STTR Phase I and Phase II Award Data for FY 2002

The Small Business Administration has released the STTR Phase I and Phase II award data for FY 2002, which reflects STTR awards bestowed by the five federal agencies that participate in the STTR Program (DoD, DoE, NIH, NASA, and NSF). Pennsylvania ranked an impressive 8th overall, according to total STTR dollars brought into the state--an improvement over the state’s 14th-place ranking in 2001.

For more detailed award data, visit http://www.sba.gov/sbir/FY2002STTRRankingbyTotalDollars.pdf.

“Small opportunities are often the beginning of great enterprises.”
Demosthenes

Words from a Winner: Quantum Simulations, Inc.

Company name: Quantum Simulations, Inc.
Website: www.quantumsimulations.com
Address: 5275 Sardis Road, Murrysville, PA, 15668
Number of employees: Six, plus consultants as needed
Awarded by: Department of Education, NSF

Most people would agree that approaching customers before you have a finished product to offer is a bit like "putting the cart before the horse." However, for Quantum Simulations, Inc., this seemingly backward approach proved to be an effective strategy for winning SBIR grant monies.

Granted, the company’s initial reason for approaching a potential customer wasn’t for the purpose of selling a product--it was for gaining helpful advice.

According to Quantum Simulations Co-Founder and Executive Vice President Rebecca Renshaw, the company sought the advice of Holt, Rinehart and Winston--a leading publisher of secondary education materials--as part of its proposal preparation for the SBIR program.

By consulting with the publishing company, Quantum Simulations was able to not only gain valuable insight into what features a potential customer would want, but they were also able to include a third-party validation in their SBIR proposal.

"By including a letter of support from Holt, Rinehart and Winston in our SBIR proposal, we were able to demonstrate to the federal agency that we were really taking the commercialization aspect seriously," said Dr. Benny Johnson, co-founder, president, and CEO of Quantum Simulations.

"Bringing in potential customers early is also helpful because they’re more willing to purchase your product when they’ve been involved early in the product’s development and fully understand what they’re getting," Ms. Renshaw said.

And for an educational publisher like Holt, Rinehart and Winston, the product Quantum Simulations was developing was definitely something of interest: intelligent tutoring software for science education, particularly in chemistry and science-related mathematics applications.

When Dr. Johnson and Ms. Renshaw started Quantum Simulations in 1998, they were well aware of what existing educational software had to offer: tutorials restricted by pre-stored problems or, worse yet, multiple-choice questions that didn’t allow students to "show" their work or allow them to learn why their answer was correct or incorrect. Dr. Johnson and Ms. Renshaw argue that neither option is truly helpful for students with specific chemistry equations to balance or measurements to convert.

"Usually, educational software is just a list of problems stored in a program," Dr. Johnson said, "but if you think about a student who’s struggling with the materials, they need help on the specific problem they’ve got sitting in front of them right now. Early on, we said that at a minimum, our software had to be able to allow a student to enter his or her own problem."

And it does. In April of 2003, Quantum Simulations received a patent on a new type of artificial intelligence that teaches students conceptually, allowing them to enter their own problems, enter their own work (just as they would write out the work on paper when the teacher says, "Show your work"), ask questions, and receive customized tutoring based on their level of expertise with a topic.

"Our artificial intelligence allows a computer to give good instruction even when a student’s answer does not match an ‘expected’ wrong answer--a classic limitation of existing educational software," Dr. Johnson said. In each of the programs, students interact with the Quantum Tutor--similar to an on-demand human tutor--that provides real-time feedback based on the student’s work that he or she enters into the software.

The company also has a patent pending on the software’s ability to generate questions that the students can ask the Quantum Tutor.

"Quite often, students who are confused don’t even know what questions to ask, so the Tutor will generate a list of questions they can ask about the processes that are going on," explained Ms. Renshaw. "The questions aren’t the same every time a student goes through the program--they are customized based on what is being discussed. And, they range from being very specific about the problem the student is working on, to being more general in nature about the overall scientific or mathematical application being used."

Early on, Dr. Johnson and Ms. Renshaw knew they had a great idea, but as Dr. Johnson points out, "The best idea without commercialization won’t get funded."

Enter the Pittsburgh Technology Council’s EnterPrize Business Plan Competition, which Quantum Simulations entered and where Dr. Johnson and Ms. Renshaw subsequently decided that licensing would be their most effective and appropriate commercialization strategy.

"Our work in the business plan competition helped identify this path," Ms. Renshaw said, referring to the company’s decision to pursue a licensing agreement with Holt, Rinehart and Winston, as opposed to selling their technology independently. "We’re a small company, and as such, have limited resources for marketing, sales, and end-user support. Therefore, licensing became the best option for us."

And along the way, SBIR funding provided both the financial support and the credibility an early stage company needs.

"The funding provides early validation to the commercial market," said Ms. Renshaw. "As a result, we received our first contract after a Phase I, are building a larger technical staff, and are developing strategic partnerships and collaborations."

To date, Quantum Simulations has received multiple Phase I and Phase II awards from the Department of Education and the National Science Foundation, totaling nearly $2 million. Early on, they received a $35,000 seed grant from the Ben Franklin Technology Center of Western Pennsylvania (currently Innovation Works) and a $35,000 prize in the EnterPrize Business Plan Competition.

When it comes to the actual task of writing an SBIR grant proposal, Dr. Johnson and Ms. Renshaw are the main employees involved in the work--Dr. Johnson covering the technical and research elements, and Ms. Renshaw addressing the business and commercialization aspects. In the beginning, the proposal-writing process took them about four to five months, but that timeframe has shrunk to approximately two months. Along the way, they’ve regularly sought the resources available to them at the federal agencies, particularly the program managers.

"The program managers are very helpful," said Ms. Renshaw. "They’re extremely informative and supportive--they want you to succeed. I would encourage any company applying for SBIR funding to seek them out."

"They also help establish contacts," added Dr. Johnson. "For example, our program manager at the Department of Education, Dr. Joe Teresa, helped introduce us to school districts that could benefit from our software. And Dr. Sara Nerlove at the National Science Foundation has also provided excellent counseling and guidance from the outset."

Along with seeking the assistance of program managers, Dr. Johnson and Ms. Renshaw have another piece of advice for companies applying for an SBIR grant for the first time: Develop a true R&D plan.

"A company needs to present truly innovative research, not just aesthetic upgrades to existing products," said Ms. Renshaw. "And it needs to be presented in a solid manner. When we review other plans, we often see key weaknesses, including poorly defined objectives, weak execution, and a lack of resources."

But perhaps the most notable piece of advice that Quantum Simulations offers--and that they are living proof of--is to bring in potential customers as early in the process as possible. As Ms. Renshaw points out, several things occur:

"You ensure that what you’re developing is in line with what the customer also views as commercially worthwhile; you can solicit third-party letters of support, which carry weight in the proposal review process and provide substantial external validation of your ideas and concepts; and the customer is integrated in the process from the start, so when it’s time to actually have them purchase, they are very familiar and comfortable."

In short, it creates a win-win situation for everyone involved, which is now not only a classic negotiation tactic, but an effective approach to winning federal funding... and future customers.

"The thing always happens that you really believe in; and the belief in a thing makes it happen."
Frank Lloyd Wright