1. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 1 Playing the SBIR Game to Win Fred Patterson The SBIR Coach www.SBIRcoach.com 2007 ASBDC Conference Denver, Colorado September 18, 2007

2. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 2 Today’s “Game Plan” Part 1 – Rules of the Game –The R&D Funding Challenge –SBIR Program Overview –Playing the SBIR Game –Overview of Strategies Part 2 – Strategies to Win Awards –The Structure of a Proposal –Understanding the Priorities –Building a Winning Team –Commercialization – the End Game

3. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 3 The R&D Funding Challenge High-Risk Projects are tough to fund Funding sources are demanding –Banks insist on collateral and debt service –Investors want equity, “a voice”, and a schedule of their profitable returns Friends and Family Angels Venture Capitalists.. x

4. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 4 The Holy Grail of R&D Funding Willingness to fund high-risk projects R&D capital without debt to service An Investor who won’t take equity Protection for Intellectual Property Support for Commercialization All of the above from one source We’ve just described the basic characteristics of The SBIR Program!

5. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 5 SBIR Program Overview Mission: Apply entrepreneurial spirit of small business to solve tough problems Matchmaking Federal R&D needs to small business capabilities Required planning for commercialization The SBIR “set-aside” must be spent annually by the largest Federal agencies

6. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 6 Actually, It’s Two Programs SBIR (Small Business Innovation Research) –Applicants are Small Businesses STTR (Small Business Technology Transfer) –Applicants are Small Businesses in partnership with a Research Institution

7. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 7 How Much Money is Available in FY 2007? SBIR – Approx. $2 Billion –2.5% of the R&D budget of the qualifying Federal Agencies. STTR – Approx. $250 Million –0.3% of the R&D Budget of the qualifying Federal Agencies

8. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 8 The SBIR “Pie” DOD HHS NASA DOE NSF TOTAL FY 2007 >$2¼ Billion Labeled Agencies also do STTRs

9. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 9 Agency SBIR Differences Granting Agencies Ü Investigator proposes project approach Ü Less-specified topics Ü Assistance mechanism Ü More flexibility DOD HHS/NIH NASA DOEd EPA DOT DOC DHS Contracting Agencies Ü Agency specifies the project requirements Ü Highly focused topics Ü FAR-driven procurement Ü More fiscal requirements DOEd NSF DOE USDA HHS/NIH

10. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 10 SBIR Program Applicant Eligibility A small business (500 employees) owned by individuals (>50%), US located, and independently operated Organized for making a profit Principal researcher (The PI) must be principally employed by the small business (or the research institution if STTR*) * For most agencies

11. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 11 A Competitive Three-Phase Program Phase I: Feasibility Phase II: Proof-of-Concept Phase III: Commercialization

12. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 12 Phase I Conceptual Design Awards are made averaging $100,000 for 6-12 months to support the conceptual feasibility and design of the solution using the technological approach of the proposer.

13. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 13 Phase II Prototype Development Awards averaging $750,000, for as many as two more years, expand the Phase I design to “proof of concept” and evaluation of commercialization potential.

14. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 14 Phase III Commercialization No SBIR set-aside funds support this phase. During this period the developer moves the innovation from the laboratory into “end use” in the marketplace.

15. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 15 The SBIR Coach’s Baseball Metaphor Phase I –Class A (Bush Leagues) Phase II –Class AAA (Minor Leagues) Phase III –The Major Leagues

16. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 16 Who Owns the Intellectual Property? The Applicant does! Full rights are retained for –Technical Data –Patentable Inventions But you have to take the appropriate measures to protect your IP or the Government can eventually take it over!

17. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 17 SBIR Phase I Dynamics Phase I Topics – “The RFP” Proposal preparation and submission Proposal review and evaluation Phase I project selection

18. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 18 Proposal Topics The Agencies select the technical topics for their annual Solicitation Publish them on their web sites Provide guidelines for proposal content and submission Manage the proposal collection process

19. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 19 Proposal Preparation & Submission Companies match published topics to their technology – can they solve the stated problem? Proposals are written and submitted –20-25 Pages maximum – follow the outline –Submission is electronic via the Web

20. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 20 Proposal Evaluation The Agencies review the proposals Rate and Rank them according to: –Degree of innovation –Technical merit –Credibility of the management team –Future market potential

21. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 21 SBIR Phase I Project Selection Criteria 1.Agency needs (R&D priorities) 2.Proposal reviewers’ opinions 3.Amount of SBIR/STTR money available 4.Deployability and/or Scientific Merit On average 15% of Phase I proposals are funded

22. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 22 Phase II Dynamics Phase II proposals are submitted at the end of the Phase I work –Some agencies invite, others expect Only Phase I winners are eligible Evaluation processes vary On average 40% of Phase II proposals are funded

23. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 23 SBIR/STTR Annual Opportunities AgencySBIRSTTR2007 Due Dates Dept of DefenseXXJan, Apr, Jul, Oct HHS: NIH/FDA/CDCXXMany dates NASAXXSeptember Dept of EnergyXXDecember Nat’l Science FoundationXXJune, December Homeland SecurityXFebruary, August USDAXAugust EPAXMay Dept of EducationXJune Dept of CommerceXJanuary Dept of TransportationXMay

24. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 24 The SBIR Game There are actually 23 SBIR Programs The “Golden Rule” applies “We who have the gold make the rules!” There is no common rule-book Funding decisions are subjective There is no appeal worth trying The payoffs are worth the effort

25. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 25 The Challenge The game is VERY competitive The rules may be hard to interpret Good proposals are hard to write Funding decisions are subjective The money doesn’t flow quickly When you take Government money you are subject to scrutiny and audits

26. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 26 The Good News It’s a relatively fair game Phase I puts you in a “sole-source” position for Phase III IP is yours to keep No strings on the money SBIR funding provides leverage The Government pays on time

27. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 27 The Rule Books Each Agency is unique –Different solicitation schedules –Different solicitation styles –Different funding levels –Different proposal outlines –Different evaluation processes –Different attitudes Find the Rules on their web-sites IF YOU WANT TO PLAY IN THEIR GAME – FOLLOW THEIR RULES!

28. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 28 Information is Key to Playing the Game Keep aware of Agency interests Cultivate your future customers Watch solicitations for topics Know the current “state of the art” Seek collaboration partners Scope out your competition

29. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 29 The SBA SBIR Website (www.sba.gov/sbir) The SBIR Web Portals Agency List-Servers National SBIR Conferences –Oct 29-Nov 1 in Richardson, TX The SBIR-Alerting Service (lyris.pnl.gov) Google, et.al. Information Sources

30. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 30 SBIR Web Portals SBIR announcements and news items Links to all Agency websites Solicitation schedules Search Engines for all Agencies –Open and closed topics –Grant and contract awards SBIR conf/workshop schedules State newsletter links Lots of other stuff

31. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 31 SBIR Gateway (www.SBIRgateway.com)

32. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 32 SBIR World (www.sbirworld.com)

33. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 33 Strategies to Win SBIR Awards Customers Technology Team Commercialization Innovation

34. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 34 Customer Strategies Know your customer Understand what he needs Give him what he wants Stay on his “radar screen” “Pre-Solicitation Marketing”

35. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 35 Technology Strategies Have a strong technology base Get an independent assessment Guard your Intellectual Property Use your IP as a leveraging tool Propose technology that your customers really want “Field-of-Dreams” was a movie!

36. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 36 Team Strategies Strong credentials that will impress your customer –Technical and Scientific –Business and Managerial Full roster of appropriate players A track record of success Your customer is also your investor

37. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 37 Commercialization Strategies Yes, you need a business plan! The Agencies are measured on how much commercialization money derives from SBIR funding They will pay a lot of attention to this, so you had better too! Commercialization means “End Use”

38. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 38 Innovation Strategies Innovation is a combination of cleverness and originality Know what your customer knows Make sure that you’re “up first” Tell your story with clarity and conviction Innovation may NOT be the most important factor

39. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 39 Playing the SBIR Game to Win (Part 1) Fred Patterson The SBIR Coach www.SBIRcoach.com

40. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 40 Game Plan for Part 2 Strategies to Win Awards The Structure of a Proposal Understanding the Priorities Building a Winning Team Commercialization – the End Game

41. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 41 SBIR Proposal Framework Significance Problem Solution Approach Market Commercial Potential (Phase III) Tech. Objectives Work Plan Budget Resources Team Facilities & Equip. Purpose Innovation The Project Capability Courtesy of Robert E Berger, PhD

42. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 42 Reviewers’ Evaluation Criteria Innovation The Project’s Technical Merit Your Capabilities Commercialization Potential

43. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 43 Innovation Significance Problem Solution Approach Market Commercial Potential (Phase III) Tech. Objectives Work Plan Budget Resources Team Facilities & Equip. Purpose Innovation The Project Capability

44. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 44 Technical Merit Significance Problem Solution Approach Market Commercial Potential (Phase III) Tech. Objectives Work Plan Budget Resources Team Facilities & Equip. Purpose Innovation The Project Capability

45. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 45 Capabilities Significance Problem Solution Approach Market Commercial Potential (Phase III) Tech. Objectives Work Plan Budget Resources Team Facilities & Equip. Purpose Innovation The Project Capability

46. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 46 Commercialization Significance Problem Solution Approach Market Commercial Potential (Phase III) Tech. Objectives Work Plan Budget Resources Team Facilities & Equip. Purpose Innovation The Project Capability

47. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 47 Understanding Priorities 1.Agency needs –Know their priorities –Ask them questions 2.Reviewers’ evaluations 3.Funding limitations

48. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 48 Agency Needs Significance Problem Solution Approach Market Commercial Potential (Phase III) Tech. Objectives Work Plan Budget Resources Team Facilities & Equip. Purpose Innovation The Project Capability

49. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 49 Agency Information

50. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 50 Building a Winning Team The PI is the key player Lone Wolves are suspicious Outside counsel shows maturity Do you have commitments?

51. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 51 Capabilities Significance Problem Solution Approach Market Commercial Potential (Phase III) Tech. Objectives Work Plan Budget Resources Team Facilities & Equip. Purpose Innovation The Project Capability

52. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 52 Involvement of Others Consultants Universities Research Facilities Suppliers Subcontractors

53. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 53 How Much of the Work Can Be Outsourced from Your Company? SBIR –Phase I – 33% –Phase II – 50% STTR –Phase I – 74% –Phase II – 80%

54. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 54 Special SBIR Team Considerations The PI’s Commitment –Employment status –Level of Involvement Other Employee considerations –W2 vs 1099 employees Consultants

55. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 55 Special STTR Team Considerations The CRADA –Cooperative Research and Development Agreement –Prepared by Office of Sponsored Projects IP Sharing Agreement –Division of new intellectual property –Prepared by Office of Technology Transfer

56. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 56 Commercialization Issues You can’t make money from Phases I and II What kind of company do you want to be? Phase III isn’t funded by mandated small business set-asides

57. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 57 Phase III Benefits When the Government is Your Customer No limitation on funding Data Rights are preserved Sole Source is justified

58. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 58 Commercialization Questions to Answer How will you make money from this technology development? What will it take to get you there? How will you make the product? Who will be your customers? How will you sell to them? How will you finance commercialization?

59. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 59 Why is it so difficult to get to Phase III? Making and selling it is very different from inventing and designing it! Bootstrapping commercialization is virtually impossible. The company must undergo a culture shift to survive as anything but a “lifestyle” company.

60. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 60 Culture Shift? The Hallmark of Success changes from “Technical Excellence” to “Making the Numbers” The focus of “Operations” changes The Founder may not be comfortable in the new role as “Dealmaker”

61. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 61 Seeking Outside Funding

62. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 62 Agency Interest in Your Commercialization Their selection quality is ultimately measured on how well you do! Most offer special commercialization assistance programs They expect you to report your commercialization successes

63. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 63 Commercialization Assistance Programs DOD –Commercialization Pilot Program (CPP) NIH –Commercialization Assistance Program (CAP) NSF –The SBIR MatchMaker Program NASA –Innovative Partnership Program DOE –Several Commercialization Support Programs

64. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 64 DOE Commercialization Support Programs Commercialization Opportunity Forum –Focus: Business Plan development Trailblazer TM –Early in Phase I to support transition to Phase II Virtual Deal Simulator TM –Early in Phase II to map out a sequence of tasks that can lead to Phase III Technology Niche Analysis TM –Mid-Phase II to identify Phase III partners

65. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 65 In Conclusion The SBIR Program is a fantastic opportunity for small business R&D There are lots of potential SBIR projects in almost every technology arena The SBIR game is complex and highly competitive There are strategies to getting that competitive advantage needed to win You can play this game to WIN!

66. Learn the Plays That WIN We Know This Game © The SBIR Coach, 2007 66 Playing the SBIR Game to Win Fred Patterson The SBIR Coach www.SBIRcoach.com