“Digging” to the Future: The Benefit of Unexpected Business Opportunities

“It is futile to try and guess what products and processes the future will want. But it is possible to make up one’s mind what idea one wants to make a reality in the future, and build a business on such an idea.”
Peter F. Drucker

SBIR/STTR solicitation topics are to a large degree speculation on what products and processes the commercial market will want in the future, although one must assume the agency has a good idea of what it wants. The small business winning the award tries to develop the technology requested in the solicitation topic and is in the difficult position of having to satisfy both the agency and the commercial future--with a relatively small amount of money and little direction.

Peter Drucker’s quote infers that it is possible to shape what the future wants. For most of us, this is an enticing idea but a daunting task, to say the least.

The typical gestation time for an SBIR project is three to five years; some will take less, but most will take longer than three years. This means from the time it starts its Phase I work, a small business must have its sights set on the horizon three to five years out, anticipating not only where the state-of-the-art of its technology will be, but also the future market wants and needs. If the company performs as planned, but the future does not want what the company has developed in three years, the journey will have been interesting but not especially productive.

Imagine a tunnel being dug from opposite sides of a mountain at the same time. On one end, the SBIR small business starts digging (using government funds) as fast as it can, and on the other end, the future begins steadily carving out its own path. The objective of the small business is to connect these two tunnels with perfect alignment and make a lot of money by charging fees from others who wish to travel through. If the two tunnels are not well aligned, there won’t be much revenue collected for using the hard-to-navigate channel. Or, worse yet, the tunnels might not match up at all, and no fees will ever be collected. If the small business misses the connection, it stands the risk of running out of money before it digs all the way through. Some companies wander around inside the mountain for years and finally give up.

Fortunately, there is a partial solution in this tunnel analogy: Start drilling multiple small, low-cost tunnels to increase the odds of meeting the tunnel of the future squarely and timely enough that the fees collected will more than offset the drilling costs.

At the macro level, this is one of the basic concepts underlying the entire SBIR program: Encourage a number of small businesses to perform development work, in hopes a number of them will lead to revenue streams that will help the domestic economy.

The same theory applies at the micro level. A small business working with SBIR funds could consider spinning off some part of its technology with market potential as early as possible. However, if this move does not further the solicitation objective, the SBIR Program Manager may or may not allow government funds to be used for this purpose. If the Program Manager isn’t receptive to funding the spin-off technology, there are still a few ways to address this situation: form a subsidiary and pursue the spin-off independently, form a partnership with another company, or license some phase of the technology for a different application. Even though federal funds normally cannot be used to pursue these options, in many cases it may be possible to move ahead with modest further investment. The point is to anticipate and be aware of unexpected business opportunities that develop during the SBIR project.

Collecting some fees from the tunneling is better than none at all. In reality, it is possible to increase your chances of anticipating the future and offer the “wants” of tomorrow by working cleverly.

This discussion brings us to a key suggestion: When contemplating a solicitation topic, think about multiple applications that might be derived from your core technology. When your approach to a topic offers options at several points along the commercialization path for spinning off products or services, you are much more likely to be ready with what the future wants.

“Progress lies not in enhancing what is, but in advancing toward what will be.”
Kahlil Gibran

Words from a Winner: Nanomat, Inc.

Company name: Nanomat, Inc.
Website: www.nanomat.com
Address: 1061 Main Street, North Huntington, PA, 15642
Number of employees: 25
Awarded by: DoD, NASA, NSF, DoE

The saying, “Good things come in small packages,” could be the motto for Nanomat, Inc. A leading manufacturer of nanomaterials, the company has proved that bigger is not necessarily better. In fact, Nanomat produces a number of materials that outperform their conventional counterparts due to a smaller mass size that offers a higher performance capacity.

As Nanomat’s president and CEO, Dr. Srikanth Raghunathan is fully aware of the benefits nanomaterials offer. Noting that the Greek translation of “nano” is “dwarf,” Dr. Raghunathan helps clarify just how small his company’s products are.

“A nanometer is a billionth of a meter,” Dr. Raghunathan explains. “Our nanomaterials are comprised of grains that are measured by nanometers. They often contain only three to five atoms.”

Due to their miniscule size, nanomaterials are strong, hard, and ductile at high temperatures. The nanomaterials Nanomat currently produces are gold, talc, calcium carbonate, iron, and iron-cobalt alloys. The applications for these nanomaterials are extensive, ranging from fuel-efficient spark plugs to heat-durable microprocessors to longer-lasting, sharper cutting tools.

During their efforts to produce these high-performing materials, Nanomat has sought and won several SBIR awards. According to Dr. Raghunathan, Nanomat has received approximately 10 Phase I and two Phase II awards. Currently, they are preparing to start two DoD projects and one NSF project, and there are seven other projects ongoing.

Dr. Raghunathan says that everyone at Nanomat has been involved with writing proposals at one time or another. At Nanomat, about seven to eight employees are active in writing SBIR proposals. For any individual proposal, however, Dr. Raghunathan estimates that one or two employees are involved and that the entire proposal-writing process takes 15-20 full days.

“However, that time frame can be longer depending on how long it takes to address our reviewers’ comments,” he says.

While Nanomat typically starts the proposal-writing process right after the solicitation comes out, he notes that sometimes his company will have already started the work that addresses a particular topic. By “formulating ideas as soon as we have them,” Nanomat is not driven solely by solicitation topics. They investigate and sometimes pursue products that are developed independent of a federal request.

During the proposal-writing process, Dr. Raghunathan has found it helpful to speak with personnel at the sponsoring federal agency, as well as utilize DTIC (Defense Technical Information Center) resources. The technical reports DTIC provides have helped Dr. Raghunathan and his team complete what he considers the most difficult part of the proposal-writing process: drafting the background information section.

“We know exactly what we want to do--we know our goals and objectives,” he said. “So, creating the workplan is relatively simple. However, the background information part is difficult. It takes a lot of time to dig up information on what other people have done, to show the federal agency why our approach is different or better.”

Dr. Raghunathan mentioned that he hopes DTIC will consider extending their current report limit (currently 10), as well as offer the option of downloading the reports directly from the DTIC website--a way that existing technology could facilitate the proposal-writing process. As he points out, technology has already improved the task of researching solicitations.

“We still have to read through solicitations, but that process is getting less difficult due to search capabilities on the Internet,” he said. “In the ‘old days,’ like the late 80s, the indexing wasn’t very good. We literally had to read through all the solicitations to find what was suitable. The indexing available now has really improved that process; it helps us identify suitable solicitations faster.”

In Dr. Raghunathan’s opinion, the area of federal funding that requires the greatest amount of improvement is administrative. Admittedly one of his pet peeves, Dr. Raghunathan feels that the administrative issues (such as audits, reporting, and record keeping) involved with receiving grant money could be made much simpler.

“It’s very bureaucratic,” he said. “And it all takes too much time.”

That inconvenience aside, Dr. Raghunathan is pleased that Nanomat has been successful receiving SBIR grants. Due to his experience with the process--Nanomat has been denied SBIR proposals “many times” as well--he has some advice for companies who are applying for an SBIR grant for the first time.

“I think most people try to jam all the information into 25 pages, which only confuses the reviewers,” he said. “Presentation is just as important as technical merit when it comes to drafting a proposal.”

Dr. Raghunathan offers another important piece of advice: “If you don’t think you can commercialize your idea, don’t even bother. Several agencies--the NSF in particular--are now asking for a lot of business plan information with their proposals.”

Finally, even though his company has succeeded in obtaining SBIR grants, Dr. Raghunathan is quick to stress that these federal awards only comprise roughly 5-10% of Nanomat’s revenue.

“I think many small companies depend on SBIR awards for survival, and that is a terrible mistake,” he said. “If I had depended solely on SBIR funds, I would have been in trouble a long time ago.”