatever that means.  Never mind, it's also a Congressional re-election year and the goodies will be passed out, including oceans of words about how critical manufacturing is to the national economy, blah, blah, blah.   Look for level funding which lets the politicians avoid charges of cutting critical programs (those that produce votes). 

Georgie One-Note. The Bushies have an answer for the perceived trials of American manufacturing. Guess what?  Cutting upper class taxes, tort reform,  less "burdensome" regulation (like worker safety, dumping, overtime).  The same remedy is recommended for all other problems, like any danger of failing re-election.  Manufacturing is a political motherhood in an industrial country and the politicians will say or do almost anything to pretend to be fostering it. W must be getting worried about all the Midwest manufacturing that are not re-appearing as the economy "grows". He even gave up the battle against MEP. Perhaps he could do something worthwhile by converting SBIR, which could develop all kinds of new manufacturing ideas, into a growth program instead of a mere set-aside contract research agent for the federal agencies.  Ah well, it's an election year and pandering is to be expected. 

Michigan Too.  Last week Gov. Granholm signed bills to aid Michigan’s tool and die industry and to promote new venture capital investment in the state’s high-tech industries. The Michigan Early Stage Venture Capital Investment Fund would provide tax credits for investors as the fund could be invested in VC companies to promote investment in qualified businesses. The hitch comes in "qualified businesses" which usually means the ones that real VCs don't like. [story from SSTI, Jan 16, 04 ]

Politics Beats Principle. The administration now loves MEP which until now it has tried to zero out. Re-lection prospects must look glum in the manufacturing states where unions and democrats have a lot of clout. Blah, blah, blah, wonderful things will happen if the government funds a program where government gives advice to the private industrial sector. Of course, the beneficiaries have always loved it even though they cannot show that it made any economic difference. In politics, atmospherics count. Look for Congress to wade in to the handing out of pork and to make grand pronouncements about how critical MEP is to US manufacturing competitiveness. Ah yes, that old apple pie standby - competitiveness. Then look in 2005 for the administration to revert to starvation funding.  Ain't politics a hoot?

SBA says Congress released another $470M to re-start the 7(a) loan program. Seems odd that a Congress not in session can do anything decisive. All to typically Congress plays executive but ladling out funding piecemeal with a requirement that the executive ask for more funding when the allocation runs out. Gone are the days when the Congress passed the laws and the President faithfully executed them. The power competition envisaged in the Constitution induces each to play games with the laws. 

Boston Makes, Defense Takes. Just like the big sign on the bridge at Trenton NJ, the Boston technology haven wins a lot of business in counter-terror operations and other defense spending now that the peace dividend is gone. . From motors for the Navy's ships to fabrics to keep soldiers warm, this area's manufacturers are playing a big role in the war against terrorism.... According to a Defense Department study, Massachusetts with $5.2 billion in defense contracts in fiscal 2001 ranked sixth among the 50 states in defense dollars coming in from contracts. In fiscal 2002, the state total was $4.9 billion, and it ranked tenth. ... Officials from companies doing defense work in the region say that the engineering and scientific muscle provided by colleges such as Harvard, the Massachusetts Institute of Technology, and the University of Massachusetts at Lowell leave the region well positioned to meet the Defense Department's demands. As the military is pushing for a more high-tech approach to its work, the high-tech companies and the defense contractors have begun working together. ... American Superconductor had to lay people off in recent years because of the general downturn in the economy, but it is hiring again to support the new contract work. They now have 264 employees.  [Christine McConville, Boston Globe, Jan 15]

Goals are for talking, mandates are for action. DOD's goal was 3%; its actual was 0.13% in contracts awarded disabled vets, says Robert Tomsho (Wall Street Journal, Jan 13). SBIR came a lot closer to its mandate of 2.5% because Congress watches the figures and the law requires the percentage as a minimum (which in government becomes a ceiling).  Small businesses headed by target groups like women, minorities, and women get only a goal which is just for talking and report writing and carries no penalty for failure. In principle, the government encourages veterans to start businesses but then leaves them dry. That's because the enablers are the legislators for political reasons and the executors are the bureaucrats who have no interest in minority votes. Tomsho says, It was different after World War II, when the G.I. Bill, enacted in 1944, provided small-business loans to veterans, among other benefits. During the law's first decade, more than 280,000 farm and small-business loans were granted to veterans of World War II and Korea. Congress ended that program in 1973. For a time, the Small Business Administration had a special loan program for Vietnam veterans but, by the mid-1990s, it was phased out as well. ...  The 1999 law set no penalties for agencies that didn't meet the goal. Federal contracting officials also say that the law gave them no legal authority to set aside certain contracts for veteran-only bidding.  ... At bottom, laws are one thing, political will to enforce is quite another. SBIR has survived because the law is seen not as charity but as investment in future  technology. In practice, it has little of either. 

Poking MDA for SBIR. Sen Kerry asked SECDEF why MDA isn't contributing its legal share to SBIR. Although the law dings MDA for 2.5% of its RDT&E extra-mural (outsourced) money, MDA seems unable (that is, unwilling) to spend it on SBIR. MDA has been playing a delay-of-game strategy for several years in inventing ways not to do the legally required SBIR and then saying it cannot handle the rush of such contracting at the end of the obligation period (two years). The real deal is that MDA HATES SBIR -hate, hate, hate  (even more than the other agencies hate it) - and is willing to risk Congressional storms to divert it to mainline programs. Read Kerry's letter.

No More Paper Chase   Aimed at streamlining the grants process, is a new central listing of available awards from all 26 federal agencies that dole out money for research and other programs. The site will eventually allow you to download an application and submit the completed package online, using free software. So far, five agencies have posted applications for selected grants, including the Department of Health and Human Services and the Department of Energy.  [Science, Jan 2] 

SBA declares poverty, says its 7(a) loan program is tapped out by increased demand and budget delays.  The San Diego Union Tribune says, Local lenders characterized the action as a temporary annoyance but said it could jar the thousands of entrepreneurs who are counting on the funds.  Just like SBIR awards, the annoyance is either small or great depending on whether you are the one not getting the money or the one passing out a little less. 

Some Pie for Us. Meanwhile, Intel and HP have a great idea for the government - more deficit spending. The CEOs, as part of a general high-tech industry push, want lower taxes (on themselves of course) and more government spending on research and education. The Computer Systems Policy Project also includes Dell and IBM. How much money? Less than the $30B agricultural subsidy for what they scorn as 19th century technology.  [story Washington Post, Jan 8]

Even though you haven't yet submitted all (or any) of your irresistible proposals to DOD, the next round solicitation has been posted, for 2004 STTR.   Proposals due on income tax day Apr 15. What are they looking for? The usual: a brand new idea that's been thoroughly tested from an innovative company that knows all the ins and outs of the DOD mind. 

VCs exited from 17 companies through the IPO gateway in the fourth quarter, the busiest IPO quarter in three years. Did SBIR play a role? Only by accident since the government shows no sign of caring whether public capital enters new technology or whether companies most likely to exploit a success should be favored in award decisions. SBA treats SBIR as an entitlement program wherein every technically acceptable proposal should receive an award. Fortunately for the national deficit, SBA has no public money to invest in R&D. 

After three years of steady decline, the venture-capital business stopped hemorrhaging in 2003, spurred in part by a rising stock market and renewed activity in initial public offerings of stock.  ... venture capitalists also renewed their faith in start-ups, reversing a three-year postbubble trend. Select companies with sound management teams and strong business models got funding, even if venture capitalists often spent months "kicking the tires" before placing their bets.  [Ann Grimes, Wall Street Journal, Jan 2, 04]  How will the government adjust to having more VC on offer for new technology? Yawn!  The government's attitude toward SBIR mimics the beneficiaries' lobby - only firms too mediocre for VC should get the free SBIR. The voting on the question of whether VC sponsored firms should be eligible still runs heavily negative. And since SBIR is a political program, voting by beneficiaries is likely to matter to Congressional rule-makers. 

GRAND RAPIDS – is rolling out MiTech Review, a comprehensive, twice-monthly e-Newsletter that will feature select, in-depth articles on the latest technology-based products and services from companies in Michigan and the Midwest.  to learn more, Christian Moskal, Editor & Publisher, Meanwhile in LANSING – The Michigan House on Thursday overwhelmingly passed a $150 million venture capital fund to target technology start ups and repay investors with tax credits if it loses money. The Senate passed the bill earlier.  The bills would create the Michigan Early Stage Venture Capital Investment Corporation.  More Michigan Tech News

A Cozy Procurement Deal.  ONR awarded an SBIR to upgrade an existing airborne instrument used for data collection on airborne particles. Of course, the company claims it is innovative and critical (and why would the Navy dispute such a claim?). The company is a heavy beneficiary of SBIR and the Navy gets to improve an instrument without spending procurement or R&D mainline money.  Cozy arrangement between an experienced handout company and the Navy bureaucracy. Not too surprising is a 1988 Phase 2 award for the basic instrument that will be modified and a 1997 Phase 2 for a related instrument aboard the plane. Anyone think any other company had a decent shot in the competition?  Did the nation benefit from innovation? We'll never know because economic measurement of any SBIR program is avoided like a disease. 

Army Phase 1s - the old pattern. Army SBIR loves math models and a few old friends. Physical Optics 10,  Triton Systems 6, Intelligent Automation 6, Aptima 5, Texas Research Institute 5, Foster-Miller 4, ALPHATECH, 4, Scientific Systems 3,  MER 3,  Architecture Technology 3, Coherent Technologies 3. The 11 firms had already won at least 1700 Phase 1s and about 800 Phase 2s. They need the work and the inspiration of a hand up?   The knowledge capturing included the well-loved projects like  Army Virtual Prototyping Vehicle Electrical System Management Design Tool, Agent-Based Knowledge Enablers for the Unit of Action, Using Cognitive Systems in Generation of Course of Action, C2-MATE: Command and Control Model-based Architecture Tool for Evaluation. Innovative? Every actor has a self-serving definition of innovation. 

California ROI, Not Enough. Even before the Gubernator chopped license fees, Califonria abandoned its tech innovation handout money despite a credible claim of a decent ROI. . CalTIP's success does not seem to be in question. The program has created about 1,245 jobs each year with an average annual salary of $63,000. Tax revenue generated by CalTIP has returned $2.27 for each dollar invested, representing a 127% return on investment for the State. CalTIP has leveraged $500 million in federal matching funds, attracted $900 million in private follow-on funding to California, and helped introduced 134 products to market. [James Klein, "Is California Killing Its Tech Industry?" Larta VOX, Dec 22]   It seems a shame that a similar federal program continues despite no credible ROI. So goes the politics of federal handouts. If there were political justice, CalTIP would continue and SBIR would be shut down. But if you're looking for political justice. search the administration's fanciful claims about bringing democracy to Iraq. 

Energy's SBIR closes Jan 6. What are your odds of getting through to the real money of Phase 2?  Probably less than you think unless you are a seasoned SBIR veteran. TDA Research, for example, in the last round of Phase 2s won three which brings the company's total to over 80 from a variety of agencies. 36 Phase 2s went to companies that have won a total of at least 1600 Phase 1s which led to roughly 800 Phase 2s. Emphasize your experience!  Energy clearly favors companies who do not graduate from handout programs. If Energy cared about anything but gaining more knowledge in its tech areas, it would progressively raise the bar of acceptance for companies whose SBIR total rises. 

helping small high-tech companies get from idea to market