I grew up in poverty in New York, but I was lucky enough to study engineering at the Rensselaer Polytechnic Institute. I founded a company that went public when I was 28, and I used that money to invest in startups.
It is exhilarating to see many founders flourish, but when I return to upstate New York, the desolate remnants of long-closed factories remind me of areas that the technological revolution never reached.
The number behind those empty facades could not be more serious. At the end of 2019, even before the shock of COVID, US manufacturing fell to 11% of GDP, Lowest level in 72 years. We prepared much of that land for low-cost competitors in China, which became the world’s top producer in 2011. We now have only a small window to restore manufacturing as the foundation of American prosperity, and a notable but underdeveloped federal program plays a large role.
My firm, SOSV, specializes in running programs that help founders take technically difficult ideas from research to product. Many of these companies represent the future of American industry, especially when it comes to national priorities such as industrial automation and decarbonization.
You might think that those startups would be ripe for venture investment, but in reality, only a fraction of venture capital flows to them. They are very risky when compared with categories like SaaS and Consumer.
The brilliant design of SBIR has helped thousands of technology-minded entrepreneurs cross over from research to real products, new markets and enterprise support.
That is why in 1982 the US Congress established the Small Business Innovation Research (SBIR) program, which, in the words of its founder, Roland Tibbetts, “is to provide funding for some of the best early-stage innovation ideas – ideas.” . However, there are still a lot of risks for private investors, including promising capital firms. “
For more than $ 3 billion per year in contracts and grants distributed by federal agencies, SBIR has produced 70,000 patents, $ 41 billion in follow-up venture capital investment. 700 public companies.
The brilliant design of SBIR has helped thousands of technology-minded entrepreneurs cross over from research to real products, new markets and enterprise support. We will need thousands more brilliant scientists, technologists and entrepreneurs to step forward in the decade ahead. They can do this from their garage, but they cannot make it out of thin air. Congress should quickly work to create an “SBIR 2.0” with three significant improvements to how SBIR works today.
First of all, we need At least 10 times more SBIR funding. Even at $ 30 billion, SBIR funding would be a goalscoring error in Washington compared to many budgets, such as $ 693 billion for defense in 2020, and a fraction of total US enterprise investment, reaching $ 156 billion in 2020. Gone. Still, of course, nothing in the federal budget could do much to help American industry.
Second, we need to focus on new SBIR funding on key strategic areas, particularly decarbonization and advanced manufacturing. The first will save humanity’s future on this planet. The second will help us leap forward on our missed generation of manufacturing investment to establish leads in key areas including robotics, battery technology, artificially intelligent devices, and additive manufacturing. Who can ask for better markets?
Finally, there is a need to speed up the process of review and reward. A great example is the innovative US Air Force “Pitch Day” program in 2019 and 2020, which funded the best founding pitches (carefully pre-qualified) in a matter of minutes. In our almost frictionless market for talent, waiting for a long time to be deliberate and blasphemous is not a win-win approach.
The late February Biden administration of issuing an executive order on the US supply chain suggests that the White House is already working hard on policy measures. There is no doubt that the administration’s effort will attract many perspectives, but the key should be a continued focus on America’s primary ineffective fuel: the ingenuity and drive of our people.
We will only take the buried areas of this country out of the realm of poverty, rebuilding American manufacturing for entrepreneurship by giving them the tools with our own hands.
Editor’s Note: Former ClearTips COO Ned Desmond is now a senior operating partner at SOSV.