Have A Moonshot Idea? The NSF is the investor for you!

From sending a man to the moon to putting a portable computer in everyone’s pocket, today’s technological and scientific renaissance is the product of great innovators — people who push boundaries and test the limits of science and technology as we know it. But the brightest minds must first be given the opportunity to experiment and grow.

The National Science Foundation’s (NSF) Small Business Innovation Research (SBIR) program lets America’s innovators take those chances.

Ben Schrag, a senior program director for the NSF’s SBIR program, and his colleagues are working with startup companies that are exploring new frontiers. From growing energy-efficient bricks with biology to harvesting synthetic spider silk to make more durable clothing, the companies on their radar are exploring new frontiers. Schrag and his colleagues take pride in funding some of the most technically risky small businesses and startups in the United States.

Schrag recently spoke to Propel(x) about how NSF’s SBIR grants are encouraging innovation, some of the exciting technologies that are being supported, and how they’re raising funding for the innovations that will build the great companies of tomorrow.

Propel(x): How does Small Business Innovation Research (SBIR) work? How do you interact with the private sector, find companies, evaluate them, and fund them?

Schrag: Actually there are 11 government agencies that have SBIR programs, and what they all have in common is that the government is giving either a grant or a contract to a small business to support the research and development of some new product or service that the agency thinks is valuable.

Propel(x): And I understand you look at all of these deals from the NSF lens. What is your charter at the NSF?

Schrag: The National Science Foundation as a whole mostly supports ‘blue-sky’ scientific discovery — science for the sake of science. The SBIR program, on the other hand, is a small piece of NSF that helps move that scientific discovery out of the lab and into the marketplace by funding small businesses to do R&D for eventual commercialization. In SBIR, we are looking at very early stage, risky, innovative technologies, and our goal is to support technologies as early as possible, usually before any other private funder or agency is willing to jump in, because the technology risk is too high. And we try to do that across a very broad set of technologies, with very few exceptions; almost any technology with innovation, technical risk and with a commercial potential is a candidate for support by NSF.

Propel(x): And how do you source these companies, and how are you finding them so early?

Schrag: We use a lot of traditional tools of entrepreneurs, so word of mouth is the most powerful thing we have. We have about 500 companies we touch every year, and we try to use those folks as ambassadors. We are trying to also do a lot of outreach to like-minded organizations, such as Propel(x), as well as to colleges and universities — where we have a pretty high brand recognition — and the program directors such as myself do a lot of outreach events anywhere there are concentrations of entrepreneurs. Every week there’s at least one or two of us who are out in the community talking to entrepreneurs and innovators.

Propel(x): How many of these companies do you fund a year?

Schrag: At any given time we are actively funding something like 400 to 500 different projects. And most of the companies we fund have a single project with NSF. So the number of different small businesses that we support is almost as high: something like 400 that are actually getting NSF support at any given time.

Ben Schrag, Senior Program Director for the NSF’s SBIR Program

Propel(x): What is your background? How did you become involved with NSF and SBIR?

Schrag: I am trained as a physicist. I did my graduate work at Brown University, finishing in 2003. The last year of grad school, I was helping to start a small business with one of my colleagues and my graduate adviser. I worked for six years right out of grad school at that company, working on a couple of new technologies. One was a kind of magnetic sensor and the other was a semiconductor instrument for identifying and diagnosing faults in computer chips. Our company got early funding from the National Science Foundation through this program, so I’ve been on the receiving end of the SBIR program as a principal investigator before I came to NSF. And in our case, it gave the company the ability to get started before we were able to raise private funding, and to get a jump on testing out our technology and building relationships. And that was invaluable to us. And because of that, I always understood the power of the program. So I jumped when I got the opportunity to work at NSF. It was a no-brainer. In 2009, I came to Washington and I started in my role here at the NSF.

Propel(x): As you are looking at companies right now, what has you most excited?

Schrag: As one of nine Program Directors, I’m obviously only seeing a small section of the technology, and only at the very early stages. But almost all of the companies I work with are really exciting to me. They’re incredible entrepreneurs who have huge ambitions, and they’re uniformly talented and hard-working. And while we don’t push any one thing at NSF, one of the things that seems prominent these days in the area that I fund is the growing market demand for more sustainable materials. Ten years ago, there wasn’t nearly as much interest from consumers or businesses in the market in terms of where materials come from or what happens to them after their useful life is over. Today, it really feels like there’s a huge amount of opportunity for companies who can create new materials that are not only better-performing, or more inexpensive, but also that are better for the world, that are better for human health, and the environment — that don’t consume scarce or non-renewable resources.

So, these days we’re seeing some really exciting material technologies that are being pushed forward by teams who are thinking hard about how this material’s production and use is going to affect the planet. It’s great to see those entrepreneurs who obviously have, in addition to great business ideas, the passion for making the world better. It’s really great to see them be able to get even more traction because of the increased interest in sustainability. Because of that, they seem to be having much more success, and more quickly, than they would have even five or seven years ago. So that’s very exciting, and we have had some great stories that have emerged as part of this broader trend.

Propel(x): Could you name a few of those?

Schrag: Sure. One of the companies that has gotten a lot of press lately is called Ecovative Design. They have developed a replacement for Styrofoam and other petroleum-based materials by using agricultural waste as a feedstock, combined with the use of a fungal root structure called mycelium. So they basically grow what people call “mushroom packaging.” This material is based on feedstocks that are currently considered waste streams, and the end product performs the same as Styrofoam. In addition to not requiring petroleum as an ingredient, these materials degrade in the environment and therefore don’t sit around in landfills for long periods of time the way that Styrofoam does. And based on this, the company has grown dramatically in the past six years or so. I think that they had three employees when they first got funding in the 2009 time frame, and they’re at over 70 employees now and they’re doing great business. They have built some strong partnerships and they’re really dynamic.

We also have a couple other companies in the same vein. There’s a current grantee company called bioMASON that’s actually figured out a way to grow bricks. The traditional brick masonry that you typically see works well, but it takes a lot of energy to create. The bricks usually have to be heated to a very high temperature, and there’s a lot of greenhouse gas emissions associated with that. And bioMASON has figured out a way to use a new biocement to make a brick without any heating or almost any embodied energy at all. And so their technology has the potential to get rid of all the greenhouse gas emissions associated with masonry, which is a significant amount.

One more company we’ve funded which is a little different from those two is a company called Bolt Threads. They’ve figured out a new way to create spider silk, which is a fascinating material with attractive properties, that a lot of people want to make things out of, but is hard to harvest because you can’t farm spiders — they kill each other in close quarters. Bolt Threads has built their business on deep expertise in synthetic biology, which is a new emerging area of scientific research that NSF has supported on the fundamental side, and that my colleague, Ruth Shuman, has supported with NSF SBIR funding in her biology portfolio for many years. Based on this, Bolt Threads has developed a way to grow spider silk using an engineered bacteria so they don’t need a spider at all.

As a result, they can create this silk on an industrial scale. And once you have that industrial scale of spider silk, you can create all kinds of new materials, from breathable fabrics to better bullet-proof vests. There’s a lot of potential for these materials, and they’ve raised about $90 million in private capital since we helped them get started in the early days of 2010. They have a real potential to disrupt the textiles market.

Propel(x): For an Angel investor who is kind of on the fence or is really interested in investing in science, but does not know this world, what tips would you give them in terms of starting out in investing in deep tech and in this kind of innovation?

Schrag: Just like any other investor, I would say to try to talk to some people who know the technology aspects, or to look for other signs of technology validation. Just like the NSF looks for validation from customers or follow-on investors to understand whether to invest Phase IIB funds in awardees. For people who are interested in these types of investments, I’d also look to see if government agencies with deep science expertise have supported a company. We find a lot of our companies get traction based on the NSF SBIR funding because then the external investors see that experts have looked at the technology and feel like it’s solid. Even though we’re the National Science Foundation, we bring in hundreds of external technical experts every year to help us to do our own diligence on the SBIR/STTR proposals we receive. Just like we bring in people who really understand these technology areas to give us advice and to help us make decisions, I recommend that Angels tap into their network to find the same types of people. Alternatively, they should to look to partner with private organizations that have the same focus on deep technology and deep science start-ups.

Read the complete interview with Ben Schrag, including more about Ben’s background and the NSF’s efforts to drive innovations on the Propel(x) blog.

Propel(x)is an online angel investment platform that brings together investors, startups, and experts to support and invest in breakthrough technologies.

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