[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






      FIELD HEARING IN NEW YORK: JOB CREATION IN HIGHER EDUCATION 
   COMMUNITIES: HOW UNIVERSITY RESEARCH AND DEVELOPMENT SPURS SMALL-
                            BUSINESS GROWTH

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

                                HEARING

                               before the

               SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             AUGUST 5, 2013

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


            Small Business Committee Document Number 113-034
              Available via the GPO Website: www.fdsys.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

82-343                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001











                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                       BLAINE LUETKEMER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

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







                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Richard Hanna...............................................     1

                               WITNESSES

Bahgat Sammakia, Ph.D., Vice President for Research, Binghamton 
  University, Binghamton, NY.....................................     3
Chuck Schwerin, CEO, Sonostics, Inc., Binghamton, NY.............     5
Rick Pray, President, RPA Electronics, Binghamton, NY............     8

                                APPENDIX

Prepared Statements:
    Bahgat Sammakia, Ph.D., Vice President for Research, 
      Binghamton University, Binghamton, NY......................    22
    Chuck Schwerin, CEO, Sonostics, Inc., Binghamton, NY.........    27
    Rick Pray, President, RPA Electronics, Binghamton, NY........    31
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.

 
 JOB CREATION IN HIGHER EDUCATION COMMUNITIES: HOW UNIVERSITY RESEARCH 
                      AND DEVELOPMENT SPURS SMALL-
                            BUSINESS GROWTH

                              ----------                              


                         MONDAY, AUGUST 5, 2013

                  House of Representatives,
               Committee on Small Business,
        Subcommittee on Contracting and Technology,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2008, Engineering and Science Building, Innovative 
Technologies Complex, Binghamton University, 85 Murray Hill 
Road, Vestal, New York, Hon. Richard Hanna [chairman of the 
Subcommittee] presiding.
    Present: Representative Hanna.
    Chairman Hanna. Good morning, everyone. I want to thank you 
for being here. We will bring this hearing to order.
    I want to thank each of you for being with us today as we 
examine the relationship between Binghamton University and the 
local economy here in the Southern Tier, with a particular 
focus on the small businesses that are created from research 
that is spun out of this university's labs.
    Binghamton University is a public research university and 
is one of four universities centers in the State University of 
New York system. Since its establishment in 1946, the 
university has grown from a small liberal arts college, Harper 
College, to a large doctoral-granting institution presently 
consisting of 6 colleges and schools and home to nearly 15,000 
undergraduate and graduate students.
    In the most traditional of senses, Binghamton University is 
the economic hub of this region. It provides over 11,000 direct 
and indirect jobs and provides about $622 million a year in the 
region. And when you take into account the expenditures 
associated with the university, it amounts to approximately 12 
percent of the gross domestic product for Broome and Tioga 
counties.
    While all of this is critically important to our area, what 
we want to focus on today is how Binghamton University 
translates the high-tech research it conducts in its 
laboratories into brand new small businesses. That process, 
wherein universities and research institutions transfer 
scientific findings from one organization to another for the 
purpose of further development and commercialization, is known 
as ``technology transfer.''
    The Federal Government spent about $131 billion for basic 
research in 2012. More than half of all basic research 
conducted in our Nation's colleges and universities is funded 
by the Federal Government. Therefore, this Committee has a keen 
interest in seeing what we can do to improve technology-
transfer processes.
    Federal programs like the Small Business Technology 
Transfer Program, STTR, offer specific avenues to help 
universities, such as Binghamton University, move new 
discoveries from the lab to the marketplace. The STTR program 
was created to provide Federal research and development funding 
for proposals that are developed and executed jointly between 
small business and research in not-for-profit organizations. 
This program helps create new high-tech businesses with new 
jobs for new graduates.
    I am also very interested to hear how Binghamton University 
is partnering with current businesses to fill their workforce 
needs. One of the problems we often hear about from small 
businesses that testify before our Committee is that innovative 
firms can have difficulty finding qualified individuals to fill 
vacancies.
    Programs like the New York State Strategic Partnership for 
Industrial Research, or SPIR, can help match qualified students 
with small firms looking to expand. This industry-supported 
initiative is a win-win. Qualified students get practical, 
real-world experience and potential employment following 
graduation, and the small businesses get an educated and 
capable extra set of hands to help grow their businesses.
    It is the partnerships like these that often prove to be 
the most successful. I am looking forward to hearing from our 
witnesses on these important issues.
    What I would normally do at this time is introduce Grace 
Meng, the ranking member from the Democratic side and a good 
friend. But since she is not here, I will just go ahead and 
introduce our first witness.
    Dr. Bahgat Sammakia, is vice president for research at 
Binghamton University. He was a distinguished professor of 
mechanical engineering, joining Binghamton's staff in 1998.
    He is the founding director of Small Scale Systems 
Integration and Packaging Center, a New York State Center of 
Excellence. He is also director of Energy Efficient Electronic 
Systems Center, a National Science Foundation industry and 
university cooperative research program that has focused on 
reducing the energy consumed by data centers around the world.
    Dr. Sammakia earned his bachelor's degree from the 
University of Alexandria in Egypt and his master's and doctoral 
degree from the University of Buffalo. He is a fellow in the 
American Society of Mechanical Engineers, holds 14 U.S. patents 
and has published more than 180 peer-reviewed technical papers.
    Thank you for being with us here today, Doctor.
    I am going to introduce each person separately before they 
speak, so go ahead, sir. Thank you.

   STATEMENTS OF BAHGAT SAMMAKIA, PH.D., VICE PRESIDENT FOR 
 RESEARCH, BINGHAMTON UNIVERSITY, BINGHAMTON, NEW YORK; CHUCK 
SCHWERIN, CHIEF EXECUTIVE OFFICER, SONOSTICS, INC., BINGHAMTON, 
 NEW YORK; AND RICK PRAY, PRESIDENT, RPA ELECTRONIC SOLUTIONS, 
                   INC., BINGHAMTON, NEW YORK

              STATEMENT OF BAHGAT SAMMAKIA, PH.D.

    Mr. Sammakia. Thank you, Congressman.
    So good morning, everyone, and welcome to Binghamton 
University's Innovative Technologies Complex.
    This location is the perfect setting for the topic 
addressed by today's hearing. These buildings are home to 
multi-user labs, where industry partners work alongside our 
scientists. The university, along with the State and Federal 
Government, have invested about $250 million in this complex.
    If you look outside, behind me as a matter of fact, you 
will see our Center of Excellence building, which is under 
construction and will be completed and occupied next year. We 
also have plans to build a fourth building in this complex, 
which will be near Murray Hill Road, and that will be a 
building focused on smart energy research.
    My submitted testimony goes into more detail about the 
university's initiatives to educate students, develop path-
breaking research, and transfer that research to the community 
through commercial marketing to help businesses.
    We have a long history and a strong reputation for 
collaborating with the private sector. We currently partner 
with more than 20 global companies. We have also assisted 
hundreds of small businesses to grow and prosper. In fact, 
about 10 percent of our total funding comes from industry, and 
that is about 40 percent higher than the national average. But 
we can do better, and, with your continued support, we will do 
better.
    We do have challenges, and I wanted to take this morning to 
highlight some of those challenges.
    We face significant obstacles in our research efforts on 
campus. Funding is crucial to everything that we do. And while 
we have experienced steady growth of research, Federal grants, 
and investments over the past decade, we are now seeing that 
trend of growth to begin to slow off and level off, and in some 
areas it is actually retrenching.
    Our Nation is rapidly losing ground in key areas that 
support innovation. Further cuts, like the ones we are 
experiencing with sequestration, will only worsen the problem. 
The consequences can and probably will be devastating. They 
could include a less prepared, less skilled workforce, limited 
U.S.-based scientific and technological breakthroughs, fewer 
U.S. patents, and a decline in U.S. startups, products, and 
jobs.
    I have had the opportunity to travel to other countries to 
learn about how their universities work with industry and the 
government to facilitate collaboration. Everywhere, I found 
that they are all encouraged to work side-by-side. The students 
and the faculty work hand-in-hand with industrial engineers and 
scientists. That structure really pays dividends. During the 
past 2 decades, the rate of U.S. research and development 
investments has been outstripped by those in places such as 
China, South Korea, Hong Kong, and Taiwan.
    The answer to this innovation deficit is a sustained, 
strategic Federal investment. And failing to act will pass to 
future generations the burden of lost leadership in innovation, 
economic decline, and limited job opportunities.
    Our president, Harvey Stenger, recently joined SUNY 
Chancellor Nancy Zimpher and other SUNY presidents in a letter 
that calls for the closing of the innovation deficit. They have 
taken this public step because they believe this is a crucial 
time not only in our Nation's economic history but also in its 
innovation path to the future. SUNY leaders believe that 
targeted investments in research and higher education must be 
made, as they are a key driver of long-term economic growth and 
fiscal stability.
    I believe the exciting new National Network for 
Manufacturing Innovation, or NNMI, program is an example of a 
step in the right direction as we strive to build manufacturing 
research that leads directly and quickly to job creation. 
Binghamton University is participating in two such proposals 
for this Federal program which brings universities and 
companies together in a meaningful way. It is all about 
collaboration that occurs in such a focused, concentrated 
manner that technology innovation and job creation are bound to 
result.
    Just as we must reinvest in research and development, we 
also need to strengthen our commitment to education in the STEM 
disciplines: science, technology, engineering, and mathematics. 
It is truly the only way to prepare the next generation of 
Americans and American companies for what we know will be a 
global race for prosperity and security.
    Binghamton University is eager to partner with our State 
and Federal leaders, and we will continue to collaborate with 
industry, both large and small. My written testimony has much 
more detail about the many ways we work to enhance our research 
efforts, develop technologies, and transfer innovation into the 
community to help spark economic growth and create jobs.
    I do want to discuss one way we, as a university, hope to 
bridge the gap between mind and the marketplace. Our plan 
involves the development of a high-technology incubator. 
President Stenger's proposed incubator has received priority 
support from Governor Cuomo and the New York State Regional 
Economic Development Council.
    With your support, Congressman Hanna, as well as the 
support of Senators Schumer and Gillibrand, we have also 
received crucial funding from the Federal Government's Economic 
Development Administration. Thank you.
    Binghamton University and the regional economic development 
community plan to build the incubator in downtown Binghamton to 
provide a unique entrepreneurial ecosystem for emerging 
companies. This facility will foster innovation, 
commercialization, and job creation through collaboration 
efforts of academic, industry, and government partners.
    There is no facility in Broome County that is suited to 
such high-tech companies. Creating this infrastructure will 
enable emerging companies to grow and relocate in the 
community. These activities are at the core of what we do. With 
your support, we expect to continue to aid regional businesses 
as well as the overall economy and to expand our efforts into 
the future.
    Thank you again for allowing me to address you today, and 
thank you for choosing our campus to host this event. 
Binghamton University is proud of its academic reputation, its 
research accomplishments, and its facilities, and we are always 
eager to partner with our representatives in government and in 
commerce.
    If you have any additional questions, I would be happy to 
elaborate on the remarks I have just presented as well as my 
written testimony.
    Chairman Hanna. Thank you, Doctor.
    I would like to welcome Donna Lupardo for coming here 
today, someone I know who shares your interest in education and 
in this facility. So thank you for being here.
    I neglected to introduce Adam Hepburn. We have other staff 
around the room who probably--Renee and Justin. Virtually 
everybody from Washington is up for this. We have a skeleton 
crew down there, but we try to focus on the district. And we 
try to make sure that people from Washington are familiar with 
not just the issues but the faces and circumstances of this 
district, the 22nd.
    So thank you.
    Our second witness is Chuck Schwerin, CEO of Sonostics, 
which spun out of bioengineering research at Binghamton 
University in 2008.
    He previously directed the implementation of worldwide 
software copy protection and license management at Pitney Bowes 
MapInfo. He also coordinated the development, implementation, 
and maintenance of MapInfo's three core technologies, including 
MapInfo Professional, the flagship product.
    Prior to his employment at MapInfo, he founded 
Environmental Data Systems in Saratoga Springs, New York, a 
software firm where he designed, marketed, and maintained 
unique software products for waste management and healthcare 
consumers.
    Mr. Schwerin received his bachelor's degree in geography 
from Clark University and his master's in environmental policy 
and planning from Tufts University. He holds three patents on 
geographic information technology.
    Thank you, sir, for being here. You may begin.

                  STATEMENT OF CHUCK SCHWERIN

    Mr. Schwerin. Thank you very much.
    Good morning, Mr. Chairman and members of the Committee. My 
name is Chuck Schwerin. I am CEO of Sonostics, a 5-year-old 
startup with an exclusive license from the Research Foundation 
of SUNY to commercialize research emanating from Binghamton 
University's Clinical Science and Engineering Research Center.
    Congressman Hanna's message on the House Committee on Small 
Business Web site sums it up well. To unlock economic growth in 
this country and certainly in the Southern Tier of New York 
State, it is imperative that we, quote, ``foster an environment 
where small businesses can thrive,'' unquote.
    Here in the Southern Tier, far from the startup sweet spots 
of Silicon Valley, North Carolina's Research Triangle, or 
Boston's Route 128, the ecosystem for nurturing small-business 
innovation is still immature, despite the proximity of such a 
prominent institution as Binghamton University. The tri-cities 
cannot expect thousands of new manufacturing jobs to walk 
through our doors anytime soon.
    While New York State is blessed with numerous institutions 
of higher learning that foster cutting-edge research, it takes 
a team of complementary talents to build a successful business, 
and they are not necessarily all found within the university 
walls. We must create an ecosystem here that attracts 
entrepreneurs and funding sources and marries their skills with 
compelling technology from the university to spawn innovative 
companies that offer well-paying jobs.
    In my view, a culture of rational risk-taking is lacking 
among the traditional funders of early-stage business. That 
would be high-net-worth individuals, functioning angel 
networks, and most lending institutions. Further, there are too 
few early-stage funding sources at the State level, though the 
recent $45 million Innovate New York Fund is a welcome 
addition.
    There is a plethora of research developed within the 
university, but only a modest percentage can be deemed 
translational. That means the purpose of that research is to 
create practical applications with commercial value.
    Sonostics licensed several innovative technologies from the 
Research Foundation at SUNY that address chronic 
musculoskeletal conditions, which affect millions of people and 
confound traditional standards of care. The products and 
services we developed are meant to cause a reexamination of how 
these conditions are treated and at a fraction of existing 
costs.
    When faced with a challenge of how best to translate 
research to commercial viability, technology-transfer offices 
can either identify mature public or private entities to whom 
they can license the raw technology or help the researcher/
inventor build a team that can commercialize that technology 
via a startup venture. Sonostics is an example of the latter 
choice and, in my view, can be a better generator of jobs.
    We negotiated a fair agreement for developing an innovative 
technique for detecting muscle weakness and worked closely with 
the university tech-transfer office and the patent attorneys 
they selected to protect the intellectual property. Then we 
recruited software engineers to write the software, medical 
assistants to deliver the service, and continue to support 
graduate student research on the core technology.
    Sonostics could not have survived without significant 
assistance from both the public and private sector, and this 
aid included:
    One, State support for the Centers of Advanced Technology. 
In our case, we collaborated with the CAT at Stony Brook, which 
specialized in sensor technology and built our first 
prototypes.
    Two, State support for SPIR grants, the Strategic 
Partnership for Industrial Resurgence, which subsidized 
graduate student research using our technology in new, 
clinically advantageous ways.
    Three, an NIH-IRS collaborative initiative called QTDP, or 
the Qualifying Therapeutic Discovery Project, funded via the 
Affordable Care Act, to encourage research and development in 
companies with fewer than 250 employees.
    Four, a New York State Tax and Finance-administered program 
called QETC, qualified emerging technology company incentives, 
that also rewarded investment in pure research that is 
translated into commercial products.
    Five, loans from the Broome County Industrial Development 
Agency.
    Six, incubator space at the Broome County Innovation 
Center.
    And, lastly, Binghamton University, not only through its 
SPIR program, but with its business-friendly technology-
transfer office and its promotion of Sonostics as a poster 
child of how corporate-higher education partnerships can 
succeed.
    It is encouraging to see government assistance for a new, 
state-of-the-art incubator that is planned for downtown 
Binghamton under the aegis of the university. Such facilities, 
combined with the just-passed Start-Up New York tax benefit 
bill, should enable communities like Binghamton to more 
favorably compete against other States in the drive to attract 
and keep entrepreneurial talent and grow new enterprises.
    This is not a case of ``build it and they will come,'' 
however. Hard work remains to demonstrate to entrepreneurs that 
Binghamton can, as Mr. Hanna said, foster an environment where 
small businesses can thrive.
    Having lived through the birth and adolescence of a local 
startup during quite challenging economic times, I would like 
to offer several suggestions on fostering that environment.
    One, tax abatement policy is great for companies that 
already have reached the stage of maturity where profits are 
realized and taxes are due. Typically, this is not the case 
during a company's early years. The benefit of QTDP or QETC for 
Sonostics was our ability to accept tax reduction as grants, 
not as carry-forward credits against some uncertain future 
profit. Continuance rather than sunsetting of State and Federal 
incentives that lowers tax burdens for profitable firms or 
provides grants to not-yet-profitable ones is a prudent course.
    Two, continued State support for centers of advanced 
technology and centers of excellence that enables young 
venturers a means to validate technology and produce prototypes 
in a most cost-effective way.
    Three, public-sector support for seed-stage businesses 
should increase. The $45 million Innovate New York Fund is 
commendable but not sufficient. Those funds will likely go to 
companies already generating significant revenue.
    A hundred thousand dollars invested in a startup can often 
have a greater marginal impact and create more jobs than would 
a $500,000 investment in a company already generating several 
million a year in revenue. Many will fail, but the successful 
ones can more than repay investments in the losers. Their needs 
to be a cultural shift in the level of acceptable risk-taking.
    Lastly, firms like Sonostics do not possess all the 
resources necessary to identify newly instituted or time-
limited opportunities sponsored by the public sector. A one-
stop shop that dispenses information about financial incentives 
or regulatory updates would be a welcome innovation for 
entrepreneurs, technology-transfer staff, as well as county 
development agency personnel.
    That role today falls to the tuned-in legal and accounting 
professionals who specialize in startup clients and tend to be 
located in the geographies where new venture creation is more 
prevalent. If we in upstate New York are to compete, this 
knowledge base ought to be more easily and equitably 
disseminated. Perhaps congressional constituent services could 
help level the playing field via information seminars, 
workshops, or other distribution methods.
    I very much appreciate your decision to hold this hearing 
in Binghamton, and I thank you for the opportunity to provide 
you with my input.
    Chairman Hanna. Thank you, sir.
    Our next witness is Rick Pray, president of RPA Electronic 
Solutions, Incorporated.
    Mr. Pray holds a bachelor's degree in electrical 
engineering from Penn State and a master's degree in electrical 
engineering from Syracuse University.
    From 1981 to 1995, he worked as a visual systems engineer 
for Link Flight Simulation, contributing to the development of 
image generator and display systems for the training and 
simulation marketplace. He also briefly worked for CID 
Technologies, developing high-performance scientific imaging 
camera systems.
    In 1995, he cofounded RPA. With RPA, Mr. Pray has continued 
to develop solutions for training and the simulation industry, 
many of which have related to small-business innovation 
research efforts with all branches of the U.S. military and 
primarily involved in visual systems research and development.
    Thank you for being here, sir. You may begin.

                     STATEMENT OF RICK PRAY

    Mr. Pray. Thank you. I want to thank you, as well, for the 
opportunity to speak today.
    I do come to you as a small business that was not created 
out of research here at Binghamton University. We spun out of 
Link Flight Simulation. But we have found many programs here 
with the university that have worked well for us.
    We have taken advantage of SPIR, the Strategic Partnership 
for Industrial Resurgence. We have had about 10 graduate 
students come through our facility, working on various internal 
research and development projects that we had going. And we 
have hired three of them directly as full-time employees, and 
they still work for my company.
    We have also taken advantage of the Integrated Electronics 
Engineering Center here at Binghamton University. The IEEC 
provides the ability to access very expensive high-tech 
equipment that is used in electronics manufacturing that a 
small business like us would not be able to afford.
    We have to produce the same level of quality in electronics 
as much larger entities than ourselves. We build systems that 
are usually in the realtime signal processing and image 
processing marketplace. And when there are problems in 
production that we have with local manufacturers in various 
things, because we are doing state-of-the-art design and 
construction of systems, we have to get access to inspection 
equipment, manufacturing equipment, and things of that nature 
that allow us to improve our processes, find out what the 
faults are. And the IEEC center has provided that. They provide 
it both with access to very expensive X-ray equipment and 
systems where we can go in and look for problems and find out 
what the source of them is.
    It has also provided us graduate students who work in the 
lab that may have an area of expertise one of my employees does 
not in how to operate equipment or how to look for specific 
things. We have actually had them take some of our circuit 
cards that were having production problems and destroy them and 
take them apart and figure out where the problems were in the 
manufacturing process for us.
    So SPIR and the IEEC center have been great resources for 
us. And, in fact, on the SPIR side of it, we just hired one of 
those SPIR employees 2 months ago now as a full-time employee 
for our company. So we actively use that program.
    We also take advantage of the university for workforce 
training. We have funded multiple master's degrees and 
bachelor's degrees through our tuition-assistance policy with 
our employees. My business partner, himself, came here and got 
his master's degree, funded by our company.
    So we take advantage of that to keep our workforce trained. 
We have the tuition assistance. We fund, you know, advanced 
degrees in the same field of study that our current employees 
have. And that has been a great asset to us, to have this local 
facility here and this local university where we can keep our 
workforce trained.
    We have made some attempts on the STTR Program with 
Binghamton University. You mentioned the Small Business 
Technology Transfer Program in the past. In our area of the 
market that we serve in training and simulation, it is 
primarily in realtime visual systems and display systems 
products. And so we tried an attempt at one point to partner 
with a researcher here at the university and go after an STTR 
that was in that field of interest.
    We were not successful there; we didn't win that one. And 
it was primarily because, in the feedback we got, that the 
research of the faculty member here was not involved in our 
marketplace. They were not involved in realtime visual systems 
and training research.
    So we haven't attempted that again, but we do find that 
there are a lot of Link spinoff companies still here in the 
area, many of them small. I can think of at least seven off the 
top of my head. Two of them are actually large. And, you know, 
there are some things we would love to partner with the 
university on in new cutting-edge research in our areas of 
interest, as well.
    We see that, you know, even though some of us have been 
around--our company formed in 1995--we have been around for 18 
years now, we are still very small. We are a 10-, 11-person 
company. There are things we just cannot fund on our own 
internal research and development funding. We don't have the 
financial resources to do so. But if we could go after some of 
these STTRs or other things and have the university team with 
that, there are many, like I said, training and simulation 
companies in this region that would directly benefit from that. 
We are already job producers. You know, we would like to expand 
and actually get actively involved in even more of that.
    We have found that some other universities have been very 
successful at it, one in particular, the University of Central 
Florida. They have actually put in place curriculum that are 
credits and targeted class work in training and simulation, in 
simulation and those types of things within their engineering 
program. So they actually have a curriculum designed around the 
training and simulation marketplace.
    We would love to have, you know, some classes here that our 
employees could take and that other students that come to this 
university--there are a lot of local students who come here, 
too, that would like to stay in the area--to come out with more 
specialized training in our field and our marketplace and the 
other six or seven companies that exist around here, as well.
    But, all in all, you know, we have found this university to 
be a great resource for us. SPIR, IEEC, and the fact that we 
can bring our existing employees over here and, you know, have 
them take coursework and advance in their fields of interest is 
a great advantage to our business.
    Thank you.
    Chairman Hanna. Thank you.
    One of the things that I can say without hesitation is that 
we all know that education is that thing which transforms not 
just individuals but countries and will allow our country to be 
competitive globally. As you said, Doctor, we are falling 
behind.
    And I, for myself, am vice chair, along with Mr. Lipinski 
from Chicago, of the Science, Technology, Engineering, and Math 
Caucus, something we spend a great deal of time in our office 
thinking about and pursuing.
    So I would like, though--and I want to say, too, up front, 
I agree with your comments about sequestration. But one of the 
underlying issues here that is implicit in particularly your 
statement, Dr. Sammakia, is that there is a purpose in 
government investing in basic research. There are people who 
would argue that--and I am not one of them--who would argue 
that basic research is something that businesses will do 
because they have a profit motive and et cetera. So you see 
cuts in this area. But yet we are falling behind in terms of 
what we spend as a function of our national budget on those 
items compared with other countries.
    If this isn't too much to ask, because I would really like 
to have as concise a reason as possible on why it is important 
that government funds basic research.
    Mr. Sammakia. So the gap between research and development 
and products is shrinking. So basic research of a few decades 
ago is completely different from what we call basic research 
today.
    Even what we call basic research today has become fairly 
applied. Almost all the research we conduct at the Center of 
Excellence in Binghamton has a product and a customer in mind. 
So it is very focused. It is focused on something people will 
buy and use and live a better life with. So it is really 
applied research. So that is one.
    This country used to have major research labs which were in 
the private sector, and that has really gone down over time. 
Investment by the private sector in basic research is almost 
nonexistent now. The research is very applied in the priority 
sector.
    One example--I can give you many examples, but I prefer to 
give you just one, which is Bell Labs, which used to conduct a 
lot of research that was really basic research but which has 
resulted in tremendous economic opportunities. A lot of 
products have come out of Bell Labs that have enabled a lot of 
real applications, even though it was basic research.
    So basic research is very important. Why it is important 
for government to invest in it? Well, for one thing, you heard 
today from my colleagues, Chuck and Rick, that they came and 
used infrastructure on campus. They worked with us; they hired 
our students. Well, all of that is enabled by the Federal 
funding. So, in reality, we can't build our labs, we can't 
acquire equipment, and we can't hire the students to conduct 
research without Federal funding.
    So that funding is now building the infrastructure. Some of 
our labs in this very building are used by multiple companies, 
by 20, 30, 40 companies. And we built these labs with the 
intent that they become available to industry. So we conduct 
our research, but industry comes and takes their measurements, 
or we help them with the taking of the measurements.
    So this is infrastructure that enables not only research, 
but it also enables direct economic impact and direct product 
work. We love to do that. We love to work with industry very 
closely on solving real-life problems. It is also very 
important for our students to get that experience, because when 
they go to work after that, they are ready.
    And I think I will stop here.
    Chairman Hanna. Thank you. Thank you. That helps a lot.
    So what you are saying is there is a gap; that the profit 
motive, of and by itself, doesn't provide or fill that gap; 
that the kind of venture capital that the government can supply 
does those things that other people may not imagine that need 
to be done. It is true science.
    Mr. Sammakia. That is exactly right.
    Chairman Hanna. Would you like to weigh in on that?
    Mr. Schwerin. I think the profit motive is often too short-
range. We are so quarterly driven, especially, you know, the 
public companies, that there is a disincentive to invest in 
innovation that may not pay off at all or may not pay off for 
years to come, because you are being so scrutinized for how you 
perform on a quarter-by-quarter basis.
    I mean, the number of, you know, landmark companies that 
have failed, especially in this region, because they didn't 
keep up, you know, are legion. And, unfortunately, we are so 
short-term-driven that, you know, public funding is really the 
only other alternative to allow the time that it takes to 
germinate, you know, pure research into something that is----
    Chairman Hanna. To actually get into the unknown and 
create----
    Mr. Schwerin. Right.
    Chairman Hanna.--without knowing exactly where you are 
going. Interesting.
    Mr. Pray, you have an interesting policy. You talked about 
it in your testimony. You actually help your employees come to 
Binghamton University, and your company pays for their tuition?
    Mr. Pray. Right. We have a tuition-assistance program. Up 
to $2,500 a year of tuition we will pay for our employees to 
get advanced degrees. And $2,500 will essentially fund two 
graduate-level courses here at Binghamton University. So, you 
know, we consider that they will be part-time students, but 
they will come here as a graduate student and they will do two 
classes a year and we will pay for that.
    And if they choose to go to another school, which some 
have, as well, we have paid for it there. You know, it doesn't 
have to exclusively be here. It is where they want to get their 
degree. But it has to be an accredited university----
    Chairman Hanna. Sure.
    Mr. Pray.--and it has to be in their field of work.
    Chairman Hanna. Interesting.
    I listened to the conversation about this shrinking of the 
middle class, and the President says, and I think rightly so, 
that if you are going to rebuild our economy, it is going to 
have to be from the middle class out. I also believe that it is 
from the bottom up. And education represents from the bottom 
up. And I am a big believer in early childhood education.
    Doctor, you have an Office of Entrepreneurship and 
Innovation Partnerships here. Can you talk a little bit about 
maybe some of the products that you have come up with and what 
you have seen happen because of that?
    Mr. Sammakia. Sure. So one of the biggest ways that that 
office participates in helping local companies and companies 
around the State and around the country is in licensing some of 
our ideas and some of our patents to those companies. And the 
number of licenses we have had has grown substantially over 
time. We are very happy to work closely with companies that 
way.
    We also have a very strong advocacy in terms of anyone who 
on campus comes with up an idea and wants to start a company, 
we allow them to start here in the pre-incubator, with the idea 
that we would then move them out into the community and help 
them start the company.
    One real success story which we are very proud of is a 
company called Sigrity, which was started by one of our faculty 
from the IEEC that was mentioned earlier. That company 
developed software that computes noise that happens in 
electronic systems, both electrical and electromagnetic noise, 
which is a really important problem for industry. So the 
software started getting used by big companies, namely Intel 
and IBM, for their package designs.
    And then eventually the faculty member decided that he 
wanted to do this full-time. He ended up leaving the university 
and moving his company to San Jose, where it became a really 
successful company. Sigrity now is used in almost every 
processor design that happens in this country.
    Recently, he was here giving a talk, and he said, ``If you 
say 'Intel inside,' you should also say, 'and Binghamton 
inside,' as well.'' So we are really delighted to hear that. It 
was a wonderful----
    Chairman Hanna. He does say that?
    Mr. Sammakia. He said that in his talk here, of course.
    However, that company grew to be around 150 employees, some 
of which are in Rochester, New York, the majority in Silicon 
Valley, of course. And they recently got bought out by an even 
larger company, and the product is now getting even wider use.
    And the university got over a million dollars in licensing 
fees out of that one patent. So that is really a success story 
for the university and for the company, for the country in 
terms of job creation and opportunity. That work could have 
been done elsewhere just as easily. So that is an example we 
are very proud of.
    But our biggest impact is working with industry directly by 
licensing some of our ideas to them, and then they use them in 
many different ways.
    Chairman Hanna. Certainly. Thank you.
    You know, Mr. Schwerin, you touched on something that I 
don't know if it is generally understood, and that is--although 
it ought to be--that you have to make a profit in order to use 
the kinds of deductions that benefit companies to further their 
business interests.
    And what you said was, and correct me if I am wrong, is 
that grants to companies that are startups are more important 
than tax write-offs to people who aren't making any money.
    Mr. Schwerin. Because you may not live to see the day.
    Chairman Hanna. You may not live to see the day.
    Mr. Schwerin. Yeah.
    Chairman Hanna. So, implicit in that is that you are saying 
that the government has a role in funding innovative companies 
that may not be successful. Because, clearly, if they were, 
they wouldn't be talking about----
    Mr. Schwerin. When you don't need the money, there is no 
shortage of folks willing to lend it.
    Chairman Hanna. Would you like to talk about that? Because, 
you know, that is the kind of thing that gets a lot of 
pushback, from where I am. I mean, if you have more to say 
about it.
    Mr. Schwerin. Well, I just thought it was quite forward-
thinking, and I haven't seen it in too many instances. I 
mentioned two of them that we took advantage of.
    You know, again, this was a little-known--the QDTP program 
was a little-known aspect of Obamacare that I think germinated 
from Senator Menendez' interest in the medical device companies 
in New Jersey, but it certainly had a national impact.
    It had a very, very small window for application. There was 
very little exposure about its existence. And, certainly, 
nobody in this community knew about it. I was fortunate enough 
to come upon it, and we applied, and we were fortunate enough 
to qualify.
    But, you know, that was a very, very helpful infusion at a 
time when we really needed it. And, again, it was specifically 
for, you know, medical device research and development of 
translational research--so it is not just blue-sky research; it 
is for, you know, clinical applications--for companies with 
fewer than 250 employees.
    Chairman Hanna. Is that what made you say that you think 
there should be, effectively, a clearinghouse of information? I 
mean, because you said you fell on it, so I assume that it was 
an accident that you learned about it and that----
    Mr. Schwerin. I had a family connection to Senator 
Menendez' office.
    Chairman Hanna. Is that what it was?
    Mr. Schwerin. Yeah.
    Chairman Hanna. Well, that is fine, too, you know.
    Mr. Schwerin. So I was fortunate. But, you know, once I 
knew about it and I went looking for it, I found references to 
it coming from, you know, law firms, large accounting firms 
that, you know, have a pipeline into this sort of information. 
And I felt this was kind of an unfair playing field, that, you 
know, outside of the major sweet spots, as I said, where this 
information is commonly disseminated and these, you know, 
professional support institutions like accounting firms and 
like law firms--I mean, you should never write your own 
contract, you should never try to do your own taxes; you should 
stick to your core competency. But if we are in an environment 
where this is not typically understood, these incentives are 
not particularly well-publicized, we are going to miss out for 
no good reason.
    So I thought there ought to be a one-stop shop. I am not 
sure--I don't want to take the, you know, local development 
agencies off the hook here, but Congress, I think, is--I mean, 
that is where this stuff emanates, and perhaps there could be a 
more institutionalized way of disseminating it.
    Chairman Hanna. You know, I sit here not knowing if there 
is. And I am sure there is a place to go, but I will be the 
first to admit if you want to find something in government, 
there are so many different layers. So that is something worth 
thinking about, and I appreciate it.
    Maybe you could give me an idea of what kind of threshold--
I mean, the government isn't going to put money in someone's 
pocket simply because they think they have a good idea. Could 
you describe for me something to me that might work?
    I am sure there are application processes and that kind of 
thing, but where should that impetus come from and what should 
it look like? When the government invests in something that is 
essentially venture capital through a grant, there has to be 
some basis to do that that is responsible and protects the 
public's interest. Otherwise, everyone, you know----
    Mr. Schwerin. Well, you know, in these sort of two real-
world examples, one federally-supported and one State-supported 
through Tax and Finance, we had to document what these funds 
were going to be used for. And, frankly, they were funds for 
which expenses had already been expended. So we had to 
demonstrate not with, you know, descriptions of the research 
that was going on, with pictures and with diagrams and with a 
rationale for how this was going to be used in a commercial 
way.
    So this was for specific projects already under way. And 
the documentation was pretty rigorous. So I think the public 
was protected.
    Chairman Hanna. So you are comfortable with that?
    Mr. Schwerin. In these cases, I was. I mean, this was done, 
as I said, very quickly. And, you know, as it turned out, there 
were so many applications, especially for the Federal program--
so, on the one hand, I am saying that we don't know about it; 
on the other, I am saying that there were lots of applications, 
but they are not coming from, you know, places like upstate New 
York.
    Chairman Hanna. Sure.
    Mr. Schwerin. We ended up doing just as well as larger 
companies, because they threw their hands up in the air and 
said, we don't know how really to evaluate all of these 
applications in this, you know, 60-day time window, so we are 
going to give everybody the same amount of money.
    Chairman Hanna. Uh-huh.
    Mr. Schwerin. So I would say that is the best way to do it.
    Chairman Hanna. Mr. Pray, could you give me a real-life 
example of an instance in which the RPA worked with the IEEC 
department at Binghamton University? Is there a specific 
product you developed?
    Mr. Pray. Sure. There was one in particular where we had 
advanced into some signal processing circuit cards we were 
designing for a customer that had a lot of ball grid array 
devices on it. They are called BGAs.
    In a ball grid array device, there is an electronics 
package where all of the conductive locations of getting in and 
out of that integrated circuit are on the bottom of the chip. 
So when you mount them on a circuit card, you can't access them 
anymore; they are hidden underneath. And when you start having 
manufacturing problems in those areas, it is very, very 
difficult to go in and find out exactly where the problems are.
    So we took a couple of example cards and we brought them 
over here to the IEEC, and we started out with X-ray 
inspection. So we took--and we were able to look at all of 
these different layers. You can focus the depth of the X-ray 
very, very accurately to very, very small increments. So we 
could look at the layer at the circuit board where the 
conduction points are supposed to be and work our way up 
through the electronics package and actually find where the 
voids were and where the problems were.
    In that case, we didn't actually find those with the X-ray. 
What we ended up doing then was having them do a destructive 
analysis on the circuit card itself. And they found that there 
were some problems with the printed circuit boards we were 
buying from a vendor. I don't remember which vendor it was, but 
it was out west. And there were actually problems with the 
circuit card manufacturing itself that they were able to find 
in the IEEC labs by going and stripping that circuit card in 
very, very small layers and taking pictures. And it was through 
that that we actually found faults in the card in the 
manufacturing process.
    Chairman Hanna. Amazing.
    Mr. Pray. Yeah.
    Chairman Hanna. Doctor, as you know, I have always been 
supportive of high-tech incubator projects. As many of our 
local, State, and Federal elected partners representing this 
region are, Cornell also has an incubator--I forget, maybe you 
call it a system. But they developed many companies from 
Cornell that are still in the area.
    Can you give me an update on where your projects are and 
what is out there, what is going on?
    Mr. Sammakia. So, yeah, it is a really important project. 
When you think about the entire food chain for economic 
development and technology transfer in this region, we have 
everything except for a high-tech incubator. That was the 
missing piece.
    On campus, we have pre-incubation. We have quite a bit of 
space in this building and other buildings where companies can 
start when they are very small. And then at some point, they 
need to get into a point where they start building products but 
they are not full manufacturing, and that is where the high-
tech incubator will go.
    President Stenger saw that very clearly when he first came 
here and made it one of his top priorities to raise the funds 
to build such an incubator. He has successfully raised just 
over $11 million out of our estimated need of $13 million to 
construct the building and prepare the land. That funding is a 
combination of State and Federal funding.
    So we are really pleased that we were able to raise $11 
million. And we are convinced that the remaining $2 million we 
will be able to raise over the time it will take to construct 
the building. So we are very confident this project will be 
successful.
    The location is identified, on Hawley Street in downtown 
Binghamton. The land has been acquired and all the properties 
on it have been acquired, and we are in the process of 
finalizing that stage. We expect the building to be constructed 
over the next couple of years. A really exciting project that 
will make a big difference.
    Chairman Hanna. You know, what is interesting to me, since 
I have been in Congress--and I have been in business for 30 
years; this is all rather new, so I am very honored to be among 
you and to listen to you--is that, in the last 20 years, about 
98 percent of the jobs we have created in this country have 
been service-related jobs.
    And Congress talks about all jobs as if they were the same. 
We look at an unemployment or employment rate, when we know 
that there are tens of millions of people out of work or 
underemployed. And even those who are employed aren't building 
middle-class lives like I was fortunate enough to build for 
myself, and my parents. And the paradigm has changed in this 
country.
    And I would ask you to comment on this because, clearly, I 
have an opinion about it, but that if we do not engage in 
education to build those value-added, transferable, salable 
goods, if you will, to the rest of the world, we will continue 
to see the decline of our middle class, which is what you have 
said in your opening statement.
    Mr. Sammakia. And that is exactly right. I mean, that is 
why I find the concepts like the NNMI so exciting, because it 
is about building intelligent manufacturing that is affordable 
in this country. So it is not just any manufacturing; it is the 
kind of manufacturing we can build and sustain.
    Chairman Hanna. So I am putting words in your mouth, so 
correct me, but so what we are saying here is, if we do not 
stay at the cutting edge of everything new, we are almost, by 
definition, falling behind.
    Mr. Sammakia. You are absolutely right. I mean, again, we 
are at a point where anything that becomes fully commercialized 
and straightforward to build will get built elsewhere. So we 
need to be technically aware of that, and we need to be at the 
cutting edge of technology and stay there and create jobs in 
the sector, which is related to technology and which is really 
affordable in this country. I mean, that is the whole key, 
affordable----
    Chairman Hanna. Right. And it isn't just about creating 
doctorates----
    Mr. Sammakia. Correct.
    Chairman Hanna.--or master's degrees. In this district, 
throughout, there are machine companies, that you need a very 
high degree of technical skill to operate what used to be a 
basic milling machine. I can think of dozens of those.
    So undergraduate degrees that provide--and graduate degrees 
that provide a wide variety of skill sets still have a chance 
to have people do what are traditional jobs, but the need to be 
technically proficient in those jobs is much higher than it 
used to be. On-the-job training isn't quite the same.
    If you would like to speak to that?
    Mr. Pray. I can tell you from our experience. So we compete 
in the marketplace with all of the consumer goods that are out 
there that serve lots of different functions in image 
processing and things of that nature. And customers are often 
willing to accept that if it is going to cost them less money, 
even if it doesn't quite meet what they want.
    So a company like mine has to go look for these niche 
marketplaces, where there is nothing else out there right now 
commercially or consumer-available that does what the customer 
needs. And we have to design things that are state-of-the-art, 
that have the same kind of reliability that people expect out 
of it, you know, the same kind of manufacturing quality, but 
fit these niche marketplaces, and make it affordable to 
manufacture them here in the United States.
    All of our products are manufactured here in the United 
States--electronics and electromechanical and mechanical 
assemblies. And, you know, we get a great deal of savings out 
of IEEC, in that the kind of equipment we use here of theirs 
would cost us millions of dollars that we don't have to invest 
into it. So we are able to keep our products competitive and 
build them state-of-the-art, you know, through local 
manufacturing places here by working with IEEC and our design 
teams, you know, to stay abreast and stay ahead of it.
    And the kind of jobs, you know, that our company creates 
are high-paying jobs. We have to compete with large companies 
for our employees, so we have to provide the same kind of 
benefits and the same kind of resources available. You know, we 
provide full medical, dental, vision insurance, and we provide 
the tuition-assistance program. And they are very good-paying 
jobs.
    Chairman Hanna. You know, Cornell University has a 
cyclotron. You know that?
    Mr. Pray. Uh-huh.
    Chairman Hanna. And they have people from all over the 
world access that. They are adding new ports to it now, 
something we helped them with. And it is just a remarkable 
facility. There is a lot to be happy about in this region.
    I want to ask you, Mr. Schwerin, you noted in your 
testimony that Sonostics might be interested in being a tenant 
at the new high-tech incubator under development. Do you want 
to talk about that?
    Mr. Schwerin. A couple of weeks ago, we actually moved from 
the existing innovation center, which is a small incubator 
downtown supported by the county, up to the startup suites here 
at the university, in part because of a second license that we 
negotiated for additional technology so we can offer additional 
services. And we looked at that as sort of a graduation from, 
you know, the incubator downtown.
    The new incubator that is planned is a whole different 
animal, in terms of its not being simply cubicles or an empty 
room but it would have wet labs and be appropriate for the kind 
of high-tech company that is, you know, rightfully spawning 
from the university.
    And, actually, we have been approached by the county, 
asking if we would like to be, you know, a tenant when that 
time comes. And we would be honored to be part of that. 
Sonostics doesn't require wet labs, but the ability to continue 
research on the technology that we have licensed here, as well 
as delivering the service on site, is something that we must do 
to stay ahead.
    I mean, you know, we are in the healthcare field, and so we 
are not manufacturing lots of widgets. We are trying to change 
the face of how some, sort of, ill-served or underserved 
fractions of the population are treated. And, today, the 
expenses are too high and the outcomes are too poor for some of 
the chronic conditions that we are dealing with.
    So I like the idea of having the incubator house, you know, 
a plethora of different companies serving different fields.
    Chairman Hanna. What you are saying is that the sunk 
costs--the costs that you would have to undertake are 
prohibitive, but when they are shared costs and when they are 
sponsored, there is no telling who will go there or what can 
come out of it.
    Mr. Schwerin. That is right.
    Chairman Hanna. Is that fair?
    Mr. Schwerin. That is right. And, frankly, you know, the 
existing incubator downtown is really not simply for high-tech. 
We are one of the few high-tech companies that were in that 
incubator. But I just--I would like to be associated with that.
    Chairman Hanna. I want to ask all of you about something a 
little more controversial. It is not in any of my notes. It is 
my personal opinion that people with doctorates, people with 
STEM degrees who come to this country should have a much easier 
way to stay here and to get whatever is required to allow them 
to do that, to the extent that I would say, if someone 
graduated from Binghamton University, they should all but have 
a stamp with their diploma, you know, that you can stay here.
    Have you seen instances in your career, Doctor, that have 
forced good people out of the country simply because of the 
waiting time? And I know the lead time is sometimes, I have 
heard, as much as 9 years. I would like to know about that.
    Mr. Sammakia. I agree with you 100 percent. I think this is 
a very important issue, and I think it does cause a problem for 
our graduates.
    When I first came to this country, it was a fairly 
straightforward process to get a green card. After getting my 
Ph.D., you had to apply and within a year to 2 years you were 
able to get your green card, which really means that you are a 
citizen except for voting, so you had all the rights of an 
American.
    Today, unless you are in the absolutely top echelon of 
maybe 1 or 2 percent--they categorize that as distinguished 
scientists--it is a really long and difficult process. The 
process can take up to 9 years to get a green card.
    In the meantime, the candidate may not be able to leave the 
country, so they are trapped. In many cases, you have young, 
single people who are in this country who would like to go back 
to their country and get married, perhaps, and come back, you 
know, just real-life issues like that, and they can't deal with 
it. And, in many cases, they give up and leave.
    Chairman Hanna. Sure.
    Mr. Sammakia. Top-quality scientists.
    Chairman Hanna. What I have heard and what is also 
explicit, I should say, in your statement, people don't need as 
much as they used to to be here to practice their skills. Yet 
we are training people in skills that we need, and we don't 
have an easy way for them, and for us, to benefit from that.
    Mr. Sammakia. You are absolutely right.
    And the other challenge now is that there are opportunities 
for these people elsewhere. So if they are from China or India, 
for example, that is a growing infrastructure. They are our 
competition, and we are essentially forcing some of them back.
    Chairman Hanna. Sure.
    Mr. Sammakia. So that is it a really important issue for 
growing technology in this country.
    Chairman Hanna. Gentlemen?
    Mr. Pray. Well, I kind of have the opposite problem in my 
shop, because we do a lot of ITAR-restricted work with the 
government, so we have to have all U.S. citizens in our place. 
So, you know, even when we bring in SPIR students, we have to 
declare on there it has to be a U.S. citizen that comes into 
our facility.
    Chairman Hanna. Uh-huh. Well, you know, what is 
interesting----
    Mr. Pray. But I have had customers of mine who have had 
foreign students working for them that they loved and wanted to 
hire and couldn't because they got sent home.
    Chairman Hanna. One of the things--I have only had this job 
2 years and a little over 6 months, right? The 24th District, 
the old district, had over 20 universities and colleges: 
Hamilton, Colgate, the entire SUNY system, Ithaca, Hobart, just 
on and on and on. And I visited them all, and the story was the 
same, only it was more in reference to New York. You know, we 
have tens of thousands of young people getting educated here, 
and they can't find a way to make a living in New York that is 
based on the skill set that they had gained. You know, it is a 
tough environment. But my point is that the same thing is 
happening nationally.
    Let me ask, because we have a little bit of time--we have 
another appointment. And I can't tell you how grateful I am to 
have such like-minded people in one place, because this does 
help us. We can go back and stand up for something that I 
believe in, which is that we are missing out in this country on 
focusing on the number-one thing that has been transcendent for 
mankind forever. And that is, you know, education and how you 
value it and how you reinforce it.
    And, you know, there is not nearly the degree of importance 
put on that conversation, I believe, as there should be and 
needs to be. And my concern is that we are falling behind at an 
accelerated rate, that the rest of the world knows how we got 
where we are and were and understands at least, if not better 
than us, as well as us on how to compete with us.
    And we are becoming globally--you know, we are still a 
great country. We do a lot of things wonderfully. In 
manufacturing, we are still--unless something changed in the 
last few days, we are still the number-one manufacturing 
country. And people are coming back here.
    But in order to keep that a constant, we need to focus on 
what you do here and learn the very clear difference between 
what we regard as an expense in Congress and what we regard as 
an investment in Congress. And that is the essence of the 
conversation.
    You know, you talked about sequestration. It was a 
hamfisted thing because everything was sort of treated alike, 
for a lot of reasons that I don't need to get into. But, you 
know, you have in me and in our staff, who are all better 
educated than I am, a great belief in that.
    So I want to thank you all.
    And if anyone would like to say anything, we have a couple 
of minutes. If you want to close with anything, go ahead. 
Normally, everybody gets 5 minutes, and somebody hits a gavel, 
but we don't really have to do that here.
    Mr. Sammakia. Well, I would like to repeat my thanks to you 
for holding this event at Binghamton. I think this is a really 
important discussion to have.
    I would also like to thank Donna Lupardo, who--I don't know 
if she was here when I made my opening comments, but her role 
in building this infrastructure has been absolutely crucial. So 
thank you, Donna.
    And, again, thanks for having us.
    Chairman Hanna. I mean, how blessed--you know, IBM, who is 
not here as they were, certainly--I mean, this is--Binghamton 
is the birthplace of so many wonderful things. And it still is, 
because you are here and Binghamton University is here. And I 
am really grateful for that.
    Go ahead, sir.
    Mr. Schwerin. I would like to echo what Dr. Sammakia said. 
I appreciate the opportunity to participate here. And we are 
honored to be part of this family, you know, from the 
Binghamton University community.
    Mr. Pray. Yeah, I would echo that. I am very thankful that 
you held this forum and I had the opportunity to come and 
speak. And, you know, Binghamton University has been a great 
asset to us.
    Chairman Hanna. Well, thank you. Thank you all for being 
here.
    I would like to thank the audience for being here, too. It 
is important. It is a Monday morning, and people got up and got 
out, and I am very grateful.
    I have to formally ask unanimous consent that Members have 
5 legislative days to submit their statements and supporting 
materials for the record.
    Without objection, so ordered.
    This hearing is now adjourned.
    Thank you, everyone.
    [Whereupon, at 11:07 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X


      Congressional Field Hearing 8-5-13 at Binghamton University


                 Higher Education and Entrepreneurship:


 How Partnerships between Universities and Small Business Can Grow Jobs


                       Congressman Richard Hanna


    Testimony provided by: Binghamton University Vice President for 
                        Research Bahgat Sammakia


    I want to welcome you all to the Binghamton University 
campus, specifically our Innovative Technologies Complex. When 
we were asked to host this event, we thought this location 
would be the perfect setting for the topic addressed by this 
hearing. Exiting things are happening here at the University, 
many of them right inside the walls of these buildings.

    You have asked me to testify about the role higher 
education can play in helping small businesses advance 
technologies and create jobs. Binghamton University has a long 
history as well as a strong reputation for working with 
companies large and small. We also work closely with 
governments both large and small. We play a vital role in 
transferring the knowledge and innovations created and 
developed on our campus to the broader community.

    We have partnerships with large corporations such as IBM, 
GE, Microsoft, Analog Devices, Corning and BAE, which has a 
large presence right here in Greater Binghamton. These are just 
a few examples. But just as important, we have partnerships 
with smaller companies such as Sonostics, which is growing a 
company right here in Binghamton with technology that was born 
at our university. We also work closely with a small firm in 
Oneonta, Custom Electronics Inc., to improve ultra-capacitor 
technology. Again, these are just a few examples of our 
relationships with small business and the types of technology 
research we are committed to developing.

    Before getting too far into the discussion of our role 
promoting small business growth, I want to take a few moments 
to talk about the University and its vision and mission. Our 
president, Harvey Stenger, has a vision for the University to 
become the premier public university of the 21st century. It is 
our mission in the research division to support that vision. We 
wholeheartedly support it because it is a vision of excellence. 
One of the main initiatives under our new Road Map strategic 
plan is to be an institution that is path-breaking in its 
academic and research pursuits.

    As I stated, our academic institution has a strong 
reputation for research and collaboration with the private 
sector. When talking about the work we do, I always want to 
make the point that we here at the University have scientists 
and engineers who make important discoveries and develop 
technologies that will have a positive impact on society.

    Why do we believe this to be true? It is because this 
campus is grounded in the humanities and social sciences. Those 
who do not plant their feet on this foundation of liberal arts 
can still make important discoveries, but they may not be ones 
that are right from a social perspective. So again, while we 
make it a priority to focus on research, innovation, technology 
transfer and job creation, and we are successful in all of 
these important endeavors, we believe that what sets us apart 
is our history of excellence in these areas.

    While Binghamton University works well with private 
industry and small business, we know we can get better, and we 
will get better. Under the guidance of President Stenger's Road 
Map and with the help of our NYSUNY 2020 Challenge Grant, we 
expect to strengthen our research efforts. It is with 
additional research faculty that our research and its impact on 
society and our economy will grow.

    During the next several years, we anticipate hiring an 
additional 150 faculty members. Those hires will be targeted in 
strategic areas where we already have a record of success: 
smart energy, neuroscience, molecular biology, computer 
science, nursing and bioengineering, just to name a few. The 
increase in faculty will allow us to reduce the student/faculty 
ratio and enable us to close the gap between Binghamton and 
other top schools in the areas of research and graduate 
education, which are among the biggest challenges we face in 
our quest to become the premier public university.

    We also face other significant challenges in our research 
efforts on campus. As you most certainly are aware, the federal 
agencies that support a good portion of our research dollars, 
notably the National Institutes of Health and the National 
Science Foundation, have seen their funding stay flat or cut in 
recent years. Without the government's investment in R&D, we 
cannot be successful. In fact, we saw the first-ever dip in our 
overall research funding this year after two decades of steady 
growth.

    We understand the economic climate and we recognize the 
challenges our leaders face in Washington. But we also know 
that a renewed focus on support for R&D and on higher education 
is a wise investment. ``Science is not a luxury,'' the late 
John Marburger III, former science advisor to President George 
W. Bush and then-vice president for research at Stony Brook 
University, wrote in 2001. ``Economists estimate that 
approximately half of post-WWII economic growth is directly 
attributable to R&D-fueled technological progress.''

    We are good stewards of the money we receive. With our Road 
Map strategic plan, our research efforts will become even more 
focused and we will identify new ways to build 
multidisciplinary collaborations for the good of society. 
Binghamton will make key contributions to innovations in smart 
energy, health sciences and other fields. We are also exploring 
the possibility of creating a pharmacy school.

    So how do we get our research to market? How do we transfer 
technology created on campus into jobs out in the real world? 
Our University's staff works closely with researchers on campus 
and provides technology, education, business and law support.

    Also at the top of our toolbox is the commitment to foster 
an entrepreneurial spirit. That spirit is across campus, not 
just in our scientists and engineers but in all of our 
students, both graduate and undergraduate. Building Binghamton 
University's entrepreneurial ecosystem is at the heart of 
everything we do.

    One of our most effective tools is our Office of 
Entrepreneurship and Innovation Partnerships. In this office, 
our staff has worked with faculty to build portfolios of 
intellectual property. Not all of our intellectual property is 
patented, of course, but we have patented a number of 
innovations. This is a complicated process that can take as 
long as seven years. And, again, that is just the patent phase. 
From there, it can take several more years to develop a 
meaningful product or service for industrial purposes and the 
commercial market.

    When faculty, students or staff create an innovative 
process or product, the Office of Entrepreneurship and 
Innovation Partnerships serves as the campus resource to help 
assess, protect and leverage the underlying intellectual 
property rights. And while we have experienced many successes 
with bringing research on campus to the commercial market, we 
still experience gaps in support, especially at the proof-of-
concept stage.

    That is where additional state and federal resources could 
provide a tremendous bridge to help us connect the invention in 
a lab to the eventual launch of a company--a company that will 
create new products and, just as important, jobs for our 
community.

    Just as we must reinvest in R&D, we also need to strengthen 
our commitment to education in the STEM disciplines: science, 
technology, engineering and mathematics. It is truly the only 
way to prepare the next generation of Americans and American 
companies for what we know will be a global race for prosperity 
and security.

    In my travels to places such as India, Korea, Hong Kong and 
Taiwan, I have seen excellent models of infrastructure that 
supports scientists, industry and education. The exciting new 
National Network for Manufacturing Innovation (NNMI) program 
appears to be a step in the right direction as we strive to 
build manufacturing research that leads directly and quickly to 
job creation. Binghamton is participating in two proposals for 
this federal program, which brings universities and companies 
together in a meaningful way.

    Another way we as a University hope to bridge the gap 
between mind and marketplace is by developing a high-technology 
incubator. President Stenger's proposed incubator has received 
priority support from New York State's Regional Economic 
Development Council as well as crucial funding from the federal 
government's Economic Development Administration.

    Binghamton University and the regional economic development 
community plan to build the incubator in downtown Binghamton to 
provide a unique entrepreneurial ecosystem for emerging 
companies. The Hawley Street facility will foster innovation, 
commercialization and job creation through collaborative 
efforts of academic, industry and government partners.

    There is no facility in the region suited to new high-tech 
companies. Creating this infrastructure will ensure the region 
reaps the benefits of federal and state investments in the 
knowledge-based economy. The incubator will enable emerging 
companies to grow and relocate in the community.

    Opportunities include access to a university-based skilled 
workforce and university staff charged with building 
relationships with industry; university multi-user facilities; 
human resource programs such as internships and co-ops; and 
university technology transfer and commercialization offices. 
The private-sector investment community will be encouraged to 
have a presence at the incubator as well.

    Initiatives at the University, including the proposed 
Southern Tier High-Technology Incubator and the Center of 
Excellence in Small Scale Systems Integration and Packaging, 
provide stability to the region and an added boost to the 
regional and state economies.

    I wanted to touch on two important federally funded 
programs also administered by our Office of Entrepreneurship 
and Innovative Partnerships; the Small Business Innovation 
Research Program and the Small Business Technology Transfer 
Research Program. As you all know, these two programs help the 
University help many small businesses in our region. They are 
at the heart of what this entire discussion today is about--our 
University using valuable resources like the ones provided by 
SBIR and STTR to encourage the conversion of government funded 
research into commercial applications.

    Utilizing these programs, our University has been able to 
partner with and assist about a dozen companies since 2005. We 
are currently focusing on internal efforts to leverage these 
programs even more and identify additional companies in our 
region that can be helped by the resources provided by SBIR and 
STTR.

    Additionally, the Small Business Development Center, a SBA-
sponsored program administered by the University, assists 
entrepreneurs, business and industry in developing solutions 
for their problems. This leads to increased profitability for 
the entrepreneur and increased investment and job creation for 
the community. By assisting new and existing small business 
firms, the SBDC contributes to the stability and growth of the 
small business sector in the region.

    Since its start in 1984, the expert advisors of the 
Binghamton SBDC have worked directly with 13,365 businesses, 
helping them to invest $189,621,041 in the area's economy, and 
create or save 10,530 jobs.

    Before wrapping up, I want to share with you a few 
statistics that underscore the University's influence on this 
region and its economic vitality. Our most recent study 
indicates this University's economic impact at approximately 
$965 million annually for Broome and Tioga counties alone, and 
$1.2 billion for New York State.

    Based on fiscal year 2011--the most recent numbers 
available--Binghamton University accounts for an estimated 12 
percent of the gross domestic product of Broome and Tioga 
counties through its direct and indirect expenditures, 
including salaries, goods and services, capital outlays, and 
student and visitor spending, which total over $622 million. 
When applied to the Binghamton Metropolitan Area regional 
multiplier, this $622 million grows to $965 million in total 
annual economic impact for the region.

    In terms of jobs, Binghamton University employs nearly 
5,000 faculty, staff and student workers, and supports an 
additional 5,500 full- and part-time jobs in Broome and Tioga 
counties, and 225 full- and part-time jobs beyond the region, 
for a total of 11,000 jobs in New York State.

    As you can see, our reach is enormous and our impact 
impressive. We stand ready to continue to be that driving 
economic force for our community and an important resource for 
businesses across the country. With your support, we can 
continue to do great things: educate our students, make 
discoveries and create technology.

    Thank you again for allowing me this opportunity to address 
you today as part of this field hearing. And thank you for 
choosing our campus to host this event. Binghamton University 
is proud of its academic reputation, our research 
accomplishments and all of our facilities on the main campus, 
downtown and here at the ITC. We are always eager to partner 
with our representatives in government and collaborate with the 
leading minds in commerce. If there is any additional 
information you require from us, please do not hesitate to ask.

    Thank You!

    --------
                      Testimony of Chuck Schwerin


                        Chief Executive Officer


                            Sonostics, Inc.


              Before the House Committee on Small Business


                             August 5, 2013


                          Binghamton, New York

    Good morning, Mr. Chairman and Members of the Committee. My 
name is Chuck Schwerin and I am CEO of Sonostics, a five-year 
old start-up that spun out of research at Binghamton 
University's Bioengineering Department.

    On the House Committee on Small Business website, 
Congressman Hanna sums it up: to unlock economic growth in this 
country, and certainly in the Southern Tier of New York State, 
it is imperative that we ``foster an environment where small 
businesses can thrive.''

    Outside of the traditional start-up sweet spots of Silicon 
Valley, Research Triangle, and Route 128 outside Boston, there 
historically has been in either the institutional knowledge nor 
the raw materials for nurturing such an environment. For start-
ups like my firm, Sonostics, it is akin to salmon swimming 
upstream in order to survive, let alone thrive.

    Yet companies like Sonostics are exactly what are required 
to nurture a rebirth of the economic engine necessary to 
replace the manufacturing institutions that used to dominate 
this region. Communities like the Tri-Cities cannot expect 
25,000 manufacturing jobs to walk through our doors anytime 
soon. But the good news is that New York State is blessed with 
numerous institutions of higher learning that have the ability 
to spawn dozens of innovative companies like Sonostics, 
providing well-paying jobs that should attract people back to 
the region and keep those already here.

    While there is no shortage of research pursued within the 
New York State university system, a modest percentage 
historically could be deemed translational; meaning the purpose 
of the research was to create commercial utility. The research 
Sonostics licensed, converting muscle vibration to force to 
detect imbalance that is typically the cause of 80% of joint 
pain, can be directly translated to clinical efficacy. Since 
University faculty may devote up to 20% of their time to 
external ventures, the need for entrepreneurs to partner with 
research faculty to operate new ventures is critical.

    If there is inadequate community support for innovative, 
high tech ventures, attracting individuals such as me, to a 
place like Binghamton, NY, can be a challenging prospect. I was 
very intrigued with the technology but also had a spouse 
teaching at the University, so the move was not so difficult. 
For this to become a trend, for outside entrepreneurs to seek, 
or be recruited to, start-up companies in upstate New York, 
institutional and community support for new ventures will be 
most important.

    Growing a company that leverages University research 
demands critical steps. To reach a stage where investment 
becomes interesting to outside investors it is necessary to:

          1. validate the technology
          2. secure a license from the University
          3. build a prototype
          4. identify a market
          5. recruit a team
          6. generate revenue

    In order to keep the lights on during the first five steps, 
a chief executive must also identify sufficient financial 
backing. Hence, the first years of Sonostics' existence were 
spent pitching to friends and family, to Angel investors, and 
translating the research idea to a commercially-viable product 
or service.

    An early step involves negotiating a license with the 
Technology Transfer office of the University. Tech Transfer 
offices have two primary choices. They can either identify 
mature public or private entities to whom they can license the 
raw technology, or help the researcher/inventor build a team 
that can create new ventures that focus on commercializing the 
raw technology.

    The former course of action may be simpler for the Tech 
Transfer officers to pursue, but the latter is a better 
generator of jobs, of which Sonostics is an example. We 
negotiated a favorable agreement for developing and marketing 
vibromyography, the non-invasive modality for detecting muscle 
imbalance, and worked closely with the University Tech Transfer 
office and the patent attorneys they selected to protect the 
intellectual property.

    It is fair to say that Sonostics could not have survived 
without significant assistance from Broome County, the State of 
New York and the Federal Government. This aid included:

          1. State support for the Centers for Advanced 
        Technology--in our case we collaborated with the CAT at 
        Stony Brook, which specialized in sensor technology and 
        built our first prototypes;

          2. State support for SPIR grants (Strategic 
        Partnership for Industrial Resurgence), which 
        subsidized our ability to leverage graduate student 
        research using our technology in new ways that would be 
        clinically advantageous for us;

          3. QTDP (Qualifying Therapeutic Discovery Project 
        Program), a NIH/IRS collaboration funded via the 
        Affordable Care Act to encourage research and 
        development in companies with fewer than 1000 
        employees;

          4. QETC (Qualified Emerging Technology Company 
        Incentives), a New York State Tax and Finance 
        administered program that also rewarded investment in 
        pure research that translated into commercial products;

          5. Broome County Industrial Development Agency loans; 
        and

          6. Broome County Incubator space in the Innovation 
        Center.

    Continuance, rather than sun-setting, of State and Federal 
incentives, that either lowers tax burdens for profitable firms 
or provides grants to non-yet-profitable ones,, makes enormous 
political and economic sense.

    Sonostics was not able to take advantage of the SBIR (Small 
Business Innovation Research) program because we did not have 
the necessary staff with proper academic credentials who could 
act as Principal Investigators and devote at least 51% of their 
time to the company.

    The concept of business incubators has also been important 
to the growth and survival of Sonostics. Broome County supports 
a small innovation center for start-up businesses, that 
includes below-market rent, complimentary web access, printing 
and copying, reception, conference rooms and telephone access--
all attributes that impact a young company's overhead.

    What the incubator does not possess, state-of-the-art 
office and lab space for high-tech ventures, will be part of a 
new downtown incubator that is largely government-funded but 
under the aegis of Binghamton University. Such brick and mortar 
extensions of the University, combined with the just-passed 
Start-up New York tax benefit bill, should enable upstate 
communities with a university presence to more favorably 
compete against other states in the drive to attract 
entrepreneurial talent. Sonostics may well be one of the early 
tenants.

    My recommendations for initiatives to support the growth of 
new, innovative entities include an over-arching reminder that 
incentives must recognize the life cycle of these kinds of 
ventures. Tax abatement policy is great for companies that 
already have reached a stage of maturity where there are taxes 
due. This is not the case during the first few years, 
typically. The benefit of QTDP or QETC, for Sonostics, was the 
ability to accept tax benefits as grants, not as carry-forward 
credits against some uncertain future profit picture.

    Continued support for Centers for Advanced Technology (and 
Centers of Excellence) via State and Federal line items, 
enables small ventures to increase their chance of survival 
during the early years when resources are so scarce.

    Finally, firms like Sonostics do not possess all the skills 
necessary to navigate the ever-changing regulatory shoals. We 
do not assume regulations will cease to exist. Rather, we want 
to be able to call upon professionals in the legal and 
accounting arenas who can ensure we are taking full advantage 
of the tools and opportunities that governmental entities 
provides. Outside of the traditional geographic hotbeds of 
innovation, these professionals are frankly not well-versed in 
the opportunities companies like Sonostics need. Continuing 
education support for legal and accounting professionals 
specifically in the area of innovation incentives would help 
grow small companies and improve the chances of success.

    I appreciate your attention to this critical aspect of 
economic growth and thank you for the opportunity to provide 
you with my thoughts on this subject.

    Respectfully,

    Chuck Schwerin
    CEO, Sonostics, Inc.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                 
