Hearings to examine reforming SBIR-STTR for the 21st century.

1[Senate Hearing 119-20]2[From the U.S. Government Publishing Office]34                                                         S. Hrg. 119-2056                       GOLDEN AGE OF INNOVATION:7                REFORMING SBIR-STTR FOR THE 21ST CENTURY89=======================================================================1011                                HEARING1213                               BEFORE THE1415                      COMMITTEE ON SMALL BUSINESS16                          AND ENTREPRENEURSHIP1718                                 OF THE1920                          UNITED STATES SENATE2122                    ONE HUNDRED NINETEENTH CONGRESS2324                             FIRST SESSION2526                               __________2728                             MARCH 5, 20252930                               __________3132      Printed for the use of the Committee on Small Business and33                            Entrepreneurship3435 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3637        Available via the World Wide Web: http://www.govinfo.gov3839                                __________4041                   U.S. GOVERNMENT PUBLISHING OFFICE4259-574                     WASHINGTON : 20254344-----------------------------------------------------------------------------------4546            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP47                    ONE HUNDRED NINETEENTH CONGRESS4849                              ----------5051                        JONI ERNST, Iowa, Chair52            EDWARD J. MARKEY, Massachusetts, Ranking Member53JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington54RAND PAUL, Kentucky                  JEANNE SHAHEEN, New Hampshire55TIM SCOTT, South Carolina            CORY A. BOOKER, New Jersey56TODD YOUNG, Indiana                  CHRISTOPHER A. COONS, Delaware57JOSH HAWLEY, Missouri                MAZIE K. HIRONO, Hawaii58TED BUDD, North Carolina             JACKY ROSEN, Nevada59JOHN R. CURTIS, Utah                 JOHN W. HICKENLOOPER, Colorado60JAMES C. JUSTICE, West Virginia      ADAM B. SCHIFF, California61JOHN HUSTED, Ohio62                Meredith West, Republican Staff Director63                 Sean Moore, Democratic Staff Director6465                            C O N T E N T S6667                              ----------6869                      Witness Prepared Statements7071                                                                   Page72Mr. Austin Strawhacker, Associate State Director, America's Small73  Business Development Center Iowa, Ames, IA.....................     874Dr. Ken Mahmud, Executive Vice President, Triton Systems,75  Chelmsford, MA.................................................    1576Mr. Caleb Carr, Chief Executive Officer, Vita Inclinata77  Technologies, Broomfield, CO...................................    2378Mr. David Rothzeid, Principal of Investments, Shield Capital,79  Washington, D.C................................................    318081              Additional Letters/Statements for the Record8283Alliance for Commerical Technology in Government-Letter dated84  March 7, 2025..................................................    5485Iowa Economic Development Authority-Letter dated March 5, 2025...    5686MassBio-Letter dated March 5, 2025...............................    5787MassMEDIC-Letter dated March 5, 2025.............................    6188New England Innovation Alliance-Statement dated March 5, 2025....    6389Open Source Investigation into Triton Systems Connections to90  China..........................................................    7091Small Business Technology Council-Letter dated March 5, 2025.....    8592Software in Defense Coalition-Letter dated March 4, 2025.........    8693The Technology Association of Iowa-Statement.....................    8994Triton Systems Inc.-Memo dated March 19, 2025....................    9095Triton Systems Inc.-Chair Ernst Additional Statement.............    949697                        Questions for the Record9899Dr. Ken Mahmud100    Responses to questions submitted by Senators Cantwell and101      Hirono.....................................................    97102Mr. David Rothzeid103    Responses to questions submitted by Senator Cantwell.........   105104Mr. Austin Strawhacker105    Responses to questions submitted by Senator Hirono...........   108106107                   GOLDEN AGE OF AMERICAN INNOVATION:.108                REFORMING SBIR-STTR FOR THE 21ST CENTURY109110                              ----------111112                        Wednesday, March 5, 2025113114                      United States Senate,115                        Committee on Small Business116                                      and Entrepreneurship,117                                                    Washington, DC.118    The committee met, pursuant to notice, at 2:34 p.m., in119Room 428A, Russell Senate Office Building, Hon. Joni Ernst,120chairwoman of the committee, presiding.121    Present: Senators Ernst [presiding], Young, Hawley, Budd,122Husted, Markey, Shaheen, and Rosen.123124               OPENING STATEMENT OF SENATOR ERNST125126    Chair. Thank you everyone, and I call the Committee on127Small Business and Entrepreneurship to order. With its128authorization expiring at the end of this fiscal year, today we129turn our attention to the Small Business Innovation Research130and Small Business Technology Transfer programs, or SBIR/STTR.131This program has effectively partnered federal agencies with132private sector entrepreneurs to scale research and development133projects aimed at addressing the pressing challenges of the134day.135    While we've seen a measure of success over the years136through the committee's oversight efforts, agency studies and137GAO reports, it is clear SBIR is in need of additional reforms138to safeguard taxpayer funds and enable this program to meet its139full potential. Despite the funding spanning 11 agencies and140countless critical technology areas, SBIR has demonstrated an141incredible potential to revitalize our small business142industrial base and preserve America's technological143leadership. The cutting-edge technologies being generated are144already serving to enhance competition, improve supply chains,145and increase overall readiness.146    For these reasons, I am excited to announce that today I'm147introducing the Investing in National Next Generation148Opportunities for Venture Acceleration and Technological149Excellence or INNOVATE Act--we have to come up with these fancy150names, okay--the INNOVATE Act, a bill to reauthorize and151comprehensively reform the SBIR/STTR program.152    My legislation streamlines and simplifies existing153processes, directs the funding toward projects based on merit,154channels funding to help accelerate the most promising projects155towards final stage commercialization, protects against waste156and abuse, and introduces enhanced protections and157accountability tools to prevent these new technologies from158getting into the hands of our foreign adversaries.159    First, the INNOVATE Act reforms Phase I to provide new160applicants with a simplified two-page proposal process with161smaller, one-time awards, so that more innovators throughout162the country can have access to this program, even if they can't163hire professional grant writers. My bill also eliminates DEI164preferences. These measures enable agencies to scout the best165proposals based on substance from across the country. I am166committed to ensuring open competition for innovators with167traditionally lower engagement in the program.168    Second, my bill addresses the practice of SBIR Mills, where169firms benefiting from their beltway connections and grant170writing expertise have been able to collect an outsized portion171of the funding, with fewer results to show for it. This problem172was verified by both the GAO, the Government Accountability173Office, and the DOD's Defense Industrial Board, which reported174that the firms that got the most awards were less productive in175terms of commercialization, investments, and patents than those176who got fewer awards.177    To prevent the use of Phase I or II funding as a permanent178source of revenue, my bill imposes a $75 million lifetime cap.179It forces small businesses with dozens of awards to demonstrate180commercial traction or follow on contracts with non SBIR181dollars.182    Third, my bill empowers DOD to repurpose, underutilized and183overly regulated STTR Phase II funding, to more efficiently184scale the most promising technologies for long-term contracts185for deployment through strategic breakthrough awards. For these186awards of up to $30 million, the bill limits eligibility to187small businesses making clear progress towards188commercialization, and with an identified DOD end user.189    It also requires 100 percent matching funds to ensure that190firms have skin in the game, and aren't just in it for191corporate welfare. These reforms will enable more flexible use192of SBIR funding to help bridge the valley of death for the193companies on the verge of success.194    Finally, my bill builds on my longstanding work to195safeguard these new SBIR technologies from being stolen by our196adversaries. For years, China and other state actors have197stolen intellectual property and proprietary secrets from198American businesses and universities. That is why I championed199the Foreign Ties Due Diligence Program Reforms in the 2022200reauthorization. But we have found that more needs to be done.201    That's why my INNOVATE Act introduces a new definition of202foreign risk, to create a stronger risk assessment baseline203standard, that must be applied consistently across all204agencies. It implements a clear list of ties to foreign205countries of concern, that disqualify an applicant. And it206empowers agencies with clear clawback authority if a small207business exposes SBIR funded products to adversarial influence208post award.209    By targeting SBIR funds to the very best innovators in the210country, by cutting off the unserious applicants who are just211after corporate welfare, by providing a boost to the best212companies who need it to get over the final hurdles and by213better protecting our taxpayer funded innovations from going214directly to China, the SBIR/STTR program can expedite new215technologies, increase economic opportunity, and attract216investment back into our towns and cities, and help to usher in217a new golden age of innovation for America.218    I look forward to working with my colleagues to get this219across the finish line. It's up to us, the members of this220committee, to work together to optimize this important program.221I'd like to thank the witnesses for being here today and being222willing to share their experience and expertise with us. I now223recognize Ranking Member Markey for his opening statement.224225                  STATEMENT OF SENATOR MARKEY226227    Senator Markey. Thank you, Madam Chair. And today's hearing228centers on American innovation and the small businesses that229lead the way every day of the year.230    For decades, the Small Business Innovation Research231Program, or SBIR, and the Small Business Technology Transfer232Program, or STTR, have played an essential role in driving our233country's innovation. And I'm extremely proud that234Massachusetts small businesses have played such a prominent235role.236    The Commonwealth is the second highest recipient of total237awards in the country, receiving more than 24,000 SBIR awards,238totaling $8.3 billion, and 2,000 STTR awards totaling over $720239million.240    This success is due to the Massachusetts business plan:241attract the best and the brightest, provide a world class242education, and provide opportunities for small businesses to243compete on a level playing field, while having the best244educated and the best trained workforce in the country. We245start in the fourth grade, we're number one in the fourth,246eighth, and 10th grade in America in math and verbal. It's a247business plan; it provides that workforce.248    This has led to the development of America's high-tech249highway, Route 128, which extends outside of Boston and into250the surrounding area, akin to Silicon Valley in California, or251the research triangle in North Carolina.252    SBIR was codified in 1982, and STTR 10 years later, both on253a bipartisan basis. During this time, Congress was keenly aware254that the federal research and development needs of the country255were not being met. SBIR and STTR were designed to use256America's small businesses to drive innovation.257    These highly competitive programs have contributed to the258golden age of innovation in our country. We have experienced259that over the last 40 years. Without these programs, Americans260would not have novel technologies at their fingertips as they261do today. For example, the very popular LASIK eye surgery, was262developed in part due to an SBIR funding. SBIR also funded263earlier Qualcomm wireless communications systems.264    I'm proud of the SBIR and STTR advancements that have come265from Massachusetts. Just as Iowa is rich in nutrient filled266soil makes it the premier producer of corn, it is Massachusetts267technology ecosystem that provides a fertile ground for268innovation in the technology sector, which is why we're not269just the Bay State, we're also the brain state.270    For example, Massachusetts small businesses have received271more than 70 awards for projects related to the treatment of272Alzheimer's disease, the brain, and it's approaching it for273many different avenues. Today we'll hear from Triton Systems, a274company from the Commonwealth, that used an SBIR award to help275create the world's smallest heart pump, which is now276universally used in hospitals because of an SBIR grant.277    Without SBIR and STTR funding, many of these products may278have never seen the light of day. These programs are highly279efficient and pay dividends for the American people. The return280on investment for every dollar the government spends on these281programs is anywhere from $20 to $30.282    SBIR and STTR awards from the Department of Defense alone283creates over 65,000 new jobs every year. The SBIR and STTR284programs work because they prioritize merit and competition-285Darwinian paranoia inducing competition--that's the hallmark of286STTR and SBIR. That's what it's all about-Darwinian287competition; the best ideas prevail.288    We should not place limits on the number of awards or the289amount of funding that goes to deserving small businesses. We290should not put a limit on the best ideas or the best291technologies. That's what we're going to need to compete292against China. We would never limit the number of contracts293that a large defense contractor receives from the Federal294Government. So why would we consider limiting our most nimble295allies in innovation-our small businesses?296    We don't tell Raytheon or Lockheed Martin, ``You've had297enough Federal contracts; we're going to start with a smaller298firm.'' We don't do that. We go to where the best ideas are.299While SBIR and STTR have enjoyed bipartisan support for several300decades, we have not yet been able to make them permanent.301They're currently set to expire at the end of September.302    I've worked throughout my time in Congress to make303improvements to the programs and ensure that their304authorization never lapses. It's critical that we do so again,305and I'm looking forward to working with you, Chair Ernst, on306this issue, and I want to thank all of our witnesses for your307help in us understanding this issue today.308    Chair. Great. Thank you, Ranking member Markey. And again,309I want to extend a warm welcome to all of our witnesses today,310and I will now introduce the three witnesses who are testifying311today on behalf of the majority. I am thankful that all of you312took time out of your busy schedules to join us in front of the313committee and share your expertise and insight into the SBIR314and STTR programs with this committee.315    First is Mr. Austin Strawhacker, who is the Associate State316Director at America's SBDC in Iowa, at Iowa State University in317Ames, Iowa. The Iowa SBDC operates 15 centers across the state,318providing expert business counseling to entrepreneurs and small319business owners. Mr. Strawhacker oversees the Iowa's SBDC's320Technology and Commercialization team, which supports321innovative entrepreneurs in leveraging federal and state322resources in all 99 counties.323    He also chairs the Association of Small Business324Development Centers Research and Data Committee, and serves on325the Iowa Rural Development Council. Mr. Strawhacker also holds326bachelor's degrees from Grandview University and a Master of327Public Administration from Drake University, both in Des328Moines, Iowa. So, Austin, thank you very much for being here329today.330    Next, Mr. Caleb Carr is the CEO of Vita Inclinata, an331aerospace and industrial company headquartered in Broomfield,332Colorado. Vita Inclinata received six SBIR awards totaling just333over $4 million that were crucial to the company's success. Mr.334Carr serves as a board member for the Software and Defense335Coalition, and is a professor of entrepreneurship at the336University of Colorado. He graduated with a bachelor's degree337from the University of Colorado at Denver and holds a Juris338Doctor from Mitchell Hamline School of Law.339    Our third witness, Mr. David Rothzeid, is a Principal at340Shield Capital, a venture capital firm focusing on investing in341early-stage companies, developing technologies critical for342national security. He served for eight years as an acquisition343officer in the United States Air Force. Thank you very much for344your service to our country, including a deployment with345Special Operations Command in Afghanistan.346    He subsequently worked at the Defense Innovation Unit,347ending his time there as Director of Acquisition Pathways. Mr.348Rothzeid has a bachelor's degree from Miami University, and an349MBA from the University of Colorado, Colorado Springs. Thank350you again. And I now recognize Ranking Member Markey to351introduce his witness.352    Senator Markey. Thank you, Madam Chair. The minority353witness today is Dr. Ken Mahmud, who is the executive Vice354President of Triton Systems, which is a business at the cutting355edge of innovation. Triton Systems is a multi-award winning356SBIR and STTR company and was awarded the Small Business357Administration's TIBBETTS Award in 2016 for its success in the358SBIR program.359    Dr. Mahmud has more than 35 years of experience in research360and development, including managing Triton's participation in361the SBIR and STTR programs. And we welcome you, Doctor, to the362panel today. Thank you, Madam Chair.363    Chair. Thank you, Ranking Member. And briefly, I'd like to364take a moment to explain our lighting set system to the365witnesses. There are three lights in front of you; green means366go, yellow means you are running out of time, and red means to367go ahead and wrap up those remarks. So, I ask unanimous consent368that the witness's full statements be included in the record.369Without objection, so ordered.370    As your written testimony has been made part of the record,371the committee asks that you limit your oral remarks to five372minutes. And with that Mr. Strawhacker, you are recognized for373five minutes for your testimony.374375STATEMENT OF MR. AUSTIN STRAWHACKER, ASSOCIATE STATE DIRECTOR,376  AMERICA'S SMALL BUSINESS DEVELOPMENT CENTER IOWA, AMES, IOWA377378    Mr. Strawhacker. Chair Ernst, Ranking Member Markey, and379distinguished members of the committee, thank you for the380opportunity to testify on the reauthorization of the Small381Business Innovation Research and Small Business Technology382Transfer Programs.383    As the Associate State Director of America's SBDC Iowa, I384provide oversight to our technology and commercialization385center, which provides guidance to innovators, often including386the exploration of SBIR and STTR funding. I'm proud to work for387an organization that is vital to the success of so many small388businesses. The Iowa SBDC fosters innovation, strengthens local389economies, and drives small business success.390    We engage with approximately 5,000 clients annually, that391in 2024 alone launched 225 new businesses, created 101,795 new392jobs--I wish it was the bigger number, generated $174 million393in sales and secured $57 million in new capital. This yields an394ROI of 3.7 on all of our funding sources.395    Hosted by Iowa State University, the Iowa SBDC collaborates396with various partners to provide tailored services that support397businesses in both urban and rural areas. Our regional centers398act as a pipeline to lead technology driven businesses to our399technology and commercialization center for assistance with400SBIR/STTR proposal development, intellectual property, and401commercialization assistance.402    Today I would like to focus on three main points: the403importance of the SBIR/STTR programs, the importance of404localized support, and outline a couple of challenges and405opportunities. For over 40 years, SBIR and STTR have ensured406that small businesses play a significant role in the federal407research and development.408    These programs help develop groundbreaking technologies,409create high quality jobs, and enhance our global410competitiveness. In Iowa SBIR and STTR fundings help bridge the411gap between research and market deployment, particularly in key412sectors like advanced manufacturing, agricultural technology,413and biosciences. These programs also attract follow on414investment, drive job creation, and expand local supply chains.415    In fact, over 50 percent of successful SBIR and STTR416applications that we have assisted with, have leveraged their417awards to generate additional funding that has more than418doubled the overall investment in these companies. Rural419entrepreneurs in particular exemplify the grit and innovation420that define American small businesses. Despite facing421challenges such as limited access to capital, workforce422shortages and geographic barriers, they drive technological423advancement and local economic growth. SBIR and STTR often424provide the critical support needed for these entrepreneurs to425take risk, push innovation, and continue to contribute to the426national competitiveness.427    The success of small businesses, particularly in rural428communities, depends on access to localized support. A prime429example in Iowa is Senator Ernst Entrepreneur Expo, an annual430collaboration between the Senator, the Iowa SBDC, and Iowa431State University Center for Industrial Research and Service.432This event connects small businesses with industry experts,433government resources, and potential investors, fostering434collaboration and showcasing innovation.435    Additionally, we have established the Great Plains SBIR436working group with our partners in Kansas, Nebraska, and437Oklahoma. This group meets monthly to share best practices,438develop solutions and strengthen the regional support network.439    While SBIR and STTR have been highly effective, there are440opportunities to enhance their impact. Streamlining the441application process and introducing a smaller Phase I award442could lower barriers for first time applicants, particularly in443rural areas. This would allow early-stage research to explore444commercialization potential before full feasibility and445commercialization work begins.446    Many companies also receive very little feedback on their447Phase I proposals if they're declined. Often the reason for448declaration is something that SBDC could help with proactively449if more guidance was provided. Increasing transparency and450structured feedback would help applicants refine proposals and451improve success rates.452    There should be recognition that innovation exists453everywhere across our nation, yet just five states receive 46454percent of SBIR/STTR awards and dollars according to public455data on sbir.gov. Addressing this disparity through targeted456outreach, regional training, and improved evaluation457transparency, could ensure fair access to funding no matter the458geographic location of the business.459    In conclusion, SBIR and STTR awards have driven innovation,460strengthened local economies, and created high quality jobs in461America for over four decades. By leveraging SBDC's support,462small businesses can access commercialization experts, funding463strategies and technical assistance to maximize program464benefits.465    Continued collaboration among federal agencies, local466resource providers and entrepreneurs will be essential in467maintaining the United States leadership and innovation. I468thank you for your time and consideration today, and I welcome469any questions.470    [The prepared statement of Mr. Strawhacker follows.]471    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]472473    Chair. Thank you very much, Mr. Strawhacker, and we will go474next to Mr. Mahmud, and you are recognized for five minutes for475your testimony.476477 STATEMENT OF DR. KEN MAHMUD, EXECUTIVE VICE PRESIDENT, TRITON478               SYSTEMS, CHELMSFORD, MASSACHUSETTS479480    Dr. Mahmud. Good afternoon, Honorable Chair Ernst, Ranking481Member Markey, and all other members of the Senate Small482Business Committee. Thank you for the opportunity to speak at483today's hearing. I'm pleased to share my insights into how484Triton has supported SBIR's successful track record of both485advancing national security and the economy. I'd like to share486a few examples with the committee, mainly to show the different487paths to commercialization and the benefits to both the war488fighter and the United States as a whole.489    First, a few words about myself. I received my Master's and490Ph.D from RPI in upstate New York, in chemical engineering. I491have been in leadership roles as Senator Markey mentioned in492U.S. industry for over 35 years. I'm an inventor with over 30493patents, and I received the Tibbetts award from the SBA on494behalf of Triton for commercial success and commercializing495SBIR derived technologies.496    Triton is a hundred percent U.S. owned company with497significant employee ownership. Most of our technical staff498have security clearances and carry an incredible passion for499helping the country and the war fighter, as you will see. Let500me show you some examples of the impact on national security501and the economy as a whole.502    We supply a critical component to the F-35 aircraft, which503is the largest DOD platform ever. It is expected to save the504Air Force over $550 million in sustainment costs. We supply505another critical component to the F-22 aircraft, which will506enable another $200 million in sustainment cost savings for the507Air Force.508    We have set up a venture in the state of Washington to509manufacture long range aerial mobility systems, to support a510Navy program of record. To do this, we are setting up an entire511Berry compliant U.S. supply chain, bringing back capability512that had moved overseas. This involves companies across the513country, primarily starting with North Carolina, but also514companies in Tennessee, Massachusetts, Rhode Island,515Pennsylvania, and of course final manufacturing in the state of516Washington.517    Our hearing protection product is being qualified for Army518helicopter air crew. I do want to point out here that hearing519loss and tinnitus is two of the biggest health issues affecting520our veterans. With over a million veterans affected, it is521estimated that the VA provides over a billion dollars in522disability benefits related to these conditions.523    Our bladder relief product for aviators is being qualified524for navy combat missions, and Air Force recon missions. Our525SBIR derived sensor technology enabled the world's smallest526heart pump for use in cardiac failure intervention. I do want527to mention here that heart disease is the number one cause of528death for Americans today.529    We are also investing in the first large area metallic 3D530printing capability in the country, with internal funding. This531will be a new capability for the United States, allowing for532the manufacturer of 3D printed large metallic parts for533aircraft, missiles and other DOD platforms. I would like to534finish by offering some suggestions to the committee for535improving the SBIR program based on our experience with it.536    The SBIR program is one of the most successful technology537programs in the federal government, as indicated by all538National Academy of Science Studies and multiple agency539studies. We believe this is because of the merit-based nature540of the program, the competition, the ruthless competition that541it fosters, and the flexibility, and this is very important,542the flexibility given to the agencies to adapt it to their543needs.544    Our suggestions to the committee include: number one,545provide meaningful incentives for transition to Phase III for546DOD platforms in particular. I will just add on a personal547note, that you know, for a small business when most of the548platforms are owned by the prime contractors, it is incredibly549hard for a small business which is focused on a sub component550or a component to de-risk it, mature it, qualify it, and551integrate it. It requires a tremendous amount of cooperation552with the primes.553    And I do want to add here that, small businesses like ours,554who have developed a rare expertise in working with academia to555reduce ideas to practice and working with primes, to then take556them to a platform and transition it to a program of record,557offer a unique skillset in our innovation ecosystem.558    Number two, streamline the contracting process. I believe559this is a request that all of the witnesses will make,560streamline the contracting process by mandating standard561contracts. Number three, adequately resource the agencies to562implement the foreign risk management provisions.563    And number four, reauthorize permanently, or at least for a564longer term so that small businesses and agencies have some565certainty in their business planning. I wish to end by thanking566the members of the committee for your continuing support for567the program, and for the opportunity for me to speak to you568today.569    [The prepared statement of Dr. Mahmud follows.]570   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]571572    Chair. Thank you very much, Mr. Mahmud. I appreciate that.573We'll move next to Mr. Carr. You're recognized for five minutes574of testimony.575576  STATEMENT OF MR. CALEB CARR, CHIEF EXECUTIVE OFFICER, VITA577          INCLINATA TECHNOLOGIES, BROOMFIELD, COLORADO578579    Mr. Carr. Chairwoman Ernst, Ranking Member Markey, and580members of the committee. Thank you for having me today.581    I founded my company following the death of a friend of582mine. While we were on a search and rescue exercise in the583mountains, he experienced active cardiac arrest and we called584the rescue helicopter to come and rescue him. The helicopter585proceeded to lower a rescue basket down to us, but due to the586winds of the helicopter, the rescue basket kept swinging, and587because of it, we couldn't get it through the trees above. As a588result, we called off the mission and called time of death.589    Several years later, my business partner and I founded what590would be known today as Vita, a company focused on designing591technology that would eliminate the swing and sway of suspended592loads on rescue helicopters and save lives. Preventing the593reality that happened to my friend over a decade ago and594drastically improving upon the current solution that our war595fighters and rescue personnel use today, a rope.596    We started in a cold garage in Denver, Colorado, working597tirelessly to find a solution to the problem. Investors would598turn us down, left, and right due to the lack of market599knowledge on the issue and more importantly, the amount of600complexity that designing a solution and selling said solution601to the U.S. government would entail.602    It wasn't until something else took a risk on us in late6032018-the SBIR program, specifically the open topic AFWERX SBIR604program. The SBIR program took a risk on us, our three-page605white paper, and our idea. And in doing so, it empowered us to606quit our jobs, hire a team, and design a solution that we now607call the Vita Rescue System. Subsequently, the company went on608to secure two Phase II contracts and eventually a Phase III609transition, $50 million IDIQ to the U.S. Army, which we610anticipate putting into motion later this year.611    Meanwhile, that system is now deployed to the battlefields612of Ukraine, CALFIRE's fire attack helicopters that were used613recently during the Palisades in Eaton fires, multiple Army614National Guard units, including South Carolina and across the615entire Air National Guard.616    Yet that was just the beginning. Thanks to that investment617by the SBIR program, Vida expanded into providing the essential618gear that crews need to fight the mission, such as harnesses619and rescue bags, to the point whereby just two weeks ago, we620received the following message from a son. ``I just wanted to621thank you for making such a great product. My father was in a622horrific helicopter accident and his best friend died on623impact. He was in the backseat and had your harness on, and624despite the helicopter being destroyed, he actually walked away625from the incident with only bumps and bruises''.626    It's this type of mission, this type of capability, these627products, would not be here today without the support of the628SBIR program. You are going to hear a lot today about what the629SBIR program is and is not. But I come to you as someone who630used the SBIR program for what it was meant to do-transition631real life solutions into the hands of the people that need it632most.633    What I can tell you is the SBIR program should not be a634welfare program to award 50 plus contracts to the same party.635The SBIR program is an investment program, an investment in636ideas to facilitate solutions that take what was a rope for637decades, and make it into a technology solution. An investment638to empower Americans and frankly, the market to validate scale639and deploy new capabilities that never thought about until640today.641    The SBIR program is a mission-focused initiative, that642advances the objectives of the agencies it supports, providing643structure and funding to enable companies to directly address644these missions head on, whether for organizations like CALFIRE645or the South Carolina Army National Guard. I wonder, would646those crews have this capability today if the capability647remained in the R&D environment. Yet at the end of the day, the648SBIR program is the bedrock of transitioning the future into649reality.650    Therefore, as you consider how to improve the SBIR program651during the upcoming reauthorization, I encourage you to support652the following. One, dedicated funding mechanisms for companies653that can demonstrate, private sector demand for commercialized654technology and government demand for innovative solutions. As655we must provide the tools to transition and transition quickly.656    Two, the use of firm fixed price contracts for SBIR's657default contracting vehicle, reducing the bureaucratic658overhead, and allowing the SBIR program to take the small risk659on people like me, and empower us to do something great.660    And three, limits on SBIR awards for those repeat661offenders, specifically companies that continue to receive SBIR662awards without commercializing a viable product from the vast663majority of their SBIR awards, directly to the end user, not to664a prime to an end user. In doing so, you'll prevent the SBIR665program from becoming a welfare program, and keep it focused on666being an investment vehicle to allow entrepreneurs like me to667ideate, innovate, and create the critical solutions that don't668just sit on the shelf for someone to talk about one day, but669instead are used in reality, executing the mission that it was670designed to complete. Thank you for your time today, and I look671forward to your questions.672    [The prepared statement of Mr. Carr follows.]673    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]674675    Chair. Thank you very much, Mr. Carr. And now I recognize676Mr. Rothzeid for five minutes of testimony.677678  STATEMENT OF MR. DAVID ROTHZEID, PRINCIPAL OF INVESTMENTS,679                SHIELD CAPITAL, WASHINGTON, D.C.680681    Mr. Rothzeid. Thank you, Chair Ernst, Ranking Member682Markey, the members of the committee, Senator Rosen, thank you683for the opportunity to testify.684    I'm an investor at Shield Capital, where I work with over68540 early-stage startups, building technology at the686intersection of national security and commercial applications,687colloquially known as dual use technology. Before this, I spent688over a dozen years on active duty as an Air Force acquisition689officer, including at Defense Innovation Unit, where I helped690pioneer a new model for working with venture-backed startups.691    The reality is that America's technological edge is692eroding. While we maintain clear dominance in Iraq and693Afghanistan, we face a very different challenge in the People's694Republic of China, yet our defense and commercial technology695ecosystems continue to operate in parallel universes. If we are696going to win the global power competition, then we must697leverage America's private capital markets backing the most698innovative ideas.699    Private capital is critical to accelerating the development700of next generation defense tech. Venture capitalists bring701funding, expertise, and a culture of iteration needed to702develop cutting edge capabilities. Venture-backed startups703thrive on rapid R&D, allowing them to develop, test, and scale704disruptive technologies efficiently.705    In recent years, the investment in defense tech has surged,706growing from 8 billion in 2016 to 42 billion just last year,707seven x increase. And this trend, it's driven by geopolitical708instability and emphasis on streamlined processes from709organizations like DIU and AFWERX, and a growing recognition of710private capitals value in national security.711    The SBIR and STTR programs were created as America's seed712capital for innovation, avenues for non-dilutive funding, which713have contributed to major technological breakthroughs developed714by venture-backed companies. These program, SBIR or STTR should715be reauthorized, but with vital improvements. I outlined a716number of policy solutions in my written testimony, including717addressing an obstacle course that favors entrenched companies718so-called SBIR Mills.719    A naval postgraduate school study found that of nearly7205,000 SBIR companies, the top 25 alone secure 18 percent of all721DOD Phase I And Phase II funding. That's over 2.3 billion722between 2012 and 2021. Many of these firms focus on securing723grants rather than fielding operational capabilities.724Meanwhile, true high growth startups like the one here on my725right, the ones building the technology of the future,726organized to scale, employing thousands, and attracting727billions of private capitals, are often locked out. We must728ask, shouldn't America's government backed seed capital be an729entrepreneur's first step and not a bureaucratic bottleneck?730    Even when startups win SBIR awards, too few transition to731Phase III procurement contracts. That same MPS study found that732only 16 percent of SBIR companies transition beyond Phase II,733the rest remain stuck in perpetual R&D. Programs like TACFI and734STRATFI in the Air Force and Space Force and Catalyst in the735Army provide a model for bridging this gap.736    As a former acquisition officer, it is these types of737programs that would incentivize a federal government program738office to engage with SBIR companies rather than ignore them to739the purview of government labs. Without these transition740pathways, startups struggle to gain meaningful traction and741investors hesitate to back them.742    At Shield Capital, we have four startups that have743successfully transitioned from a SBIR Phase II to winning a744STRATFI contract, enabling them to integrate into emerging745programs of record. We expect these startups will likely746graduate from the SBIR program, creating an onramp to scalable747operational technology. This is the paradigm we need to solve748for.749    VC financing on a grand scale-it is small but mighty force.750Just like SBIR within federal R&D, by working together, we751ensure that SBIR will be a true launchpad. Venture-Backed752startups will gain a real onramp into government markets, and753both private capital and federal investment can work together754to co-fund the technologies our war fighters need.755    R&D-it's a bipartisan issue that impacts the workforce and756economy of every state in America. Chair Ernst, Ranking Member757Markey, your states represent two critical sectors of American758innovation. Iowa's ag tech drives food security, while759Massachusetts biotech sector pioneers' life-saving760advancements. Neither thrives without investment, scale, and761clear pathways to impact.762    In conclusion, I want to thank all the members of the763Senate Small Business Committee. Now is the time to modernize764SBIR as a bridge between government needs and America's private765capital system. The golden age of American innovation will not766be won by government funding alone, it will be secured by767unlocking the full potential of America's arsenal, leveraging768our free market system, ensuring economic prosperity, and769national security resiliency. I look forward to being a770resource and answering your questions. Thank you.771    [The prepared statement of Mr. Rothzeid follows.]772   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]773774    Chair. Great. Thank you, Mr. Rothzeid. And now I recognize775myself for five minutes of questions. We'll move into776questions. So, we'll start with you. Mr. Strawhacker, thank you777for your amazing work and support of small businesses in Iowa.778I am very familiar with what you do, and thank you for it.779    I believe it's in our national interest to scale the best780technologies with strong potential to solve America's781challenges no matter where they are located. What bureaucratic782obstacles exist for small businesses who are new to SBIR and783what reforms should Congress consider?784    Mr. Strawhacker. Thank you, Chair Ernst, for that question.785As I mentioned in my testimony, local support is critical for786early-stage development, particularly when it comes to learning787about what these programs can and cannot do for companies. The788expo that we jointly host in the state has done tremendous work789in educating people about these resources, but it has also790brought federal agency representatives to our state to have791firsthand conversations with those business owners. That's792where I believe the most work occurs.793    When someone can sit down with someone who can answer their794questions, right then and there, and provide firsthand795technical assistance in the moment, leads to significantly796better planning as people start to enter this space.797    In 2022, the year before the expo was launched, we held a798very similar event. And while it was impactful--because it was799the first one that we had done in quite some time, it was very800difficult to get a lot of our agencies to come and have a801presence at that event. Those that did come, were blown away by802the amount of innovation that occurs in our state.803    Thankfully we have many more of them coming to our event804right now. But in addition to the expo, the other things that805were mentioned in the testimony such as introducing a smaller806Phase I award, will be very helpful as well as increasing the807transparency and feedback when awards are not approved. Thank808you.809    Chair. Thank you. And if we could move on to you, Mr.810Rothzeid. In your written testimony, you stated, ``innovation811thrives in a competitive market where the best ideas rise to812the top''. Over the past five years, just 10 percent of DOD's813SBIR/STTR funding went to companies without prior government814contracts. I'm concerned about whether SBIR is living up to its815potential, and from what I've been able to see, a system so816skewed towards the status quo and entrenched players is not817utilizing competition to drive the innovation America needs to818stay ahead. So how can we ensure real and open competition in819the SBIR program?820    Mr. Rothzeid. Thank you, Senator Ernst. And I agree with821you, it is not okay that only 10 percent of SBIR recipients are822new entrants. This ought to be seed capital for the next823emerging ideas. I think one of the major bottlenecks for that824program is the idea of these esoteric, very nuanced, specific825topics that are clearly wired for specific companies based on826prior existing relationships with a company and government827labs.828    If we can start to generalize the topics more around829different technology areas that an innovator can come and830create a new solution around, that is what's going to create831disruptive technology for the future. It's also what's going to832address the problems for the program officers that are833responsible for fielding operational equipment to the war834fighters.835    The labs have a different perspective with R&D, versus the836program office that are trying to deal with near and dear837issues. Additionally, I do find it hard to believe that a838company, a small business, can work on a myriad of different839technology areas. For my startups any more than two or three,840and they're very tapped out. So, we sort of have to ask841ourselves, why is there such a market efficiency where a842company can still be a small business, but work across a dozen843different SBIR at the same time? Thank you, ma'am.844    Chair. Thank you for pointing that out. I appreciate it.845And I will now turn to Ranking Member--Oh, I can, yes, sir, I846can. I will now turn to Senator Rosen for her questions. Thank847you.848    Senator Rosen. Thank you, Madam Chair, thank you. Senator849Markey. I have a 3:30 and I didn't want to miss, this is such a850great hearing and it's so important. And I just want to thank851you all for your ideas, for your energy to bring them into852reality and to really think out of the box when you see a853problem, be that those real problem solvers, and it is very854exciting. This is a great committee to see the entrepreneurship855and the way people think.856    And so, the SBIR, the STTR, the programs, they're just857critical sources or capital for startups, and for people who858see a problem and think, how can I make it better? How can I859fix it? How can I find that solution? But unfortunately, some860states aren't receiving their fair share of this vital R&D861funding.862    Like the Chair, State of Iowa, Nevada sadly is ranked in863the bottom third of SBIR and STTR award recipients. In 2023, we864received only 23 of the SBA awards compared to the national865average of 118 awards per state. I hope to maybe move that up.866But the Federal and State Technology Partnership Program was867created to address this gap. The FAST program provides funding868to economic development entities, research institutions, and869that in turn provide that technical assistance and support to870the small businesses who are applying, you often just don't871know how to get started, right? That's a big issue.872    So FAST Mission to strengthen the competitiveness of873underserved businesses seeking the SBIR/STTR grants, it's874critical. And Congress, I believe must continue to support it875alongside its innovation initiatives. So, Mr. Strawhacker, as a876FAST recipient, I know you know how important it is, can you877discuss the ways your SBDC has better served businesses who878struggle to navigate the SBIR/STTR process. And what challenges879are you facing that we can address here?880    Mr. Strawhacker. Thank you, Senator Rosen. You are881absolutely correct that the FAST program is tremendously882valuable to this overall equation, but it does play a883complimentary role to the business owners and the innovators.884We are there to connect them to resources, connect them to885people who can ultimately invest in these companies. But it's886their idea and their innovation that drives us forward.887    We have brought on a myriad of different proposal888development tools. We have sent our advisors to as many889trainings as we can possibly get to. And I'm confident in890saying that the proposals coming out of Iowa right now are as891strong as they have ever been.892    We have developed deeper partnerships with state agency,893Iowa Economic Development Authority, who provides some of the894matching funds. But there is still a lot of work to be done. I895hope that other states will look at implementing an896entrepreneur expo where they can bring firsthand agency897representatives.898    Senator Rosen. I've already written that down. We're going899to contact you on that.900    Mr. Strawhacker. Happy to share any details. Thank you for901your question.902    Senator Rosen. Thank you. I want to talk a little bit about903rural business access to SBIR funding. Because we know small904businesses are the key economic drivers in every Nevada905community, in fact, Nevada is known for our large, obviously,906casinos in Las Vegas, but to be honest, 99 percent of907businesses in Nevada are small businesses. They bolster our908industries, they support the good paying jobs, local jobs. It's909true both urban and rural.910    And despite their importance, rural small businesses911historically face a lot of challenges accessing capital and912small business resources, I know you know this as well. So913again, I'm going to stick with you today, Mr. Strawhacker. What914challenges do you think the rural businesses have and how can915we help them address that maybe more specific need they have916and the ways the FAST program can really better connect our917resource partners to the SBIRs?918    Mr. Strawhacker. Thank you, Senator. It is often remarkably919difficult to physically get to certain parts of rural states.920    Senator Rosen. You've been to Nevada, so, you know, deep921frontier, rural states, most mountainous state in the lower 48,922I might add.923    Mr. Strawhacker. I did not know that. Thank you.924[Laughter.]925    That is why we have utilized the longstanding success of926the SBDC network to come alongside the FAST program. We have 15927offices strategically located around the state of Iowa through92811 partnerships with community colleges. And then four centers929hosted by our three public institutions in the state.930    Those people are in the community where those business931owners are developing their ideas. They're constantly932networking with different economic development agencies,933different lenders. They serve as the pipeline for that934technology-based business into our technology and935commercialization center who can ultimately get them to that936finish line.937    Senator Rosen. Well, good. We might be reaching out to you938for some connection with Nevada.939    Mr. Strawhacker. Absolutely.940    Senator Rosen. Thank you all for being here and what you941do. And thank you again, Senator Markey, Madam Chair.942    Chair. Yes. Thank you so much, Senator Rosen. Next, we'll943go to Senator Husted for five minutes of questions.944    Senator Husted. Thank you, Chair Ernst. Appreciate that. So945business is hard. Many startups fail, particularly if you're in946tech because there's somebody else out there, all the time,947who's also innovating and trying to identify a path, a use for948their technology.949    And how do you go about the process of identifying who950should receive assistance, who shouldn't? Because in a951marketplace, it's so much easier in the sense that when it's952your real money and it's your decision, you are far more953discerning than when it's not. And so, how does that process954work right now? And how can we make it more like how a real955marketplace works? And I'm open to whomever can answer that956question the best.957    Mr. Carr. I mean, I'll jump in, it's an elevator pitch. At958the end of the day, it's a quick white paper with a quick959summary, 1, 2, 3 pages, and that's it. The reality is, the SBIR960program has continuously gotten longer and longer and longer in961regards to its proposals. I can tell you with a team of three962people working in a garage, I did not have time to write a963hundred-page proposal. I have an elevator pitch. And the964question is, are you-as the person on the other side, willing965to buy into that elevator pitch or do you think that something966else should be awarded instead?967    Senator Husted. And does the process that we're using in968this, is it entrepreneurial enough? Does it work?969    Mr. Carr. I think the bureaucracy, as much as I would love970to make it simpler, it forces you to be an entrepreneur.971Because at the end of the day, you got to figure out how to972navigate the market. And if you're trying to navigate the U.S.973government, you've got to learn and be that entrepreneurial974self to be able to figure out how you complete that navigation.975    And so, from my perspective I believe a lot of the976proposals, supporting, making that elevator pitch much easier977for smaller companies to make it, you will continue to see more978and more entrants coming into the program to be able to979validate whether it's real or not.980    Senator Husted. As I was doing a little research on this,981one of the common complaints is that, hey, the people who do982figure it out are the ones who are getting all the money. And983the people who haven't figured it out, you know, and there's984just a barrier that it's like a mystery of, what door I go into985and how I do this? How do we improve upon that?986    Mr. Rothzeid. Well, if I may, you know, I've been somebody987on the other side as a government evaluator. And a big part of988it, because on certain areas, you get so many proposals that989you try to take the easy way out, and you say, who didn't cross990their t and dot their i perfectly. And so that sort of991sentiment certainly favors those who have gone through the992process before because they're able to rinse and repeat a lot993of their proposals going forward.994    And I think that's why with Chair Ernst and her995recommendations of putting a cap, sort of gets us away from996being more process oriented and more about the spirit of the997idea. Because when the same companies can submit 50998applications at a time in a given window, and the resources to999be able to evaluate all of the incoming solicitations, there1000has to be a level of empathy for the reviewer on the government1001side.1002    As a venture capitalist, I take pitches all the time.1003Right? I've got three more scheduled later today on different1004companies. Most of them are going to receive a no, and that's1005just the reality. Because I'm looking at the competitive1006marketplace, the ins, you know, how good is the founder? What1007is the opportunity for them to sell into? These are difficult1008things that you learn over years and reps. And our government1009stakeholders don't necessarily have that same background, but1010we just need to make it easier for them to evaluate less1011companies.1012    Senator Husted. Thank you. My time is going to run out. And1013I want to ask a question because I'm not sure how to do. Is it1014more difficult the way we set up particularly for our1015contracting with the U.S. military? I was told one time that1016small businesses--that the big contractors welcome them as long1017as they stay in their box. And if they can't have a they really1018try to--we have bidding rules that make it hard for a small1019business to do entry. Is that accurate for anybody who's worked1020on that?1021    Mr. Carr. I can jump up and say absolutely not. As a1022lawyer, one of the best things I ever did was go to law school,1023because I'll tell you the NDAs that I signed with some of the1024big primes, they take your IP, they absolutely take the1025knowledge, the idea, and then they fit you into that box, and1026they force you into that box.1027    Senator Husted. And you must stay in that box.1028    Mr. Carr. You must stay in that box, which is completely1029against the idea.1030    Senator Husted. Yes. Madam Chair, an opportunity maybe to1031explore that issue on another occasion. Thank you.1032    Chair. Yes, absolutely. Thank you, Senator Husted. And1033Senator Markey, we'll go back to you.1034    Senator Markey. Thank you so much. And I agree with--1035listen, this whole idea of the big companies, like Microsoft1036just swiped the browser idea, you know, from Netscape, just1037swiped it. Oh, we're going to give it away. We've innovated it1038so we can give it away--the Internet Explorer. Big companies1039actually don't make breakthroughs, it's just a joke, they steal1040it from younger companies, whoever, they'll buy it up. But a1041lot of stealing goes on. You got to protect these people from1042the highway robbery of Silicon Valley companies. They just put1043more police on that beat.1044    The SBIR and STTR programs provide small businesses early-1045stage funding when private sector funding is less likely. Many1046small businesses have said that without SBIR and STTR funding1047their businesses and the technologies that they successfully1048develop may not exist.1049    More often than not, companies utilize SBIR to develop1050technologies that ultimately reach the market to benefit1051Americans across the country and provide critical technology to1052the government. So, Dr. Mahmud, can you speak to the impact1053that SBIR and STTR funding have had on Tritons ability to1054innovate technologies that benefit everyday Americans?1055    Dr. Mahmud. Thank you, Senator, for the question. So, as I1056had mentioned at the beginning, just because of the passion of1057our employees, we do target benefiting the war fighter for a1058lot of the technologies that we develop. And it turns out in1059many cases that the technologies have a dual use. In fact, in1060our business model, when the technology has a commercial use,1061we completely spin off the company to go raise money in the1062venture capital market, as has been discussed. Because the1063commercial market operates, you know, the venture capital1064industry has very tight timelines and expectations, as was just1065mentioned.1066    So, one example that I can cite, which is benefiting1067everyday Americans, is when we started and we created a spinoff1068for a sensor technology, a location sensor technology, and the1069application--the biggest application turned out to be for a1070heart pump. A heart pump that is used as I had just mentioned,1071for Cardiac disease, heart attacks and cardiac disease are the1072number one cause of deaths, for Americans.1073    This heart pump used this sensor, they enabled the heart1074pump to become the smallest heart pump and heart pumps are1075inserted through the artery, it has to be very small. And so,1076it enabled this technology and that heart pump is now widely1077used. So, this is an example of something that has widespread1078application, but did come from an SBIR technology that was1079targeting a different application.1080    Senator Markey. Again, half all SBIR and STTR awards are1081made by the defense department.1082    Dr. Mahmud. Correct.1083    Senator Markey. The Defense Department has to approve these1084SBIR awards, this is the technology the defense department1085wants, to protect our country. And, ultimately our advantage1086over China or any other country is that we're technologically1087superior to them.1088    My mother would always say to me, when she was disappointed1089in me as a boy, she would say, Eddie, your father and I are1090going to donate your brain to Harvard Medical School, it's a1091completely unused human organ. Okay? So, you have to learn how1092to work smarter, not harder. So that's what technology is, and1093it has to be the best technology if you're going to surpass the1094Chinese, this is a ruthless Darwinian world that we're in right1095now.1096    So, in your opinion, doctor, does the Defense Department1097make those kind of ruthless Darwinian decisions to enhance our1098defense capability when they're deciding who gets these SBIR1099awards?1100    Dr. Mahmud. I can only speak to my company's experience; I1101can't speak to DODs practices. In our experience, we tend to1102focus on trying to understand what the gap is for the war1103fighter. We focus a lot to understand that. Oftentimes the1104commercial application may not be obvious to us. And when we do1105find a commercial application, as I said, we spin off the1106company to raise money in the venture capital market.1107    And as I've showed in our examples, when we understand the1108problem, and I'll give you the example of the F-35, there was1109two problems there. One is of course sustainability costs, the1110source was a foreign source, and then the second problem was1111that it was causing a significant health hazard to the war1112fighter, the maintenance depots, and the service depots.1113    And so, we worked with the primes, and as I mentioned, you1114do have to work with the primes because they own the F-35. They1115own most platforms. We work with the primes closely to1116incorporate this new material to solve this problem, which as1117the Air Force has announced, is going to save them over a half1118a billion dollars. So, I'm not sure if I answered your1119question.1120    Senator Markey. Well, you did. You have a technology that1121the military's going to use, would work smarter, not harder,1122saves money, you know, it works better. It's a smart1123technology. And you did it in conjunction with the Defense1124Department wanting a solution and you did it with the prime,1125but the prime itself wasn't coming up with the answer. And the1126SBIR incentivize you to find the answer to the problem. Is that1127correct?1128    Dr. Mahmud. That's correct, Senator. And if I may add, you1129know, cost savings that we bring to the government, like in1130this case, and there are other cases, there's another case1131where we save $200 million for the F-22 platform. They do not1132show up in any metrics. None of our metrics, SBIR metrics,1133success metrics, they don't show up.1134    So, it's highly unlikely if we don't solve this problem1135that anyone else will do it. Because there's no financial1136incentive for most companies to take on a problem that has a1137low return for the company, relatively speaking, versus the1138government.1139    Senator Markey. And if I may, so you are saying essentially1140venture capital money is looking to make a big profit. And here1141there's not a big profit, but there's a big problem that has to1142get solved by the Defense Department because of some medical1143condition that they want to see solved.1144    Dr. Mahmud. I will just say, you know, our spinoffs are1145very active in the venture capital market, so we understand,1146you know, how the venture capital market works very well. I1147will just say that there are problems that are debilitating and1148life-changing and very, very difficult for the war fighter. I1149just mentioned the hearing loss problem. The hearing loss1150problem is a significant problem for the war fighter.1151    The F-35 problem was really exposing them to a lot of toxic1152dust. The bladder relief problem which we worked on, and is now1153being evaluated by the pilots in the Navy and the long-range1154recon missions that the Air Force is running over our1155adversaries. You know, there is no restroom for female pilots.1156There is no solution. You know, some pilots practice tactical1157dehydration. It is not a good situation. And, you know, we came1158in with a solution that was optimal for female pilots, female1159aviators actually. And also, for male aviators now.1160    So, these are not problems that the traditional marketplace1161looks to address because the market is too small. There's only1162so many pilots. There's only so many--the market is just not1163big enough to attract those investments. And those are the ones1164where we feel we have brought tremendous benefit to the war1165fighter.1166    Senator Markey. Thank You, doctor. Thank you.1167    Chair. Thank you. And I now recognize Senator Shaheen.1168Thank you.1169    Senator Shaheen. Well, thank you Madam Chair and Ranking1170Member. I'm delighted that we're doing this hearing on the SBIR1171and STTR programs. Thank you to all the witnesses for being1172here. I apologize for missing your testimony. I was at Armed1173Services hearing subcommittee, so that's why you weren't there,1174Senator Ernst. [Laughter.]1175    Senator Shaheen. But the reason I'm so enthusiastic about,1176one of the reasons I'm so enthusiastic about the SBIR program1177is that it was created by New Hampshire Senator Warren Rudman1178back in the 1980s. And so, I've had a chance to see it up close1179from that time to see how it's grown and to see the difference1180that it's made for small business in New Hampshire. And I know1181that you have stories about the differences that it's making in1182Massachusetts and Iowa and across the country.1183    And you may have already asked this question, question,1184Senator Markey, because I just came in on the end of it. But as1185I understand Dr. Mahmud, in your testimony, you described1186millions of dollars in savings to the Defense Department from1187SBIR work that your company has done. And do you know if those1188savings are counted in statistics about the SBIR return on1189investment or on in the commercialization data that's provided?1190    Dr. Mahmud. Thank you, Senator. I did, you missed that1191part, that question was asked, but I will repeat that. Thank1192you for asking that. So, you know, cost savings that we realize1193for the government and just as importantly benefits to the war1194fighter's health, preventing hearing loss, once a war fighter1195is exposed to noise, and they are exposed to a lot, air crews1196are exposed to a lot of noise, it is a permanent condition,1197it's impossible to reverse it. It's very difficult to reverse1198it, I should say. It's not impossible, it's very difficult to1199reverse it.1200    And I also mentioned that the VA, there's a million1201veterans with hearing loss right now, and 2 million with1202tinnitus, which is related. So, we have focused in terms of our1203support to the war fighter on developing technologies for air1204crew protection that's being qualified for Army helicopters.1205And we are developing bladder relief for female pilots for long1206distance recon mission.1207    Senator Shaheen. I did hear you talking about that.1208    Dr. Mahmud. Okay. Thank you.1209    Senator Shaheen. Apologize my attention because you were1210talking about hearing loss, and we have a New Hampshire company1211that's developed a new hearing protection helmet system for1212aircraft carrier deck crew for that very reason. And they1213estimate that the Navy's going to save about $500 million1214because of their SBIR award. So, it is something that I think1215we ought to think about how we include that information in the1216statistics about the program.1217    Mr. Strawhacker, I think you talked about working together1218with neighboring states on the FAST program. Do you think more1219funding for FAST would help with those partnerships and or how1220can we encourage that kind of collaboration?1221    Mr. Strawhacker. Well, I do think that that type of1222collaboration should definitely be looked at being implemented1223everywhere across the nation. Especially those FAST awardees1224who exist within an SPDC program. We already have a nationwide1225network that builds in geographic subgroups, that meet together1226some annually, some quarterly. I know the Southeast area is1227very strong in the SPDC network.1228    Those that have the FAST grant in addition to the SBDC1229program, have that natural group already there. They just need1230to tap into bringing the right advisors to the table and having1231that. The FAST grant plays a complimentary role to the business1232owners, they are the innovators, it's their technology. They1233just need us to support them and help them access the correct1234resources. Thank you, Senator.1235    Senator Shaheen. Thank you. Dr. Mahmud, I know that there1236has been some discussion about limiting the number of awards1237that a business can get through the SBIR program. And I would1238ask you and others on the panel, if that's something that would1239be helpful. I know that we have a number of companies in New1240Hampshire that have been very successful at getting multiple1241awards, and I would hate to have them be limited in what they1242could get. So, I don't know, maybe you could speak to that and1243others could speak to it if you have a view on that issue.1244    Dr. Mahmud. Sure, thank you, Senator, for the question. I1245think one of the most powerful foundations of the SBIR program,1246it was set up very wisely, that the agencies have a tremendous1247amount of flexibility to adapt the program to their mission1248needs. So, they have the flexibility to decide on limiting the1249number of applicants. They have the flexibility to decide on1250how many open topics, they have tremendous flexibility to1251adjust to what they need.1252    So, you know, from our view, we support the mission of the1253agencies. And if we are allowed to, if we see a problem, we'll1254put in our idea. And if it is a good idea or the best idea, it1255is often recognized. And if it's not, its not. We think the1256tent is wide and we have a shrinking defense industrial base.1257We have no opportunity to take out good ideas. We are not going1258to win if we take out good ideas. So, there's no reason to cap1259good ideas.1260    Senator Shaheen. Thank you. I'm out of time, Madam Chair,1261but I don't know if anybody else would want to speak to that?1262    Mr. Carr. I would just add, so I'm a large proponent of1263putting some type of cap in, especially for Phase I and Phase1264II. And the specific reason for it, is we're talking about1265small businesses here, we're not talking about primes. If1266you're a small business, I can't chase 20, 30, 50, a hundred1267different technologies with different market applications and1268different things. I can't raise money for it. These guys would1269never give me money. Because the reality is, I've got to be1270super focused as an entrepreneur, to be able to scale that1271capability into an actual product and then naturally into a1272company.1273    So, if we have companies that have hundreds of different1274products and technologies, what are they working on? And in1275fact, I would argue that they're absolutely getting1276disincentivized to be able to take that one particular1277technology that we say.1278    Senator Shaheen. And do we have any that fit in that1279category? Is there information that shows that we have multiple1280companies that fit into that category?1281    Mr. Carr. I would argue that SBIR Mills would be the way to1282do it.1283    Senator Shaheen. And do you also feel that way if it's done1284not simultaneously, but serially, so the company gets an award,1285is successful, then applies again, and gets another award and1286is successful or not, applies again. Are you concerned about1287that aspect of it as well?1288    Mr. Carr. I mean, for us we actually--because of the dual1289use aspect of the SBIR program going into, we actually1290diversified into construction cranes and now stabilize loads on1291suspended cranes. But it's tangential technology specific to1292what we are building. What I would argue there is that if it1293continues to be linear and you go from one technology to the1294next, are you really exiting the business or are you just1295continuing to basically create kind of a new product at the1296bequest of the U.S. government, i.e., the SBIR program, but1297never taking that to the final step, which is, Hey, you're my1298customer. How do I get this to you? And how do I get it to you1299as fast as I can? But not just you, but the whole market as a1300whole.1301    Senator Shaheen. Thank you. Thank you, Madam Chair.1302    Chair. Thank you. And Senator Budd, you are recognized for1303five minutes.1304    Senator Budd. Thank the Chair and thank you all for being1305here today. Mr. Rothzeid, every day I hear from small1306businesses in North Carolina particularly small businesses with1307innovative solutions to real problems facing our war fighters1308who discuss challenges to working with the DOD. We hear it all1309the time.1310    So, the PPBE reform report, or the commission on Planning,1311Programming, Budgeting and Execution, I'm sure you're familiar1312with it, highlights the barriers to new and emerging defense1313companies in working with the DOD. Specifically, PPBE1314commission finds that ``A challenge SBIR faces, is that1315promising Phase II projects are not deployed as often as would1316be preferred by the DOD.'' So, what do you see as the principal1317barriers to Phase II projects deploying further within DOD?1318    Mr. Rothzeid. Thank you, Senator Budd. And I would just1319recognize that the managing partner of Shield Capital Raj Shah,1320was one of the commissioners on the PPB and E.1321    Senator Budd. You might have a little insight then.1322    Mr. Rothzeid. So as far as you know, the transition rates1323which I highlighted in my testimony being about 18 percent,1324moving from Phase II to Phase III, is a low number. And I'm not1325here to argue that it needs to be a hundred percent right.1326We're talking about seed innovation; we're trying out ideas.1327The war fighters can provide feedback. If it's not meeting a1328need or if it's not a scalable need, then there's no need to1329continue it forward.1330    But I think one of the areas that really hampers the1331Department of Defense is, while you can win an SBIR in the year1332of execution, so within this current fiscal year, the planning1333programming and budgeting, and execution is inherently a two1334year long process. So, there's no gap year to be able to fill1335that need, so that what the war fighter likes and sees and1336wants to scale, they now have to sort of sit on their hands and1337wait for the PPB and E to now catch up for the ensuing fiscal1338year, often two fiscal years ahead.1339    And that can be a really big challenge for a company that1340is trying to sell a product that is very specific to the war1341fighter. Now, in a lot of cases in the companies that we invest1342in, they're dual use tech. So yes, we want them to sell to the1343Department of Defense National Security, we also want them to1344be selling to the commercial environment. That sort of leverage1345provides them an opportunity to stay afloat while the PPBE1346cycle catches up.1347    However, why should our war fighters have to wait for a1348solution that they need today? Right? We're working for a1349readiness that allows us to be prepared tomorrow.1350    Senator Budd. So, in simple terms, what's the fix there?1351Other than just getting cash flow, I imagine from the1352commercial applications.1353    Mr. Rothzeid. Absolutely. And so, one thing that the1354Department of the Air Force came up with in March of 2020 was1355the STRATFI/TACFI program. And it allows them to leverage1356additional SBIR funding up to 15 million with just SBIR1357funding, to carry forward on promising technology that has1358matching funds. In that so far as the DOD has non SBIR funding1359allocated to them, and they've also erased third party venture1360capital.1361    Senator Budd. Okay. So, you mentioned that 18 percent kind1362of make that gap over to Phase II, right?1363    Mr. Rothzeid. From Phase II to Phase III.1364    Senator Budd. Phase II to Phase III. So, 82 percent don't.1365So, with this new system, if you will, in place that you just1366mentioned, what does that number go to? It goes from 18 percent1367to--what would you estimate it to be?1368    Mr. Rothzeid. Well, with the reality of an opportunity1369cost, where now more of that funding that would've gone to fund1370more Phase I, more Phase IIs being put into this other bucket1371of STRATFI or a bridge if you will, you're probably going to1372see a shrinkage of the amount of total number of SBIR Phase I,1373Phase IIs, a larger number of opportunities to transition to1374Phase III. I would expect it to go more to the 35 percent,1375ideally doubling.1376    Senator Budd. And you're saying in that 82 percent, which1377would diminish in this scenario, the 82 percent fails. There's1378a lot of good useful things. It doesn't, need to be a hundred1379percent that passes, but the 82 percent that fails, there's a1380lot of useful things in there for our war fighters that are1381unnecessarily failing.1382    Mr. Rothzeid. Unfortunately, that is the case.1383    Senator Budd. Okay. The PBBE Reform Commission also1384recommended aligning the SBIR program to the DOD overall1385science and technology strategy by ensuring that the1386programming and budgeting process includes specific analysis of1387SBIR and STTR projects as budget requests are being developed.1388So, can you speak to your views on that recommendation?1389    Mr. Rothzeid. I'm sorry, sir, I wasn't quite following.1390    Senator Budd. So, I think there's the question of, they1391want to align the PBBE Reform Commission, they want to align it1392with the DoDs overall science and technology strategy. And they1393want the budgeting process to include specific analysis of SBIR1394and STTR projects as the budget requests are being developed.1395So, do you have any thoughts on that?1396    Mr. Rothzeid. I would just say that 11 of the 14 critical1397technology areas as identified by the Department of Defense, 111398of them are commercially developed. We need to align our S&T1399strategy with where the emerging market trends in the1400commercial sector are occurring, and make sure we are providing1401healthy amount of financing in those areas for DOD programs.1402    Senator Budd. That's very helpful. Thank you all.1403    Chair. Thank you, Senator Budd. I'll go ahead and start, if1404you'd like a second round.1405    Senator Markey. If I may, if you don't mind.1406    Chair. I'll go ahead and--if you want to go ahead, I'll1407close up after you. Absolutely, Ranking Member, go ahead.1408    Senator Markey. No, I thank you so much. Two weeks ago, the1409House Small Business Committee held a hearing on SBIR and STTR1410where Chairman Williams in the house, talked about the1411importance of preserving merit-based competition in the1412program. He said, innovators thrive in an environment where1413competition reigns supreme, where they are free from the1414limitations or caps on their success. And I agree with that. We1415should prioritize merit without adding extra layers of1416bureaucracy.1417    So, Dr. Mahmud, through Triton Systems we have seen great1418success in meeting the increased commercialization benchmarks1419for experienced small businesses. And I understand that the1420company did not meet the increased transition benchmarks1421leading to a limit on the number of Phase I and direct to Phase1422II awards Triton can receive. How have these caps impacted your1423company's strategy in determining what you would be proposing1424in the future?1425    Dr. Mahmud. Thank you, Senator, for the question. I think1426we can all agree that the commercialization benchmark, this is1427what everybody's talked about, is very important. Everything1428needs to have a purpose. Everything needs to--we need to1429maximize commercialization. That's how all companies should be1430measured, at least in my opinion. The Phase I to Phase II1431conversion metric does not have a commercialization meaning,1432you know.1433    For example, we just talked about bringing in more1434companies, giving out a lot of Phase I awards. Air Force did1435that, by the way. They gave out a lot of small Phase I awards,1436and then maybe they had one or two Phase IIs in mind. I don't1437know.1438    Senator Markey. Maybe they had one or two?1439    Dr. Mahmud. Phase II's in mind. Because they want to see1440what's out there. So, this is the idea, is to make small1441investments and capture the best idea. So, I certainly don't1442feel that the Phase I to Phase II conversion metric carries any1443commercialization meaning.1444    Having said that, the Phase II awards as was discussed1445here, it was just discussed in a number of questions.1446Oftentimes the small business has no control, the need may have1447gone away. The customer no longer needs it, or the agency no1448longer needs it, or there's no funding. Or they will award1449many, many Phase Is and determine one Phase II. So, what we1450have done based on these new benchmarks is really become1451extremely risk averse and we only focus now on Phase Is where1452we totally understand how to transition this, you know, what is1453the best endpoint----1454    Senator Markey. So, you just look now at surefire1455commercialization?1456    Dr. Mahmud. That's right. We do not take high risk.1457    Senator Markey. You don't focus as much on the breakthrough1458technology that can be transformative because it's not a1459surefire commercialization yet. We need to be taking the risk1460to find the breakthrough because, in China, they're throwing1461tens of hundreds of billions of dollars at the breakthroughs.1462    Dr. Mahmud. Correct. We do not pursue high risk1463opportunities even if we have a good idea because we are not1464sure what the outcome is.1465    Senator Markey. Which is very, very helpful. And can you1466explain the process of transitioning from proof of concept, or1467a Phase I award, to a Phase II award and how rigorous that1468process can be even for the most innovative technologies? Dr.1469Mahmud.1470    Dr. Mahmud. Would you like me to explain the process, or1471excuse me, I didn't catch the question?1472    Senator Markey. The question is, can you explain the1473process for transitioning from a proof of concept or a Phase I1474award to a Phase II award? How rigorous is that process?1475    Dr. Mahmud. I'd be delighted to. So, you know, the, the1476philosophy of the SBIR program is to invest low in the Phase1477I's and then to see which of these proof of concepts is1478demonstrated. That's the process. But agencies have very1479different practices, as I just mentioned. Some may have a path1480to a Phase II, some may have no funds for a Phase II, this1481happens quite a bit. So, the agency itself may not have a plan1482on moving it forward, and oftentimes the need goes away.1483    So, the process for a general small business is understand,1484you know, if you can show the concept in the Phase I, then1485compete to demonstrate you have the best solution for the Phase1486II. And you know, that's the process. But as I said, because1487the agency practices are very different and the situations are1488different, the Phase II may become irrelevant, and then the1489small business has no control.1490    Senator Markey. No, and I thank you for that. And I thank1491all the witnesses. I thank you, Madam Chair. And I can just1492finish up, if I may, just by saying that we've heard the word1493``Mills'' thrown around today disparaging some of the most1494innovative and dedicated small businesses.1495    Massachusetts is proud of its mill culture. Our economy was1496built off of the textile mills during the Industrial1497Revolution. The only reason Thomas Markey left Ireland to go to1498Dover, New Hampshire was the mills were in Dover, New1499Hampshire, where Senator Shaheen's husband was being raised. So1500that's the only reason I'm here--is those mills.1501    And today the Senate Republicans, they're trying to paint a1502picture that innovative, ambitious, and productive small1503businesses or ``mills,'' as they like to call them, are bad.1504These mills that they want to end, they're small businesses1505that delve into novel ideas and bring them to reality. They are1506small businesses that develop cancer therapy technology and the1507world's smallest heart pump. Small businesses that save1508hundreds of millions of dollars for the federal government and1509have a huge return on investments, small businesses that1510advance the national security interest of our country.1511    If being a mill means being an efficient and effective1512small business innovator, then I don't think that's a bad1513thing. And Massachusetts and many other states are hubs of1514innovation, and that's why we produce such tremendous1515technology. And we don't have big businesses that much in1516Massachusetts that drive our economy, we have small businesses1517that come up with good ideas that serve our nation and save1518lives, especially in this defense sector. Okay, this is where1519we specialize.1520    Department of Energy is high on the list as well, but 801521percent as we know of the Department of Energy budget is just1522nuclear weapons, nuclear management. Right? You need the1523smartest people thinking about that, NASA all the way down the1524line. Those are the agencies that are asking for these1525technologies to be invested in, okay? And it's to keep us ahead1526of our geopolitical rivals in the rest of the world. It's using1527our brain power, and we just have to ensure that these small1528businesses are able to freely compete for government funding1529and are not penalized for their excellence. If someday they1530want to sell to a big company, Raytheon or Lockheed, that's1531their right.1532    But the innovation's going to come for our defense and for1533many other areas, from these smaller companies, and that has to1534be the primary thing. Is it going to likely produce that1535breakthrough or not? And does the Defense Department want to1536take a risk over here with some breakthrough technologies that1537may or may not get the result they're looking for in the first1538or second round? Okay.1539    That's the decision I think we have to make as a country.1540And I thank you, Madam Chair, for this very valuable hearing.1541    Chair. Thank you. I do have just a couple of additional1542questions and we'll demonstrate why we think there is a need1543for reform. And so, Dr. Mahmud, again, thank you for being1544here. And please answer yes or no for this question. Are you1545aware of any ties between your leadership team, personnel, or1546spinoff companies with foreign countries of concern?1547    Dr. Mahmud. May I answer the question?1548    Chair. Yes.1549    Dr. Mahmud. So, we are a cleared facility. We are audited1550by the Defense Counterintelligence and Security Agency (DCSA).1551We work closely with DCSA on vetting out any kind of foreign1552intrusion into the company. As I had just mentioned, when our1553spinoffs go out in the venture capital market, you know, we1554have no control of them. The spinoffs, you know, they will go1555and raise money in the venture capital market. We have no say1556on that.1557    We have taken in consultation with DCSA incredible1558safeguards to isolate our technologies and our personnel from1559everyone, including the board and the management of our1560company. We have worked very closely with DCSA to do that1561because of this exact concern that spinoffs, we have no control1562over what they do.1563    Chair. So, you are aware though, that there have been ties1564to countries of concern?1565    Dr. Mahmud. I've read in the press. I am not personally1566aware, but I've read in the press that, you know, one of the1567spinoffs, has made--raised money globally. So, there is concern1568about that, and we cut off all ties with those spinoffs a long1569time ago.1570    Chair. Okay. And just so for the record, Triton has1571received 902 SBIR/STTR awards, accounting for more than $3501572million. And that is really hard for me to explain to Iowans1573how someone who has received over $300 million can still be1574considered a small business. So that's really difficult for me1575to explain in the Heartland.1576    So, I do want to enter into the record open-source data1577that I found on ties between Triton CEO and joint ventures with1578Triton spinoff companies. You did state that you can't control1579those companies, but they are ties between your spinoff1580companies and companies in China, and without objections, so1581ordered.1582    Chair. So again, what we found in 2020, was that Tritons1583current CEO then was appointed to serve on the board of CITIC1584Capital Acquisition Corporation, which is a Chinese financial1585service sponsored by a state-owned financial conglomerate in1586China. Further, FRX polymer, a spinoff again of Triton,1587received $22 million from CITIC and pursued a joint venture1588with a Chinese company in 2019. Tritons biotech division also1589merged to become Chinook Therapeutics, which in 2021 pursued a1590joint venture with Pivotal bioVentures China.1591    Triton, CEO was the chairman of FRX until last month, and1592was a board member of Chinook Therapeutics. I would like to1593enter into the record open-source data on these ties with1594China, and without objection, so ordered.1595    Chair. I also want to point out the SBIR due diligence1596disclosures require Triton to disclose joint ventures and1597foreign investment. Spinning these companies off to do joint1598ventures and taking Chinese investment appears to be a1599loophole, and this track record should be accounted for when1600Triton applies for SBIR awards.1601    Triton does not seem to care who they are selling taxpayer1602funded research to. This is a national security risk and why1603I've proposed strengthening the due diligence evaluation1604standards, to make sure agencies are catching all of this open-1605source analysis and making prudent judgment calls on who they1606award repeat contracts to.1607    So, again, the SBIR mills, I understand that while there1608may be opportunity out there for these small businesses, I'm1609going to set the record straight with this. Success is not1610measured in the number of SBIR awards a company wins, but1611rather the commercial and mission impact made by leveraging1612SBIR dollars. I think a number of you stated that. We should1613not reward firms that game the system and use SBIR known by1614many as America's Seed Fund, as their primary revenue source,1615yet have fewer sales, fewer investments, and fewer patents as1616GAO reports.1617    SBIR mills push out innovators in the heartland states like1618mine of Iowa, and like Senator Jackie Rosen's in Nevada. I have1619a hard time justifying again to Iowans that companies that can1620take hundreds of millions of dollars of SBIR grants can still1621pass as a small business. So those concerns outline exactly why1622I am pursuing changes to the SBIR/STTR program. I do hope that1623we will have a bipartisan bill that we will be able to move1624forward. We have been joined by Senator Young. Senator Young,1625do you have questions before we close today's hearing?1626    Senator Young. Well, I do Chairman. Thank you so much,1627Chair Ernst, I thank the Ranking Member for holding this1628important hearing. Thank all of our witnesses for being here.1629    As Congress continues to consider reauthorizing this1630important SBIR/STTR program, I think it's critical that we take1631this opportunity to review the framework, look for ways in1632which we can improve it. Relatedly, over the last year or so,1633I've had the privilege of chairing a commission, the National1634Security Commission on Emerging Biotechnology.1635    And one of the topics that will be included in our report1636to Congress, is how China is outspending and out strategizing1637the United States when it comes to critical technology1638investment, and development of those technologies, especially1639in the area of biotechnology. And, and so I asked Mr. Rothzeid,1640how can the federal government better ensure that funds of this1641program are translating into material technology innovation,1642especially in the areas that require sustained capital to1643scale?1644    Mr. Rothzeid. Thank you, Senator Young. In my mind, the1645only way that the U.S. can compete with China when it comes to1646technology is by leveraging its greatest asset, and that's the1647private capital marketplace, the envy of the world, because it1648attracts entrepreneurs both here in the United States and1649abroad to want to come build here.1650    The days of the government being able to foot the bill with1651its R&D budget are long gone past, but the systems and the1652programs and the structures that we've put in place, were1653predicated on that paradigm. Just going back to 1960, 241654percent of all the world's R&D expenditure were happening in1655government labs, today, it's less than 1 percent.1656    So, if we're going to compete, we have to get smarter about1657how we're leveraging taxpayer dollars and leveraging third1658party capital providers, to build technology companies of1659consequence. Thank you, sir.1660    Senator Young. Well, thank you. Your points of emphasis are1661well received, especially in light of the fact that I've been1662working with, I think every member of this committee, on1663something outside of the jurisdiction of this committee, but1664it's to preserve research and development deductions through1665the tax code for our small businesses and frankly, for emerging1666high growth potential businesses pre profitability, to offer1667them an R&D tax credit to incentivize their early-stage R&D and1668then hopefully growth as a company. Mr. Rothzeid, to continue,1669do you have additional thoughts on how the SBIR/STTR program1670can better support American tech innovation and biotech and1671other critical sectors?1672    Mr. Rothzeid. Yes. Senator Young, I think what Chair Ernst1673has proposed with creating bridge programs within the SBIR1674program to provide larger pots of funding for technology of1675consequence as signaled by the federal agencies, similar to1676what the Air Force and Space Force have done with STRATFI and1677the Army with Catalyst, these are the types of signals that1678help ensure that the investors can then understand what's1679really important to the federal agencies, provide additional1680capital to those companies so that they can hire the right1681amount of people, invest in cutting edge equipment, and1682continue to scale and grow.1683    Because if we're not building companies that want to scale1684and grow, then they won't be able to meet the needs of national1685security and outfitting thousands of soldier sailors, marines,1686airmen, and guardians.1687    Senator Young. Thank you for that. I have about a minute1688left and would just like to briefly explore with you, Mr.1689Rothzeid, something related to DODs integration of open topic1690solicitations. My office has been impressed with these and1691their importance. These allow small businesses to propose1692solutions, to more broadly define problems. As we think about1693ways to support small businesses that are working on innovative1694technologies, it seems like expanding what departments and1695agencies can solicit open topic proposals for, might make some1696sense. Can you offer any reflections on this topic?1697    Mr. Rothzeid. Senator, I believe that the open topic is the1698reason why this convening is happening today, getting interest1699from venture capitalists like myself and startup founders, like1700Mr. Carr. It's because innovators are building solutions that1701the department hasn't even imagined.1702    If we leave it to the whims of the department, they'll come1703up with very bespoke requirements around the things that1704they've already thought of. But that's a very small pool of1705people. Instead, we need to open it up to open topics. What are1706the solutions to the problems I didn't even know I had, and let1707the entrepreneurial class of America go to work.1708    Senator Young. In light of the fact that I've already gone1709over my time. Might I work with you on an ongoing basis to1710explore ways to expand the scenarios and situations with which1711open topic proposals can be utilized and related topics?1712    Mr. Rothzeid. Senator Young, absolutely.1713    Senator Young. All right, great. Thank you, Chair.1714    Chair. Thank you. Are there any additional questions? Okay.1715And with no further questions, I want to thank the witnesses1716for being here today. I ask unanimous consent that the record1717of today's hearing remain open for two weeks for members to1718submit questions, revise, and extend their remarks, and submit1719additional information into the record.1720    Chair. Without objection, so ordered. And with that, the1721Committee on Small Business and Entrepreneurship stands1722adjourned.1723    [Whereupon, at 4:11 p.m., the hearing was adjourned.]1724   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]17251726                               [all]