One of the keys to long term growth in our economy is to create an environment that encourages innovation. We know that when given the opportunity, small firms have proven that they can lead the way innovating and creating new jobs. Many innovations and businesses that we benefit from today found their start in basements and garages around the country.
From 2000 to 2017, small businesses created 8.4 million new jobs, or nearly two-thirds of all the new jobs created in the U.S. In my own district in Colorado, 93 percent of employer businesses are small, and many of those are professional, scientific, and technical services.
One of the ways we have spurred innovation is through targeted and smart federal investments in research and development. Since the 1980s the SBA has led the SBIR/STTR Program, also known as America’s Seed Fund, to invest in research and development of cutting-edge technology. The SBIR/STTR program is funded through a federal set-aside of extramural research and development funding spanning 11 federal agencies. Each agency offers direct grants to science and tech entrepreneurs to help bring their technology to the market under the direction of the SBA’s policy directive.
Over the last three decades the SBIR program has boasted significant return on investment and has generated billions in tax revenue. A study of the Navy and Air Force SBIR/STTR program shows that the 6.25 billion dollars in SBIR funding generated 8.8 billion dollars in tax revenue, and 92.1 billion dollars in overall economic impact.
Despite the success of the program, the SBIR/STTR programs’ set-aside has only been incrementally increased to 3.2 percent as a part of the 2011 Reauthorization over the last 6 years. Since then, our global competitors like China, have aggressively invested in research and development. When SBIR/STTR was first implemented in 1982, the U.S. was at a crossroads much like today and in danger of losing its leadership in innovation due to globalization.
More than thirty years later, due to stagnant investments in research and development, the U.S. is once again at risk of falling behind. Due to short term cost cutting and failure to accelerate the infusion of federal funds, other countries are swiftly catching up to the U.S. For example, China has drastically diminished the U.S. lead in innovation as they have aggressively invested in research in development, while the U.S. investment as a percentage of GDP has dropped.
The SBIR/STTR plays a critical role in maintaining the U.S. dominance in innovation. U.S. technology has maintained a lead because of significant success in information and communications technology. The computer, microchip, and Internet were all achieved through partnerships between government, academia, and entrepreneurs.
The first computers were funded by the military and commercialized through the University of Pennsylvania and Harvard. Similarly, Google founders Larry Page and Sergey Brin used federal funding to research and then develop a prototype of today’s Google search. Most significantly, Qualcomm developed the microchip that changed the global face of wireless communications using grants from the SBIR/STTR program. The company now holds more than 13,000 patents, has over 35,000 employees worldwide, and is valued at nearly 100 billion dollars.
Like the SBIR/STTR program, the SBA’s Growth Accelerator Competition Fund is changing how innovation is funded in America. Over the last five years, the competition has funded over 223 projects in 45 states. The competition has also had significant success reaching diverse applicants awarding 44 percent of the awards to women, 41 percent to underserved communities and 16 percent to rural communities.
However, the SBA and participating agencies can do more to foster innovation and help the U.S. maintain its global leadership. In the past few months I’ve spoken with researchers and small business owners who have shared their experiences with SBIR/STTR. They point to what their industry calls the “Valley of Death,” where innovative ideas that don’t get timely or appropriate funding can’t move forward. In order to remain competitive in innovation with the rest of the world, there is a significant need to reduce process burdens and streamline applications.
We will use today’s hearing to not only discuss the benefits of the programs, but also consider where they can be improved. We will also highlight ideas like the Air Force’s pitch day model, which awarded Securisyn Medical based in my district with a SBIR Phase I award, to small business innovation vouchers for commercialization and technical assistance.
I hope that today’s discussion will shed light on the many benefits of these programs and I look forward to working with my colleagues to improve the SBA’s ability to accelerate innovation and maintain U.S. competitiveness.
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