| Volume 12, Number 2 2005
Pathways Beyond Innovation:
By Carl G. Ray
Innovation is defined as the process of taking new ideas to a point of inventing something
new; or a new way of doing things. Through the application of research results and
discoveries, innovation provides a pathway for creating new, value-added products and
increasing efficiencies of scale for organizational operations. Innovation is the catalyst
that keeps technology moving forward and businesses
continuing to contribute to economic growth.
The NASA Alliance for Small Business Opportunity
However, that contribution is accomplished only when the innovation is complete. For
the average small business participating in the NASA Small Business Innovation
Research (SBIR) program, the development of research into applied technologies, the
application of these technologies to NASA
mission systems and the transfer of these technologies to the marketplace as a product for
commercialization are not easy efforts. Even with early-stage funding from the federal
government, these firms struggle to move their technologies to the end of the innovation
NASA is pursuing new approaches to facilitate the successful transition of its SBIR
award-winning companies into investment-ready, reliable, high-tech business competitors. The
NASA Alliance for Small Business Opportunity (NASBO) is a critical destination on
NASA's SBIR innovation pathway that may help more small businesses close the
For a long time, the small-business community has been — and continues to be — one of
the most significant sources of innovation. Another growing set of resources are the many
research institutions throughout the United States. Congress recognized the potential of
these communities back in 1982 when it established the SBIR program, and again in
1992 when it created the similar, but smaller, Small Business Technology Transfer
These programs are legislated as federal research-and-development (R&D) set-asides for
small high-technology firms.
SBIR is a set-aside program for small business concerns (SBC) to engage in federal R&D
with the end goal being commercialization of their resulting technologies as products in
the marketplace. STTR is a set-aside program to facilitate cooperative R&D between
SBCs and U.S. research institutions (universities) to transfer technologies and develop
them into commercial products.
The objectives of these programs are to increase opportunities for SBCs to participate in
government R&D, improve overall U.S. competitiveness and contribute to national
economic growth. STTR has the additional goal to encourage formal relationships
between SBCs and nonprofit research institutions for the purpose of providing a pathway
to move institutional discoveries to the commercial marketplace.
Currently, five federal agencies with R&D budgets exceeding $1 billion are required to
participate in the implementation of the STTR program. The following 11 federal
departments or agencies, all with R&D budgets exceeding $100 million, are required to
participate in the implementation of the SBIR program:
The law established SBIR funding at 2.5 percent and STTR funding at .3 percent of each
participating agency's extramural (externally contracted) R&D budget. Each agency may
develop its own program implementation in accordance with the Small Business
Administration, which sets the policies and guidelines for the program. In total, the
annual budget for these programs across all agencies represents an R&D investment of
over $2.2 billion. The NASA contribution is approximately $124 million, including the
SBIR and STTR programs.
- Department of Agriculture
- Department of Commerce
- Department of Defense
- Department of Education
- Department of Energy
- Department of Health and Human
- Department of Transportation
- Environmental Protection Agency
- National Aeronautics and Space
- National Science Foundation
- Department of Homeland Security
(new in 2005)
Both programs are implemented in three highly competitive phases. At NASA, Phase I
of an SBIR award is funded at $70,000 for six months and targeted toward establishing
feasibility of the pursued research. Then, where laudable results are found, firms may
continue to pursue Phase II funding for up to two years and $600,000.
Phase III, however, is the point at which the company must find alternate funding to
develop the technology further and/or pursue product development. Not unlike the
challenge in the traditional "start-up" pathways of the marketplace, this highly
competitive stage continues to be the most challenging.
NASA has participated in these programs since their inception. In 1994 NASA made a
major shift in their implementation, resulting in agency-specific goals that included
organizational restructuring to administer the programs together, strategic alignment with
mission objectives and a more holistic approach to the congressional intent.
For more than 10 years the SBIR and STTR programs had significant value-added
innovations such as paperless, Web-based electronic management and subtopic alignment
with Mission Directorate programs. Still, participating businesses found themselves
facing the same challenge as small businesses in the traditional path marketplace:
Investment funding for advanced technology development and/or commercialization is
very difficult to obtain.
Lessons learned from discussions and workshops with investment representatives,
business service firms and the SBIR firms revealed two significant realities that the new
holistic approach needed to address:
Another lesson learned was that although NASA SBIR and STTR technologies are
aligned with mission program needs, additional funding to mature those technologies is
needed to reduce the risk of program infusion and to bring better "fit, form and
functional" solutions to the table.
- Innovation can successfully move
into the marketplace only by
attracting additional financial
- Many Phase II SBIR/STTR firms,
like their counterparts in the
small-business community, are
typically not prepared to
competitively enter the
marketplace because of a lack
of business maturity.
The challenge was to find a way to improve the attractiveness of the NASA SBIR Phase
II firms to the investment community and increase the potential for NASA to leverage the
benefits of the SBIR- and STTR-developed technologies.
Thus was the catalyst for NASBO, which was piloted in 2002 in
collaboration with the NASA Commercialization Center (NCC) at CalTech in Pomona,
Calif. The pilot was designed to explore frameworks for mechanisms and incentives for
creating strategic partnerships between the various small-business service providers,
including incubators, universities and their affiliates, large contractor firms with potential
interest as partners, and most importantly, early-seed capital investors and venture-capital
The concept was to use the large volume and high quality of the NASA SBIR Phase II
portfolio to attract the resources for technology investment. That investment attraction is
based on two unique aspects of the SBIR and STTR programs:
- When Phase II companies enter
relationships with a NASBO
chapter, they have already proven
feasibility and successfully developed technology using the federal
dollars from these programs.
- Firms typically own the intellectual
property culminating from their
developed technologies. This is
perhaps most attractive to early-stage investors.
Each relationship would provide a scalable, market-driven partnership with end-to-end
commercialization capabilities, including business-development services and self-
sustaining funding sources. The entity would then submit a proposal for a nonfunded
partnership with NASA to become a NASBO chapter. Proposals must demonstrate a
capability and commitment to provide business services to the SBIR firms, and to be a
source of investment funds that can support a required implementation plan.
|The Center for Training, Technology & Incubation at Cal Poly Pomona is the home of the NASA Commercialization Center. This business incubator is an important resource that offers small
businesses and entrepreneurs critical guidance through the turbulent waters of project start-up.
The NCC pilot has run for two years, during which time eight SBIR companies received
NASBO-funded business services, and three ventures successfully moved to the
marketplace. To show the potential extent of NASBO benefits, the NCC provided the
guidance, interface and funding support for one of the companies to acquire the flight test
required to approach NASA Jet Propulsion Laboratory about utilizing (SBIR Phase III)
the technology in one of the mission programs. This capability may prove to be the most
significant benefit of NASBO, increasing NASA utilization and infusion of SBIR/STTR
Currently, NASA has one NASBO chapter under a nonfunded Space Act Agreement with
Technology Tree in Houston. Two other entities are working with NASA on making the
transition to NASBO chapters: the NCC at CalTech, and Georgia Tech's Southeast
Regional Technology Transfer Center in Atlanta. The National Technology Transfer
Center in Wheeling, W.Va., also is participating as a developmental NASBO member.
While focused on providing business services to NASA SBIR Phase II firms, each
NASBO chapter may be uniquely structured, such as:
NASBO extends the innovation pathway beyond the technology challenges and through
the program infusion and/or business barriers. This is how research and technology, via
the NASA SBIR-STTR pathway, are transformed into viable products, services and
systems for space exploration and commercial markets.
- The chapter can specialize in different technology or industry areas.
- The partnerships may be geographically regional or national.
- The funding sources may be from the investment community or local
Many NASA SBIR Phase II companies have state-of-the-art technologies, but have found
pursuit of investment and ventures daunting. NASBO can provide a conduit for these
Phase II firms that have a confirmed technical novelty and validated technical team but
need help developing their competitive business potential.
The dramatic increase in our highly competitive and globalized markets demands a
renewed emphasis on
successful innovation. Rapid changes in the markets have created a new world of
competition. Because the current arena is set in a truly global context with high-quality
competitors and risk assessment, the rules of engagement are vastly different from those
of just a few years ago.
Beyond the innovation and new technology, a highly volatile business arena exists in
today's market. For SBIR, the federal government is fulfilling its role with initial R&D
investment. NASBO may be a way to ensure that this investment achieves its maximum
Today the challenges for much of the new technology coming from R&D investments are
about not only the technology gap but also the business barriers in the marketplace. It's
not enough to transfer federally
funded technology. The government must be innovative in developing appropriate links
and partnerships with state, regional and local
supporting infrastructures to facilitate the transition of these small businesses to highly
Developing these kinds of pathways will not only help businesses flourish but also
increase the value of the SBIR federal R&D investment. NASBO provides a critical
element to the SBIR-STTR innovation pathway by helping small businesses make a big
difference and continue investing in America's future with NASA.