I’ve known Edmund Pendleton from the University of Maryland as the Director of the D.C. National Science Foundation (NSF) I-Corps Node (a collaboration among the University of Maryland, Virginia Tech, George Washington, and Johns Hopkins). 
But it wasn’t until seeing him lead the first I-Corps class at the National Institutes of Health that I realized Edmund could teach my class better than I can.
After seeing the results of 500+ teams through the I-Corps, the NSF now offers all teams who’ve received government funding to start a company an introduction to building a Lean Startup.
Here’s Edmund’s description of the I-Corps Lite program.
SBIR/STTR Program and Startup Seed Funding
The Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) programs are startup seed funds created by Congress to encourage U.S. small businesses to turn Government-funded research into commercial businesses. Eleven U.S. agencies participate in the SBIR/STTR program, with DOD, HHS (NIH), NSF, DOE, and NASA offering the majority of funding opportunities.
The SBIR/STTR program made ~6,200 seed stage investments in 2014, dwarfing the seed investments made by venture capital. 
The SBIR/STTR program represents a critical source of seed funding for U.S. startups that don’t fit whatever’s hot in venture capital. In fact, half of all seed stages in tech companies in the U.S. were funded by the SBIR program.
The SBIR/STTR program
The SBIR/STTR program funds companies in three phases. Phase I funding is for teams to prove feasibility, both technical and commercial.
Since most of the founders come from strong technical roots, companies in Phase I tend to focus on the technology – and spend very little time understanding what it takes to turn the company’s technology into a scalable and repeatable commercial business.
In 2011 the National Science Foundation recognized that many of the innovators they were funding were failing – not from an inability to make their technologies work – but because they did not understand how to translate the technology into a successful business. To address this problem, the NSF collaborated with Steve Blank to adapt his Lean LaunchPad class at Stanford for NSF-funded founders. By focusing on hypothesis testing, the Lean LaunchPad had actually developed something akin to the scientific method for entrepreneurship. (see here, here and the results here.) This was an approach that would immediately make sense to the scientists and technologists NSF was funding. Steve and the NSF collaborated on adapting his curriculum and the result was the 9-week NSF I-Corps program.
NSF’s original I-Corps program was specifically designed for academic innovators still in the lab; fundamentally, to help them determine the best path to commercialization before they moved to the start-up stage. (I-Corps participants are at the “pre-company” stage.) But NSF realized the Lean LaunchPad approach would be equally beneficial for the many startups they fund through the SBIR/STTR program.
The “Beat the Odds” Bootcamp – an I-Corps “Lite”
The good news is that the NSF found that the I-Corps program works spectacularly well. But the class requires a substantial time commitment for the founding team to get out of the building and talk to 10-15 customers a week, and then present what they learned – the class is essentially a full time commitment.
Was there a way to expose every one of ~240 companies/year who receive a NSF grant to the I-Corps? The NSF decided to pilot a “Beat the Odds Boot Camp” (essentially an I-Corps Lite) at the biannual gathering of new SBIR/STTR Phase I grantees in Washington.
Steve provided an overview of the Lean LaunchPad methodology in an introductory webinar. Then the companies were sent off to do customer discovery before coming to an optional “bootcamp workshop” 12 weeks later. Four certified I-Corps instructors provided feedback to these companies at the workshop. The results of the pilot were excellent. The participating companies learned a significant amount about their business models, even in this very light-touch approach. The NSF SBIR/STTR program had found a way to improve the odds of building a successful company.
During the past two years, I’ve taken the lead to expand and head up this program, building on what Steve started. We now require the participating companies to attend kick-off and mid-point webinars, and to conduct 30 customer interviews over the twelve-week program. The companies present to I-Corps instructors at a “Beat the Odds Bootcamp” – the day before the biannual NSF Phase I Grantee Workshop.
In March we conducted our fourth iteration of this workshop with a record number of companies participating (about 110 of 120, or 90%) and 14 certified I-Corps instructors giving feedback to teams. This time, we added afternoon one-on-one sessions with the teams in addition to group presentations in the morning. Companies are very happy with the program, and many have requested even more face time with I-Corps instructors throughout the process.
The smart companies in Phase I realize that this Bootcamp program provides a solid foundation for success in Phase II, when more dollars are available.
What’s Next
Currently, once these teams leave I-Corps Lite, they do not have any “formal” touch points with their instructors. Over time, we hope to offer more services to the teams and develop a version of I-Corps (I-Corps-Next?) for Phase II grantees.
We envision even greater startup successes if SBIR/STTR funded teams can take advantage of I-Corps classes through their entire life cycle:
- “Pre-company” academic researchers – current I-Corps
- Phase I SBIR/STTR teams – current I-Corps Lite
- Phase II SBIR/STTR teams – develop a new I-Corps Next class
The emphasis and format would change for each, but all would be solidly rooted in the Lean LaunchPad methodology. And of course, we don’t want to stop with only NSF teams/companies…as we all know. The opportunity is huge, and we can have a significant impact on the country’s innovation ecosystem.
Summary
NSF led the development of the SBIR program in the late 1970s. It has since been adopted by the entire federal research community. We believe NSF’s leadership with I-Corps will deliver something of equal significance… a program that teaches scientists and engineers what it takes to turn those research projects into products and services for the benefit of society. I-Corps Lite is one more piece of that program.
Lessons Learned
- The SBIR/STTR program is a critical source of seed funding for technology startups that don’t fit the “whatever’s hot” category for venture capital
- The program is a national treasure and envied around the world, but we can (and should) improve it.
- SBIR/STTR Phase I applicants needed more help with “commercial feasibility”…a perfect fit for business model design, customer discovery and agile engineering – so we rolled out the NSF I-Corps
- The I-Corps was so successful we wanted more NSF funded entrepreneneurs, not just a select few, to be exposed to the Lean methodology – so we built I-Corps Lite
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Filed under: Customer Development, Lean LaunchPad, NSF (National Science Foundation), Teaching |
I very much applaud your efforts with NSF SBIR recipients. Having worked for a company that successfully translated several of these NSF grants into a commercial product, I feel such efforts are long overdue in the STTR/SBIR world.
The SBIR/STTR is a really important program – and one of the few ways entrepreneurs can move their dreams forward without equity dilution.
It is, however, far from perfect.
1. The NSF is just one of a number of U.S. agencies funding such programs (DoD, NASA, NIH, etc.) – and they may not be as uniformly as enlightened as the NSF. It’s unclear that these agencies even talk with one another with regards to SBIR grant applicants.
2. There remains significant opportunity to abuse such SBIR/STTR program funds by companies whose primary business model is to repeatedly write grants and win SBIR funding – with no intent to ever bring anything to commercial viability. The commercial track records of the top 10 “SBIR Mills” in the United States is poor despite having captured hundreds of Millions of SBIR dollars that could have – in my opinion – be better spent on funding emerging entrepreneurs who have genuine skin in the game. (It’s also interesting to note that the ability to sort companies by the total funds they have secured over the years was recently removed from SBIR/STTR site functionality.)
3. SBIR funds tend to support technology development for niche products serving niche applications in which the government has current or future interests that aren’t presently interesting to commercial markets/investors. It takes quite a bit of thought – and experience in a variety of market sectors – to see how some of these proposals could be translated to the “dual-use” applications the U.S. Government covets.
4. SBIR/STTR Program Managers are under intense pressure to the spend the $ they have as quickly as they can after they receive it. It’s a primary job performance metric. To help them. they tend to turn to past SBIR grant-winners to help them make quick decisions about what to fund. If you’re not friendly with the Program Manager – and with previous grant winners who review applications – your chances of winning SBIR funds are very small. “SBIR Mills” know this and use it to their advantage.
5. My experience with the handful of companies providing “market insight” to grantees – using the small amount of $ (< $10K) the SBIR program provides – has been quite disappointing. It would be charitable to call it "cut and paste" marketing. It's not worthy of basing any commercial business on.
Unfortunately, resolving these issues isn't straight forward. I don't have all the answers, but do have a few suggestions:
A. As you've intimated, permit the use of SBIR funds for some level of early-stage business development and marketing help to help define the focus of technology development efforts, Right now, the funds must be primarily dedicated to technology development, too often resulting in "technology push" problems that cause technologies to be shelved after they've been developed because they don't solve any meaningful problem in the marketplace. I trace this back to grant applications that have been written by scientific/technical personnel have a vested interest in the employment outcome, but not the market outcome. Putting a marketing/business development person on the payroll – with proven chops in the target markets – could help. A lot.
B. Place a lifetime limit that any entity and/or individual may secure in SBIR/STTR funding that cuts across all funding agencies. They may be harsh and controversial, but I think they're necessary. If an individual and/or company hasn't produced anything commercially viable with the $ they've won over some metric that's a product of time, $, market maturity or important, they need to go do something else other than using their government connections to continue to try to win STTR/SBIR grants.
C. Establish a metric that rewards SBIR/STTR Program Managers for bringing new companies and individuals into the funding fold. There are thousands of companies and budding entrepreneurs out there who could make very efficient use of the SBIR/STTR dollars, but lack connections into and experience with these complex government funding processes. Perhaps simplifying the application process could help. SBIR applications as they stand today are too complex and require a great deal of the experience to complete and "spin" properly for Program Managers. Sad to say, but SBIR Mills have learned to efficiently process the paperwork – and know how to spin their efforts to entice Program Managers to fund their efforts.
D. Ban current SBIR grantees from serving on SBIR grant application review processes. Same with individuals who work in the national labs who may have long-established relationship with potential awardees in the technology areas of interest. There's an subtle conflict of interest that arises with this relationship and the tie-backs of SBIR/STTR funding to funding levels of the government labs.
My two cents… or three…
I am a big fan of Edmund’s as well. We are lucky to have him in the DC Metro.
We are currently working with a physican lead startup who is very successful at early stage grant funding but pushed back when presented with the lean I-corp model – Just last night he said it is too much of a risk to use this model since the reviewers aren’t trained in it and to just write a regular grant instead. How do we counter that view?