[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
_____
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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.
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