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



 
                    INNOVATION CORPS: A REVIEW OF A

                NEW NATIONAL SCIENCE FOUNDATION PROGRAM

                    TO LEVERAGE RESEARCH INVESTMENTS
=======================================================================



                             FIELD HEARING

                               BEFORE THE

             SUBCOMMITTEE ON RESEARCH AND SCIENCE EDUCATION

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                         MONDAY, JULY 16, 2012

                               __________

                           Serial No. 112-96

                               __________

 Printed for the use of the Committee on Science, Space, and Technology


       Available via the World Wide Web: http://science.house.gov




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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                    HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
    Wisconsin                        JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
DANA ROHRABACHER, California         ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland         BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois               DONNA F. EDWARDS, Maryland
W. TODD AKIN, Missouri               BEN R. LUJAN, New Mexico
RANDY NEUGEBAUER, Texas              PAUL D. TONKO, New York
MICHAEL T. McCAUL, Texas             JERRY McNERNEY, California
PAUL C. BROUN, Georgia               TERRI A. SEWELL, Alabama
SANDY ADAMS, Florida                 FREDERICA S. WILSON, Florida
BENJAMIN QUAYLE, Arizona             HANSEN CLARKE, Michigan
CHARLES J. ``CHUCK'' FLEISCHMANN,    SUZANNE BONAMICI, Oregon
    Tennessee                        VACANCY
E. SCOTT RIGELL, Virginia            VACANCY
STEVEN M. PALAZZO, Mississippi       VACANCY
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
                                 ------                                

             Subcommittee on Research and Science Education

                     HON. MO BROOKS, Alabama, Chair
ROSCOE G. BARTLETT, Maryland         DANIEL LIPINSKI, Illinois
BENJAMIN QUAYLE, Arizona             HANSEN CLARKE, Michigan
STEVEN M. PALAZZO, Mississippi       TERRI A. SEWELL, Alabama
ANDY HARRIS, Maryland                SUZANNE BONAMICI, Oregon
RANDY HULTGREN, Illinois                 
LARRY BUCSHON, Indiana                   
DAN BENISHEK, Michigan               EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas
                            C O N T E N T S

                         Monday, July 16, 2012

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Mo Brooks, Chairman, Subcommittee on 
  Research and Science Education, Committee on Science, Space, 
  and Technology, U.S. House of Representatives..................    10
    Written Statement............................................    11

Statement by Representative Daniel Lipinski, Ranking Minority 
  Member, Subcommittee on Research and Science Education, 
  Committee on Science, Space, and Technology, U.S. House of 
  Representatives................................................     7
    Written Statement............................................     9

                               Witnesses:

Dr. Thomas Peterson, Assistant Director, Directorate for 
  Engineering, National Science Foundation.......................
    Oral Statement...............................................    13
    Written Statement............................................    15

Mr. Steve Blank, Lecturer, Stanford University and the University 
  of California at Berkeley......................................
    Oral Statement...............................................    21
    Written Statement............................................    23

Mr. Neil Kane, President, Illinois Partners Executive Services, 
  LLC............................................................
    Oral Statement...............................................    46
    Written Statement............................................    48

Dr. Gabriel Popescu, Assistant Professor, Department of 
  Electrical and Computer Engineering, University of Illinois at 
  Urbana-Champaign...............................................
    Oral Statement...............................................    53
    Written Statement............................................    56

Dr. Andrew Mazar, Director, Program for Developmental 
  Therapeutics and Entrepreneur-in-Residence Innovation and New 
  Ventures Office, Northwestern University.......................
    Oral Statement...............................................    65
    Written Statement............................................    68


                  INNOVATION CORPS: A REVIEW OF A NEW


                  NATIONAL SCIENCE FOUNDATION PROGRAM


                   TO LEVERAGE RESEARCH INVESTMENTS

                              ----------                              


                         Monday, July 16, 2012

             U.S. House of Representatives,
    Subcommittee on Research and Science Education,
               Committee on Science, Space, and Technology,
           Northwestern University School of Law, Chicago, Illinois

    The Subcommittee met, pursuant to call, at 10:00 a.m., at 
Lincoln Hall, Levy Mayer 104, 375 East Chicago Avenue, Chicago, 
Illinois, Hon. Mo Brooks [Chairman of the Subcommittee] 
presiding.
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[GRAPHIC] [TIFF OMITTED] T5392.002

[GRAPHIC] [TIFF OMITTED] T5392.003

[GRAPHIC] [TIFF OMITTED] T5392.004

[GRAPHIC] [TIFF OMITTED] T5392.005

    Chairman Brooks. The Subcommittee on Research and Science 
Education will come to order.
    Good morning; welcome to today's hearing, Innovation Corps 
and review of a new National Science Foundation Program to 
Leverage Research Investments. The purpose of today's hearing 
is to examine the new National Science Foundation Innovation 
Corps program and assess its value to the American taxpayer and 
potential contribution to the Nation's future prosperity. In 
front of you are packets containing the written testimony, 
biographies and truth-in-testimony disclosures for today's 
witnesses.
    Chairman Brooks. Ranking Member Lipinski, first and 
foremost, it is a pleasure to join you here in Chicago this 
morning for what will be the first, minority field hearing held 
by the Science, Space and Technology Committee in this 
Congress.
    This is your hearing, on your turf. The Chair recognizes 
you first, Mr. Lipinski, for an opening statement.
    Mr. Lipinski. Thank you, Mr. Chairman, and thank you for 
waking us up with the gavel this morning. I thank you for 
coming here and, well, first of all, scheduling this hearing in 
Chicago, traveling here to hold it. I didn't even realize it 
was the first one that--field hearing for the, uh,--for the 
Democrats. I especially appreciate that. I know your time here 
in Chicago is short, but I hope you enjoy your visit as much as 
I enjoyed my time down in Huntsville when I traveled there for 
our STEM education hearing a couple months ago. I'd also like 
to thank Northwestern for hosting us. I'm a proud graduate of 
Northwestern, and received my Bachelor's Degree of Mechanical 
Engineering at Northwestern. Although, it was up in Evanston. I 
actually did get into Northwestern Law School and decided not 
to become an attorney, for whatever that means. I know 
Chairman--Chairman won't think anything bad about me. And, 
finally, I want to thank our witnesses----
    Chairman Brooks. You know, we are in a law school.
    Mr. Lipinski. Yeah. I'd like to thank our witnesses for 
taking the time to share your insights and experience with 
National Science Foundation Innovation Corps Program.
    And I would like to thank everyone else who has joined us 
for the hearing.
    Very briefly, I-Corps is an NSF education program which 
helps federally funded research innovations transition from the 
university lab into a profitable company. It is based on the 
Lean LaunchPad course developed by successful Silicon Valley 
serial entrepreneur Steve Blank, and essentially applies the 
scientific method, which is well-known by researchers, to 
developing a startup.
    I strongly believe that the I-Corps program embodies NSF's 
original mission of both promoting the progress of science and 
advancing the national prosperity. Let's not forget that second 
part, especially when we are looking to maximize the efficiency 
of our federal government. When Vannevar Bush talked about the 
need for a National Science Foundation in 1945, he was 
concerned about getting the U.S. back to full employment. Back 
then he wrote, ``We do not know yet how we shall reach that 
goal, but it is certain that it can be achieved only by 
releasing the full creative and productive energies of the 
American people.''
    More recently, the America COMPETES Act Reauthorization 
that passed last Congress stipulates that the Broader Impacts 
criterion used in evaluating NSF grant proposals must include 
the, ``Increased economic competitiveness of the United 
States,''; and, ``Increased partnerships between academia and 
industry.'' Now, as Chairman of this Subcommittee at that time, 
I included those two additional components in the bill in order 
to reinforce the original mission of the NSF as we see 
innovation and the role of our research institutions becoming 
increasingly critical to job creation. We will hear today from 
our witnesses how educational programs like I-Corps fit 
perfectly into the mission of the NSF.
    Although it's only about one-quarter of one percent of 
NSF's budget, I think this program will yield disproportionate 
benefits. By giving scientists who have already been awarded 
NSF research grants the education needed to push their work 
outside of the ivory tower into the marketplace, we are helping 
turn NSF's research investments into jobs. I'm encouraged by 
the many stories I've heard from awardees in the first and 
second cohorts, including two of the witnesses here today. In 
May I had the opportunity to sit in on the final presentations 
of the second I-Corps cohort at Stanford. I was very impressed, 
not only by the innovations presented, but also by the stories 
about what the participants learned through the program.
    For anyone who hasn't looked at this program in depth, it 
is important to note that we are talking about a stage of 
commercialization before private sector financing gets 
involved. The goal of I-Corps is to educate scientists, to help 
them establish the viability of an idea before forming a 
startup. What I am especially excited about is not just the 
promise of the new technologies being explored by the teams 
fortunate enough to participate in I-Corps, it is also the 
exponential leveraging effect that is already happening. I-
Corps participants are taking what they have learned and are 
working with their new private sector connections and their 
university administrators to create opportunities on their own 
campuses to educate students and faculty on the basics of 
entrepreneurship. Many are from institutions in communities and 
regions without a significant record of entrepreneurship. So, 
they are becoming, in a sense, missionaries carrying the best 
practices of Silicon Valley back to their own communities and 
figuring out how to localize these best practices.
    Despite the tremendous promise of the I-Corps program, some 
of my colleagues may be skeptical that this is an appropriate 
use of funds for the National Science Foundation. I explained 
briefly how I see I-Corps fitting into NSF's core mission, but 
I welcome all of our witnesses today to help us understand how 
NSF is filling an unmet need, and why you believe it's 
appropriate for the NSF. I also welcome your thoughts on how 
the I-Corps program can be improved. And, finally, I challenge 
you to share your thoughts on what more the private sector and 
universities themselves can be doing in this space. I invited 
Dr. Mazar to testify about his role as an Entrepreneur-in-
Residence at Northwestern University. Northwestern is just one 
of many universities around the country who have taken their 
own initiative and either their own funds or private sector 
donations to bolster entrepreneurial activity on their 
campuses.
    The way I see it, this is not a situation where either 
universities do this on their own, or the private sector does 
it, or the federal government steps in. This is a partnership 
among all three, and all three have a role to play, resources 
to contribute, and benefits to reap. We have good 
representation here from all of the partners, and I look 
forward to an interesting and thoughtful discussion about the 
new NSF I-Corps program and where we take it from here. Once 
again, I thank all of the witnesses for being here this morning 
and I look forward to your testimony.

          Prepared Statement of Ranking Member Daniel Lipinski
    Thank you Chairman Brooks for scheduling this hearing in Chicago 
and traveling here to hold it. I know your time here is short, but I 
hope you enjoy your visit as much as I enjoyed my time in Huntsville 
when I traveled there for our STEM Education hearing. I would also like 
to thank Northwestern University for hosting us here today; I am a 
proud graduate of Northwestern having received my bachelors degree in 
mechanical engineering. And finally I want to thank our witnesses for 
taking the time to share with us your insights and experiences with the 
National Science Foundation's Innovation Corps Program and everyone 
else who has joined us for this hearing.
    Very briefly, I-Corps is an NSF education program which helps 
federally funded research innovations transition from the university 
lab into a profitable company. It is based on the Lean LaunchPad course 
developed by successful Silicon Valley serial entrepreneur Steve Blank 
and essentially applies the scientific method--which is well-known by 
researchers--to developing a start-up.
    I strongly believe that the I-Corps program embodies NSF's original 
mission of both promoting the progress of science and advancing the 
national prosperity. Let's not forget that second part, especially when 
we are looking to maximize the efficiency of our federal investments. 
When Vannevar Bush talked about the need for a National Science 
Foundation in 1945, he was concerned about getting the U.S. back to 
full employment. Back then he wrote, ``[w]e do not know yet how we 
shall reach that goal, but it is certain that it can be achieved only 
by releasing the full creative and productive energies of the American 
people.'' More recently, the America COMPETES Act Reauthorization that 
passed last Congress stipulates that the Broader Impacts criterion used 
in evaluating NSF grant proposals must include the ``Increased economic 
competitiveness of the United States'' and ``Increased partnerships 
between academia and industry.'' As chairman of this subcommittee at 
that time, I included those two additional components in the bill in 
order to reinforce the original mission of the NSF as we see innovation 
and the role of our research universities becoming increasingly 
critical to job creation. We will hear today from our witnesses how 
educational programs like I-Corps fit perfectly into the mission of the 
NSF.
    Although it's only about one quarter of 1 percent of NSF's budget, 
I think this program will yield disproportionate benefits. By giving 
scientists who have already been awarded NSF research grants the 
education needed to push their work outside of the ivory tower into the 
marketplace, we are helping turn NSF's research investments into jobs. 
I'm encouraged by the many stories I've heard from awardees in the 
first and second cohorts, including two of the witnesses here today. In 
May I had the opportunity to sit in on the final presentations of the 
second I-Corps cohort at Stanford, and I was very impressed not only by 
the innovations presented, but also by the stories about what the 
participants learned through the program.
    For anyone who hasn't looked at this program in depth, it is 
important to note that we are talking about a stage of 
commercialization before private sector financing gets involved. The 
goal of I-Corps is to educate scientists to help them establish the 
viability of an idea before forming a start-up. What I am especially 
excited about is not just the promise of the technologies being 
explored by the teams fortunate enough to participate in I-Corps. It's 
the exponential leveraging effect that is already happening. I-Corps 
participants are taking what they have learned and are working with 
their new private sector connections and their university 
administrators to create opportunities on their own campuses to educate 
students and faculty on the basics of entrepreneurship. Many are from 
institutions in communities and regions without a significant record of 
entrepreneurship. So they are becoming, in a sense, missionaries 
carrying the best practices of Silicon Valley back to their own 
communities and figuring out how to localize these best practices.
    Despite the tremendous promise of the I-Corps program, some of my 
colleagues may be skeptical that this is an appropriate use of funds 
for the National Science Foundation. I explained briefly how I see I-
Corps fitting into NSF's core mission, but I welcome all of the 
witnesses today to help us understand how NSF is filling an unmet need, 
and why you believe it is appropriate for NSF. I also welcome your 
thoughts on how the I-Corps program can be improved. And finally, I 
challenge you to share your thoughts on what more the private sector 
and universities themselves can be doing in this space. I invited Dr. 
Mazar to testify about his role as an Entrepreneur-in-Residence at 
Northwestern University. Northwestern is just one of many universities 
around the country who have taken their own initiative and either their 
own funds or private sector donations to bolster entrepreneurial 
activity on their campuses.
    The way I see it, this is not a situation where either universities 
do this on their own, or the private sector does it, or the federal 
government steps in. This is a partnership among all three, and all 
three have a role to play, resources to contribute, and benefits to 
reap. We have good representation here from all of the partners, and I 
look forward to an interesting and thoughtful discussion about the new 
NSF I-Corps program and where we take it from here. Once again I thank 
all of the witnesses for being here this morning and I look forward to 
your testimony.

    Chairman Brooks. Thank you, Mr. Lipinski. I now recognize 
myself for five minutes for an opening statement.
    The National Science Foundation funds basic research, which 
is oftentimes too costly and too risky for industry alone to 
undertake, but has many times proven to be groundbreaking and 
economic successes in the end. For example, current 
nanotechnology initiatives marked by a transformative 
technology which allows scientists to manipulate matter at the 
atomic and molecular levels, was preceded by scientists funded 
by NSF who were learning how to detect activity at the scale of 
individual atoms. Now, companies are making plans to utilize 
this pioneering technology to produce nanoscale products which 
will enter the marketplace.
    I could list other examples, but I think my point is clear; 
that NSF has contributed to America's economy and 
competitiveness in invaluable ways. Unfortunately, today the 
United States faces unsustainable budget deficits which limit 
the spending in Congress, and what it is able to appropriate. 
While I am thankful to chair a Subcommittee which oversees such 
important research and development activities, it is the role 
and responsibility of Congress to work to prevent overspending, 
ensure that federally funded programs do not impede the work of 
the private sector, and provide the best return on the taxpayer 
dollar. The question we must address is which activities fall 
under this purview.
    NSF created a new Innovation Corps program, I-Corps, to 
assess the readiness of emerging technological concepts for 
transitioning into new products through a public-private 
partnership. According to NSF, the program will, ``bring 
together the technological, entrepreneurial, and business know-
how to bring discoveries ripe for innovation out of the 
university lab,''; and, ''increase the number of entrepreneurs 
emerging from university laboratories.''
    While this certainly sounds like a worthwhile endeavor, I 
have a number of questions, including the degree to which the 
federal government should determine which companies succeed and 
which fail, which are entitled to I-Corps assistance and which 
are not, but, if so, whether it is appropriate for this kind of 
decision-making to be made by an agency whose primary mission 
is basic research, at a time when businesses are struggling to 
compete with big government, and funding is already scarce, and 
at a time when there are already a number of questions arising 
over the federal government picking commercial winners and 
losers.
    And rather badly, I might add, in the case of Solyndra, 
roughly a 535-million-dollar cost to the United States 
taxpayer; Abound Solar, potentially a 400-million-dollar loss 
to U.S. taxpayers, who went bankrupt after receiving 70 million 
dollars from U.S. taxpayers; and Beacon Power, nearly a 70-
million-dollar cost to U.S. taxpayers, 43 million in Department 
of Energy loan guarantees, and more than 25 million in other 
Department of Energy grants. I need to better understand how 
and why NSF is best equipped to make these similar types of 
decisions for university research.
    I look forward to hearing from our witnesses today, to 
working with my colleagues, to further explore I-Corps and 
determine its viability as a program funded by taxpayer 
dollars.

                Prepared Statement of Chairman Mo Brooks
    The National Science Foundation funds basic research which is 
oftentimes too costly and too risky for industry alone to undertake, 
but has many times proven to be groundbreaking and economic successes 
in the end. For example, current nanotechnology initiatives, marked by 
a transformative technology which allows scientists to manipulate 
matter at the atomic and molecular levels, was preceded by scientists 
funded by NSF who were learning how to detect activity at the scale of 
individual atoms. Now, companies are making plans to utilize this 
pioneering technology to produce nanoscale products which will enter 
the marketplace.
    I could list more examples, but I think my point is clear--that NSF 
has contributed to America's economy and competitiveness in invaluable 
ways. Unfortunately, today the United States faces unsustainable budget 
deficits which limit the spending Congress is able to appropriate. 
While I am proud to Chair a Subcommittee which oversees such important 
research and development activities, it is the role and responsibility 
of Congress to work to prevent overspending, ensure that federally 
funded programs do not impede the work of the private sector and 
provide the best return on the taxpayer dollar. The question that we 
must address is which activities fall under this purview.
    NSF created a new Innovation Corps program (I-Corps) to assess the 
readiness of emerging technology concepts for transitioning into new 
products through a public-private partnership. According to NSF, the 
program will ``bring together the technological, entrepreneurial, and 
business know-how to bring discoveries ripe for innovation out of the 
university lab'' and ``increase the number of entrepreneurs emerging 
from university laboratories.'' While this certainly sounds like a 
worthwhile endeavor, I have a number of questions, including the degree 
to which the federal government should determine which companies 
succeed and which fail, but, if so, whether it is appropriate for this 
kind of decision-making to be made by an agency whose primary mission 
is basic research. At a time when businesses are struggling to compete 
with big government and funding is already scarce, and at a time when 
there are already a number of questions arising over the federal 
government picking commercial winners and losers--and rather badly I 
might add in the case of Solyndra, Abound Solar, and Beacon Power--I 
need to better understand how and why NSF is best equipped to make 
these similar types of decisions for university research.
    I look forward to hearing from our witnesses today and to working 
with my colleagues to further explore I-Corps and determine its 
viability as a program funded by valuable taxpayer dollars.

    If there are other Members who wish to submit additional 
opening statements, your statements will be added to the record 
at this point. I know we have an audience here, Congressman 
Lipinski and I are the only two Members who are here today. We 
have a good number of others who are Members of the 
Subcommittee, and at this point, that is when they would be 
permitted to offer statements.
    At this point, I yield to Mr. Lipinski to introduce our 
witnesses.
    Mr. Lipinski. I thank the Chairman, especially thank you 
for the opportunity to do this, to let me go first in opening 
statement and to introduce our witnesses. I'm not used to that, 
after, you know, being the minority. So, thank you, I 
appreciate that.
    Dr. Tom Peterson is Assistant Director of the National 
Science Foundation Directorate for Engineering. Prior to 
joining the NSF, he served on a faculty at the University of 
Arizona, beginning in 1977, serving as head of the Chemical and 
Environmental Engineering Department from 1990 to 1998, and as 
dean from 1998 until 2009. Good to have you, Dr. Peterson.
    Next we have Steve Blank. Steve Blank is currently a 
Consulting Associate Professor at Stanford University, and 
adjunct at U.C. Berkeley Haas Business School. In 21 years as a 
Silicon Valley entrepreneur he created eight companies in 
various computer-related fields. So, a serial entrepreneur for 
those familiar with the term. Although he formally retired in 
1999, he became very busy as an educator, teaching courses at 
Stanford, U.C. Berkeley and Columbia. During this time he 
developed the Lean LaunchPad course NSF uses for the Innovation 
Corps Program. And I want to add that Steve waited, he had his 
plane delayed for three, four hours last night; they cancelled 
it; he drove all the way from Richmond, Virginia, to Dulles 
last night to take a six a.m. flight, which was then cancelled. 
From there he went to Washington Reagan National to get out 
here. So, I especially appreciate all the effort that he's gone 
through to be here today.
    Next we have Neil Kane. Neil Kane is the President and 
founder of Illinois Partners Executive Services. Most recently 
he was the CEO with Advanced Diamond Technologies, a company he 
co-founded in 2003, by licensed technology at Argonne National 
Lab. Mr. Kane is a former co-Executive Director of the Illinois 
Technology Enterprise Center at Argonne. He was Entrepreneur-
in-Residence at the Research Park at the University of Illinois 
at Urbana-Champaign. Good to have you.
    Next we have Gabriel Popescu. Dr. Gabriel Popescu is an 
Assistant Professor in the Department of Electrical and 
Computer Engineering, University of Illinois at Urbana-
Champaign, and holds a full-faculty appointment with the 
Beckman Institute for Advanced Science and Technology. Before 
joining the UIUC faculty in 2007, Dr. Popescu received a Ph.D. 
in optics in 2002, from the University of Central Florida. Dr. 
Popescu received an I-Corps grant earlier this year for 
quantitative phase imaging solutions, for materials in life 
sciences. Good to have you, Dr. Popescu. And I have to say that 
as it came down to going--between Northwestern and Illinois to 
go to undergraduate engineering, and I chose Northwestern, but 
mainly, probably that it's closer to home. No, it's a great 
university, University of Illinois.
    And, finally, we have Dr. Andrew Mazar, who serves as the 
Entrepreneur-in-Residence and the Managing Director for the 
Center for Developmental Therapeutics in the Chemistry of Life 
Processes Institute at Northwestern University. He has spent 23 
years working on drug discovery, development and 
commercialization at the interface of academia and industry. 
Dr. Mazar is a member of several cancer journal editorial 
boards and has published over 90 papers in peer-reviewed 
journals. Good to have you, Dr. Mazar.
    Now, this next line, I think the Chairman--did you tell 
them how much time they have.
    Chairman Brooks. Ah, there it is.
    As our witnesses should know, spoken testimony is limited 
to five minutes, after which the Members of the Subcommittee 
will have five minutes each to ask questions.
    I now recognize our first witness, Dr. Peterson, for five 
minutes.

               STATEMENT OF DR. THOMAS PETERSON,

              ASSISTANT DIRECTOR FOR ENGINEERING,

                  NATIONAL SCIENCE FOUNDATION

    Dr. Peterson. Chairman Brooks. Ranking Member Lipinski. 
Thank you for inviting me to participate in this field hearing 
focusing on NSF's Innovation Corps, or I-Corps. I'm very 
pleased to have the opportunity to discuss this very exciting 
program with you.
    NSF is recognized and respected worldwide for identifying 
and supporting fundamental research and education in science 
and engineering, through a peer-review evaluation of the merits 
of the ideas that are proposed. That process, both by 
definition and by construction, selects the best and most 
creative ideas, those that offer the greatest promise for 
success. We invest more than seven billion dollars annually in 
these efforts. Our grantees are the winners in this process, 
but so, too, are the taxpayers who have invested in this 
research through the NSF.
    I-Corps has as its genesis many of the foundation's long-
standing innovation ecosystem programs. Those existing NSF 
innovation research alliances include consortia, such as the 
Engineering Research Centers, the Industry University 
Cooperative Research Centers, and the Science and Technology 
Centers, as well as the Academic Liaison with Industry program, 
and of course the Small Business Innovation Research program. 
These programs complement our other significant investments in 
fundamental science and engineering research by offering 
multiple pathways to moving discovery to innovative 
technologies.
    Many of these programs have been in the NSF portfolio for 
decades. For example, the SBIR program is a government-wide 
program that was initiated at NSF in the early '80s. The 
Centers programs that I mentioned all began at NSF in the late 
1980s.
    To build a national culture of innovation we need not only 
sustained research investment, but also skillful and deliberate 
catalysts to hasten the application of scientific discoveries. 
A robust innovation ecosystem also helps conceive novel 
research questions, and it shifts the science and engineering 
knowledge paradigms altogether. That, in effect, is what we 
seek to accomplish through the Innovation Corps program.
    The goals of I-Corps are as follows: First, to build on 
NSF's investment in fundamental research; second, to offer 
academic researchers and students an opportunity to learn 
firsthand about technological innovation and entrepreneurship, 
and thereby fulfill the promise of their discoveries; and 
third, to prepare students for real-world experience through 
curricular enhancements, and provide them with opportunities to 
learn about and participate in the process of transforming 
scientific and engineering discoveries to meet societal needs.
    We accomplish these goals in I-Corps by providing three 
elements. Namely, financial support to the teams to assist the 
development of a prototype or a proof of concept; a specific 
structure for the I-Corps team, comprised of a principal 
investigator, an entrepreneurial lead, and an innovation/
entrepreneurial mentor; and finally, a strong education 
component focusing on a hypothesis-driven approach to 
developing a methodology for evaluating both the technical 
merits, as well as the marketability of the concept that's 
being proposed.
    Every directorate in NSF participates in I-Corps. The 
structure of I-Corps mirrors the NSF Director's vision of 
OneNSF, working together seamlessly in well-integrated and 
efficient ways across organizational and disciplinary 
boundaries.
    Teams that advanced their efforts towards commercializing 
technologies were facilitated by inclusion of public and 
private sector experts to provide guidance by participation in 
tailored curriculum and by funds to evaluate the commercial 
readiness of technology ideas. Some exciting new technologies 
that have emerged from the first I-Corps cohorts include 
photocatalysis to help clean up contaminated water, a new 
technology for semiconductor-based hydrogen and hydrocarbon 
sensors, and production of graphene film.
    I-Corps presents a new model for public-private 
partnerships that leverages our significant investment in basic 
research with relatively smaller I-Corps funding, thus offering 
a bigger bang for the buck.
    In the first two cohorts over 4,000 discussions took place 
between I-Corps teams and potential partners, customers and 
stakeholders. As of today there a total of 100 teams, and there 
are 100 mentors that joined these teams, plus over 70 
additional mentors who have been identified as already willing 
to join other teams.
    In summary, the I-Corps program has been a significant, 
positive addition to the NSF investment portfolio, even though 
it constitutes less than one-third of one percent of the NSF 
budget. For those teams who have participated, it has been 
truly transformational to thinking in a more entrepreneurial 
way. An enormous and significantly underutilized storehouse of 
creative ideas with potential economic benefit exists in our 
nation's colleges and universities, and I-Corps is simply a way 
to help unlock and unleash some of those ideas generated by 
current and previous NSF investments.
    I thank the Committee for their interest in this exciting 
program, and for giving me the opportunity and the privilege to 
come here today to tell you about it. I'd be happy to answer 
any questions.
    [The prepared statement of Dr. Peterson follows:]
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    Chairman Brooks. Thank you, Dr. Peterson.
    I now recognize our second witness, Mr. Blank, for five 
minutes.

            STATEMENT OF MR. STEVE BLANK, LECTURER,

                    STANFORD UNIVERSITY AND

            THE UNIVERSITY OF CALIFORNIA AT BERKELEY

    Mr. Blank. Thank you, Chairman Brooks and Ranking Member 
Lipinski; and thank you for the opportunity to discuss the 
National Science Foundation Innovation Corps. And I hope to 
address Chairman Brooks' questions directly, because I think 
they're appropriate questions for the country, given the set 
economic climate.
    I just have to note that, in volunteering my services to 
the National Science Foundation, my career has gone full 
circle. I started my government service volunteering for my 
country during Vietnam for four years in the air force, with a 
year and a half in Southeast Asia. So, I'm glad to be doing 
this type of government service again.
    I think Dr. Peterson described the role of the Innovation 
Corps and the SBIR and STTR program. But it's just important to 
note that what we have here is an education program that 
bridges the basic research that this Committee authorizes the 
NSF to do, and commercialization that we fund through the SBIR 
and STTR program. For 30 years we've been writing checks, but 
not having any educational process to assure that the 
recipients of those checks actually understood how to take best 
advantage of those scholars.
    The Innovation Corps is the first successful STEM education 
program to bridge this gap between NSF-funded researchers who 
want to commercialize their technology and the needs of private 
capital. The data from the first 50 teams show the 
effectiveness of this program.
    By the way, there's been two other key consequences, 
completely unexpected, that we had no idea would happen. The 
first has been the leveraging effect, as these Principal 
Investigators went back to their own universities and took this 
methodology and actually started teaching it to their own 
students in their own universities. And the second, I think 
important for this Committee and this Congress, is the effect 
and the applicability of this program to small business 
innovation and job creation on ``Main Street'', as well as in 
technology startups. That is, the same process can be used for 
the other 99 percent of businesses in the United States, not 
just for technology startups.
    So, what's new about the Innovation Corps? We now know that 
startups are not smaller versions of large companies.
    In fact, we now know that researchers who used to believe 
that the entire company was about their idea, is now learning 
that their idea and their technology is just one small piece of 
all the things they need to know about how to build a 
successful venture. They need to know--to understand customers, 
they need to understand pricings, they need to understand 
distribution channels. None of those things are visible inside 
the laboratory.
    And so, what the class is about, this education program, is 
getting these scientists and engineers out of their labs, for 
some of them the first time in 20 years since they've seen 
daylight. And, actually, having them talk to people they've 
never talked to in their entire lives. An average team talks to 
a hundred customers in eight weeks. A hundred. Let me tell you, 
if Solyndra was doing that, we wouldn't have been writing these 
checks.
    Now, in fact, if we were looking for a program to avoid 
waste in the United States, this is the program to do that. And 
it's a uniquely American program. Because we've talked about 
hypothesis testing, we've talked about how scientists 
understand how to test hypothesis, but we sometimes forget that 
in America we don't punish failure, we actually understand that 
failure is part of the scientific method.
    But we actually now teach the same in getting out of the 
building and talking to customers, and we now understand that 
when this wasn't the right customer, it's okay to now 
inexpensively look over here. If this wasn't the right pricing, 
look over here. If these aren't the right features, look over 
here. And it's only in the United States that we actually are 
able to take these risks and integrate quickly.
    The last thing I want to mention is why is this program 
necessary. And I think a lot of this discussion is about a 
fallacy of the role of private capital. I think you know I 
taught this class from day one with venture capitalists sitting 
in the class as instruction. We brought private capital in on 
day one. And their take was the same as mine, none of these 
guys were fundable at all. They weren't. It was great science, 
great technology, great whatever, but they didn't have a clue 
about the business. It's not the role of private capital to 
actually go identify where the technology fits. It's actually 
the role of the technologist to get out of the building, have 
some discussions, and take the business to the next step so 
they can present it to private capital. And that's what this 
class has been doing.
    I-Corps is an educational program that's a bridge to 
private capital, not as a replacement. And I think, I'm proud 
to say, that a lot of these teams will get funded by private 
capital, only because they've been through this class.
    The other comment that I just want to make is picking 
winners and losers. As I said, this doesn't replace private 
capital with government's funds. Its goal is to get research in 
the country that we've already paid for, to a point where a 
team can attract private capital in the shortest period of 
time.
    Now, I'm happy to take questions. And I just should, would 
like to close, that I think the results were pretty 
spectacular, and I'm just proud to have been part of it.
    What we've seen is a government program designed, built, 
and tested and scaled within a year. Amazing. This is like the 
early days of NASA. With just one-quarter of one percent we've 
leveraged the country's entrepreneur commitment to research, 
its partnership of private capital, and its tolerance for 
failure in a uniquely American way. It's an extraordinarily 
efficient use of taxpayer money, and it will pay us back with 
jobs and a competitive edge on a global scale. Thank you.
    [The prepared statement of Mr. Blank follows:]
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    Chairman Brooks. Thank you, Mr. Blank. And thank you for 
your extraordinary efforts to get here.
    The Chair next recognizes our third witness, Mr. Kane, for 
five minutes.

             STATEMENT OF MR. NEIL KANE, PRESIDENT,

           ILLINOIS PARTNERS EXECUTIVE SERVICES, LLC

    Mr. Kane. Chairman Brooks, thank you; I'd also like to 
thank Ranking Member Lipinski and the other Members of the 
Committee for the opportunity to speak here today. I'm the 
token mentor on the panel, and the team that I mentored was in 
the first I-Corps cohort, and we attended Steve's class at 
Stanford in the fall of 2011.
    I'm a serial entrepreneur, and I've spent the last 12 years 
helping professors and researchers commercialize their 
research. I've been involved in eight university spinoffs, and 
in five of them I was the CEO. Along the way I've encountered 
every small business and tech transfer issue there is. I've 
also developed a deep appreciation for the role that NSF can 
play in helping to get these companies down the runway and 
airborne.
    Shortly after the I-Corps program was announced last 
summer, Professor Yi Lu from the University of Illinois asked 
me to be a mentor to his team. He had just published a paper on 
an innovative method for turning a personal glucose meter, the 
kind that diabetics use, like this, into a general purpose 
point of care medical diagnostic device that could be used to 
detect viruses, toxins and infectious diseases. And for any of 
you who'd like to have your blood glucose checked today, I'd be 
happy to oblige. While the science is exceptionally innovative 
and creative, the I-Corps program would allow us to deal with 
the challenge of figuring out how to bring it to market.
    The goal of I-Corps is not to make entrepreneurs out of 
professors. The curriculum allows academics to develop an 
awareness and appreciation for what elements need to be present 
for innovation to have a chance to succeed in the market. It is 
more often poor market fit, in my opinion, rather than poor 
technology, which causes startups to fail. People who have 
never commercialized technology always underestimate the time 
and effort required. A startup is a perpetual open-book test 
where you're not graded on a curve. Its challenge is academics, 
because for the first time in many of their careers being the 
smartest person in the room does not guarantee success.
    When technology has an obvious need, like a cure for 
cancer, arguably I-Corps is not needed. This falls into the 
category of, ``If I build it, they will come.'' Instead, the 
purpose of I-Corps is to answer the question, ``If I build it, 
will they come?'' NSF's other traditional programs address the 
question, ``Can I do it.''
    I-Corps is a teaching program with a considerable amount of 
skills transfer that will increase the effectiveness of 
research programs when measured on commercial impact.
    I am currently also working on another startup, this one at 
Northwestern University, and even though that project did not 
go through I-Corps, like any good disciple, I have brought 
teachings to that project. There's a lot of leverage now that 
you have a wave of mentors who have been trained in this 
methodology. And I have passed the torch to several Kellogg MBA 
students, one of whom has his own startup.
    Based on our experience with I-Corps, we formed a company 
in Champaign called GlucoSentient, and I became the founding 
CEO. We got a Phase I SBIR from NSF, which is critical toward 
our ability to translate the technology from the university 
setting into the commercial world. A few months ago our company 
was not venture ready. We hope it will be after the SBIR is 
done. Several of the graduate students who worked on the 
technology in their research programs at the university will 
have full-time jobs in the company to continue its development.
    Entrepreneurship is the link between scientific innovation 
and economic development. I'm going to repeat that. 
Entrepreneurship is the link between scientific innovation and 
economic development. Instead of discouraging I-Corps, Congress 
should encourage it. It's a low-cost program that adds fuel to 
NSF's research mission. I-Corps will pay a handsome return some 
day for taxpayers with job creation and wealth building, not to 
mention enhancing the global competitiveness in the United 
States.
    When I was an undergraduate engineering student at the 
University of Illinois in Champaign, there was no 
entrepreneurship curriculum. Basic business courses, like 
marketing and finance were taught in the business school so far 
across campus from the engineering quad that we couldn't have 
taken courses there even if we had wanted to. Today it's cool 
for engineers, scientists and programmers to become 
entrepreneurs and learn business skills.
    The dislocations in the economy over the past few years 
have taught us that even STEM students need business skills to 
succeed professionally. I-Corps helps prepare a new generation 
of researchers for the realities of today's economy, regardless 
of whether they become entrepreneurs or not. The professors who 
go through the program develop a deeper appreciation for the 
relevance of their research, which improves their ongoing 
effectiveness. And NSF is investing in a network of mentors who 
can help to materially move the needle in improving the 
outcomes of the commercial entities that become the stewards of 
the NSF-funded research.
    Thank you.
    [The prepared statement of Mr. Kane follows:]
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    Chairman Brooks. Thank you, Mr. Kane.
    The Chair now recognizes our fourth witness, and I hope I 
pronounce this correctly, if I don't please correct me.
    Mr. Popescu, for five minutes.

               STATEMENT OF DR. GABRIEL POPESCU,

         ASSISTANT PROFESSOR, DEPARTMENT OF ELECTRICAL

                   AND COMPUTER ENGINEERING,

           UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN

    Dr. Popescu. I'd like to thank Chairman Brooks and Ranking 
Member Lipinski for inviting me to share my views on the NSF I-
Corps program.
    I am an Assistant Professor in the Department of Electrical 
Engineering at University of Illinois. Since an undergrad, I 
have been studying optics and lasers and their applications in 
biomedicine. I'm a believer in the fact that technology can not 
only generate high-quality health care, but can also help 
reduce its cost and, you know, help access to health care.
    Engineering the tools for scientific discovery has been 
named by National Journal of Engineering as one of the 14 grand 
engineering challenges for the 21st Century. My laboratory 
develops the next generation of light microscope, that will 
help understand how cells and tissue function in both health 
and disease. Therefore, my research has three components: 
Technology development, basic science studies, and clinical 
application. Our technology has the potential to generate early 
and accurate diagnosis, new cures for devastating diseases, 
inexpensive blood testing for global care, and can generate 
billions of dollars in wealth across several different markets. 
Like in vitro diagnosis, biotech energy in my department.
    Our research community, many of my peers asking whether 
they can purchase an instrument from some company. This made me 
realize a tremendous challenge, one that I was not well 
prepared to overcome. And that was, how do we go like this to a 
successful product that can be made available to all.
    I participated in the I-Corps program as the PI for our 
team Phi Optics. Our participation in the I-Corps program has 
made a serious impact in our understanding of the 
commercialization process and the potential for success of our 
company. With the knowledge gathered during the program, and 
the adjustments we brought to the business model, we're now 
rounding up $400,000 in seed investment. We have commitments 
from a local venture firm and a major investor, which they both 
come up with a hundred thousand, each.
    Recently, Phi Optics received the first order for the 
alpha-prototype of our microscope from a major life sciences 
company. The prototype will help gather internal interest for 
potentially investing more money in our company. This fall we 
will be visited by a world leading microscopy company, 
interested to partner and co-develop our technology into 
commercial products. Therefore, we are very confident about the 
outcome of our efforts. And much of this confidence can be 
traced back to the intense work during the I-Corps program.
    Let me just tell you a few specific things about my 
experience as a I-Corps awardee. As a PI I've learned a great 
deal during the program. For example, I learned that features 
of our technology are not synonymous with value proposition. 
And thank you for that. Our team learned that we must develop a 
clear and compelling value proposition in order to gain 
traction from customers.
    Business models need to be flexible and allow for pivoting. 
Invariably, information will be gathered along the way that 
directs a startup to change strategy and business approach. For 
example, our team ended up with two different business models 
depending on whether we team up with a strategic partner, like 
a large corporation, or not.
    Interacting with a hundred potential customers is an 
incredibly valuable experience, the results of which cannot be 
replicated in any other way. Prior to attending the program, I 
did not have a good appreciation of the two fundamental tasks 
in starting a business. Which is business model development and 
customer development.
    The striking feature, to me, of this program, is that it 
offers a scientific approach to commercialization. Through 
interactions with potential customers, we have the opportunity 
to test certain hypothesis. For example, what is the proper set 
of features that our instrument should have, first; and what is 
the cost. This is precisely our research approach in the 
laboratory, where, in order to understand a certain phenomenon, 
we perform experimental validation of our various hypotheses.
    Personally, I would like to see the I-Corps program 
expanded locally, if possible, on campuses throughout the 
country. As an alumnus, I will be very happy to help train new 
teams at University of Illinois.
    In terms of the objectives and achievements of the I-Corps 
program my opinion is that it will be a very effective use of 
federal dollars. It combines several key elements to produce a 
highly catalytic environment for the launch of technology 
startups. Number one, top-notch entrepreneurial education from 
experienced, world leading instructors.
    Two, significant interaction with potential users and 
customers of technology. We--particularly, we talked to 105 
different people.
    Maximum accountability to the teaching team and program 
peers. This combination of elements makes the I-Corps quite 
unique among federal programs, and should increase the odds of 
commercial success of the program participants.
    Speaking on behalf of the Phi Optics team, I believe the 
program objectives were achieved.
    Seems like I have run out of time, but I would like to say 
one thing about the benefits to the taxpayer. And that is, for 
decades NSF has been investing large amounts of funding in 
basic science, which continuously pushed the frontiers of our 
knowledge. The SBIR/STTR has helped commercializing some of the 
technology developed through this research. I do believe that 
the I-Corps program is an extremely useful pre-SBIR tool for 
training the startup teams and helping them validate the true 
potential for their commercialization. As large industry looks 
to academia and small businesses, including spin-out companies, 
to fill product portfolios and identify new tools for 
efficiency, the I-Corps program can act as a catalyzer and 
enhance the probability of commercial success.
    The taxpayers receive a huge return from their investment. 
These programs provide an opportunity to validate the 
commercial potential before significant investments from 
federal and private sources are committed.
    In essence, the probability of success for the projects 
going forward is maximized, while the losses due to the 
projects unlikely to succeed are minimized.
    With that, I will close. Thank you very much.
    [The prepared statement of Dr. Popescu follows:]
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    Chairman Brooks. Thank you, Dr. Popescu.
    I now recognize our final witness, Dr. Mazar, for five 
minutes.

            STATEMENT OF DR. ANDREW MAZAR, DIRECTOR,

           PROGRAM FOR DEVELOPMENTAL THERAPEUTICS AND

            ENTREPRENEUR-IN-RESIDENCE INNOVATION AND

          NEW VENTURES OFFICE, NORTHWESTERN UNIVERSITY

    Dr. Mazar. Thank you, Chairman Brooks and Ranking Member 
Lipinski, for the opportunity to testify today. Northwestern 
University and I appreciate your interest and support for 
science and technology issues. My name is Andrew Mazar, I'm the 
Director of the Center for Developmental Therapeutics at 
Northwestern, and also the Entrepreneur-in-Residence. My 
perspective that will be a little bit different today, it's not 
from the NSF perspective, I'm coming from the perspective of 
therapeutics development.
    But I think a lot of the challenges that I'm discussing are 
applicable, also, to the I-Corps program, and we all face a 
similar challenge with trying to commercialize bipartisan into 
technology.
    So, today, as I said, I'm representing the perspective of 
the Entrepreneur-in-Residence, or EIR. Northwestern created 
this position within the Chemistry of Life Processes Institute, 
also referred to as CLP, to address the unique challenges 
encountered when advancing novel therapeutic projects through 
development in an academic setting.
    A critical component of this mission is the capacity to 
move discoveries from the laboratory bench into the hands of 
society, which is facilitated by the EIR position, which works 
in tandem with Northwestern's Innovation and New Venture 
Office, also referred to as INVO. So, this is our next 
generation of transfer, but it's much more than that, and 
really focused on commercialization aspects of our 
technologies.
    As the EIR, I partner and collaborate on many different 
projects with faculty members across all the different 
Northwestern schools. In this role I have now helped found 
seven companies over the past couple years, and also founded 
the Center for Developmental Therapeutics, which provides 
actual hands-on assistance with the development of new 
therapeutic projects, both of them in the scientific 
development side, as well as the commercialization and 
fundraising side.
    So, my EIR position was the first of its kind created at 
Northwestern, although there have been additional EIR positions 
created across the university since then.
    I believe that the collaborative interaction that I enjoy 
with INVO has also been spurred on by the success of Lyrica, 
which is a drug marketed by Pfizer that was invented at 
Northwestern, and really a tremendous success story with the 
University. Lyrica is a tremendous example of leveraging the 
federal investment in basic research to develop a new drug that 
is benefiting millions of people, as well as generating a 
revenue stream for Northwestern that is being re-invested to 
create new programs. This type of royalty stream and re-
investment by the university is especially important in today's 
challenging funding environment as it provides a complementary 
source of capital that can be used to build transformative and 
constructive programs in the academic setting, such as CLP and 
the EIR, something that is not always possible through 
traditional grant mechanisms.
    Further, I believe that the success of Lyrica has bolstered 
what was already a very entrepreneurial culture for 
Northwestern, and taken it mainstream across the entire campus. 
The number of people thinking about their research in terms of 
translation and commercialization has grown exponentially since 
the EIR was put in place.
    Let me now speak to the challenges. One of my major 
challenges has been overcoming the perception that discovering 
and developing new drugs is somehow inferior to more basic 
knowledge-generating research. I believe that academic drug 
discovery and development is one of academia's most important 
missions. Drug development creates new knowledge and technology 
for every new product that is developed, and new models for 
collaborative research across departments and schools involving 
multiple investigators. Further, drug discovery and development 
is highly entrepreneurial, and is, therefore, consistent with 
the entrepreneurial nature to which most universities aspire.
    Finally, commercialization of new therapeutics helps the 
U.S. grow its economy and maintains its global competitiveness.
    Another major challenge is funding. I believe that it is 
possible to discover and develop new drugs in the academic 
setting, and that large research-driven institutions with 
medical schools, such as Northwestern, could become quite good 
at this if funding was available. Today we do not have a fund 
that can provide the capital required for these types of 
activities.
    A few academic institutions have been able to raise small 
gap funds, usually through philanthropy, but in most cases 
these have not provided adequate resources to really move 
projects forward. However, several examples of gap funds, 
Michigan and Harvard, that were allowed to invest sufficient 
capital in promising projects do exist, where returns on 
investment have already been observed within a few years after 
the initial investment was made. Thus, I believe the gap-
funding model to support commercialization will work if 
utilized properly.
    I believe that the I-Corps program, from what I understand, 
is trying to do exactly this, and it should be expanded. 
Without programs like I-Corps the basic research investment 
will be wasted. If gap funding is not available and if venture 
capital is no longer investing in early-stage projects, which 
it is not, then basic research ends up sitting on a shelf in 
the tech transfer office.
    The most important thing I'd like to see from the I-Corps 
program is to make more funds available for each project. Each 
project should be evaluated for what milestone or inflection 
needs to be met next, and sufficient capital should be provided 
to support this. The milestones may be scientific, commercial, 
or a combination of the two, but providing insufficient funds 
is as bad as providing no funds at all.
    Given that there are limits on how much money is available 
for this program, I would favor making a larger meaningful bet, 
rather than trying to fund as many projects as possible and 
none of them moving forward. And it's not to say that the 
federal government should bear the costs of these types of 
programs alone. It is possible to leverage the federal 
investment with private funding, and, in fact, the federal 
investment can be viewed as a de-risking strategy that attracts 
private funding that would not otherwise be available. The I-
Corps program is already doing something like this by requiring 
identification of potential customers for each technology 
funded, and I believe that if I-Corps funding is increased, 
this approach can be expanded to seek out actual commitments of 
funds that can match or exceed the government investment. This 
drastically lowers the barriers for entry into 
commercialization, and in my opinion, spurs entrepreneurship 
and economic growth.
    Mr. Chairman, thank you for providing me an opportunity to 
provide testimony at this field hearing on the Innovation 
Corps. This concludes my remarks. I would be happy to answer 
questions.
    [The prepared statement of Dr. Mazar follows:]
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    Chairman Brooks. Thank you, Dr. Mazar.
    Just that everyone will understand, we have your submitted 
testimonies; they're much more extensive than, of course, what 
you were able to deliver in a five-minute span, so we 
appreciate you abiding by our time limitation, but know that 
the full remarks will be a part of the hearing record.
    At this point, we go into the questioning segment by 
Members of the Committee. Normally, we have a five-minute 
limitation, too. But under the circumstances, the time that's 
been allotted for the hearing, I'm going to be somewhat liberal 
in the amount of time that's allowed for myself and Mr. 
Lipinski. And, again, since this is Mr. Lipinski's home court, 
I recognize Mr. Lipinski first.
    Mr. Lipinski. Thank you, Mr. Chairman. And I'll try to keep 
it close to five minutes, then you can go, we can have a--each 
have second round, maybe the best way to go through this. 
Probably the first thing I need to do is hold up my I-Corps 
cup, that maybe the camera is not on me, promoting I-Corps and 
now that the camera is coming around.
    But not paid for with taxpayer dollars, I was assured.
    I just want to say, I was at the--this morning I spoke to 
a--the local chamber of commerce. West Suburban Chamber of 
Commerce. And they had one question. And I think most 
American's question right now, even if they're not directed at 
anything, is, What's the future of our country? Where are the 
jobs going to come from? We're in this--we're in a deep hole 
that we're slowly getting out of, but too slowly getting. 
What's the future of employment going to be? And I think the 
future is largely going to come from American innovation. And 
that's why I think programs such as I-Corps are critically 
important. We have here in the Chicago area great research 
universities, we have National Labs. They're doing great work. 
And we need to do a better job of taking that research, those 
discoveries--and not everything can be turned into a product, 
I'm not claiming that, but those that can, getting that into 
the market and providing jobs here in America. So, that's--I 
think that's the number one thing, the number-one question that 
really is on everyone's mind. We've heard--we're hearing--I 
wish we were hearing more about innovation and the role 
innovation plays in that--and needs to play for our country.
    I want to--first I have a question that I think Dr. 
Peterson and Mr. Blank would be best to address but some of the 
other witnesses may want to jump in. Some of the witnesses 
offered thoughts on how the program can continue to be improved 
and/or expanded in their testimony. Mr. Kane suggested an 
additional educational module on what the startup process looks 
like.
    Dr. Popescu suggested some one-on-one time with teams and 
instructors to address challenges unique to each team. Mr. 
Blank recommended trying I-Corps training--tying I-Corps 
training SBIR grants. Dr. Mazar talked about the need of a 
larger grants to support proof of concept activities. So, Dr. 
Peterson, Mr. Blank I'd like to get your thoughts on some of 
these suggestions. I'll start with Dr. Peterson.
    Dr. Peterson. Thank you, Congressman Lipinski. Let me first 
of all begin by reminding everyone that the I-Corps is just 
barely one year old. I think, as with any program, it's very 
important to carefully analyze how the program is going, not 
make drastic changes in a short period of time.
    Very carefully we learn the lessons that we can on the 
investments that we're making. I think one of the key lessons 
that we have learned, as has been pointed out, both from your 
comments and the comments from others around this table, that 
the key element of the Innovation Corps program is education. 
It is the entrepreneurial education, innovation education, that 
is to be provided to students and the faculty to help them in 
this process and innovation. And what we found, really, is that 
in this first year the education component has in effect become 
the great learning step. We have outstanding ideas that are 
available from NSF grantees, both current and former. Providing 
the education components, components that Steve Blank has 
talked about, has been the great learning step.
    So, the first thing that we are going to focus on is 
expanding our ability to provide those education components in 
other geographical locations. NSF just recently made awards to 
both the University of Michigan and Georgia Tech to do so. In 
this next year we will try to expand to other universities. So, 
I would say, if there are other changes that may take place 
within the I-Corps next year, the primary focus at this point, 
is to expand the education component.
    Chairman Brooks. I'm going to interject just for a moment. 
I've been requested to ask everyone, including the Members, to 
make sure that their microphone is on and that it is close to 
their mouths, because it is being recorded, and it will assist 
with that sound recording.
    Mr. Blank. Thank you, Congressman Lipinski. You know, I 
think that's a great question, what can we do with more, and 
what we will do more with less. I think that's the role of 
government in the coming years in this budget. And I think, 
again, if you think about where the I-Corps sits, it's basic 
research, research that's looking to be commercialized. And on 
the other side, SBIR, SDAT, our funds and private capital.
    And what the I-Corps is for me, is we now know something we 
didn't know ten years ago, didn't even know five years ago. And 
what we now know, and combined and embedded in this program, is 
how to make these startups sufficient. That is, how do we not 
give them tens, or hundreds of millions of dollars before they 
even know what is it they're doing. And that's the core of the 
program. I believe that every basic research organization in 
the United States, not just the NSF; ARPA-E, DOE, NIH, all of 
them have an I-Corps program, and that would be the best use of 
taxpayer money, instead of just writing blank checks. I think 
having an efficient education program, because, for me, this 
isn't a funding program, this is an education program that 
actually helps scientists themselves discover whether this is a 
viable business. So, instead of coming to Congress or private 
capital with their hand out, they're now coming with customers. 
And that's the first time we actually know how to do this.
    And so, my first request to Congress, if I had a wish list, 
would be, we've got to think about expanding this past NSF, in 
front of every resource or organization that's running SBIR and 
STTR programs. We'd make them incredibly efficient for just a 
ridiculously small amount of money, because it's an education 
program, not a funding program.
    Mr. Lipinski. Anything else anyone wants to add on that? 
Okay. I think I'll--with that, I'll yield back, and I--we'll 
come back with more questions. Thank you.
    Chairman Brooks. Thank you, Mr. Lipinski. I want to cover 
some of the background that Congress is dealing with right now, 
financial climate of the United States of America. You all 
probably have a feel for this, but I'm going to give you some 
specifics. We're looking at a 1.4-trillion-dollar deficit, 
followed by a 1.3-trillion-dollar deficit, followed by a 1.3-
trillion-dollar deficit. This fiscal year we blew through the 
one trillion dollar mark in the last week or so, and we still 
have two and a half months to go. Last November we blew through 
the 15-trillion-dollar debt mark; sometime this year we're 
going to blow through the 16-trillion-dollar debt mark. The 
cost to service America's debt from FY 2010, to FY 2011, went 
up 25 billion dollars a year. From 196 billion to 221 billion. 
Now, what's 25 billion dollars?
    That is more than the entire NASA budget. Okay? So, that 
amount of money is in perpetuity now is being spent on 
servicing our creditors, instead of giving some kind of return 
for taxpayers who are losing that money to the federal 
government, in hopes of getting some kind of service back in 
return.
    You've seen what's happened in Spain, Italy and Greece, 
where their interest rates are significantly higher. They're on 
a downward spiral, trying desperately to avoid an insolvency 
and bankruptcy of their nations. But for the bailouts by other 
nations in the European community, they would have gone into 
insolvency and bankruptcy. What does that mean? Well, their 
unemployment rates generally are in the neighborhood of 20 
percent, those three nations on average. Two of them are 
higher, one of them is lower.
    Now, think about that, the impact on the Unites States of 
America, if we follow that same path. So, Congress is working 
hard to try to determine ways to avoid a federal government 
insolvency and bankruptcy. For emphasis, if we have a federal 
government insolvency and bankruptcy, you might see zero money 
for National Defense; you might see zero money for the NSF; you 
might see zero money for Social Security; you might see zero 
money for Medicaid and Medicare. Think of the federal 
government program, there might be zero for it.
    Right now, thirty-six cents on every dollar that the 
federal government spends is borrowed. No business, as I'm sure 
Mr. Kane. Since he's in that field, knows, no business can last 
very long when their operational cost, 36 cents on the dollar 
is borrowed. Okay? And while I wish I could say that things are 
getting better, they're not. The hole just keeps getting deeper 
and deeper as evidenced by our, again, having another trillion-
dollar deficit for this fiscal year.
    And, surprisingly, in the atmosphere in Washington, about 
how, you know, there are cuts, I'm sure you've seen about it in 
the media, in the context of those cuts, yes, there have been 
some cuts to some programs. But in the fiscal year that ended 
September 30th of last year, actual federal government spending 
went up well over 100 billion dollars. So, when Washington 
talks about cuts, it's not like we understand the words, net; 
Washington is talking about picking a little cut there, picking 
a little cut there, but nonetheless, the overall spending is 
still ballooning.
    So, what we have to do, what I desire from you all as much 
as possible, is information that will help me determine why 
spending has to be cut in order to save our federal government 
from an insolvency and bankruptcy. Now, I have a background in 
economics, and, to me, the insolvency and bankruptcy, if we 
continue on the path that we're on, is inevitable. It is an 
absolute certainty. The only question is when. Now, if we get 
off that path and we get off quick enough, then maybe we can 
save our country from insolvency and bankruptcy.
    And to kind of put it into perspective, and I know when I 
talk these big numbers sometimes people kind of get their eyes 
glazed over, but think the Great Depression. Think 15 and 20 
percent unemployment. Then think about having a federal 
government that is not solvent and can't pay any bills. In the 
Great Depression we had a government that was solvent. Albeit 
it was difficult times, they at least could pay their bills. 
And when World War II broke out, the federal government was in 
a position to help defend our country, not on one front, but 
two fronts.
    So, that having been said, I'm going to start asking some 
questions about the I-Corps program. For those of you who are 
not aware, each team picked to participate in the I-Corps 
program gets $50,000. In 2011 there were 46 teams, only 2.3 
million dollars out of all the trillions of dollars being spent 
by the federal government. In 2012, the year we're now in, a 
hundred teams will be picked, at a cost of five million. The 
projection for 2013, according to some of the testimony I 
received, is 250. So, over a two-year period, you're talking 
about, roughly, a five-fold increase in spending, and the 
number of teams that will be selected to participate in the I-
Corps program.
    Very basic question. Where does the $50,000 go? Anyone who 
wants to answer feel free.
    And just as an aside, these mikes seem to be the opposite 
of those mikes. Those mikes you push down, and it's on. This 
one, if you push down, you've turned it off. Okay. So, when the 
button is up, that's when it's on. So, who would like to make a 
stab now on the fifty thousands.
    Dr. Peterson. Chairman Brooks. Let me begin--is this----
    Chairman Brooks. You just turned your mic off. There you 
go, now it's on.
    Dr. Peterson. All right.
    Chairman Brooks. There you go, now you can answer.
    Dr. Peterson. I will just give a very simple answer and let 
my colleagues elaborate, perhaps with very specific examples. 
The $50,000 is to provide the additional support for the 
already funded NSF researchers, or previously funded NSF 
researchers, to either develop a proof of concept or a 
prototype for their particular idea. It's not meant to replace 
venture capital or anything like that, but to provide a modest 
amount of support where they can develop their proof of concept 
or prototype.
    Chairman Brooks. Well, more specifically, as I understand, 
6,000 goes to education; right?
    Dr. Peterson. There is a component that's associated with 
the indirects from the university and the components associated 
with providing the educational part of the I-Corps, yes. So, it 
does provide support for those teams who are participating in 
the educational component.
    Chairman Brooks. And is it roughly $6,000?
    Dr. Peterson. I believe that's correct, yes.
    Chairman Brooks. Who gets that money; the universities or 
somebody else, the 6,000.
    Dr. Peterson. That money is used to pay for the educational 
component, the curriculum that's provided for the I-Corps 
program. There is an intense one-week course, in addition to 
the long-term course, that's associated with I-Corps and it's 
meant to provide the support for that.
    Chairman Brooks. Specifically, who gets the money? Do you 
pay the instructors for teaching the I-Corps course, or are you 
talking about the $6,000 is being used to print the document, 
or whatever constitute the curriculum, where does the 6,000 
actually go.
    Dr. Peterson. It's to provide the support for the 
instructors, yes, sir.
    Chairman Brooks. Well, when you say, ``support for the 
instructors'', what do you mean.
    Dr. Peterson. Well, Congressman, could I provide specific 
details for you, for the record? I don't have the exact numbers 
for exactly how every dollar in that educational investment 
goes, so I'd be happy to provide that for you.
    Chairman Brooks. Okay. Can anyone help illuminate on where 
the 6,000--who actually receives the six grand.
    Mr. Blank. So, Congressman, I absolutely could tell you 
it's not me. The good news is for the first two cohorts, every 
one of the instructors volunteer for their time. And I mean 
every one of them. Not only me. We're talking about venture 
capitalists who have full-time jobs, who I convinced to teach 
in this program by themselves. And in addition, at least, if I 
understood correctly, National Science Foundation raised over a 
million dollars in private capital, not from the Kaplan 
Foundation----
    Chairman Brooks. Okay. I appreciate you going off on the 
private capital part, Mr. Blank. But right now I'm just trying 
to figure out where the $50,000 goes, that the federal 
government provides.
    Mr. Blank. Right. I think we----
    Chairman Brooks. I mean, it's a basic question.
    Mr. Blank. Since I'm not part of the NSF, I think we should 
have some of the staffers here, who could probably answer that 
one.
    Chairman Brooks. Well, we've got 44,000 that roughly goes 
to things that are not educational. From what I understand, 
travel expense would be one; is that correct.
    Dr. Popescu. Yes.
    Chairman Brooks. Building and prototype would be another.
    Dr. Popescu. Yes. For probably us, as a PI----
    Chairman Brooks. You got the money.
    Dr. Popescu. Yes.
    Chairman Brooks. What did you do with that.
    Dr. Popescu. So, we have to--the three members of our team 
have to pay the tuition educational component, and then we have 
to pay for the entrepreneurial's efforts, and for the business 
mentor's consulting efforts. And in terms of, as it was 
mentioned, we wanted to design the first viable product that 
would come out of the lab.
    Chairman Brooks. So, Mr. Blank perhaps you could help. 
Well, if any of you all could help. It sounds like the 50,000 
goes to things that would normally be, if you're starting a 
business, the startup cost of that business, and the people who 
are owning that business would be the ones that would front 
that money; is that a fair statement? With the exception of the 
6,000 for education.
    Dr. Popescu. Let me offer this. I don't think that's 
accurate, we haven't started receiving the private funds yet, 
but--so, in addition to the condition that they're--the cost of 
the trips, everything is about, to us, it is about $8,000 per 
person for the trips and in our capacity.
    And the rest is just, as I mentioned, the effort of my 
team. And, you know, I don't think this qualifies as a good 
placement for it.
    Chairman Brooks. Well, I'll take Dr. Peterson up on the 
offer, and Mr. Blank up on the offer, the offer to submit to me 
an itemization of how the money normally is spent, who actually 
receives it, that would be beneficial. At this time, I'm going 
to send the microphone back to Mr. Lipinski for additional Q 
and A.
    Mr. Lipinski. Thank you, Chairman Brooks. And I agree, 
certainly, with all the issues with the federal budget deficit 
and our debt. I recently attended a meeting with a bipartisan 
group of members of the Committee for Responsible Federal 
Budget, and the CEO of Honeywell talked about we have somewhere 
between six and three years--no one knows exactly how long-- 
before we do something serious to show that we're serious about 
reducing the deficit. So, I am very hopeful. And I think it is 
an important question, about where exactly the money goes to 
for I-Corps. But I also think we have to look at the rewards we 
get for this, we have to go through everything in the federal 
budget and figure out, what do we get for the money that we're 
spending here.
    I want to talk a little bit; hear from the witnesses more 
about the entrepreneurial education and the leveraging of this 
from I-Corps. But just in general, especially Mr. Mazar. What 
can be done in terms of teaching those who are in the lab? I 
mean, I was a political science professor, assistant professor, 
but I also have a background in engineering. And I'd be one of 
the first people to say that this is not something, 
entrepreneurship turning research into a product, is something 
with some of the hard sciences that engineers--not something 
that they necessarily have an idea of how to do. Also, I know 
social science also has some recipients of I-Corps funding--
they also had some very good idea.
    But, how have you seen--anyone on the panel-- the kind of 
the leveraging of the information coming from the I-Corps 
program, how have you seen that have an impact, especially Dr. 
Popescu, but anyone else, how is it that that helped sort of to 
bring a new sort of information and entrepreneurial spirit and 
knowledge to beyond what you have learned with I-Corps.
    Dr. Popescu. Okay. Thank you very much for the question. 
For me, the main benefit for--I would say the first benefit was 
to kind of clarify the message of our technology. If you 
remember, still remember our first presentation of the I-Corps 
was kind of, we were explaining our technology in terms of what 
it could do, very technical terms. It could do 3D imaging and 
nanoscale resolutions and all that. And then we were told that, 
``Hold on, the customers, they want to hear the value 
proposition.'' So, the first benefit was that now in our 
business proposal we have this very clearly stated. And we 
started to have--we have recently given the local investors, 
where this message was very sharp and very well received. And 
we're very confident that we will raise our $400,000 in a 
couple of months. We're very confident about that. So, I would 
say that's one thing, but we learned, basically, a whole lot 
from the startup program.
    Mr. Lipinski. Mr. Kane?
    Mr. Kane. Thank you. Let me state for the record that at 
the time the decision was made to apply for I-Corps, it was a 
university project and there was no presumption or commitment 
to start a new company. So, all of the efforts that you would 
typically expect one to make, in the investment of time and 
resources that people would make into getting a startup off the 
ground, really wasn't a consideration at the time that we 
decided to apply for I-Corps. It was only after going through 
I-Corps that we got the confirmation to suggest that we should 
start a company.
    But, Congressman Lipinski, to address your question 
specifically about the leverage, I'll talk briefly about my own 
personal experience. As you know, I do a lot of advisory work, 
consulting, and even though I'm the CEO of GlucoSentient, I 
also am involved in several other startups.
    And since the time that I went through I-Corps and first 
got exposed to Steve's curriculum in the lectures at Stanford 
last October, since then I have spoken at the University of 
Illinois, at Northwestern, at Notre Dame. We had a group of MBA 
students from Kellogg who were assigned, as a semester-long 
project, to assist the Northwestern startup that I'm working 
on, to do some market development and characterization of the 
opportunity. And I actually encouraged them and brought the 
business model generation techniques that I learned in Steve's 
class at Stanford to this project at Kellogg. They went out and 
bought the textbook and read it, and now some of that 
methodology is being infused there.
    So, over time, I mean, I'm just the data point of one, but 
now that I've been exposed to the curriculum, and then you 
multiply my efforts by the dozens and soon hundreds of other 
mentors who have gone through the program, we're out in the 
community, at the business schools, at the engineering schools, 
helping to diffuse that knowledge. And I think over time you're 
going to see an exponential gain as that starts to accure.
    Mr. Blank. And if I can, Congressman Lipinski, since I 
designed the course to do this on purpose, let me assure you 
and Chairman Brooks that the goal was shock and awe for the 
students who went through it. And I think they could all tell 
you that they were certainly changed from the first day of that 
class. And given their experience and their stature, I don't 
think anybody spoke to them like that in the last 20 years. And 
they certainly learned about what was important in the shortest 
period of time. And more importantly, for the country, I think 
we changed them forever. I think we made them incredibly 
efficient.
    Now, I think Chairman Brooks' issue about the $50,000, 
while, relevant, this is not funding for the startup. I think, 
as Mr. Kane said, they don't come in thinking they're going to 
build a company, they come in thinking, How can I commercialize 
this? And all of a sudden when they leave, they now understand 
what it takes to build a company, with no doubt. I think this 
was the--probably the shortest period of emersion we could get 
a team with the biggest bang for the buck. And I think we did a 
pretty good job of it, and I'm pretty proud that we're going to 
continue to do this.
    The other comment I should make for the Committee, is you 
should understand that this process is being adopted in Silicon 
Valley, literally, by qualifier. And the thing that concerns 
me, it's not just Silicon Valley, this process has been being 
conducted for a while. You know, commercialization and research 
is going to go ahead, whether we decide to join it or not. It's 
one of those great adventures of our time. And I just kind of 
believe that this country wants to be the leader of other 
nations. We can't be left behind here. Because I hope the 
fruits of all these investments, and all this research that 
this Committee has been helping fund for these decades, I hope 
we see those products printed in English and not in Chinese. 
Because this technology and this course, this educational 
process, can be adopted elsewhere. It's the one thing we know 
how to do in the United States, which is fail fast, and fail 
quickly, and test our hypothesis, that make this unique here. 
We fail to capitalize on that, how we literally will be seeing 
these products not made in Shanghai and Beijing. And that just 
bothers me as an American.
    Mr. Lipinski. Before I let Dr. Mazar address this, I want 
to say, having spent some time in the ivory towers, at the 
universities, I know in my own, in just looking at my 
experiences in political science, I saw some great research 
being done. And my question always was, ``So what?'' I come 
from a very practical midwestern background, and that was 
always my question, ``So what?'' I want to know what the 
application is here?
    And I think this has relevance in that there's a lot of 
great work that's being done and getting--Dr. Popescu said, 
``What's the value proposition?'' I think if you spend your 
time doing a lot of research, you can come up with all kinds of 
great discoveries, great findings. But, you cannot--it might 
be, at some point, applicable to starting, to creating a new 
product. Starting a new company.
    But you're not challenged as a researcher to think about 
that, really, in the normal process of what goes on at 
universities. And trying to get tenure, working on research, 
and publishing, and I think that is something that we need to 
do more of here in this country.
    And I want to ask Dr. Mazar how Northwestern is doing that, 
and how you may see others doing that. We have a lot of--now it 
seems like it has become very popular in the last decade or 
two, to have some kind of center or institute, some kind of 
program at universities to focus on technology transfer. And I 
think this is something very new and something that's really 
critically important for, as I said, innovation and jobs in 
this country. So, how do you see that? How do you see the whole 
mindset is changing?
    I'll tell you, I sat in on a class that Mr. Blank had for 
graduate students. Not the I-Corps class, but teaching Lean 
LaunchPad to graduate students. I was a Stanford graduate 
student 20 years ago. I didn't know graduate students who were 
thinking like this. There is a whole different mindset there, 
at least at Stanford, hopefully at other schools, of 
entrepreneurship and coming up with these ideas. It was almost 
shocking to me, in a very good way, that I saw these graduate 
students--like my colleagues, I was not thinking like that when 
I was at Stanford 20 something years ago. I didn't know anyone 
who was thinking like that. So, it's a whole different change 
of mindset among people who are doing research.
    So, with that, Dr. Mazar, what are you doing at 
Northwestern, and how do you see the--sort of the mindset 
changing of people who are doing the research, in terms of the 
possibilities when they do have something that could possibly 
become an innovation?
    Dr. Mazar. So, thank you, Congressman. I'll try and keep my 
comments brief since that's blinking a lot right now. Seems to 
be angrier everysecond for some reason.
    Mr. Lipinski. Don't worry.
    Dr. Mazar. So, Northwestern, I think, in observing over the 
past several years just the culturalship, the way everybody 
started, the students all way through faculty, through 
administration and senior leadership, is viewing 
entrepreneurship as well in the university. And I think 
Northwestern has been forward-looking in that way, by allowing 
to have it organic. There's a lot of programs for students and 
faculty that are adaptive programs. There's, for example, the 
Fawn Center For Entrepreneurship, where, in this case, actually 
bred into the neotype of the students, graduate students and 
even undergraduates, very early on in their approach to pursue 
their ideas and think about how to commercialize and go out in 
the competition, write business plans. There's lot of support 
for that. And a lot of that is coming from, I'd say, two big 
sources; one being the Innovation New Venture Office, which is 
sort of the next generation tech transfer, but much, much more 
at Northwestern.
    The transfer function is just one little part of that. But 
they are the ones that are really pushing a lot of these 
adaptive programs, but also pushing hands-on training side by 
side with mentors and entrepreneurs. And so, that's sort of how 
I came to be here, is because I could sit down with faculty, 
and we'll just talk about theory, or you should do this, you 
should do that. But I actually rolled up my sleeves and I rode 
with them side by side and take their therapeutic ideas, and 
moved them forward toward the clinical, towards 
commercialization. And I think that most faculty have worked in 
sort of medically-related research.
    If you talk to most people, they say, ``Man, I'd really 
like to translate my idea into a drug, but I don't know how to 
do it.'' So, as soon as you sit down with them and show them 
how to do it, that process just begins to flow and occur 
naturally. And so, consequently, a lot of these projects now, 
that sort of used to stop at what I call the power one stage. 
So, once you write your papers, what do you do next? Well, in 
most universities here of late, you send that to a transfer 
office. Here we're now trying to take those projects and 
advance them further, so we can get them out the door, out into 
pharmaceutical companies or partnership, or startups or spin-
offs, so we're immediately commercializing, generating revenues 
to the University.
    And so, I think, to me, that cultural shift, and also just 
having people within the University who have been there, done 
that, who have that expertise, that will work side by side with 
faculty, has been sort of the biggest change that I've seen 
that's helped a lot of these things move forward.
    Mr. Lipinski. Thank you. And I have to thank the Chairman 
very much for all the extra time. When I was at Stanford, I was 
in the Engineering Economics Systems Program there, which is 
now Management of Science of Engineering, to see students who 
are in that same program coming to that class, and have these 
ideas. It's great to see that and I think we need to have more 
of that across this country for the future of our country. 
Thank you.
    Chairman Brooks. I'm going to try to reduce this to a 
general sense again. We basically have three kinds of 
expenditures in Washington D.C., one is interest on the debt. 
We have no choice but to pay it. If we don't pay it, our 
creditors charge us a lot more, or they can cut us off. If they 
cut us off, all of a sudden you have to have a 36-cent-on-the-
dollar reduction federal spending across the board. But that's 
one place. The second place is the entitlement programs. That's 
where the big boom is, over a hundred-billion-dollar increase 
in spending for Social Security, Medicaid, Medicare, wealth 
transfer programs, a variety of different stewards. And then 
we've got the third pot of money, which is where NSF comes 
from, which is where National Defense comes from, and that's 
discretionary spending. That is the one area of the federal 
government where spending has actually been cut. And so, what 
I'm looking for is information that would help me protect this 
program as opposed to others that are being cut. I use National 
Defense as an example. With sequestration, if it comes to 
fruition, and it's scheduled to for January 1st of 2013, you're 
looking at 700,000 layoffs. Seven hundred thousand layoffs. And 
the DOD said that it was court workers, uniform defense 
personnel, or private sector support contractors. A reduction 
in our National Defense capabilities of approximately 25 
percent, according to Committee estimates. House Armed Services 
Committee estimates. So, you're seeing great competition for 
the dollars that we have. And even with that competition, we're 
not reducing spending enough to adequately reduce the risk of 
insolvency and bankruptcy.
    I note, and I really appreciate Mr. Lipinski reducing it to 
fewer words than I could have. He said, ``So what?'' And that's 
really the gist of it. For us to be successful in defending 
this type of program, we have to be able to show results.
    And I'm going to just read a few of the comments of some of 
the witnesses from our witness statements. Dr. Peterson said, 
``Initial anecdotal indicators suggest that the I-Corps program 
has been a significant, positive addition to the NSF investment 
portfolio, even though it constitutes less than one-third of 
one percent of the NSF budget.''
    Now, we have another comment by--this one's Mr. Blank. The 
I-Corps program, quote, ``will pay us back with jobs and a 
competitive edge on a global scale,'' end quote.
    Then we have another quote by Mr. Kane, which is closer to 
the ``So what'' comment, but it's pretty much where I am. 
Quote, ``As an entrepreneur I see things through a different 
lens. In my world view, technologies have limited value unless 
they are applied. And for jobs to be created and the tax base 
to go up, somebody eventually needs to make a profit,'' end 
quote.
    I'm looking at the teams, our efforts that we've engaged in 
so far, were 46 in 2011, 100 in 2012, and 250 projected for 
2013. I know we can't do anything about 2013, because that's 
projection. Probably can't do anything about 2012, because 
that's also just in an embryonic stage. But with respect to the 
46 I-Corps teams that were set up to market products to start 
up a business, how many of those 46 are today profitable and 
self-sufficient, i.e., they're receiving no federal government 
or other taxpayer funds.
    Dr. Peterson. Chairman Brooks, if I could begin first of 
all, and then I'll ask Steve Blank to comment more 
specifically. I think it's very important to be realistic about 
what we can expect in a specific amount of time for this 
program. Absolutely all the things that we need to develop with 
new jobs, new companies, all of these we hope and have every 
expectation that this program will do, and if it doesn't do 
more things we shouldn't be investing in it. We've never 
promised that in one year, that all of a sudden there's going 
to be thousands of new jobs, or every single investment in the 
I-Corps program turns out to be a successful company. But as 
has been pointed out, this is a key investment in development 
of innovation, and I think without that step we can't 
anticipate the future, future developments,----
    Chairman Brooks. And, Mr. Peterson, if I could interject 
for a moment. You're answering my next question, I haven't 
asked it yet, but it was going to be why. My first question is: 
How many of the 46 are stand-alone, profitable, self-
sufficient, without taxpayer subsidy----
    Mr. Lipinski. Could anyone----
    Chairman Brooks. --or assistance.
    Mr. Lipinski. Can anyone talk about any progress, 
anything----
    Mr. Blank. Yeah. So,----
    Mr. Lipinski. --that looks potentially----
    Mr. Blank. So, let me ask--try to answer Congressman 
Brooks' direct question by saying, I think it's a divide by 
zero question. Which I mean is, it implicitly says that the 
goal was to set up a series of profitable companies, is the 
outcome of the I-Corps program. Which, that wasn't the program 
I was teaching.
    Chairman Brooks. That's not, the goal is not to establish--
--
    Mr. Blank. So,----
    Chairman Brooks. --startup companies, that are successful--
--
    Mr. Blank. The goal for what I was teaching was to 
understand whether these entities were capable of being startup 
companies. And, in fact, the viable answer for $50,000, which 
is probably the cheapest investment the government will make, 
is to find out, no, let's not spend or raise millions of 
dollars, that, gee, there is no market for this. So, number one 
is, is this a go or no-go decision. Number two is, are these 
technically add business viable enough to actually apply for an 
SBIR Phase I grant. Or, two is, is it possible that these 
entities could go out and become companies and raise private 
capital. And the key idea is, Chairman Brooks, I know you're 
familiar with NASA's technology readiness level, when they take 
a look at technology and say, ``Is it ready?'' We've never had 
a business readiness level anywhere in this country. What this 
program does is not build companies----
    Chairman Brooks. Mr. Blank, I'm going to have to interject 
again. Can anyone answer my question as to whether any of the 
46 are profitable, stand-alone, don't-need-government 
assistance? Any of the 46?
    Mr. Blank. I don't know, but I don't think that was the 
goal.
    Chairman Brooks. Well, that--I'm not asking you what you 
thought the goal was.
    Mr. Blank. I have no idea.
    Chairman Brooks. I'm asking, again, if anyone can answer 
the question as to whether any of the 46 of these startups have 
been successful?
    Dr. Peterson. Okay. I----
    Chairman Brooks. And I'll get to Mr. Peterson, he's 
answering--asking--he was answering my second question, which I 
haven't asked yet. But right now the question stands, does 
anyone know of any of the 46 that are making a profit and are 
successful in the business environment.
    Dr. Peterson. Chairman Brooks, you understand my reticence 
just to directly give you a yes-or-no answer, simply because I 
don't necessarily agree that if they aren't stand-alone 
companies, that they haven't been successful. My guess is, and 
we'll look, and again, we'll get exactly these numbers for you, 
but very few of the investments are now totally self-
sufficient, stand-alone, profitable companies. That was not an 
expectation in one year's investment from the I-Corps program. 
We will get you that specific information.
    Chairman Brooks. All right. Well, until I get something to 
the contrary, I'm going to infer from the silence, or the 
answering different questions, that there are no known 
profitable businesses so far of the 46.
    My second question, which, Mr. Peterson, you were focusing 
on in advance of having--of me receiving an answer to the first 
one was, why not? And if I can now summarize, the why not is 
because it's premature, and also because of Mr. Blank's 
comment, that it really wasn't the goal of the I-Corps program. 
And, Mr. Kane, you have something to add.
    Mr. Kane. I would just add that the earliest time that 
anybody could have started a company, if they had gone through 
the first I-Corps, would have been January of this year. So, 
the question you're asking is whether any companies that got 
started from a standing start, in seven months are profitable.
    Chairman Brooks. Well, my third question is going to be: At 
what point in time should we be in a position where we can 
properly evaluate the startup numbers? And I'm looking at a 
quote from Dr. Peterson's written testimony, ``Specifically, 
the Priority Goal states that by September 30th, 2013, 80 
percent of teams participating in the Innovation Corps program 
will have tested the commercial viability of their product or 
service.'' So, is 2013 when we should, as a Committee, start 
being in a position where we can sincerely evaluate at least 
the 46 startups from 2011?
    Dr. Peterson. I think the answer to that is yes. That is 
exactly what we're stating. Then we will be able to test the 
viability. That does not say, and I'm going to make it very 
clear, we are not saying that 80 percent of all of the I-Corps 
investments will end up being profitable companies. But we will 
be able answer that question.
    Chairman Brooks. And let me move to another part of Mr. 
Blank's testimony. And I thought this was an interesting 
comment interposed, and the rest of his remarks. Quote, It's 
why Silicon Valley investors fund startups when over 90 percent 
of startups fail, end quote. Is it your anticipation that with 
the I-Corps program, that kind of success rate is what we can 
expect, ten percent success, 90 percent failure.
    Mr. Blank. You know, Chairman Brooks, I think if anybody 
knew that, we'd be venture capitalists. I think the goal for me 
in building this course is to change the odds. I think we now 
know what makes startups fail. I think we now know how to make 
them fail less. I think we now know how to make them spend a 
lot less of government and taxpayers' money by finding these 
things out up front. I would hope that we actually look at the 
data. And the preliminary data, I think tells us a quite a bit, 
that we're actually achieving that goal. I think your question 
about how should we measure this for the next couple of years 
is exactly what we should be doing. And I think, as I said, the 
data we see now gives us great comfort that we're actually 
using taxpayers' money incredibly efficiently. And so, yeah, I 
think we should see better numbers from that. Because of what 
we're doing here is an education program, we're teaching them 
to be parsimonious with their time, their energy, and more 
importantly, our money.
    Chairman Brooks. Did anyone else want to add anything to 
what Mr. Blank has just stated? Otherwise I'll go to my final 
comment, question, before we go back to Mr. Lipinski, on the 
chance that he wants to go another round.
    Mr. Kane. Chairman, if I could add something, perhaps, on 
your opening statement, where you said that as a congressman 
you're trying to figure out how we reduce the budget deficit 
and where the cuts are going to be made, and as a citizen I 
have the same concern, although I haven't been elected to solve 
the problem. But, we understand that debt is a difficult 
problem. And my suggestion, to be brief, is that entitlements 
is what you should look at. Because if I look at my own 
personal household, once I made the decision to become self-
employed, I realized that there was certain freedom once I knew 
that I had an opportunity to sell my services and could be 
assured of making a living on my own. And I think that the only 
way to reduce the entitlement's burden over time is to create 
wealth. And there's no faster or better or more effective way 
to do that in the United States than through entrepreneurship.
    So, my closing statement is just a big flag waving need for 
the necessity of teaching entrepreneurship. It's not a problem 
that's going to get solved in a year, probably not even five 
years. We all know there's no silver bullet. But over time, 
creating wealth by training people how to be self-sufficient is 
the thing, in my humble opinion, that will eventually reduce 
the entitlement's burden, which is one of the solutions to 
solving the debt problem.
    Chairman Brooks. Well, Mr. Kane, I don't know whose 
congressional district you live in, but if you're saying focus 
only entitlements, the wealth-transfer programs, that we can 
invest in things that produce jobs, I would encourage you to 
consider an application for Congress. Because we need people to 
work on----
    Mr. Lipinski. If he doesn't live in my district, that's 
fine.
    Chairman Brooks. Let me move on. My test for the I-Corps 
program is a different test than I would apply for most 
National Science Foundation work. When you're doing basic 
research, you don't know what you're going to come up with, you 
don't know what the end result is going to be, you're trying to 
expand the human mind. Okay? And just the expansion of the 
human mind, in and of itself, may be worth the taxpayer money 
that's being spent on those research projects.
    But when you get to something like I-Corps, as I perceive 
it, granted this is my first term in office, but I'm more akin 
to the ``so what'' comment of Mr. Lipinski. We have to have 
results if we're going to be able to justify this program long-
term. And to me, the results are that we're generating the kind 
of jobs and wealth that most of you guys have testified to in 
your written statements as being the end result of the I-Corps 
program.
    And so, I'll be anxiously awaiting 2013 and 2014 voters 
willing in my district that I return to the United States 
Congress, and if we have significant improvement in the 
creation of businesses successfully, and the creation of jobs, 
then that enables us, or empowers us to be able to explain to 
our constituents back home that we're being wise stewards of 
the taxpayers' dollars.
    I will say that I'm very much concerned by the analogy, 
indirectly, not directly, to Silicon Valley, where venture 
capitalists are looking at a 90-percent failure rate and ten 
percent success rate. Well, we can expect 10-percent success 
rate out of them, because that's their decision. Okay? If they 
want to do ten percent or five percent, or 10 or 30 or 40, it's 
their money. Can't question it. And if that's what they are 
comfortable with, that's fine, that's meeting their 
expectation. But when you're talking about taxpayer's dollars, 
I'm not sure there are going to be very many Americans around 
the country that are satisfied with a 90-percent failure rate 
and a 10-percent success rate.
    Now, again, granted, we're early in the program. Too early, 
quite frankly, to be able to make a thumbs up, thumbs down 
decision on it. But over the ensuing few years, I hope that you 
all's involvement in it, you all will do what you all can to 
try to make sure that we have a good success rate, that in turn 
will translate into our ability to defend this program as 
opposed to defending another program that is able to project a 
better return on taxpayers' dollars.
    With that having been said, Mr. Lipinski, if you'd like to 
make any more remarks, or if you want to follow up with more 
questions we still have time.
    Mr. Lipinski. Thank you, Mr. Chairman. I think that we have 
to consider why venture capitalists are willing to go in and 
put their money on the line with only 90 percent failure rate. 
And that's because what we should be looking at is not success 
or failure rate, but what do we wind up getting out of this. 
And I don't think we should be looking at what percentage of 
these I-Corps grant recipients go on to actually create 
successful business. It's what's the end result, what is not 
percentage-wise how many succeed, but what do we get out of 
this.
    And if only one percent, if only one of them succeeds but 
succeeds in a big way, for example, then it's worthwhile.
    And we can't really measure, it's difficult to measure the 
change, as Dr. Mazar was talking about. Just the change in 
thinking of the people who participated in this program, even 
if this idea that they have brought to I-Corps doesn't work, 
doesn't mean something will not work in the future, or maybe 
some of their colleagues learned better how to be 
entrepreneurial. So, it's hard to measure the success.
    And I completely agree with you, Chairman Brooks, that we 
have to be careful about how we're spending money. And I think 
that we have to be--have to watch and see what does happen with 
I-Corps and the money that we are--NSF is putting towards I-
Corps and it's important to have that oversight, as Congress 
does, and our Subcommittee is in charge of that oversight of 
NSF over on the House side.
    And I think that it's crucial to do that, that's why we 
wanted to hold this hearing, and I thank you for doing that. 
But I think if we are looking at a solution, and we say well we 
can't have a 90-percent failure rate with the money that goes 
to I-Corps--that's not really what we should be focusing on.
    It looks like Mr. Blank wants to jump in here.
    Mr. Blank. I just want to maybe make a point for Chairman 
Brooks' comment. Chairman Brooks, you're from Huntsville, is 
that the district you represent?
    Chairman Brooks. Yes, sir, home of the country's second 
largest Research Park.
    Mr. Blank. Right. And Saturn Five was developed there, 
wasn't it, the institute?
    Chairman Brooks. It certainly was.
    Mr. Blank. And I seem to remember in the early days, in 
1960s, when I was a young boy, I think that one had a failure 
rate, those things kept falling out all the time. Not only 
Saturn Five, but all the rockets.
    Chairman Brooks. You must be older than me, my memory is we 
had it excellent----
    Mr. Blank. Not at the Center, but I remember the early red 
stones and the Jupiters, and the first grandparents all kind of 
blew up in the pan for the country. Understood.
    But, the cost of science and experimentation was failure, 
not--and that's--again, we didn't shoot our scientists when 
they failed. We don't shoot our entrepreneurs, we embrace the 
fact, that this is what we do.
    And I understand you have to explain that to taxpayers. 
But, in fact, if we actually look at some of the labs that we 
fund, we don't have a hundred percent success rate in these 
experiments. We don't expect that. We understand that's the 
nature of science. And I know you understand that. And I want 
you to know that I understand. My personal goal is to increase 
this hit rate, but I just want it you to understand that, for 
me, entrepreneurship, on day one is a faith based. Faith based, 
call 'em. And very quickly we turn these into facts. And that's 
what we use this process to do. And hopefully we can increase 
that rate to where we're all proud of what it is. I just wanted 
to share those comments.
    Chairman Brooks. Well, thank you for your comments.
    And I will make this distinction philosophically. It is one 
thing to be involved in basic science, which to some degree 
Saturn Five was with our effort to explore space, as it has 
been with nanotechnology and all of these other things that the 
National Science Foundation has been excellent at doing. And we 
understand that with basic science, there's going to be a 
significant failure rate. It is another thing, though, for the 
federal government to go past the basic science and to start 
getting into the free enterprise system. As you probably are 
aware, in Washington we had a serious philosophical battle 
between socialism on the one hand, which gives an economic 
model that does not work. Korea would be the best example. And 
free enterprise on the other end. And to what degree does the 
federal government's involvement help determine which of our 
entrepreneurs are going to be successful and which are going to 
fail, and to the extent the federal government is the 
determiner of who is successful and who fails, then you have 
politicians that are making those decisions, often for 
political allies as opposed to what should be a fair and 
impartial system, which is what you have with free enterprise. 
And so, I see a difference between basic research and the 
government, any government's, involvement in free enterprise. 
Not withstanding that difference, I understand that government 
has a role in education, and to the extent this is an education 
program that does produce results, that is something that we 
certainly need to consider perhaps in a favorable light. But to 
me, what I want to try to get more than anything else, is an 
idea of the timetable we should look at before we seriously 
evaluate this program. Because we have that in 2013, 2014, we 
should be expecting some results that justify the federal 
government expenditures of funds. And I think Mr. Lipinski hit 
the nail on the head when he also talked about, it's not just a 
success rate. You give us one Microsoft, with the thousands 
upon thousands of jobs that they create, we can overlook a 
whole lot of other efforts that were unsuccessful.
    And my staff is reminding me that you are on Mr. Lipinski's 
time. For that, Mr. Lipinski, I hand it back to you. Thank you.
    Mr. Lipinski. Thank you, Mr. Chairman. And, well, if the 
voters return both of us to Congress, I look forward to taking 
a further look at this topic in the next Congress. I think that 
gets back to, and I think we agree for the most part, on what 
we're talking about here. We want to be good stewards of the 
taxpayers' dollars, and know that it's their money that we're 
talking about here. But I think that this program, we have to 
be looking at--I think one last thing I want to mention is, is 
that Mr. Blank continued to talk about SBIR. We spent how 
much--let me ask Dr. Peterson. How much of NSF money goes to 
SBIR?
    Dr. Peterson. As you know, Congressman, it's a specific 
fraction of the research and related expenses. And with NSF, 
it's about $140 million a year, that is what our SBIR budget is 
at this time.
    Mr. Lipinski. And, I think that this is a way of hopefully 
having better results coming out of SBIR--also across the 
federal government. Not just at the NSF, we could have this 
kind of program like I-Corps at other places. It could be a 
great feeder to SBIR, and then that money, which is more money 
than what's being spent on I-Corps, that taxpayer money can be 
better spent and have a better likelihood of having good 
results, and really having successful companies come out of it.
    But, I want to conclude by thanking the witnesses for their 
testimony. I really think that this this program has great 
potential, and we need to keep watching what is happening in 
terms of results. Results are not always easy to see, but the 
potential for a great payoff, and I appreciate what Chairman 
Brooks said, if we have one Microsoft-type come out of this, 
then we can say that it's been a success. Like every other 
program we need to keep looking at it. And I thank the Chairman 
for coming out here to Chicago and taking a look at the I-Corps 
program during this hearing, and where the program is going. 
But I think we have to keep on focusing on innovation, it is 
the way that our country is going to succeed. A way American 
people are going to be successful is through innovation. We 
already spent a lot amount of money on the research, and I'm 
very happy to hear Chairman Brooks talk about understanding 
what we receive out of spending on this basic research. I want 
to thank our witnesses and thank Chairman Brooks.
    Chairman Brooks. I, too, would like to thank--well, first 
I'd like to thank the witnesses--oops, I did it, sorry. That's 
what Dr. Peterson did, pushed it in, turns it off. Now it's 
off, now it's on.
    I want to thank the witnesses for participating in this 
hearing, particularly Mr. Blank for the extraordinary efforts 
you made to come here. I look forward to additional interaction 
with each of you as this program, process, works its way 
through the system as we continue to battle over funding in 
Washington. I can assure you of one thing, the intensity of the 
debate over what's going to get funded and what is not is only 
going to get worse over the coming years because of the 
financial limitations of our country. I want to thank Mr. 
Lipinski for calling this hearing in Chicago, his hometown 
neighborhood. It also happens to be my wife's neck of the 
woods, she was born in Evanston, just a little bit to the north 
of Northwestern. So, she's enjoying herself while I'm in this 
hearing. The Members of the Subcommittee may have additional 
questions for any one of you. I would ask you to respond to 
those in writing. Of course, that includes any questions from 
the Committee staff. The record will remain open for two weeks 
for additional comments from Members. And with that, this--the 
witnesses are excused and this hearing is adjourned.
    [Whereupon, at 11:44 a.m. CST, the subcommittee was 
adjourned.]

                                 
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