Hello to everyone i wanted to say good morning because i'm here in Southern California it's my pleasure to welcome you to our Wireside Chat this is a series where we invite the public to listen in on some of the things that we're thinking about at the National Science Foundation my name is Andrea Belz i serve as Division Director for Industrial Innovation and Partnerships the IIP Division here at NSF i'm here with my colleague Steve Konsek. Steve hi everyone i'm Steve Konsek i'm a Program Director in the NSF Small Business Innovation Research Program and Steve will be here to help moderate the Q&A session which will take place at the end of this i as you can imagine you may not have the chance to have all of our questions answered the participant count is in the 600s so i'd like to welcome you all to this session and to talk to you a little bit about our programs in translational research and we think of this as going from Invention to Impact this transition has been of interest to scientists for a long time this is a clipping from meeting minutes of 1917 comments by J.J Thompson who discovered the electron and my favorite quote from here is this one that says that people would have been very skeptical if they had been told 20 years later that they would be listening to another discourse on the commercial applications of electrons and so that tells us a little bit about the surprises that can come from basic research and the applications therein so what i'd like to do first is give you a little bit of inspiration and tell you why it is that we care about translational research at NSF and how we think about it i'll tell you a little bit about the agency for some of you who are less familiar with the foundation implementation i'll tell you how our programs work and then i'd like to spend a little bit of time on our inclusion initiatives and then finally an invitation for you to engage with us so the first thing i'd like to point out is some data from the Kauffman Foundation from several years ago and these data speak to where jobs are created the blue line at the top represents firms that are less than five years old the red is six to ten years old and the yellow is over 11 years old and what you see is that consistently the newest firms are the ones creating more jobs and in fact this is consistent even in the financial crisis from a decade ago so we know that new companies create new jobs and this has been validated in the economics literature in the years since so startups serve as engines of growth they can contribute disproportionately and the reason we're concerned about this is that we see a steady decline in the rate of startup formation over the years this chart begins in 1977 and you can see a fairly consistent decline as of 2014. i'll show you more recent data in a moment but what makes this really striking is if
you think about all of the other forces that have acted to make startup formation even easier the fact that you can register a company online all the new mechanisms and corporate entities and yet the rate of startup formation is declining since 2010 you can see additional data that demonstrate the same phenomenon so the blue line at the top is global numbers and the red is in the United States the yellow is Europe so the last chart ended in 2014 and you can see the ongoing decline since then so startup creation has been declining for 40 years we also know that the venture capital world has really changed dramatically even over the last 25 years since the dot-com boom so let's see what these data are telling us this orange peak is the data and internet boom of the early dot-com era and you can see the bust and then you can see how that sector really has recovered the blue is the healthcare ventures which had less of a boom less of a bust and then has been growing fairly steadily and consistently in the years since these engineering companies basically are hardware and what you see here is the same lag in the boom but really not much recovery from the bust and so it's interesting that 30 years ago it was considered riskier to invest in software versus hardware because of the sense that you didn't have anything to hold on to at the end and now the perception of risk has really changed and we see very dramatic increase in the software space this struggle to attract capital has been documented extensively in the economics literature as well so venture capital has really changed in the last 25 years this is another view of the same data and i know it's a little bit of an eye chart so let me draw your attention to just a couple of data points which is that if you look at the electronics sector over the course of 20 years the number of deals grew by 40 percent and the funding by roughly 3x but in software the deal volume grew by 4x and the funding by a factor of 20. so there are more deals they're bigger that is where venture capital is largely going there are other perspectives on how the investor appetite for risk has changed so these data are from a 2020 paper that shows roughly the same phenomenon i just showed you but going back further in time so the blue box here is software and you can see how that has grown in the 30 years in between these two samples the next box the light blue is consumer and business products and services and you can see the explosive growth there and in some ways it has come at the cost of venture capital investment in telecommunications networking etc now this is normalized to 100 percent so it doesn't tell you about the total number of dollars going in but you can see how the proportions have really changed the top box is biopharmaceuticals and medical devices so it supports the idea that we have less investment in some kinds of hardware than we used to these data speak to the number of companies that generate revenue at the time that they raise venture financing so venture financing comes in in multiple stages the earliest stage is the seed stage and that's the red line here series A typically follows and then series B after that and of course there are more letters in the alphabet as needed so 10 years ago only 10 percent roughly 9 of the companies had revenues when they were attracting series a financing today at 67 two-thirds of the companies are generating revenues at the time that they get seed funding series A has gone from 17 percent 10 years ago to 77 percent, that's three quarters of the companies getting series A financing are already having revenue and with series B it's gone from 47 percent to 92 percent so that's a really dramatic shift in where risk lies in the private markets the investors effectively are transferring risk to the customers and the reason we care about this is that while both angel and venture groups contribute to innovation we know that venture capital funded firms experience faster commercialization and so what this suggests is that there's an even greater need for support during the early stage funding gap because the private markets have been evolving we have another view into the markets this time in the public markets when we look at the lifespan of companies on the S&P500 index what you see here is the life span the average lifespan as a function of time going back to 1965. so the ups and downs are effectively the business cycle the economic cycle but you can see that there's a general downward trend for how long companies last on the S&P500 and the most extreme case of course is to look at companies that were there 100 years ago only two of them remain today so we see that the pace of refreshing in the public markets has really changed another view of the public markets is to think about intellectual property and intellectual property is part of a class of intangible assets that includes branding goodwill and other assets this study was done by an investment bank that focuses on the role of intangible assets in estimating company value so in 1975 17 percent of the S&P500 market value represented intangible assets the vast majority 83 percent or five parts out of six were captured by tangible assets property plans equipment things that you can touch and what you see is that over the ensuing 45 years that ratio flipped and today roughly 90 of the S&P market value represents intangible assets and that includes all kinds of intellectual property so that's a stunning statement about the importance of intellectual property in the public markets another interesting statement is the idea that roughly 30 percent of the Nasdaq exchange's value stemmed from university-based research and this is from congressional testimony 10 years ago so we see that intellectual property and universities are connected to the public markets we know a little bit more about intellectual property when we consider how it relates to research and development investment and the output and so what we see here is that if we invest roughly 270 billion these numbers are a couple of years old so you could say 3 billion 300 billion dollars in R&D and we have an output related to IP of six trillion dollars and that again is all kinds of output now you can say well the output that we're getting today is not related to this R&D expenditure today because it stems from investments that we made 20 years ago and that's absolutely correct which is why our investment in R&D today is so important because it can be captured in output in the future we also know that wages associated with jobs in firms that create intellectual property are typically a little bit higher than they are in the other companies and that it's not just the people generating intellectual property it's everyone benefits from this so intellectual property has a multiplier in economic output these data relate to federally funded research and they come from a study i did for the national academies a couple of years ago and what you see here is three different levels of investment of federal research dollars so the blue data are basic research the red is applied and the green is development these data go back to 1955 and what you see is that basic research in universities has really grown over that period as you would expect whereas there is less federally funded research in industry that's not to say that industry doesn't do basic research because this doesn't capture what industry is investing in its own research we then see the applied research which is the intermediate stage and then of course the development research is highest in industry as you would expect what makes these charts interesting is that they have the same y-axis and so we can ask ourselves these questions we know that basic research happens in universities and development research happens in industries what does the handoff look like between these two groups and so that's a question of great interest to us so i know we've touched on many different topics and different sorts of data but what do we really have what we see is the following if we care about jobs in young companies we know that the venture capital community views risk differently than it used to we know also that there's a faster pace of market disruption than we have seen historically there's a strong multiplier from intellectual property and universities have a role to play and what we see is that if you combine these factors you discover that it's very meaningful for us to help launch technology startups and so i'll talk a little bit about the programs that we have in order to help execute that vision if you're not familiar with NSF our mission is to promote the progress of science to advance the national health prosperity and welfare and to secure the national defense our new director not so new anymore Sethuraman Panchanathan Dr. Panchanathan has spoken extensively about the need to accomplish our vision at strength i'm pardon me at speed and scale and so i'm going to talk a little bit about how we try to execute on this these are some numbers that describe NSF many of you may be familiar with this already but in general more than 90 percent of our budget goes to funding research education and related activities we are of course very proud of our 248 nobel prize winners we invest a billion and a half roughly in STEM education and so out of this budget you can see that we try to support basic research across just about every discipline and so this chart tells us the fraction of total federal support that we provide for basic research in a number of different fields and this is very important for us to think about in the translational world because we are really working to translate all of these different technologies to the marketplace writ large meaning deployment at scale so if you look at our budget we have a Division of Industrial Innovation and Partnerships focused on translational research and we're really working to generate impact with these programs so if we ask ourselves well what do we actually do we think we have several different roles one is that we educate nsf invests extensively in stem education of all kinds and we participate in that we accelerate the transition of technologies to practice to use at scale we demonstrate through technological feasibility studies and then we translate and those were the risks that i was speaking to in the first part of this presentation so people think that when you're interested in startups that you really love risk and the truth is that we don't love risk but we are obsessed with it and being in a startup is really an exercise in learning how to manage many different kinds of risk so we worry about skills gaps that's what we're addressing through education we worry a lot about market risk and making sure that we're building things that are meaningful in the marketplace and that people want of course we worry about technical risk and whether technologies will work and then finally we worry about financial risk and then we can map our programs onto this list of risks and discuss how we can address each of them and so i'll talk about the programs that are described here in brief this is an example of the kinds of things that we can do when we think about it this way Marinus Analytics is a spin-off from Carnegie Mellon and by integrating facial recognition with analysis of with text analysis they can identify victims of human trafficking and are working closely with law enforcement in order to do that this is another example Ginkgo Bioworks is a bio factory and their early funding came from the NSF when we were first launching a larger effort in in life sciences most recently their valuation is on the order of 15 billion dollars and so we're really excited about this company and how they were able to contribute to solutions to the pandemic i'll talk for a few minutes about the SBIR and STTR programs as i mentioned earlier we fund technologies that the agency funds as a whole we don't fund clinical trials but we fund just about everything else and so this chart shows you that in fiscal year '20 we invested more than 200 million dollars in technologies of all kinds i know the font is tiny here and that in itself is an indicator of the breadth of technology topics that we fund and if a technology of interest to you doesn't appear we also have other topics we really are working to make sure that we're funding relevant technologies and companies that are on the cutting edge of all of these so what is America's Seed Fund we are working to transform discovery into commercial and societal benefit we have a simple pitch process which enables you to submit the equivalent of an executive summary to see if it's a good fit for our program and it's an efficient way that you can get feedback from us to make sure that it's a proposal that is consistent with the goals of our program there's roughly two million dollars available per company the first stage is a six to twelve month grant of a quarter million dollars for feasibility research then a million dollars for prototype development and then this is where we try to realize the promise of partnering with private markets by matching third-party investment in a one-to-two match so 50 cents on the dollar a note on the differences between these programs the companies in both programs must have fewer than 500 employees the STTR awards involve an academic partner and so there's some fraction of the budget that is dedicated to that academic partner typically a university the PI the principal investigator must be employed principally by the small business and we work on a quarterly window system not a deadline system so you can submit a pitch anytime and a proposal anytime some information about the kinds of awardees that we're funding 95 have fewer than 10 employees and so this is a reflection of our goal of funding very young companies 81 founded in the last five years more than 50 percent are new applicants to us and if we look at how our portfolio has evolved it's gratifying to see that these companies have gone on to raise over nine billion dollars in follow-on equity financing and we've seen over 150 successful exits remember we are trying to take on the risk that the private market really cannot and so this is gratifying for us to see that we can do that this is not the only indicator of the impact that we have we funded the company that ultimately developed LASIK surgery we funded Qualcomm so there have been many great success stories in the past that indicate value far beyond the financial markets this is our stakeholder subcommittee and i encourage you to look on our website to learn more about them but we maintain very close connections both to the philanthropic and private investor communities as well as the corporate venture communities and they have been particularly helpful to us in understanding the impact of the pandemic on our community a moment about I-Corps so I-Corps is really designed to answer these questions questions like what problem does this solve do customers want something efficient or cheaper these are questions that you really cannot answer in the lab you can't even answer them on campus and so the I-Corps program requires that you are commercializing a deep technology and it's a seven-week course which focuses on teaching the business model canvas and conducting 100 interviews of industry experts it's really gratifying to teach this because we find that graduate students stand up and say things like i've never talked to anyone outside my research group before so it's a wonderful experience from that perspective the team has three or four people typically an entrepreneurial lead a graduate student or a postdoc a technical lead who's the faculty member or senior research staff and then an industry mentor the award is 50,000 dollars it used to pay for travel to shows today it pays primarily for salary support and registration in conferences and we've had roughly 2,000 teams about half of them form companies and the follow-on funding that they report is over 500 million dollars here's a great example of the kinds of technologies that we see it in I-Corps and so this is a team that has been developing socially assistive robotics pardon me so robotics to support health care services and you can see that this stemmed initially from a basic research grant 10 years ago after doing I-Corps they were able to go on and get a phase one and phase two award from us and we're happy to distribute links to their video and to their press page i'll talk for a moment about the Industry- University Cooperative Research Centers program so these are centers that are really designed for us to help catalyze partnerships between university and industry we do this through this sustained engagement model where the industry members pay membership fees and vote together on the models of the kinds of research questions they'd like to address and so today we have over 70 centers 800 members these are distributed across the country they typically have multiple universities who are participating and students have great opportunities to learn about industry research and for that reason they're often hired by these members this is a little bit of a list of the kinds of technologies that we fund again we are technology agnostic we're looking to support technologies at large throughout the nation here's an example of a center that we fund the Center for Health Organization Transformation (CHOT) and CHOT was up and running before the pandemic you might remember a year ago when there was a very interesting Wednesday when we learned that we were actually in a pandemic and the following Monday we at NSF transitioned to 100 telework as many of your organizations may have done a well as well what was remarkable was how fast we were able to respond to the needs that were clearly emerging and so you can see that two weeks later we were making awards like this one developing modeling and analysis tools to track coronavirus and infectious disease spread so this is an example of how responsive we hope to be in addressing national needs Partnerships for Innovation so these are prototyping awards for NSF-funded principal investigators again open to any technology there are two different tracks depending on whether a partner is engaged or not and the teams are required to participate in I-Corps so that they have marketplace insight while they're doing their prototyping recently we released a notice a Dear Colleague Letter about how there is an opportunity to support patent expenses in the universities and i'd like to thank the LinkedIn community for distributing this information very rapidly it was amazing to see that within a couple of days it had gotten hundreds of views so thank you this is an example of a PFI team from UT Austin where they've developed a system that provides data-driven treatment for neurological disorders and after their PFI award they were able to start doing demos with rehab and research programs and are now successfully raising money and so this is an example of the kind of transition to practice that we see i want to transition for a moment to talking about broadening participation it has been a focus at NSF for many years we're very committed to this if you were to go to this page i could not list the programs because the screenshot didn't make it past the letter A they're listed alphabetically i strongly encourage you to check them out i will talk for a moment about our focus in the Division in the Inclusion in Innovation Initiative (i4) and i4 has three key components one is affinity two is community and three is opportunity so what does that mean affinity is that we identify a partner who is interested in targeting the same groups that we are and then we co-design new activities the community is that we really form a joint mentoring team and then work to conduct outreach at scale and opportunity is that we introduce industry discovery to these students and then help them transition to funding opportunities so we have partnered with the National GEM Consortium in the i4 initiative and what's beautiful is that they decided i4 was to inspire integrate increase and impact so this has been a great partnership that we've had now for two years and in terms of the outcomes these numbers are from a couple of months ago but 20 plus events in the space of nine months with 76 universities participating we had over 200 participants in these outreach events and the reason we note that they're unique participants is we find they come multiple times to learn and hear the information again so that we can reach them and help them explore the questions that follow and we see primarily PhD students participating in some Master's students so the first GEM teams have been entering national I-Corps cohorts and this team on the top is led by this young woman who is a GEM fellow and we were delighted to see that they won a $100,000 prize competition just last month so we are excited in particular about the numbers that we're seeing so that we can help inspire students to consider translational research and to pursue some of these other funding paths in particular by using I-Corps as an on-ramp we also support the ASEE the American Society for Engineering Education in supporting underserved post-doctoral researchers they work in startups and many of them go on to be hired full-time following their postdocs in the startups and then NSF has an active effort through its Science of Science program in understanding how we can continue to broaden participation in entrepreneurship and innovation so that we can really engage all of our nation's communities in these important activities i will touch on the review criteria for our proposals we like the rest of the agency we are committed to high standards on intellectual merit and broader impacts i'll define those in a second and then we also look at commercial potential and the strength of the business model so that we can help companies be successful so the profile of a good proposal is as follows intellectual merit is that we are looking for differentiated approaches to solving a big problem and ideally with high technical risk and methods based in science and engineering on broader impacts we're looking to benefit society in many different ways strengthen competitiveness and enhance participation these are examples of the broader impacts obviously in benefit society there are so many ways that our companies can help and then finally in commercial potential we are looking to understand what is the commercialization path and we want to be a significant catalyst for that company so companies that are too far along where we may not provide a catalytic advantage may not be as central to our focus we are always looking for reviewers so please consider joining us as a reviewer if evaluating proposals along those dimensions is of interest to you and just so you have a sense of who's in IIP this org chart with small font is our team i am currently on leave from the University of Southern California Viterbi School of Engineering we have a couple of people who are also rotators as they're called from other universities we have postings in three different programs in the SBIR and STTR program in I-Corps and in PFI and so if it's of interest for you to have this kind of catalytic effect in the nation we strongly encourage you to apply to one of these postings and we have the capability to engage you if you're a university faculty member or if you're not so please contact us and look at these postings if that's of interest to you so in closing i hope that you've seen that the need to support commercialization of deep technologies is profound it's profound and it's challenging and it's challenging in part because of the way the private markets have evolved and yet the public markets also tell us that there's so much opportunity we support basic research across all disciplines as an agency and our division mirrors that and works to translate these technologies to the marketplace and to deployment at scale we support training and research in many different ways and we welcome your participation as a reviewer as a mentor on an I-Corps team or another supporter And so I'd like to thank you for your attention
2021-06-22