To better understand what led an individual or a company to submit an SBIR proposal, the following question was asked: What led you (or your company) to participate in the SBIR program? Some of the interviewees were PIs that did not have a thorough understanding of how the company initially got involved in the program and simply continued submitting SBIR proposals for the company once hired; other interviewees—particularly the co-founders that were interviewed—were very aware and/or involved in the initial entry into the SBIR program. Findings from this portion of the interviews include the following: participants enter the program to augment funding as well as to align R&D efforts with identified customers; the SBIR program is an effective mechanism for the DoD to communicate R&D requirements directly to small firms to achieve maximum participation; most successful firms continuously participate in the program; the SBIR program has provided external funding that successfully supported high-tech startup firms and their continued participation has been a result of a perception that private
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external funding would not adequately support the R&D efforts; the higher risk involved in the SBIR program inevitably results in awarded firms that are no longer in business and, therefore, not able to transition technologies or commercialize, but the risk taken by the federal government in administering this program provides a unique opportunity for even the smallest company to pursue an idea, develop innovative technology, and enter an otherwise inaccessible market in the hopes of achieving further growth.
Naturally, augmenting R&D funding through the SBIR program was a common reason provided for submitting SBIR proposals. Additionally, one of the primary reasons for participating in the SBIR program, cited by numerous interviewees, was that the SBIR program
aligns the R&D efforts of small companies with potential customers. Those potential customers
are either the DoD directly through potential phase III contracts for technology transition into another defense program, or the defense industry who subsequently subcontracts the smaller company to provide a specific technology that is required. Participating in the SBIR program ensures that research and development efforts of small companies have an identified user who specifically needs that capability; in a sense the SBIR program is frequently used as a “guide” to steer R&D projects that have potential customers in mind. One interviewee stated that his firm “uses the SBIR program as a springboard for technologies to develop and commercialize them and get them into the hands of the customer.” Another interviewee explained that his firm was involved in high-tech “niche technology” research and development that is aligned with some of the interests of the federal government; his firm seeks to develop new technologies that are marketable to both the private and public sector, and he periodically reviews SBIR solicitations for technology RFPs that align with the core competencies of the firm and identify potential customers. Another interviewee stated that “we have core competency areas that we focus on and we seek to apply those technologies in a certain way,” and added that his firm looks for topics that align with technologies they have researched before (personal communication, 2012). The information provided in the interviews highlights how the SBIR program is an effective mechanism for the DoD to communicate organizational R&D requirements to small companies in the private sector through the solicitation and award funding processes.
Most of those interviewed for this research have been involved in multiple SBIR proposals. Additionally, their firms have participated in the program for multiple years; one interviewee described it as “participation in the (SBIR) program has been a tradition within the
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company” (personal communication, 2012). Those who were aware or involved in the company’s entrance into the SBIR program stated that the program was involved in the company’s original business strategy by providing initial funding and specific R&D work with identified customers for the start-up company. One principal investigator explained that “our first project was funded by SBIR” and that the company’s founder watched another company use the SBIR program, was involved in that project, and decided later to apply for an (unrelated) SBIR award, which he subsequently won, allowing him to start a company (personal communication, 2012). This anecdotal description of the company’s history resulted in the significant growth of a research and development group now comprised of four companies that specialize in various sensing technologies.
Another interviewee, who was a co-founder and is currently the president of a very successful software development firm, described his experience entering the SBIR program: “We started in 1988, so we’ve been participating in the program for a long time. I think I found out about it from a client who was doing an SBIR” (personal communication, 2012). The interviewee stated that he was originally doing software consulting, and that he found out about the program through word-of-mouth; the interviewee described his entrance into the SBIR program as “two people looking for work.” Furthermore, the interviewee stated that his continued participation in the SBIR program is influenced from his observation that the SBIR program provides funding where the private sector would not: “I don’t think that I’ve worked on an SBIR that the private sector would fund,” explained this software development firm chief executive. This observation supports Wessner’s (2000) conclusion—discussed in Chapter II of this research—that the DoD SBIR program effectively stimulates entrepreneurial behavior and R&D efforts by providing public venture capital funding where such funding would not be available from private venture capital investors due to the inherent high risks in the projects these firms undertake.
While the interviews conducted for this research support the notion that the SBIR program is successfully used by small innovative startups as a source of funding and direction for supporting an identified customer base, not all small startup firms who win SBIR awards are successful. The co-founder of one such firm that received both phase I and phase II SBIR funding to advance innovative biometrics technologies to potentially reach customers was interviewed for this research. The interviewee applied for an SBIR phase I award as a source of
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funding to further research and develop biometric technology. Asked what lead him to apply for SBIR funding, the interviewee stated that he saw the SBIR program as a source of external funding, and he felt the SBIR program “is clearly one that you have an opportunity of winning.” He was attracted to the SBIR program because of the program’s focus on the technical proposal, and the merit of the research effort, rather than focusing on the proven capability of the firm (i.e., past experience, outside funding, revenue prospects), which is common for private venture capital funding. The interviewee stated that one benefit of the SBIR program is that it is “proposal focused,” rather than firm focused (personal communication, 2012). This observation suggests that by focusing primarily on technical feasibility of proposals and less on past performance and profitability, as is the case in private external funding, the SBIR program provides a unique opportunity for even the smallest company to pursue an idea, develop innovative technology, and enter an otherwise inaccessible market in the hopes of achieving further growth. According to the interviewee, the business’ failure was unrelated to the viability of the SBIR technology. Another unrelated example of an SBIR-awarded firm that is no longer in business is that of Traverse Technologies, which is discussed in more detail in the case study portion of this research.