Do You Know What Really Fuels Innovation? Your Tax Dollars.

In the media, we read about innovation and the venture capitalists who are funding the new, great thing. In reality Venture Capital is usually funding a company in its growth stage. That stage happens after the idea stage and after the initial prototype and market test and often after earning revenue. The real funder of innovation is the government through programs like the SBIR.

Everyone has heard of the SBA: the Small Business Administration. We often think of them as a place for small businesses to get loans. The SBA coordinates a program called the Small Business Innovation Research ("SBIR") which coordinates the research grants for all of the big agencies in the government (Depart of Defense, Health and Human Services, National Science Foundation, etc.).

SBIR awarded over $2.5 Billion in grants in 2015 (Source: SBA Office of Investment & Innovation, SBIR-STTR Presentation, October 2015). Another $1 Billion is awarded through Small Business Technology Transfer (STTR). That's almost $4 Billion in grants. Annually.

According to The MoneyTree Report created by PwC and the National Venture Capital Association, in 2015 Venture Capital made a total about $1 Billion "Seed Stage" investments.

Your tax dollars, through the SBIR and STTR invest four times as much as Venture Capital in the earliest stages of innovation.

Why Does this Matter for Inclusive Innovation?

In a day long workshop held by The National Academies of Sciences, Engineering, Medicine, representatives from the major government agencies (Department of Defense, National Science Foundation, etc) reported that their track record for funding women-led or "minority-led" businesses was falling below goals. In most cases, funding for black-owned businesses was under 1% and for women (of any color) it was 10%.

These levels of participation are continuing despite the fact that the majority of all PhDs are awarded to women, especially in fields such as biology and academic medicine. Combined with the fact that the number of PhDs earned by Black, Hispanic and other groups has risen over the past decade, this points to a system with fundamental flaws. The "pipeline" of talent has grown but the results are the same.

One small step toward improving these numbers is the recently launched "Roadshow" initiative where representatives from different agencies under the SBIR umbrella are traveling the country meet more directly with applicants.

At The Impact Seat, we worked with the SBIR to add a day onto the roadshow to focus on attracting more women to come learn about the funding opportunities. We'll be testing this pilot effort to see if it changes the composition of the grant recipients. Stay tuned.

Barbara Clarke