The Small Business Innovation Research (SBIR) program offers a unique model for funding technology innovation. The SBIR serves as a portal to connect small businesses, academics, and startup with partners in agencies across the government. It also provides assistance to ensure that small companies are treated fairly during their engagement with the federal government.
Nagesh Rao currently serves as Chief Technologist with the US Small Business Administration’s Office of Investment & Innovation. His portfolio of work includes the SBIR/STTR program and coordination of the Fueling Small Business Innovation Interagency Policy Committee for the White House’s Lab to Market Commercialization Agenda.
He is a practicing technologist and commercialization strategist working at the intersection of applied science, law, business, and public policy from both domestic and international perspectives with over 10+ years of successful experience. Nagesh has been afforded the privilege to work with top-tier cutting edge organizations such as Rensselaer Polytechnic Institute’s Office of Technology Commercialization, The National Academies (NAS, NAE, IOM & NRC), US Department of Commerce (USPTO, EDA, & OIE), LAUNCH, CleanTech Los Angeles, Global Access in Action, NCET2, Innovation Endeavors, Planet Labs, Ecovative Design, Publicbeat, Peek, Stiefel Family Foundation, and most recently Virginia Tech’s Applied Research Corporation.
Nagesh Rao played an instrumental role in the creation and execution of 5 major interagency policy committee reports regarding the SBIR/STTR program on behalf of the White House-OSTP and SBA for US Congress, as well currently co-leading the re-vamped build out of the www.sbir.gov platform that centralizes the programmatic efforts of the 11 participating federal agencies. Nagesh has been afforded the privilege to work with top-tier cutting edge organizations such as Rensselaer Polytechnic Institute’s Office of Technology Commercialization,
Within those various organizations Nagesh has worked in a myriad of roles including: patent examination, investment diligence, intellectual property portfolio curation, startup company formation and scale up, fundraising, expert advisory assessments, crafting of policy reports and much more. As well through his work he has played a significant role in developing the following programmatic endeavors: i6 Green, FLoW, Patents for Humanity, VT-ARC Additive Manufacturing Grand Challenge, and AAAS-Lemelson Invention Ambassador Program.
Furthermore he composes and presents intellectual musings which have been featured via WAMC-NPR, TechCrunch, The Scientist, Triple Pundit, MIT XPrize Lab, UC Berkeley, RPI, Stanford, Cleantech Open at Xerox-parc, NCET2, BPIA, The National SBIR Conference, Microsoft Worldwide Partner Conference, The National Academies, Next Gov Prime 2020, and PwC’s CleanTech Revolution at the LA Autoshow.
Video Transcript: Funding Technology Innovation with Nagesh Rao, Chief Technologist, Small Business Administration
(00:06) Welcome to episode number 169 of CXOTalk. CXOTalk brings you conversations about disruption in the enterprise, leadership, innovation, and we have which is probably the largest video library on this topic with executive interviews any place. And today I’m speaking with Nagesh Rao, who is the Chief Technologist and entrepreneur in residence at the US Small Business Administration. Nagesh how are you today?
(00:45) Good how are you Michael.
(00:47) I’m great and thank you so much for joining us. So Nagesh tell us about the USSBA and tell us what do you do.
(00:55) Sure and thank you Michael and to the audience. It’s a pleasure to meet you and thank you for taking timeout on a Friday afternoon to hear this what I hope to be a lively conversation.
(01:07) My name is Nagesh Rao as Michael has mentioned, and as the Chief Technologist for the Us Small Business Administration I actually work on a very cool special program. It’s the Small Business Innovation Research Grant and Contact program, and it is housed within the SBA offices of investment and innovation and that’s where I serve as Chief Technologist, because it is a little bit of a unique inter-agency initiative program from a federal wide government. So the SBIR program has been around since 1982, and it is America seed fund. And when I say America seed fund I literally mean it is a seed fund for high-tech start-ups and high-tech small business companies to engage in the necessary federal government research and development programs.
(01:57) But with the commercialization affect to do that innovative research and technology development for the federal government need and the general public’s need. It’s a $2.5 billion annual seed funding program in the forms of grants and contracts for the small businesses to work with agencies on projects from the Department of Defense all the way down to the Environmental Protection Administration.
(02:23) You’ve probably heard of companies like Qulcomm, Biogen, Symantec , probably seen 3-D printing in the Roomba vacuum cleaner. Maybe you have heard of latex surgery. The origin point for a lot of those technologies, industries, and companies is the SBIR STTR programs. They seed funded in a non-delude of manner, the origins of technologies R&D development and commercialization. And what’s really interesting is the government when I said non-deluded I really mean it. We don’t take an equity stake. All we ask is that you use the funding to do the necessary R&D efficiently, effectively, appropriately, and honestly.
(03:05) And the return on investment for the American government and for the American taxpayer is high-tech innovation, growth and development spurred on through these funding opportunities. And as a result of that – sorry Michael. As a result of that I was recruited from the private sector a few years ago to help co-manage and run that initiative. I work for Mark Walsh our Associate Administrator, Michelle Schimpp who is the Deputy Associate Administrator, and John Williams the Director of Innovation and Technology. They are all senior executive service members who I work for and help me do all the invasion, brainstorm and develop the collaboration opportunities internally with the inter-agencies initiatives from the federal government side, but then I will externally with the public and private sectors and non-profit sectors to help evangelize and further build out the use of this funding opportunity to seek these catalytic transformations and technology development.
(03:56) So you say that you’re America Seed Fund and you have $2.5 billion to invest and yet you do not take an equity stake in the companies which you invest. So how does this work? Where exactly does the money come from? Is it within your part of the Small Business Administration, does it come from you, does it come from agencies? How does that part of it work?
(04:24) Sure so the funding actually comes from the federal government agencies. From the Department of Defense, NASA, National Science Foundation, Homeland Security, USDA, Education. Those are some of the many agencies that participate in this program.
(04:39) They hold the funding though what’s called their extramural research and development budgets. The federal government extramural research and development budget is usually around 130 to 140 billion per year, and it is set aside towards the federal government to do that necessary research and development through extramural partnering activities.
(04:58) So about for the fiscal year 2016, about 23% of that budget has to be set aside for small business companies to do that innovative research and development. The agencies are the ones who are administering the funding opportunities that the US for Small Business Administration is the umbrella organization that oversees the problematic and policies oversight over the program. And so we help oversee it and then work with the agencies to collaborate and engage with the public and to find new opportunities and scout for new innovation type lines to encourage small business companies and high tech startups to engage with those agencies and apply and develop these technologies forward.
(05:40) So a good example would be a company like Made in Space. They are engaging with NASAs SBIR STTR program, and they’re this small business company that is actually literally developing the 3-D printing technology on the International Space Station. So when we heard about it a year and a half ago the space station was able to print something in space, and what folks didn’t realize was that it was done through an SBIR funding company called Made in Space.
(06:08) So does a company apply to get this money? It sounds like a pretty good deal. You hand out money, and you don’t take equity but you must get something in return. Is it that you want these people to be nice to you so you give the startups and the entrepreneurs a lot of money is that it?
(06:29) What we’re looking for is you know the angle is economic development job creation, wealth creation and maintaining America’s innovative technological leadership. A lot of countries have actually tried to replicate our program. I’ve discussed this with folks up north in Canada to folks in Sri Lanka, Vietnam. In Europe they have something similar called the Horizon 20/20 Program. In Brazil they’re looking to develop their own versions as well, but the interesting thing is that what makes ours unique is we don’t take an equity stake and there’s a reason why.
(07:03) It just doesn’t make sense in our free market society to allow for that state owned enterprise to occur. All we want to do is spur and incentivize our growth and by doing it with less, you know as is and the paperwork and whatnot to apply is a bit cumbersome. So to add on top of the the governments going to own a bit of your technology or part of your company. it just doesn’t make it a savory topical area of interest.
(07:30) So we step out. We let the market dictate for it, but what we need to do and what we like to do is we seed fund more high risk, high reward tech driven technology platforms and technology companies that are willing to do the stuff that the free market might not, deemed savory right off the bat.
(07:49) So for example with 3-D printing and I’ll get to that how does one apply in a second. The SBA program is actually catalytic and funding the development of that technology industry back in the 90s. Some of the earliest companies that were doing it were small companies like ZCore, Geomagic and DTM. And what was interesting was it was federal funded opportunities that incentivized those companies and those entrepreneurs to actually do that technology development that the VC and the angels just wouldn’t touch because it was too risky of an investment that to make at that time.
(08:27) So what we’re doing is we’re helping, it’s an augmentation helping in de-risking with the technology. And the angle for us is that it will commercialize and it will maintain our leadership, but it will also help seed fund that promising next generation technology that we need in order to maintain and grow as we technologically evolve over time.
(08:52) And for someone who is interested in applying for the program we actually incremented a gateway business intelligence platform that is at www dot sbir dot gov, we created it as a one stop shop platform that provide the necessary input and intel to a promising entrepreneur, innovator, small business company that is looking for funding opportunities, and may not realize that there are different pools of funding and different types of funding that are available on that site.
(09:20) Currently we have funding from helping human services, Department of Defense, and National Science Automation, and what’s really interesting is that they definitely go into their own directions from a science and technology mission perspective, but there’s definitely a bit of an overlap. And so what’s really interesting is if you’re supposedly, suppose you’re working on something that relates the Internet of Things and it might have an ‘I’ll help’ aspect to it. Well to be honest with you the National Science Foundation’s funding some of that development of that technology. So is Health and Human Services and the Department of Defense. They just won’t call it Internet of Things.
(09:58) We all call it a little bit different you know what we may think as robotics at one agency and autonomous systems at another agency and there’s a reason why. It’s because each of the agencies will operate either under a branch or contract in perspective, and more importantly they’re going to have different needs. And we try to be agnostic but broad and specific at the same time, so you have these different enter plays occurring.
(10:25) As for applying, like I said you can go through SBIR dot gov is a one-stop shop to help assist and where you want to apply and who to apply with. Then we look through the different solicitation funding opportunities, the actual instructions and the link to the agencies that’s funding and be able to then click on and go through the application process at the Health and Human Program or the Department of Defense or National Science foundation or the department of Energy or whatever it may be.
(10:51) With the granting agencies with the exception of the National Science Foundation, they will operate through grants dot gov for the formal application process. As a contracting agency they have their own specific contract portal that you would work through. But the whole point of SBIR dot gov is to take all those different zig-zags and funnel through it at a central point so that you can at least get to where it is that you want to get to in a quicker format.
(11:16) Nagesh, what is the criteria for getting one of these grants, because that’s what everybody wants to know. That’s what entrepreneurs want to know is, I have this great technology, how can I be part of this funding process.
(11:37) Absolutely, so one of the first important things to do is to remember that you have to be US majority owned for-profit small business company. Now does that mean you have to incorporate? Not necessarily at the upright, but if you do win, if your proposal does win funding then you do have to make sure you incorporate.
(11:58) But that’s going to include the steps of getting your EIN setup, your DUNs number setup. You have to make sure that when applying it for a particular funding opportunity that you’re addressing the needs in that application.
(12:13) The program managers from the different agencies that will fund are looking for technical skill development set, they’re looking for business skillset and they’re most importantly looking for that you’ve got something potentially feasible. And we operate this program on a three phase process.
(12:28) So what’s interesting at SBIR and as I said it’s an augmented funded source is that phase one, you can win up to $150,000 in the grant or contract, and I refer to that as being akin to an angel investment. So when we think about an entrepreneur who is going through the funding lifecycle, from idea and you know napkin to lab to marketplace. We’ve always talked about bootstrapping, followed by friends and family, followed by angel investors followed by venture capital, and venture capital breaks out into corporate venture capital, private sector and private venture capital.
(13:07) In between the angel and the friends and family is where I think especially if you’re working on a high risk, high reward, high growth technology driven application development is where SBIR fits in nicely. And phase one is up to $150,000 grant and contract and that is very much akin to an angel investment. And phase two is up to $1 million and that is akin to a series A.
(13:36) Now I’m just giving you the formal caps. There’s actually a hard cap of $225,000 for phase one and $1.5 million for phase two. And actually above that you can go above it but it gets into the technical details of wavering. But the whole point is that you know if you have a promising idea you can get some significant money to help seed fund the R&D.
(13:58) Now what’s really interesting to is that with that phase one and phase two funding, phase one is all about feasibility study and developing the proof of concept. Phase two is if you do a really good job in your phase one, the agency will then give you phase two and say, that looks promising and we think that can be a really viable prototype, so here’s a million dollars. Scale it up and grow.
(14:20) And what’s really interesting to is that the programs pretty popular. We’ve got about 16 to 20% acceptance rate at phase one. And then of those phase ones around 25-30% mature into phase two. But they tend to be a bit more disrupted technologies and they tend to be a bit ahead of its time. But it’s really for those folks, those agencies who are looking to develop you know far reaching technologies ahead of its time.
(14:48) And what the best part is that because it has been de-risked by the federal government and no equity has been lost after phase two anyways, if the company has done a really good job there’s a couple of options here, and that’s what we refer to as phase three. And for contracting agencies like NASA and defense, we call this notion, (‘spinning’? 15:09) and that is where the government is seeking from that technology to be developed for government use down the road, for the space mission programs or whatever it may be. And that is where you know the federal government will encourage you to partner with the primes, the ITKs the Lockheed Martins, we will help make those introductions and inroads so that you can be part of that upside chain process.
(15:31) And at the phase three that’s when it’s actually like a 20, 30, 40 million dollar contract to help develop. You know you’ve done a great job and the government say, I need 10,000 of those units now so let’s start producing.
(15:45) With the granting agencies like the National Science Foundation and National Institutes of Health they will usually like an emphasis on more commercialization for the publics good, and they will do all sorts of meetings. Meet and greet business conferences whatnot to encourage you to grow with the private sector and connect it to the right folks in the private sector. But then step out of it. We’ll make an introduction and then we’ll step out of it and say, we’re out of it from there, but here are folks who you may want to engage with and talk to. What we like to do is bring all the different folks together and then we get out of it, out of the room and say, it’s on you.
(16:24) But we will make those introductions and facilitate, and what’s really nice to the VC and the private sector community and the technologies funded they go that’s the seal on the golden eagle. It’s been de-risked and there’s some promise to it, otherwise they wouldn’t have funded in it.
(16:35) We have a couple of questions from Arsalan Khan from Twitter his interesting questions, he’s wondering, he’s assuming first off you’re only funding emerging technology, but them he’s wondering about the success rates of these companies, and in addition do you need to have a patent before you can apply for an SBI funding grant?
(17:01) So let me address the patent. No, you don’t need a patent. In fact if you patent any of the technology as a result of SBIR funded development, you keep the patent. We actually encourage you to own and keep that eligible property, and I won’t get into the legal concept of the development because it will go for days. But there is a provision called the BiDil Act. And the BiDil Act says that if you are a non-for-profit institution or a small business company and you’ve engaged in federal research, it then allows your property that is derived you get to keep, you get to own it; done and simple.
(17:30) And so what’s really interesting is that you don’t necessarily need a patent, I mean it helps but what we’re really hoping you do is you actually develop that promising technology that’s not fully baked out. That’s the whole point of a phase one is that it’s not fully baked out, and so it’s in its nascent stage. And if it’s promising and we think there’s some feasibility and it merits then we will fund you to develop it further so that it becomes the practice.
(18:05) Now with respect to Arsalan’s other couple of questions it was the…
(18:14) Success rates and you only fund emerging technologies, what stage of funding technology development.
(18:19) It is yes it is emerging, it’s generally nascent, but it’s nascent in the sense of like the free market, we’re filling a dearth in that connect in what they have always called the valley of death in commercialization. We’re filling a little bit of a dearth at that early phase. You know phase zero that nascent brought down.
(18:37) When I said 3-D printing back in the 90s, yes, we seed funded the origins of that principle technology in the beginning and then we got out for a bit. You know it was growing on its own. And what’s really interesting is that we put some funding back in again in 3-D printing space because it kind of needed it. And that was in areas that were related to food, space, and environmental security and whatnot. So some of the promising technologies that are coming in the 3-D printing space, Made in Space, Upperbone, and Modern Meadow are actually addressing what’s necessary needs.
(19:13) Modern Meadow has actually figured out a way to 3-D print meat essentially and leather products and whatnot. Upperbone has been able to figure out how to 3-D print and they are pioneering the 3-D printing of muscle tissue, bone, you know that sort of stuff so that you don’t have to go through the laborious process when getting a skin graph or replace a lung or kidney or whatnot. You can actually print out the organ for you instead of having to wait for a donor. And like I said with Made in Space it’s actually very interesting.
(19:45) You know when you think about the explorers back in the day when they came to the new world, they didn’t bring the old world with them. They just brought the necessary equipment to do the job and then work with the recourses here.
(19:59) With 3-D printing that’s kind of the same notion, we’re not going to bring all our resources with us and then go to colonize on a planet. You know if you think about why we’re surveying Mars and all that stuff, it’s a lot of geochemistry readouts with the different rovers. It’s because we’re trying to find out what are the building blocks and the building materials there that we can then use and adapt into a 3-D printer to print out you know the infrastructure is necessary for the housing and whatnot.
(20:25) Now success rate, so I said the success rate of getting around phase one to 16 to 20% and getting a phase two is around 25 to 30% usually. But it was interesting. I was looking this up the other day. I found a paper looking at the success and the commercialized technologies it’s close to almost 50% now. You know when you think about it and what’s funny is so the mobile wireless device, everyone knows about your iPhone and all that. Folks don’t realize that about 70% of the components of that technology actually it’s origin point of funding through developing it was from the SBIR program.
(21:10) Whether it was the processor or even the biometric scanning that was a company called Ultra-Scan Corporation that pioneered the development of that technology. There’s a lot.
(21:23) It’s pretty amazing. We’re talking with Nagesh Rao, who is the Chief Technology of the Small Business Administration. Now how do you compare to VC investment. What are the pros and cons?
(21:44) So a Venture Capitalist is great because they bring in their network and they’ve got a lot of money, and they can cut out a big check, and they are less burdensome, and cumbersome to do it absolutely. But it’s different; it’s comparing apples and oranges to be honest with you because you know they take equity stake, they want some ownership, they’re going to manage and dictate your board, and I remembered seeing that back when I worked on startups at the Bay area. I hear the horror stories from my friends, and also some good stories to, but there’s definitely bit of a takeover and the founder is also kind of pushed around and pushed over.
(22:24) You know for us in the programme we are not interested. We want to empower the founder, we want to empower the team and encourage them to do the development properly. And we just want to get out of the way, but we are incentivizing them. We are using this as a catalytic investment and a catalytic incentivisation to get them to do that necessarily R&D in areas of interest like environmental security, food, water, health, national security, to tackle those tough problems and those issues and figure out solutions for a billion people in mind and not just one or two people.
(23:02) Are there – well we have an echo turn your volume down. This is live video folks, so if you have questions for Nagesh Rao, who is the Chief Technologist of the SBA. And we are talking about small business innovation research funding, and this is a way of applying to the government and basically getting a no strings grant. So if you have questions we are on the hashtag cxotalk on Twitter, and ask away. So how do you make the selection process, who actually decides and I’m assuming since you are here you have some sort of coupon code so that people watching can get an automatic grant from you, something like that.
(23:54) So the federal funding opportunities for the selection criteria are done by the agencies themselves primarily and they all have different peer review processes. So you know whether it’s National Science Foundation, National Institute of Heal or defense, they’ll all have their own review process. But they can be industry experts, business leaders, and science and technologist in the same room generally. And they will review the proposals. They will go through it one by one and see who they think it’s promising, who is going to do a good job, and who they think will actually be able to carry forward on the potential feasibility and the development of the technology.
(24:34) The thing to keep in mind is know your audience. So for folks like National Science Federation, the Department of Energy, and National Institute of Health they’re granting agencies, they use a little bit of a hybrid between academic and the business review process. Whereas the Department of Defense, they are really looking for hard core science technologist. There is a bit of a business acumen, but at the end of the day defense is going to be looking at those small business companies and saying the long term is that you’re going to develop this promising technology and then partner with our primes because our primes have the manufacturing capability to be able to do that mass manufacturing and will want to be able to work with them.
(25:13) So it’s a mixed bag. It really does vary from agency to agency, but the whole point is that we are looking to small business companies to do that innovative research and development from an applied and commercialized perspective. I think that’s the unique thing that makes our program very successful.
(25:32) Now having Universities and having worked at a University tech transfer office years ago and whatnot, universities are very ethereal, it’s very basic R&D there. There are applied perspectives there, but you know most university folks are still thinking from the notion of, ‘oh I’m going to solve this problem’, and from the applied perspective it’s ‘I’m going to solve this problem with a purpose in mind of actually taking that discovery and putting it into action’. Now I know a lot of universities are starting to head towards that mindset and making sure that there is a bit more applied perspective, and it’s wonderful. But at the end of the day a small business company, I think one of the things that makes it a little bit incentivized and why you will get more sort of a catalyst with a small business company than a university is really the risk factor.
(26:26) For a small business company it’s do or die. For university it’s like, ‘nah it didn’t work, okay. I go back to my drawing board and I have my job to keep me happy’. And so when you think about it, those different incentivisation parameters around it’s easy when you’re a tenured to a faculty just to chill out for a moment. And if failure happens, ‘well I have something to work with’, whereas a small business company a failure happens that it, they’re done. So they have to be very smart and strategic and driven to get that success going forwards more.
(27:02) When you receive these applications, what are the initial filters that you look at? So what are the characteristics of companies that make it through the first gateway, and what advice do you have for companies who obviously are applying and want to make it through just the initial filtering process that you must go through.
(27:24) Team, team, team, like having a good idea; well one, following the instructions and following the directions. I know there’s a lot of boxes to check off, i’s to dot and t’s to cross. But it’s always important to – it’s free money. But with that free money we just expect you to do the paperwork correctly because it’s just important for us to make sure that you’re doing it right, and there’s no fraud, waste, abuse activity occurring.
(27:54) I think the other thing is that you have to have a good solid team. It’s always important to have a good strong science and technical acumen with the business acumen and with the you know a little bit of the market acumen and figuring out what it is you’re developing altogether. I think a little bit of legal to. It’s always important to have some legal advisers with you, especially when you’re thinking about patents, trademarks, copyrights, and more importantly just figuring out that patent landscape, because if you do develop some innovative stuff you will want to patent it.
(28:26) I think another important key attribute and a filter for us is that you know what you’re talking about, that it conveys in a very clear, elegant, and simplified manner what it is that you’re looking to do and how you are solving that need and addressing the issues of the federal funding opportunities; the problem statement per se.
(28:47) You know, contracting agencies like defense and NASA are going to have a bit more of a problem statement; we need this specific coding in mind, or we need this specific AI system or you know ori-finder or whatever it may be. But whereas granting agencies like even the US Department of Agriculture or whatnot, they are looking for a little bit more broader and bigger picture is like okay, you come up with an idea for food security, but how are you going to commercialize it and make it more effective and deployable. And it does vary also to phase 1 versus phase 2. Phase 1 is really more on feasibility study of like I’ve got this idea, I’ve got this solution or promising technology to help increase food yield with this next-generation crop rotation and using this autonomous system to help do that. But then actually carrying out what it is that you can do to then scale it up, and when the favor of those agencies and they say yeah, that’s actually really promising in development and we’ll fund further because we think it can scale further.
(29:56) A good example is Altura Energy actually. So it’s really interesting, Altura was funded by the US Department of Agriculture, and what they did was they repurposed aerostats. I don’t know if anyone is familiar with aerostat technology. It came from the Air Force and essentially it is a wind turbine, helium device which floats up in the sky and it was really designed more for like a satellite kind of communication technology.
(30:24) What these guys did was kind of take some of the same kind of applications of that technology and pivot it towards energy creation. So there’s terawatts of energy. When you get up to about the Empire State building height, 2000 feet up or higher, you’re dealing with constant streams of wind flow. If you’ve ever been to the top of a skyscraper or the Empire State building, you always notice it’s windy. Because the winds are going around all over and over, and that’s terawatts of energy essentially floating up there.
(30:58) And what these guys did was they figured out a way to take this aerostat technology, and with the helium float the turbine up into the sky and then it’s tethered by cables down to generators, and it’s just basically generating energy non-stop and sending it down the cable. What’s really interesting about what Altura did was they got me funding from USDA because the USDA said we need to solve these energy systems, you know deploying energy in the world environments, getting energy to the world communities and performing in that community, because you know whether it’s coal or petrol or whatnot you know it’s got to be compact and is got to be easily transportable. But you know it makes coal and petrol very savory versus you know some of the aspects of solar, wind turbine and hydro, and the economic differentiations is that it’s got to be at a price point of economics for anyone in the switching costs. So Altura has figured a way to do that. And they figured it out and in the rural parts of the country where it’s great for coal store regions to. But what is really cool because they did such a good job and it’s becoming the USDA/SBIR success story.
(32:18) What’s really funny they got the attention of Ratan Tata, so anyone who is familiar with the Tata family out in India, TATA is a major company and Tata is basically the Bill Gates of India. And he now is putting money into the company because he wants that technology developed and deployed in India.
(32:37) So it is this great opportunity also where they took this technology solution where it was developed here in the states for a specific need for the USDA we are seeing in the rural community for energy access to then finding international markets who are willing to jump on it quickly, and especially in regions of economies where it’s a blank canvas. It’s perfect.
(33:02) So you apply for the loan – sorry not long, you apply for the grant and if you successfully go through the programme, at the end of it it’s your technology, you own it completely, and there are no strings attached from the government right?
(33:23) Pretty much. So there is this one provision from the BiDil said if the federal government needs to use it we have margin rights. So the notion is the federal government needs to really desperately use the technology, we reserve the right to use it licensed free and whatnot, but it’s never really happened. We’ve never margin in, we don’t because we are not in the business for that. We are in the business of making sure that you develop the technology, you go chase the markets, and you commercialize it and get out into the hands of the masses. So we’ve never really done that and we never will.
(34:00) Are you partners with the Venture Capital community or are you competitors of the VC community?
(34:08) Collaborators, not really competitors. I guess in a way if they’re VCs got this mindset of like, I want to own all these companies and promising ideas and own it for myself, perhaps but that’s really not the case. It’s more of we’re collaborators and we’re a pathway to success. We are a very different avenue. For our ROI it’s very different from what a VCs ROI is. And our RIO is we’re looking seven, 10, 15 years down the road; a VCs looking one, two year horizon. You know we have different internal rates of insurance because for us it’s a lot job creation, economic wealth and development and technological leadership. And we really are trying to forecast and tackle issues or problems ahead of its time. Story time again.
(35:03) Remember in 2014 when we had the whole situation with Ebola, and everyone’s getting a little frantic and we’re trying to figure out what solutions are out there. Well there was one solution that was put out there to test, and it was tested out; it was a drug derivative of a tobacco leaf and it was called ZMapp. And that technology, the ZMapp drug was being tested out was developed by a small business out of San Diego called Mapp Biopharmaceutical.
(35:35) What folks didn’t realize was that Mapp Biopharmaceuticals got its origin point of starting the company and doing some of those innovative R&D in the biopharmaceutical drugs from the NIHSBIR program. It specifically that drug that was used the ZMapp drug, that was SBIR funded technology, phase one and phase two from the NIH. What folks to realize is that NIH was actually funding the development of that cure in 2008. 2008, some of the program managers at NIH were like, this might be something we need to think about. We don’t know, let’s put a solicitation out because it might come up. And that’s what happened.
(36:19) And 2014 rolled by, and you know this experimental drug is going through the works. It’s got to get clear through FDA and whatnot, but the whole idea is that NIH had the foresight to say this might be an issue to think about so let’s start thinking about it now.
(36:37) So is pretty extraordinary collection of technologies. We have 10 minutes or less left, so what advice do you have for I keep coming back to this because I think this is what everybody wants to know. What advice do you have for companies who want to apply for an SBI or grant? And once you go through the paperwork, from the point of view of the recipient company, what’s the process? So they submit their grant application and then what happens? What’s the pathway to actually getting a check?
(37:16) Yes, so one of the most important things I can tell folks is that in order to compete effectively to win the funding and have a promising chance at it, it’s always important to go to connect with the program managers from the SBIR programs. Get to know them better. And SBI dot gov is the gateway to do that. We have lists of actually all the contacts and telephone numbers for those program managers, whom you can reach out to and do an introduction.
(37:44) Now, if you want to get the attention of a program manager because they get hit up a lot. Best way to do it is come to an SBIR road tour event or the SBIR National Conference, which is the National conference is here in DC from May 23 to the 25. All the program managers will be there. We have a road tour program if you go to sbirroadtour dot com, we are going across the country bringing the pharma manager's across the US to different cities where there is an SBIR event and the program managers there within a 250 mile distance. We are sitting down. All the agency program managers are sitting down and doing one-on-one counselling sessions, where you can sit down, talk about your technology, talk about what it is what you’re looking to do, and get a better sense of what it is the program managers are looking to fund and develop, to help you develop.
(39:34) Now what’s important is do your homework, so if you go to sbir dot gov and if you go to the award section you can see what we funded in the past. We have all the data up there to show you what the projects and the type of technologies that we funded in the past. And that’s good business intelligence. That tells you, you know what our interests are. So get to know the program managers. Get to sit down with them. We are actually unveiling in July on sbir dot gov a 10 course module system where you can get trained very quickly in 10 courses on the basics of how to compete and apply and put together an effective proposal.
(39:14) So get to know the program managers, go through the course content on sbir dot gov. I think once if you do a great job and you get funded, once you go through all the different bits of the paperwork you get the money, that’s it.
(39:30) Like for a contracting agency and granting agency is a little different, so contract agency it’s a bit more milestone driven, so you’re going to have deliverables, and you’re going to have to you know every month do a billing receipts for the goods and services that you provide back to the government.
(39:46) For granting agency is typically more so that you get the money a bit more lump sum. You get the money, you have to produce a report, and you have to show what you have been able to do. They will check-in on you you know throughout the period to make sure everything is going well and you’re doing the necessary R&D so there will be check-ins and whatnot. But with granting agencies you get a bit more of the money upfront, whereas the contract agencies it gets spread out over a period of time.
(40:14) But you know, the biggest thing I can say is come to the SBIR events that we do, and the best bet is to get to know the program manager. And when they meet with you they will take the time to tell you what they are looking for and what they are thinking to do. And the best part two is that if you have got an interesting idea that hasn’t been funded before, that gives them the idea of like you know we should fund that area of interest. We should you know fund and that next gen AI or cyber security or whatnot. It gives them a chance to say all right, we’ll produce a funding opportunity. Everyone still has to compete for it and the best idea wins meritocracy, but you could actually encourage if it needs to be dealt.
(40:56) And so you go through every one of those applications looking at…
(41:03) All the managers do, yeah. Yeah, they will sit down, each agency will sit down with a slot team and they will review all of the applications, that’s their job.
(41:13) Right okay.
(41:14) And I’ve been involved in a few. Like they’ll pull me in for some of them and asked me to sit in on a review process. So I’ve done it before. I don’t do all of them. I mean it’s a lot, but I will carve out time and participate.
(41:28) And I’m assuming in those applications you need to – aside from the teams, somehow need to demonstrate that you have the wherewithal to reasonably finish and accomplish the goal.
(41:40) Absolutely, absolutely. And you have just got to make a compelling you know, the most important thing for a submission of a prospective proposal really it’s got to be compelling. It’s just got to be addressing all the pain points, the issues that they are looking, and you know, it’s always important to spend extra time to put something really good together. You know, what’s really interesting on sbir dot gov is we have these resource centers all across the US and they are what we call phase zero centers through our fast network and through the accelerator’s and even partner with SBIRs work.
(42:23) Most of the states now will have someone who is available to help at that phase zero proposal of prep work, well there is an economic development specialist and an SBIR deemed expert is there to assist you in making sure to help you, council you on putting in an effective proposal together. So we do partner a lot. If you go to sbir dot gov there is a state services section. We list out every state all the different services that are available to help you figure out how to compete effectively
(42:50) And this is all basic technology, so I’m assuming issues such as better design, better user experience, better websites, better at mobile apps, that’s not the purview right, this is about the money.
(43:09) Yeah, we are more advanced and apply driven. We’re hitting areas that you know the markets are not really touching properly.
(43:16) And that’s the reason for your existence is because you want to jumpstart innovation wherever inside the country it might be, especially on technologies that may hold promise, that may hold substantial promise in the future, But may not have a practical path to funding today, is that it.
(43:30) Correct yeah, and the thing is that we’re agnostic. We’re not just going to go in and find all the cool innovators in Silicon Valley, and Boston and that’s it. We believe there are diamonds in the rough all over across the US. And so we want to encourage the entrepreneurs who are developing simple stuff whether it’s in Oklahoma, Nebraska, New Mexico, Rhode Island, Florida. The beauty of our program is that we really seek to find promising ideas and innovators, and promising technological solutions but there are potential for solutions all across the US and that’s part of the reason why we are doing the road tours. We are going across the areas that we think there’s promising talent and high-tech small business companies that can grow in Germany, but they just need a little bit of seed funding to help them get forward.
(44:32) Okay, I think we’re just about out of time but just your last, your distilled wisdom, advice on companies that want to apply, how do you do it and make sure you win. I know you spoken about that, but just your distilled experience to summarize.
(44:55) Be smart, be pragmatic, be risk taking and know your stuff really well, and convey a story. Convey a narrative that is compelling. And believe in yourself. I mean that’s the biggest thing for any entrepreneur. Anyone who does entrepreneurship or engages entrepreneur activities you know is always going to have high highs and low lows. And so it’s always important to remember that, and believe in yourself and believe in your idea, and believe in the promise that it could be transformational.
(45:29) Okay, well what great advice. Thank you so much. We have been talking on episode number 169 of CXOTalk with Nagesh Rao, who is the Chief Technologist and entrepreneur in residence at the Small Business Administration. And we’ve been talking about the Small Business Innovation Research grant program, which is a pretty amazing program where, if you apply and you win, the government will just give you cash to develop your idea. So Nagesh Rao, thank you so much for taking the time today.
(46:09) You’re welcome Michael it’s been a pleasure.
(46:12) And everybody thanks for watching CXOTalk and we will see you again next week, thanks a lot, bye bye.
Companies mentioned in today’s show
Small Business Administration www.sba.com
Mapp Biopharmaceutical www.mappbio.com
SBRI road tour www.sbirroadtour.com
Made in Space www.madeinspace.us
Modern Meadow www.modernmeadow.com
Twitter https://twitter.com/GNageshRao @GNageshRao