As I see a number of posts negative on the NSF SBIR, so let me speak up in its defense. I'll discuss my experience as well as address some of the criticism I see above. I'll try and answer some follow up questions for people in the replies if I can as well.
My company (zeroK NanoTech) probably wouldn't exist if it where not for this program.
NSF SBIR can aid in the translation of technology that sits in the no-mans land between basic research and commercial technology. In my case the basic potential for our tech had been developed when I was a postdoc, but the federal lab where I worked (NIST) wasn’t going to be able to translate it. At the same time, there was not a great chance to obtain venture or similar funding because the market was a bit too small.
Building off the results of our SBIR-funded research we were able to obtain additional investment from a larger company interested in our technology.
The Phase I program is competitive, I recall about 15% of applications are accepted, but the application here isn’t so onerous, btu the funding amount isn’t very large; this is just for ‘proof of concept ‘ work. The odds of matriculating to Phase II and a much larger pot of money are better, about 40%. There is a decently long gap between your decision to apply and beginning of the project, but I know the NSF is working on this. The NSF is also unique in that you can apply with just about any kind of technology; most other SBIRs are not anything like this.
I’ve also served on review panels for these grants. While it is the case that some applications come from largish companies who seems to subsist on SBIRs, the NSF makes a big effort to invest in 1st time applicants if they have a solid plan. My ‘company’ in our first application was just myself and my cofounder and very little other resources and we won our award. Once you are an awardee, I found the program officers to be very helpful.
You should not be getting downvoted. There is nothing wrong with the government taking equity (or at least dividends) in the companies it invests in that nobody else wants to. It's taking a risk. It should get a reward.
Successful companies pay a lot in taxes (through employment if nothing else), so technically the government does see dividends (albeit in a non-traditional form). However, given the nature of government, it should technically be enough if society benefits more than the expected investment amount, regardless of the government payback.
It's not that simple; every company pays a lot in taxes, so the government doesn't benefit more than if a random VC had put the money in instead.
There's also the opportunity cost of the investment; the yield has to be compared to things like food stamps, education, basic research etc. There's a lot of low hanging fruit a well run government could be picking.
I would also tend towards the view that if the government invests like a VC it should take equity. If these companies genuinely have no other option, I don't see why this would be a deal killer. If they have VC they could take instead, the government shouldn't be offering free money.
We shouldn’t set profit expectations because of their future consequences on how the program will be judged.
The financial goals of this program shouldn’t be profit — or even break even. Any profit expectations will undermine the the way this program is evaluated.
Right, but it also seems irresponsible to completely ignore an obvious revenue opportunity where it exists. IMO with proper branding as some type of "Give back" tax on successful graduates, it wouldn't need to be close to break even, and could help the program grow.
Yeah but then you have to have that same agency deciding when it wants to sell shares, how it wants to use any voting power, etc. It adds overhead to the program that will negate some of the returns from equity.
I imagine that equity would involve complexities the government is not set up to handle. The overhead of maintaining hundreds of equity stakes in startups kind of boggles the mind.
If government wants an equity stake, they’d be better off investing in a fund of VC funds - like what the BC Renaissance fund does in British Columbia. They stuffed $100M (pocket change, I know) into a fund of funds and let the VC manage all of it.
These companies are still benefiting from the same government services which is what the normal corporate taxes are paying for. Saying the taxes paying for those services are also somehow pay back this free loan is very much double dipping.
On top of that, this is early stage funding and most of these companies will fail paying back little to nothing.
PS: Corporate taxes are down to 9% of the federal budget. They really don’t pay much in the way of taxes vs the services they benifit from.
Agree with your sentiment. Although it's not perfect, it fills a gap that no one else fills. Given the lack of competition on this funding, they're doing decent.
Maybe a big initiative from another country would light a fire under them.
Apple got public money from Small Business Investment Company.
Nike, Ben&Jerry's, FedEx, and Chipotle got SBA loans.
Google's search algorithm was funded by National Science Foundation.
Apple, Google, Facebook and Amazon receive billions from American states in data tax breaks.
Tesla and Space X are heavily subsidized too.
These are just a few famous examples.
The American economy would likely be a lot smaller were it not for public subsidies of various types. Fanatic capitalism is based on a myth, or at least a massive exaggeration, of what private initiative achieves on its own.
My company (zeroK NanoTech) probably wouldn't exist if it where not for this program.
NSF SBIR can aid in the translation of technology that sits in the no-mans land between basic research and commercial technology. In my case the basic potential for our tech had been developed when I was a postdoc, but the federal lab where I worked (NIST) wasn’t going to be able to translate it. At the same time, there was not a great chance to obtain venture or similar funding because the market was a bit too small.
Building off the results of our SBIR-funded research we were able to obtain additional investment from a larger company interested in our technology.
The Phase I program is competitive, I recall about 15% of applications are accepted, but the application here isn’t so onerous, btu the funding amount isn’t very large; this is just for ‘proof of concept ‘ work. The odds of matriculating to Phase II and a much larger pot of money are better, about 40%. There is a decently long gap between your decision to apply and beginning of the project, but I know the NSF is working on this. The NSF is also unique in that you can apply with just about any kind of technology; most other SBIRs are not anything like this.
I’ve also served on review panels for these grants. While it is the case that some applications come from largish companies who seems to subsist on SBIRs, the NSF makes a big effort to invest in 1st time applicants if they have a solid plan. My ‘company’ in our first application was just myself and my cofounder and very little other resources and we won our award. Once you are an awardee, I found the program officers to be very helpful.