WESTLAKE VILLAGE, Calif. \u2014 One tool government agencies can use to nurture innovation is the Small Business Innovation Research grant, but is it a bold enough tool for the Pentagon?<\/p>\n\n\n\n
Participants at a Defense News-hosted roundtable in December said no.<\/p>\n\n\n\n
The investment research program, which is run by the Small Business Administration, requires federal agencies set aside a certain percentage of their of research and development funds for outside researchers with small firms.<\/p>\n\n\n\n
SBIR offers three tiers of R&D funding for new technologies, of $150,000 or less at Phase I, which lasts about six months; up to $1 million at Phase II, or about two years; Phase III funding tests the commerciality of the technology and solicits funding from the private sector.<\/p>\n\n\n\n
To Trae Stephens, a partner at the Silicon Valley venture capital firm Founders Fund and the chairman of tech company Anduril Industries, the Pentagon would be better off making a few big bets instead of many smaller investments. He likened it to his experience at a venture capital firm.<\/p>\n\n\n\n
\u201cYou cannot make money writing $250,000 checks. You cannot build successful companies with tiny bits of revenue. You have to concentrate your investments,” Stephens said. \u201cOne recommendation that I\u2019ve been trying to push people on is if you think a company is really good, give them $10 million, give them $20 million.\u201d<\/p>\n\n\n\n
Investments in SBIR\u2019s range would be \u201cviewed as a distraction\u201d to an innovative startup, said Steve Bowsher, an executive with venture capital firm In-Q-Tel. Without \u201crecurring funding in the double-digit millions of dollars, it\u2019s not a market.\u201d<\/p>\n\n\n\n
Since 2011, the law has allowed participation by some businesses that are majority owned by investment companies. But a Dec. 21 Government Accountability Office report found that in past three fiscal years, fewer than 3 percent of grants went to such companies.<\/p>\n\n\n\n
\u201cWe\u2019ve eliminated companies with the smartest $80 billion of funding, and instead we\u2019ll work with all of the other companies,\u201d Bowsher said of the government.<\/p>\n\n\n\n
Defense Innovation Unit\u2019s director of strategic engagement, Mike Madsen, seemed to agree with Stephens that the Defense Department needs a \u201cstrategic fund of that magnitude to make those bets pay off.\u201d<\/p>\n\n\n\n
\u201cIf we could tell ourselves we have a strategy to create one General Atomics a year, can you imagine?\u201d Stephens replied.<\/p>\n\n\n\n
A veteran of the firm Palantir, which has jousted with the Pentagon, left Stephens with the perception the government is afraid to play such a major role.<\/p>\n\n\n\n
\u201cWe\u2019d run into these blockers where decision-makers kind of detested where someone was getting rich doing business with the government,\u201d Stephens said. \u201cOur best capabilities have come from people who have gotten rich doing business with the government.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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