[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                            SUBCOMMITTEE ON
                        HEALTHCARE & TECHNOLOGY
    THE CREATING JOBS THROUGH SMALL BUSINESS INNOVATION ACT OF 2011

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             APRIL 7, 2011

                               __________


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            Small Business Committee Document Number 112-009
           Available via the GPO Website: http//www.fdsys.gov
                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                     Barry Pineles, General Counsel
                 Michael Day, Minority Staff Directory


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

Ellmers, Hon. Renee..............................................     1
Richmond, Hon. Cedric............................................     2

                               WITNESSES

Mr. Glenn Norem, Executive Chairman, Totus Lighting Solutions, 
  Inc., Lakeway, TX..............................................     4
Dr. Terry Brewer, President, Brewer Science, Inc., Rolla, MO.....    11
Dr. Albert Link, Professor, Department of Economics, Bryan School 
  of Business and Economics, University of North Carolina at 
  Greensboro, Greensboro, NC.....................................    16
Dr. Scott Koenig, M.D., Ph.D., Chairman of the Board of Applied 
  Genetics Technology Corporation & President and CEO of 
  MacroGenics, Inc., Rockville, MD...............................    24

                                APPENDIX

Prepared Statements:
Mr. Glenn Norem, Executive Chairman, Totus Lighting Solutions, 
  Inc., Lakeway, TX..............................................     7
Dr. Terry Brewer, President, Brewer Science, Inc., Rolla, MO.....    13
Dr. Albert Link, Professor, Department of Economics, Bryan School 
  of Business and Economics, University of North Carolina at 
  Greensboro, Greensboro, NC.....................................    18
Dr. Scott Koenig, M.D., Ph.D., Chairman of the Board of Applied 
  Genetics Technology Corporation & President and CEO of 
  MacroGenics, Inc., Rockville, MD...............................    27

Statement for the Record:
The Small Biotechnology Business Coalition.......................    39


 HEARING ON THE CREATING JOBS THROUGH SMALL BUSINESS INNOVATION ACT OF 
                                  2011

                        THURSDAY, APRIL 7, 2011

                  House of Representatives,
                       Committee on Small Business,
                 Subcommittee on Healthcare and Technology,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360, Rayburn House Office Building. Hon. Renee Ellmers 
[chairwoman of the subcommittee] presiding.
    Present: Representatives Ellmers, Richmond and Peters.
    Chairwoman Ellmers. Thank you all for being here with us 
this morning as we discuss legislative legislation to 
reauthorize the Small Business Innovation Research (SBIR) and 
the Small Business Technology Transfer (STTR) programs.
    I would especially like to express my gratitude to each of 
the witnesses who have taken time out of their busy schedules 
to be with us today. And on a personal note I would also like 
to thank Chairman Graves for giving me the opportunity as a 
freshman to chair this Subcommittee. That was very generous of 
him and the staff as well. They are so incredibly helpful and 
it is an honor to be sitting in this position, especially since 
this is my very first Subcommittee. So thank you all. And I 
will remember you always very fondly.

                STATEMENT OF CHAIRWOMAN ELLMERS

    Chairwoman Ellmers. Small businesses are a major driver of 
high technology innovation and economic growth in the United 
States generating significant new jobs, new markets, and high 
growth industries. In this era of globalization, optimizing the 
ability of small businesses to develop and commercialize new, 
highly innovative products is essential for U.S. 
competitiveness and national security. This is why programs 
like SBIR and STTR are so important.
    Created in 1982, the SBIR program was designed to increase 
the participation of small, high tech businesses in federal R&D 
endeavors. The driving force behind its creation was predicated 
upon the belief that while technology-based companies under 500 
employees tended to be highly innovative, and innovation being 
essential to the economic well-being of the United States, 
these businesses were, excuse me, underrepresented in 
government R&D activities. By including qualified small 
businesses in the nation's R&D effort, SBIR grants and 
contracts stimulate innovative new technologies to help 
agencies meet the specific research and development needs of 
the nation in a wide variety of areas, including health, energy 
solutions, and defense.
    It has been said that nobody has a patent in good, new 
ideas. While that is true, it can be difficult for an innovator 
or a small company with limited resources to take that idea and 
manufacture it into a new product or process. Programs like 
SBIR provide a bridge between product conception and 
marketability, a step of vital importance for innovative ideas 
to become reality. The new technologies and discoveries that 
come out of this program go a long way to keep the United 
States competitive edge in the world marketplace. And the SBIR 
program is the kind of public-private partnership that is 
essential to the continued growth of our economy.
    In 2007, the National Research Council (NRC) of the 
National Academies of Science completed one of the most 
comprehensive examinations of the SBIR program. The study found 
that the SBIR program provides substantial benefits for 
participating small businesses at all agencies in a number of 
different ways. According to the NRC's study, the SBIR program 
is a significant job creation engine and considerable factor in 
the founding of new companies, helps to provide partnering and 
networking opportunities for small businesses, and provides the 
impetus to start projects that otherwise would not have gotten 
off the ground.
    There is a very strong case for reauthorization of the SBIR 
and STTR programs. The discussion draft of legislation to 
reauthorize these programs that we have before us goes a long 
way toward modernizing and improving the SBIR and STTR 
programs. They have a proven track record of creating jobs, 
advancing innovative science in the marketplace, and solving 
federal agency problems. Our legislative goal is to strengthen 
these programs to ensure efficient use of taxpayer dollars that 
help create more jobs by targeting the best science. Moreover, 
the bill does not cost anything but rather sets aside 2.5 
percent of all federal extramural research dollars for small 
businesses to compete for. Among other things, the draft would 
reauthorize the SBIR and STTR programs for three years, 
increase Phase I and Phase II award sizes for both programs, 
allow for greater participation of small companies regardless 
of their financial structure, and enhance data collection for 
the programs to help us provide accurate and consistent 
oversight.
    Again, thank you all for being here today. I am eager to 
hear the testimony of our witnesses and I look forward to 
working with you, Ranking Member Richmond and Chairman Graves 
and Ranking Member Velazquez of the full Committee to 
reauthorize these important programs.
    I now yield to Ranking Member Richmond for his opening 
statement.
    [The information follows:]

              STATEMENT OF RANKING MEMBER RICHMOND

    Mr. Richmond. Thank you, Chairwoman Ellmers.
    First, let me thank all of the witnesses for being here--
Dr. Koenig, Dr. Link, Dr. Brewer, and Mr. Norem--for taking 
time out and coming to testify today on an issue that is very 
important and has the ability to continue to move this country 
forward not just in terms of innovation but the products that 
are created and the technology that is developed, make this 
country a better place, saves lives, and all of those things 
that are very important to us, not only that but it also 
creates jobs. So thank you for doing that.
    And Madam Chairwoman, small businesses have always been our 
nation's greatest innovators, developing new products and 
technologies. Whether it is new computer software or lifesaving 
medicine, small firms are vital to the technological 
breakthroughs that keep America competitive. The Small Business 
Innovation Research program has been an important mechanism for 
enlisting small firms to meet the U.S. government's research 
needs.
    In my home state of Louisiana, entrepreneurs are receiving 
SBIR grants from NASA to work on geographic mapping 
technologies from Homeland Security to improve disaster 
response and from the National Science Foundation to improve 
online distribution of video content. Just yesterday I met with 
the president of Tulane University, Dr. Scott Cowen, who is 
also in my district, that informed me that their 
commercialization efforts are currently underway at Tulane 
thanks to SBIR.
    In addition to Tulane in my district, the New Orleans Bio 
Innovation Center acts as a business incubator helping budding 
entrepreneurs turn ideas into products. The Bio Innovation 
Center is a cornerstone of Louisiana's commitment to nurturing 
biotechnology within the state. It is a component entity of a 
larger leadership of the Greater New Orleans Biosciences 
Economic Development District, now referred to simply as the 
Bio District New Orleans.
    Beneficiaries of the work done in New Orleans' Bio District 
have made it clear that a sustained, longer term of 
reauthorization of SBIR is a priority for their membership. It 
is also a priority for me.
    The discussion draft before the Committee represents an 
important first step in moving forward to reauthorize this 
initiative. How we go about modernizing SBIR will determine 
whether small firms continue making these kinds of valuable 
contributions to the American economy. As we develop this 
legislation and begin working with our Senate counterparts, we 
should keep a number of goals in mind for the program.
    I have a central focus when it comes to SBIR. It is vitally 
important to reach an agreement that prioritizes a long-term 
reauthorization. The frequent short-term reauthorizations are 
disruptive to the planning efforts of SBIR stakeholders. The 
program is a proven job creator and a growth engine for small 
business. It is time to move forward.
    I am satisfied that the draft bill, which we will be 
discussing today, mostly addresses my priorities with the SBIR 
program. I have identified other areas where I believe the bill 
could be strengthened. As the legislative process moves forward 
I warmly embrace the opportunity to work with my colleagues and 
our chairwomen on both sides to make sure that this piece of 
legislation can be one that the SBIR stakeholders are proud of.
    Madam Chairwoman, risk-taking and innovation are prized 
values in America's entrepreneurial culture. Some of the most 
significant technological advancements that forever changed how 
we live our lives were developed not in the laboratories of big 
corporations but in the backyards and garages of entrepreneurs. 
The SBIR program is an important tool for fueling this 
creativity and in the process creating new jobs.
    During the recession, while big companies were laying off 
its employees, it is estimated that the SBIR program helped 
spark the creation of more than 1,300 new enterprises. As the 
U.S. economy regains its footing, innovation will be crucial 
and SBIR grants can be a key ingredient in that equation. For 
all those reasons, it is important that while we are taking the 
painstaking care to reauthorize this program in a manner that 
works for our nation's small businesses.
    I look forward to a thorough discussion today of the draft 
legislation and I want to thank the witnesses again for 
testifying. And with that, Madam Chairwoman, I yield back.
    [The information follows:]
    Chairwoman Ellmers. Thank you, Mr. Ranking Member. And it 
is going to be a pleasure serving on this Subcommittee with 
you. Thank you so much.
    If additional members have an opening statement prepared, I 
ask that they be submitted for the record. I would also like to 
take a moment to explain to you the timing light system. You 
will each have five minutes to deliver your testimony. The 
light will start out as green. When you have one minute 
remaining the light will turn yellow. Finally, it will turn red 
at the end of your five minutes. I ask that you try to keep to 
this time limit but I will be lenient if you are close to 
finishing. So, thank you.

 STATEMENTS OF GLENN NOREM, EXECUTIVE CHAIRMAN, TOTUS LIGHTING 
  SOLUTIONS, INC., ON BEHALF OF THE AUSTIN, TEXAS CHAMBER OF 
 COMMERCE; DR. TERRY BREWER, PRESIDENT, BREWER SCIENCE, INC.; 
  DR. ALBERT LINK, PROFESSOR, DEPARTMENT OF ECONOMICS, BRYAN 
SCHOOL OF BUSINESS AND ECONOMICS, UNIVERSITY OF NORTH CAROLINA, 
 GREENSBORO; DR. SCOTT KOENIG, PROFESSOR, UNIVERSITY OF NORTH 
CAROLINA AT GREENSBORO, ON BEHALF OF THE BIOTECHNOLOGY INDUSTRY 
                         ORGANIZATION.

    Chairwoman Ellmers. Okay. At this moment I would like to 
start off with Mr. Glenn Norem. He serves as executive chairman 
and cofounder of Totus Solutions. I am hoping I said that 
correctly. Okay. Incorporated. His company provides advanced 
lighting and security solutions for safety, security, and 
surveillance applications primarily to government agencies. Mr. 
Norem has also served as executive chairman of eeParts, 
Incorporated. He received a Bachelor of Science degree in 
Electrical Sciences and System Engineering from Southern 
Illinois University and an M.B.A. from University of Chicago's 
Booth School of Business. Thank you for being here today.

                    STATEMENT OF GLENN NOREM

    Mr. Norem. Thank you. Good morning, Chairwoman Ellmers and 
Ranking Member Richmond, members of the Subcommittee and ladies 
and gentlemen. It is an honor to be up here before you, and I 
commend your Committee for the contributions that you have had 
to the growth of our economy, the creation of new jobs, and the 
fostering of innovation in the United States. Thank you for the 
introduction.
    Totus was founded in April of 2009. We manufacture 
intelligent lighting-based security platforms that are deployed 
and establish electronic security grids to protect the citizens 
of our country, strengthen our defenses, and to improve the 
response to incidents in their jurisdictions. I am also the 
founder of eeParts, a supply chain services company with 
operations in Texas and in China. I cofounded ViewCast prior to 
that, a provider of streaming and media technologies. Prior to 
ViewCast, I was general partner of two successful venture 
capital firms focused on early stage and start-up investments.
    Totus was started by two serial entrepreneurs, again, to 
build these security platforms. It is an integration of secure 
wireless communications, video surveillance, and sensor 
monitoring arrays. The surveillance and sensor grids enable 
customers to provide an advanced level of physical security to 
their installations and superior response to incidents that 
occur in their jurisdictions. I am also here representing the 
Austin Chamber of Commerce. The Austin Chamber represents a 
five county region in central Texas and more than 2,400 
businesses with a wide range of industries and sizes.
    Entrepreneurs, innovation, and access to capital. Certainly 
not all small businesses require investment capital from third 
party resources to be successful, and many successful firms 
have been built solely with money from friends and family and 
from individual investors. However, many emerging growth 
companies require significantly more capital and will receive 
that from one or more venture capital funds. It has been my 
professional experience that the relationship between 
entrepreneurs and the venture capital professionals has 
contributed to unparalleled success of innovation and jobs for 
our nation in the last 30 years.
    The seeds of our nation's venture capital industry actually 
began with the Small Business Administration and their SBIC 
programs in the 1970s. Venture-backed companies generally 
benefit from both the venture capital's money, their 
investment, and the business development expertise of their 
professionals as the entrepreneurs strive to grow our 
businesses in today's fast paced, globally competitive 
environment.
    The SBIR program has fostered innovation and new job 
creation, and it is important to Totus as it is with many other 
small businesses in this country because it keeps us and 
enables us to stay close to our federal agencies, such as the 
Department of Defense, Department of Homeland Security, to 
create solutions to meet the critical needs of their 
organizations and the missions to protect our citizens.
    The SBIR program is a powerful catalyzer for innovation and 
a driver of the American economy. As an example of that, my 
cofounder and colleague, Steven Chen previously founded 3eTI 
and was a recipient of Phase I, Phase II, and Phase III SBIR 
grants which led to the invention and commercialization of the 
first FIPS-140 secure wireless technologies, products that were 
used by the Department of Defense and other U.S. agencies. 
Historically, our country has benefitted greatly from the 
successes of our entrepreneurs as they grew in new businesses, 
high tech businesses with innovative products creating new 
companies, new industries, and new jobs that have been proven 
to be vital to our economy.
    New company formation and access to capital has been 
difficult in the last few years. To fulfill our ambitious 
goals, new companies like Totus require both talent and 
investment capital. In the formative stages, the investments 
need to be secured before the firm recruits talent. 
Unfortunately for Texas, the current SBIR rules handicap our 
access to investment capital by prohibiting our participation 
in the SBIR program if we accept venture capital investment.
    While we have been successful in raising debt and equity 
capital from individuals, the high visible stock market crashes 
of the last decade have had a negative effect on individual 
investors that have historically provided angel capital. What 
that means for Totus, like many other small businesses hindered 
by the current situation, is that we spend more executive time 
and resources raising capital which translates to slower growth 
for our businesses and limits the creation of new jobs.
    In conclusion, it is most confounding to me that the 
venture capital-supported companies have been barred from 
participating in the SBIR program because the entrepreneurs, 
the SBIR program, and the venture capital community at-large 
have been solidly aligned in their interest in commercializing 
technology, in their missions with spurring innovation, and in 
the growth of new, commercially successful businesses. It is 
well understood that entrepreneurs and their companies are 
dependent on access to capital, and no other single factor more 
thoroughly determines whether a business will be successful.
    I trust that my comments have both reaffirmed both the 
value of the SBIR program and the need to remove barriers or 
obstacles to access to capital for entrepreneurs as we seek to 
secure capital from all available sources.
    Thank you for this opportunity to appear before the 
Committee.
    [The statement of Glenn Norem follows:]

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    Chairwoman Ellmers. Thank you, Mr. Norem.
    Next we have Dr. Terry Brewer, who is president and founder 
of Brewer Science headquartered in Rolla, Missouri. Founded in 
1981, Brewer Science, excuse me, is the discoverer of original 
solutions for the world's leading manufacturers of computer 
chips, sensors, LEDs, displays, and other microelectronics 
devices. Under his leadership, Brewer Science has grown from 
only three to 300 employees. Dr. Brewer has served on many 
boards and committees, particularly related to the area of 
innovation. He is one of the founders of Jordan Valley 
Innovation Center and serves on the Board of Springfield 
Innovation, Incorporated. Thank you for your testimony, Dr. 
Brewer.

                   STATEMENT OF TERRY BREWER

    Dr. Brewer. Good morning, Chairwoman Ellmers, Ranking 
Member Richmond, and the members of the Subcommittee.
    Thank you for the opportunity to appear here today to 
discuss the impact and the value of the SBIR program. I am 
Terry Brewer. I am president of Brewer Science, Incorporated in 
Rolla, Missouri, and I am appearing here today as a founder and 
owner of a small business that sustains high technology 
innovation.
    I founded Brewer Science in 1981 and based it in Rolla, 
Missouri. Brewer Science is a major innovator of high 
technology processes used to create ultra small circuits that 
enable devices, such as tablet computers from which I am 
talking, smartphones, digital cameras, flat panel devices, and 
LEDs. The stringent requirements of these products provide 
Brewer Science with opportunities to leverage the company's 
knowledge and creative capabilities to provide the needed 
advanced technologies for both government and private sectors. 
Our product line encompasses unique chemicals, processes, and 
equipment that are used to give devices more capability in less 
space at a lower cost.
    Like many entrepreneurs, I started the company with a novel 
concept, but with little cash. By using another company's extra 
lab space, creating a unique business approach, and accessing 
the support of programs like SBIR, Brewer Science has grown to 
nearly 300 employees. We are now the largest private employer 
in Phelps and the surrounding counties, Missouri, with sales 
offices all across Asia and Europe to access worldwide markets 
with our U.S. manufactured products.
    Additionally, we are making significant headway in the 
development of next generation semiconductors using 
breakthrough processes and materials, such as carbon nanotubes 
in our facilities in Rolla and Springfield, Missouri. Over the 
past three years, this small, privately held high tech company 
located in rural Missouri has grown into a strong innovator and 
exporter of products used by every major integrated circuit 
manufacturer in the world. We have participated in the SBIR 
program with a high degree of success, including the 
commercialization of multiple disruptive technologies. The 
global competitors from countries that provide large government 
subsidies for the research and development programs require us 
to utilize programs such as SBIR which is needed now more than 
ever.
    The founders of the SBIR program had a great vision to 
support and grow a true national treasure, innovation generated 
and sustained by American small business. In fact, American 
small businesses have become the most powerful innovating force 
on earth and it is this ability to not only invent but to 
provide sustained innovation that is the hallmark of this 
effort.
    Since receiving our first SBIR award in 1984, the 
microelectronics industry has benefitted from many Brewer 
Science technologies facilitated by the program. It has helped 
us create and sustain high value jobs en route to influencing 
the development of modern electronic devices as we know them 
today.
    So how do you calculate the impact of Brewer Science and 
its effect on the microelectronics industry? It is really not 
possible. From local jobs to advances in global 
microelectronics, Brewer Science innovations have made a 
difference in the way we live. But we are only one example of 
how funded innovation drives this kind of change. There are 
many more stories like ours that also confirm the value of the 
SBIR program.
    In driving this change, it is important to distinguish 
between science and innovation. While appropriate science 
contributes to meaningful innovation, the value of the SBIR 
program is more than just finding the best science. Science 
does not create jobs. Businesses focused on sustainable 
innovation and development do create jobs. The SBIR founders 
were right. Small business innovation research empowers 
government funding to move great innovations forward to solve 
technical challenges through commercialization and 
manufacturing thereby achieving economic growth.
    The founders of the SBIR program intended for American 
small business to generate jobs and technical growth. However, 
investment firms driven strictly for financial gain are not 
always aligned with this focus. I recognize that monetary 
support is critical for small business growth, but while 
investment firms can provide support for small businesses, 
their driving purpose may not always align with SBIR 
objectives. Any changes in the SBIR legislation should be 
sensitive to these concerns.
    In conclusion, the visionaries of the SBIR program 
anticipated the increasing need for sustained innovation from 
the U.S. small businesses. As our nation struggles with 
challenging economic times there is no better vehicle to get us 
through than American small business innovation. No better 
vehicle.
    While there are differences and distractions associated 
with the passage of this bill, I encourage the Subcommittee to 
remember the essence of what this program supports and how 
valuable SBIR is to supporting these efforts. That essence is 
the creation of technology-based jobs in the United States.
    [The statement of Terry Brewer follows:]

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    Chairwoman Ellmers. Thank you, Dr. Brewer. Thank you for 
your testimony.
    I now yield to Ranking Member Richmond who will introduce 
our next witness.
    Mr. Richmond. Madam Chairwoman, it is my pleasure to 
introduce Dr. Albert Link.
    Dr. Link is a professor of Economics at the University of 
North Carolina at Greensboro with a focus on science and 
technology policy. He received his Ph.D. in Economics from 
Tulane University and is currently the Editor-in-Chief of the 
Journal of Technology Transfer. He has written many articles on 
the SBIR program, and Dr. Link is a member of the research team 
for the National Research Council's Committee for Capitalizing 
on Science, Technology, and Innovation, an assessment of the 
Small Business Innovation Research program.
    As a Tulane graduate, it is my pleasure to introduce Dr. 
Link. Dr. Link.
    Mr. Link. Thank you.

                    STATEMENT OF ALBERT LINK

    Mr. Link. Good morning, Chairwoman Ellmers, Ranking Member 
Richmond, and members of the Subcommittee.
    The pollen season has arrived in North Carolina. So if you 
would excuse me.
    It is a privilege to be here and I thank you for the 
opportunity. The observations that I offer to you this morning 
are more general than those from Mr. Norem and Dr. Brewer. The 
insight that they offer from a company perspective is 
enlightening and extremely important.
    If I may speak at a more general level, the SBIR program 
has had, and I expect it to continue to have, a significant 
impact on the technological foundation of our economy, thus 
reinforcing the economy's potential for continued and sustained 
growth.
    Defending this statement is not difficult at an aggregate 
level. The evidence is clear that the benefits to society 
outweigh the costs of the program. In other words, a benefit 
cost analysis calculated under very conservative assumptions 
shows that the ratio of social benefits to SBIR funding costs 
far exceeds one.
    Turning to two specifics, employment growth and 
commercialized new technologies, both of which are of economic 
importance and both of which are directly linked to SBIR 
funding. After I briefly remark on each I will comment on the 
common thread between them, namely Phase III funding. 
Employment growth is not an explicit objective of the SBIR 
program, but it is definitely an important issue, especially in 
the current economic environment.
    The average annual rate of employment growth in SBIR-funded 
companies over the past decade has far exceeded the growth rate 
of the economy as a whole. The average rate of employment 
growth among, for example, NIH-funded companies has been about 
11 percent per year. And this estimate does not take into 
account employment growth associated with those companies that 
purchase innovations created by the funded companies.
    Also, across agencies employment growth has increased by 
about 30 persons per million dollars of SBIR funding. 
Employment growth varies among companies, and it is greatest 
among those that have patented their intellectual property and 
have acquired Phase III funding. Controlling for these effects, 
there do not appear to be differences in employment growth 
among companies that are owned by women and/or minorities 
compared to other companies. But women and/or minority 
companies tend to patent their intellectual property less 
often.
    Commercializing new technology funded by SBIR is an 
explicit objective of the program, and about 50 percent of the 
funded projects reach the commercialization stage. The 
probability of commercializing a new technology also varies 
among companies and it is greatest among those that have 
acquired Phase III funding and who have partnered with the 
university. And I suspect that partnering with a national 
laboratory would bring about the same result.
    And controlling for these effects on the likelihood of 
commercialization, again, there do not appear to be differences 
among women and minority-owned companies compared to other 
companies.
    The magnitude of the effect of Phase III funding on the 
probability of commercializing a new technology is noteworthy. 
Again, if I may draw from NIH as an example, the probability of 
commercialization nearly doubles when Phase III funding is 
available. Phase III funding thus has an economic importance to 
SBIR-funded companies. It is correlated with employment growth 
and commercialization, and the two are related.
    In conclusion, thank you again, Chairwoman Ellmers, Ranking 
Member Richmond, and members of the Committee for the 
opportunity to offer these observations on the overall economic 
importance of the program. I strongly encourage the Committee 
to move toward a reauthorization of the program and to include 
in that reauthorization continued evaluation studies of the 
program within an emphasis on any economic consequences 
associated with changes in the economic environment or in the 
composition of applicant and recipient companies. Thank you.
    [The statement of Albert Link follows:]

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    Chairwoman Ellmers. Thank you, Dr. Link, for your 
testimony.
    Our last distinguished panel member is Dr. Scott Koenig, 
who is the chairman of the Board of Directors at Applied 
Genetic Therapy Corporation, a private biotechnology company. 
Dr. Koenig is a board member of the Biotechnology Industry 
Association, as well as a member of its emerging company 
section. Dr. Koenig is also a board member of the Children's 
Research Institute at the Children's National Medical Center. 
He received his A.B. and Ph.D. from Cornell University and his 
M.D. from University of Texas, Health Science Center in 
Houston. He completed his residency in international medicine 
at the Hospital of the University of Pennsylvania and is board 
certified in internal medicine and allergy and immunology.
    Dr. Link, you could probably discuss this with Dr. Koenig 
to suffer as a fellow North Carolinian.
    Welcome to the Subcommittee, Dr. Koenig.

                   STATEMENT OF SCOTT KOENIG

    Mr. Koenig. Thank you very much. Good morning, Chairwoman 
Ellmers, Ranking Member Richmond, members of the Committee, 
ladies and gentlemen. I am president and CEO of MacroGenics and 
chairman of the board of Applied Genetics Technology 
Corporation. I am appearing before the Committee on behalf of 
the Biotechnology Industry Organization, which represents more 
than 1,200 companies, academic institutions, state 
biotechnology centers, and related organizations in all 50 
states.
    I am a scientist, physician, and entrepreneur, and I have 
worked at the NIH and in the biotechnology industry for the 
past 27 years. During my career I have held positions, 
including senior vice president of research at MedImmune, 
cofounder and CEO of MacroGenics, and board director of AGTC.
    During this time, I have been involved in the development 
of multiple biological product, such as a therapy to prevent a 
fatal viral illness in premature infants, a vaccine to prevent 
cervical cancer, and a number of other promising therapeutics 
still in development to treat juvenile diabetes, West Nile 
virus infections, and many types of cancers.
    I have seen the importance and impact of the SBIR program 
in the biotechnology industry, but sadly, from my perspective, 
current rules have inhibited the growth and survival of small 
private biotechnology companies and the development of 
promising technologies and products due to the inability of the 
venture-backed companies to participate in the SBIR program.
    Let me illustrate examples of each with two quite different 
outcomes for treatments for children. In the 1990s, MedImmune 
was a small, biotechnology company in Gaithersburg, Maryland, 
funded by venture capitalists and became a publicly traded 
company in 1991. At that time, one of the lead programs was a 
monoclonal antibody to prevent respiratory syncytial virus 
infection in neonates. The research and development of this 
program was funded by SBIR Phase I and II grants. Today this 
product is called Synagis, the first and only FDA-approved 
product to prevent an infectious disease and has been used now 
in over 600,000 children. MedImmune employs thousands of highly 
skilled professionals. If current SBIR rules prevailed at the 
time when MedImmune scientists first were working on and 
applied for these grants, MedImmune would have been illegible 
to receive those SBIR funds and it would have significantly 
impacted the development of the program and the company.
    Contrast this with the outcome at AGTC. Today AGTC is a 
small, private, biotechnology company in Alachua, Florida. It 
is developing cutting edge product candidates to treat and cure 
different generic diseases using adeno-associated viral vectors 
produced by their proprietary manufacturing process. The 
company by all parameters is a small company. They have seven 
employees, no product revenues, and large capital requirements 
to advance their programs through early stage pre-clinical and 
clinical development. Currently, all their venture capital 
money is being used to fund two early clinical trials and they 
have no other capital support to support other avenues of 
research.
    Prior to 2003, AGTC received several SBIR grants for three 
different projects to advance treatments of rare diseases, but 
in 2003 the company applied for a Phase I and II grant and was 
initially awarded the grant but the application had to be 
withdrawn due to the circumstances of VC ownership. This grant 
would have advanced the treatment for Pompe disease, a fatal 
genetic disorder which results in the death of many infants by 
one year of age. No investors were willing to fund this early 
stage work for Pompe and no further work has been done in the 
last eight years.
    Currently, the company is working on one of the most 
promising programs to treat blindness in children caused by 
genetic disorders. An initial clinical study using their 
technology to treat Leber's congenital amaurosis (LCA), a rare 
retinal disease affecting a few thousand patients in the U.S., 
resulted in the first restoration of partial sight in legally 
blind patients with this inherited, defective gene. The company 
desires to use their technology to treat three other genetic 
eye diseases but is unable to do so because they have no 
resources available and they cannot participate in the SBIR 
funding. In fact, AGTC did apply for a grant for one of these 
eye diseases called achromatopsia in anticipation of 
congressional resolution of matters of SBIR funding related to 
VC ownership. The grant was scored and awarded, but AGTC is 
unable to accept the funds due to the prevailing rules.
    As developers of the next generation of treatments for 
diseases that would have been unapproachable just a decade ago, 
we need to find ways to support these risky transformational 
therapies that could improve the lives of children and adults 
suffering from genetic disorders, infectious diseases, cancer 
and autoimmune diseases among others. This has personal and 
economic benefits to the individuals affected, the 
organizations and companies working on these initiatives and 
society in general. We should update the SBIR program to 
reflect today's realities and this has never been more 
important. The impact of the economic downturn is still being 
felt by the industry. The amount of venture capital dollars 
decreased by 27 percent between 2009 and 2010 and finding 
funding for promising early stage projects is still difficult 
as it has ever been.
    There is an opportunity to strengthen and restore the SBIR 
program. First, allow small U.S. biotechnology companies that 
are majority owned by venture capitalists to once again compete 
for the SBIR awards based on scientific merit. This will ensure 
that the most competitive pool of applicants and grants will be 
awarded for projects that show the most promise in bringing 
breakthrough therapies to the public. Second, clarify SBIR 
eligibility rules to make the application process more 
straightforward and user friendly. It is equally important that 
the reauthorization clarifies SBIR affiliation regulations.
    [The statement of Scott Koenig follows:]

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    Chairwoman Ellmers. Thank you for your testimony, Dr. 
Koenig.
    I would like to begin questioning with Mr. Norem. 
Technologies such as yours, and really technologies in general, 
tend to advance exponentially. Where could you see your 
technology going? Where else could it be adapted?
    Mr. Norem. Thank you for the question, Chairwoman Ellmers.
    We believe, and our investors believe, that we have a very 
rare opportunity to expand the physical security levels of our 
nation, not only at the Department of Defense military bases, 
the State Department and embassies worldwide, both here and 
abroad, but also for our communities as they want to deploy 
this in universities for increased security on campuses, 
hospitals and local jurisdictions, police departments, K-12 
education. So it is a very open market at both state, local, 
and federal here in the United States, not to mention the 
growth of the surveillance and sensor grid arrays that are 
being built in Europe and other places in the world.
    Chairwoman Ellmers. Thank you.
    To Dr. Brewer, we have been really focusing on job 
creation. That is the main focus of the 112th Congress. Could 
you put your SBIR award into jobs? Upon receipt of a Phase I or 
a Phase II, does that directly impact your hiring practices?
    Dr. Brewer. Of course we can put SBIR directly into jobs. 
We have. And yes, the Phase I and Phase II awards do affect our 
hiring practices and make a major contribution to just how far 
we can extend our own technology. So very significant to that, 
and very significant to job creation.
    Chairwoman Ellmers. Great. Thank you.
    And Dr. Link, agency flexibility is often cited as a value 
to the SBIR program. Can you explain how this flexibility is 
beneficial to the program across agencies?
    Mr. Link. If one talked to a group of entrepreneurs, each 
would probably have a different definition of what an 
entrepreneur is. The same if you talk to those in the academic 
community who study it. The common thread among those 
definitions would be the ability to be creative and the ability 
to bring that creativity into action. In this case the 
marketplace. And I think the flexibility of the SBIR program 
embraces both of those. It embraces both creativity and 
embraces both action. It allows for two phases. It allows for 
firms to attempt to try out new ideas, and if successful then 
follow them forward into a Phase II. It also allows for other 
support, whether it be federal or federal non-SBIR money or 
other forms of private investment. And there is not a formula 
that is presupposed on how those other forms of financing will 
have an effect. The market is playing itself out, as it should, 
and the success, I think, has been well documented by the 
members of this Committee.
    Chairwoman Ellmers. Thank you, Dr. Link.
    And lastly, Dr. Koenig, have you seen businesses 
increasingly seeking out more opportunities in the SBIR program 
because of the general lack of availability of capital 
nationwide at this time?
    Mr. Koenig. I think the effect of the economic downturn has 
had a dramatic effect on the biotechnology industry. The lack 
of funds available from other sources, particularly venture 
capitalists, has ended up forcing the companies to seek other 
ways to obtain new sources of capital. I have seen a lot of 
effort in trying to get SBIR funding, but because of the 
current rules, and since most of the companies within the Bio 
organization are majority owned by venture capitalists, they 
have been prohibited from participating. That has been a great 
frustration, as you can imagine, for the member companies. And 
I think that in the interest of both the companies creating new 
jobs and getting the most innovative technologies developed, if 
the rules can be changed to allow the majority funded VC 
companies to participate, it will have a huge impact on our 
country and the public.
    Chairwoman Ellmers. Thank you, Dr. Koenig.
    I now yield to Ranking Member Richmond for his questions.
    Mr. Richmond. Madam Chairwoman, if I could, I yield to 
Congressman Peters to do his before me.
    Mr. Peters. Thank you, Ranking Member Richmond. I 
appreciate that. Thank you, panelists, for your comments here.
    Dr. Link, I just want to flush out some of the things that 
you had mentioned in your analysis of the SBIR program. One, 
you talked about how the average annual rate of employment 
growth varies across funding agencies, and I think you quoted 
the NIH as about 11 percent growth. I do not know if that 
correlated to jobs. What sort of variation do you see in these 
agencies? Is there a wide variation?
    Mr. Link. The NIH was the largest and that is the agency I 
studied the most. The Defense Department is about five percent 
and the Department of Energy is about six percent. NASA and the 
National Science Foundation are in between.
    Mr. Peters. And what do you account for that difference? 
Anything in particular?
    Mr. Link. First of all, NIH and Department of Defense are 
the two--projects funded from those two agencies have received 
the most amount of Phase III money, and I think that has a 
dramatic effect on the probability of commercialization.
    When one talks about commercialization, it is not a 
dichotomous event. You either commercialize or do not 
commercialize. If you do commercialize, how successful are you 
in reaching the market? And in those two agencies, which, of 
course, are the largest in terms of allocations, they have been 
most successful in terms of the magnitude of sales. And I 
attribute that primarily to Phase III funding in those two 
agencies more so than in the others.
    Mr. Peters. And to pick up on that, you quoted about per 
one million dollars of investment is 30 jobs. Now, is that 
folks that are just getting Phase I and II or is that looking 
at Phase III as well? Does that skew the job number because the 
Phase III funding is really, and in some respects, most 
important when it comes to job creation?
    Mr. Link. Those numbers take into account Phase III money. 
And I do not think it skews the numbers because I am talking 
first about an average and the variance around that 30 is 
relatively small. It is a point estimate but I think it is a 
very good approximation across funding agencies. And we have 
looked at the data from the early 1990s to the present, and so 
I feel very comfortable with that as a sound bite.
    Mr. Peters. Right. Yeah. But the Phase III, obviously, is 
critical, not being done by all agencies. Are there 
recommendations that you have to this Committee as to maybe 
looking at structuring it to ensure that other agencies are 
engaged in Phase III funding?
    And I will open this up to all the panelists, too, because 
commercialization is the key thing when it comes to jobs. And 
the bottom line, we want to create jobs and small businesses 
are the engine of growth. I serve on the Financial Services 
Committee and deal with financing issues all the time, which is 
very difficult right now if you are a small business person to 
get the loans you need. Do we need to have a focus on Phase III 
to get our best bang for our dollar? And how do we do it? And 
just some ideas that any of the panelists have would be 
appreciated.
    Mr. Link. Let me just finish. I think it is open across 
agencies. We just do not see much venture capital among DOD and 
NASA projects compared to the others. An issue tied to Phase 
III is trying to shorten the time period between Phase I and 
Phase II. Shortening that time period helps companies retain 
employees, and I think that is very important.
    Another issue associated with Phase III funding across all 
agencies is consistency in the funding of the SBIR program, not 
going through the temporary period from 2008 to the present 
time. And the reason for that is venture capital firms, as well 
as other private equity and investment firms, they span 
companies that have received SBIR awards. The SBIR award is in 
a sense a seal of Good Housekeeping approval. It does send a 
positive signal to the marketplace, and companies are willing 
to--I am sorry, venture capital companies in particular are 
willing to invest in the time and effort to study those 
projects that have been funded and to approach those that 
appear to be the most successful.
    Mr. Koenig. So I have a sort of mixed view with regard to 
the requirements for SBIR Phase III funding, per se. I have 
found historically, and in my own experiences with getting 
funds for SBIR one and two, that this has a huge impact. I 
think the validation is very important to the VC community, but 
beyond that, it is the ability to have these funds to fund very 
early stage programs and move them far enough along that you 
can actually have results that can be endorsed. They become 
attractive not only to the venture capitalists, but to other, 
larger biotechnology companies or pharmaceutical companies that 
will engage these companies.
    There is an amplifying effect that once you have actually 
conducted the research that has been funded by Phase I and II, 
it helps to mature the early stage work to a point where it has 
some validation to be more attractive to larger sources of 
capital, both in the venture community, as well as the biotech 
and pharmaceutical industries.
    Mr. Peters. Good. Thank you.
    Chairwoman Ellmers. Thank you. That was very good.
    I now recognize Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mrs. Chairwoman.
    Gentlemen, before I come back to the venture capital 
question that I want to follow up on, I want to ask a general 
question. I am a small businessman. I participated in a SBA 
program before. It is not the one we are talking about here 
today. And I would classify my experience as fair. It could 
have been better. I have heard some really good stories about 
some things the SBA does well. I have heard some stories about 
things that are not administered as well as they might, could 
be. Tell me, how hard is it to use this program? Is this a 
relatively easy program to use? I mean, you all are in small 
business. Does it make sense to you or is it one of those 
things you have got to fill out 15 different forms and it is a 
complete disaster? Tell me about the experience of actually 
using the SBIR process and whether or not we can improve it. 
Anybody. Dr. Koenig.
    Mr. Koenig. I have to say I have been involved with SBIR 
funding since the early 1990s so I have a very long view of 
this. I remember telling one of my colleagues back in 1994 
musing that this was the jewel of the government. There is 
always criticism about government-supported programs, but when 
I saw the impact of that program and the ease in terms of 
applications and getting the funding, it made this a wonderful 
resource.
    Move forward to 2003 when the rules changed and I was 
actually very depressed about it because I saw tinkering in a 
program that was so successful. The actual application process 
is quite easy. I mean, we mostly dealt with the SBIRs through 
the NIH and this is not any more difficult, and in fact, less 
difficult than most grant submissions. The actual 
administration of that funding, getting the awards, has been 
quite easy. So I have not heard any issues in regards to the 
administrative aspects of the granting process.
    Mr. Mulvaney. Gentlemen? Yes, sir.
    Mr. Norem. We work primarily with the Department of Defense 
and I have to say, and I would speak for my colleague, that it 
has been a great agency to work with. Sometimes they are short 
of administrative help themselves, but for the recipient it is 
a very helpful process, very encouraging with their support, 
and it has been, I think, a very solid program for our company.
    Mr. Mulvaney. Dr. Brewer, do you want to check in on this, 
or is it pretty much the same?
    Dr. Brewer. Yes, I want to echo pretty much the same. We 
have worked with a broad range of agencies, and have also found 
that kind of experience across the board. We also do non-SBIR 
government contracts and if you compare the two I would say 
SBIR is certainly a jewel in the crown I think. It is very 
good.
    Mr. Mulvaney. That is good to know then. Let us come to the 
issue that Dr. Koenig has talked about at length and I know 
each of you touched on it a little bit. If we wanted to fix it, 
do you just get rid of section 107? Do you get rid of the 34, 
35 percent caps or, is there another way? Do you throw all the 
200 rule changes out and go back to the way it was before? I 
mean, if we decide that we would like to try and take this up, 
what are your recommendations about the best, most efficient 
way to proceed?
    Mr. Koenig. Well, I would personally love to throw the 
rules back and go pre-2003. Obviously, I know that this has 
been a very difficult process to change. I mean, we have been 
discussing this since 2003. I have actually appeared before the 
Committee several years ago and we are now eight years beyond 
and have not resolved the issue. What I believe and what Bio 
believes is let us find a pathway forward that allows as much 
participation as we can for majority VC-owned companies. If the 
Senate and the House could come to a solution that removes the 
caps, of course, we would endorse it, but any ability to have 
VC majority owned companies participate at this point would be 
very favorable.
    Mr. Mulvaney. And I have got only about half a minute left 
so let me ask this. Are there any other changes to the 2003 
rules that we should be looking at primarily or is this VC rule 
the one that seems to be the sticking point for most folks in 
your industry? Mr. Norem.
    Mr. Norem. I would encourage you to look at the definition 
of venture capital firms themselves. When we call on family 
offices, wealthy individuals who have a propensity to do this 
and angel capital, they form LLCs to protect themselves 
legally. They hire professional managers. They make more than 
one investment and so many of the angel capital investors are 
now deemed venture capital. So it is just another barrier for 
us to raise capital and participate in the SBIR program if that 
definition is too loosely interpreted.
    Mr. Mulvaney. Dr. Brewer, I am out of time so I am going to 
let the Chairwoman take it from here. So.
    Chairwoman Ellmers. I am going to yield some time to Mr. 
Richmond for some questions that he has as well.
    Mr. Richmond. I guess I would start with have you all had a 
chance to review the draft legislation that would come out of 
this Committee? And in that legislation, if you have some ideas 
of changes, please go ahead and offer it.
    But one of the things that I notice that is different in 
this legislation than the previous legislation was a 90-day 
window that they would have to respond. Do you think that will 
expedite things or do you think that could have some potential 
negatives to it? Dr. Brewer.
    Dr. Brewer. Yes. I think it is a good idea. Shortening the 
time of response will be a real advantage.
    Mr. Richmond. And Dr. Link, I think, oh, did you want to 
respond, Dr. Koenig?
    Mr. Koenig. I have nothing to respond to the 90 but you 
asked about other changes.
    Mr. Richmond. Yes.
    Mr. Koenig. This is actually not an opinion endorsed by 
BIO, but is my personal opinion. I remember in the mark-up of 
last year's legislation there was a limitation of VC companies 
that were affiliated with large corporations and there had to 
be less than a 20 percent ownership of the small companies by 
these large affiliated VCs. I think this is just a very 
arbitrary rule and my personal opinion, it should be excluded. 
In fact, AGTC, which I described before, would not be able to 
now participate because there is one VC, a large corporation 
associated entity, that owns a little more than 20 percent. And 
so again, the arbitrary nature of this does not seem very 
useful for such companies.
    Mr. Richmond. The other thing that I noticed in the bill, 
and I would assume you all are going to say it is a very good 
thing but I want to make sure, is the increase in the Phase I 
and Phase II grant amounts, do you think it is a sufficient 
increase? Do you think it was a necessary increase?
    Mr. Koenig. The costs of doing research have escalated and 
I think, I wholly endorse the amounts here. Knowing where we 
are in terms of the economy and issues with regards to funding 
new programs, I think there will be limitations and pushbacks. 
So any additional funding is well deserved in supporting this 
program, but obviously you have to deal with the realities of 
funding such programs.
    Mr. Richmond. Go ahead, Dr. Link.
    Mr. Link. Yes, I agree with the increase in the limits. I 
also agree with the inflation escalation that is suggested for 
funding.
    If I may have a little breadth in my answer here. There is 
another part of the proposed bill that gives directors 
discretion for a 50 percent increase in those amounts. I did 
not see in the bill, perhaps it is there, information with 
regard to oversight on how that 50 percent may be monitored, 
what kind of accountability may take place there. An 
alternative idea may be in the spirit of accountability to 
allow those companies that are invited for Phase II awards that 
look very promising and perhaps in the spirit of the purpose of 
the agency need additional funding, be invited to propose two 
Phase II awards, one for the maximum amount and one for 50 
percent greater than the maximum amount, and then have both of 
them scored rather than have the discretion for the agency to 
go above the amount without any oversight associated with that.
    Mr. Richmond. Thank you for that.
    Mr. Norem.
    Mr. Norem. If I could respond to that. I think, and 
speaking for the DOD programs and SBIR, the administrators 
themselves have oversight, and as long as they have the 
discretion on the size of award, they do a very good job, we 
find, at managing the amount, an appropriate amount of money 
that gets assigned to each program. So the discretion of the 
administrator would be my recommendation.
    Mr. Richmond. The last question I will ask. Because we keep 
talking about venture capital a lot and it is very clear that 
VCs play an important role in helping these companies start up. 
One of the other shining stars, at least in my experience 
through federal programs, is the New Market Tax Credit. And I 
was wondering how large of a role New Market Tax Credit 
allocations play in this area.
    And two, and you do not necessarily have to answer this 
now, but do you see a way in the future we could link or make 
some provisions in New Market Tax Credit allocations for this 
area of technology or in this area? Because I think that when 
you talk about job growth and benefit to the country, this is 
very significant. The rules on New Market are very open in what 
you can invest in is a large area. Would it make sense to 
direct or incentivize New Market Tax Credit companies to look 
at this area. And just, Dr. Koenig.
    Mr. Koenig. I think that tax credits are a great incentive 
in general but in the context of the companies we are talking 
about, they cannot get to use these tax credits because it 
takes over a decade for most of these companies to actually 
realize any revenue if they are successful. So unless there is 
an ability to take those tax credits and assign them or sell 
them or some way of actually helping the company indirectly to 
bring in more resources, I do not see an immediate impact on 
the company.
    Mr. Richmond. No, what the New Market program does is allow 
venture capital companies to raise----
    Mr. Koenig. Oh, I see. Yes.
    Mr. Richmond. So the VCs raise money through New Market but 
those VCs are allowed to invest that capital that they raise in 
a number of things, from housing to loans to clothing stores. 
And I guess I am asking if this is such a jewel should we try 
to find a way to incentivize those VCs to look in this area in 
terms of investing their money? And after you all answer the 
question, Madam Chair, I will now yield back.
    Mr. Norem. Ranking Member Richmond, I can only comment that 
as an entrepreneur and living in the state of Texas, we have 
got a lot of state programs that encourage and foster 
innovation and encourage entrepreneurs like ourselves in Texas. 
We have found that encouraging and linking those programs, 
providing additional access to capital for the entrepreneurs 
had been very helpful across the board and we are in a very 
severe time to raise--it is very tough to raise capital today 
in this economy. And I think all of those programs help a great 
deal.
    Chairwoman Ellmers. Thank you. Thank you. I have one follow 
up question for Dr. Brewer.
    In regard to commercialization there has been a lot of 
debate about so-called SBIR mills, companies that simply win 
multiple Phase I awards, very few Phase II awards, but do not 
commercialize much. I have heard both sides of this argument, 
but as a participant in the SBIR program do you view this as a 
problem?
    Dr. Brewer. Thank you. It is a good question. Yes, we 
recognize the problem exists, but I think it is a very poor 
business model, so I believe the mills will not be around for 
long anyway. The mills are there, but I do not see this as a 
significant problem. However, additional metrics will help us 
better determine the severity of the problem and whether or not 
a more comprehensive solution is warranted in the future.
    Chairwoman Ellmers. Okay. Thank you. I appreciate that.
    Well, in conclusion, I thank all of you for participating 
today. The SBIR and STTR programs are widely supported and 
recognized as one of the country's most important engines of 
innovation. Today was the second step in our Committee's effort 
to fully reauthorize these important initiatives. As Chairman 
Graves said at our previous hearing, we plan to work quickly, 
yet thoroughly, over the next several weeks to get this 
legislation on the House floor in May, and ultimately to get a 
bill to the President's desk as soon as possible.
    Thank you all again, and I ask unanimous consent that the 
members have five legislative days to submit statements and 
supporting materials for the record.
    Without objection, so ordered. This hearing is now 
adjourned.
    [Whereupon, at 11:08 a.m., the hearing was adjourned.]

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