Episode 4 - SBIRLand Interview with Ben Schrag from the the NSF (Transcript)

Dr. Vicky Cattani:  So I’m Vicky Cattani from Eva Garland Consulting and SBIRLand. And today I’m here with Ben Schrag, who is the senior program director for the SBIR, STTR program at the National Science Foundation. Thank you so much, Ben, for joining us here today to talk to us a little bit about your job at NSF.

Dr. Ben Schrag:  Thank you for having me.

Dr. Vicky Cattani:  I’ve been reading your bio online, and it seems, you worked in industry, you worked in academia, so why did you decide to become a program director at NSF?

Dr. Ben Schrag:  Yeah, so, I mean, I think saying I worked in industry and academia, those are a little bit overstated. I did spend time in startups, so I guess that’s a form of industry, but I never had a role of in academia really, like a full-time role since grad school. I will say the job here at NSF was kind of a combination of luck and interest. So I had been in a startup, I spun a company out with a couple of colleagues from grad school in 2002, kind of unexpectedly, and I never kind of intended to be an entrepreneur. But we were working on some research that had potential to be the formation of a startup. So I did that for six years, and as part of that process, I really got interested in this challenge, how to bring technology to market within the context of a startup.

Dr. Ben Schrag:  So I kind of fell in love and kind of got passionate about understanding how to do that well. I’ve tried and had big success over at my startup. And the job here at NSF really was kind of part of the, an extension of that passion and that kind of interest I had. But also it was lucky in that I was also trying to solve a two body problem with my wife. We were trying to find a place where we could both have great opportunities for our careers, and Washington D.C. happened to be a place where she wanted to be, and so I was also looking in that way. So again, like a lot of jobs that people get, it was a mix of luck and planning, I guess. But in 2009, I did move to D.C. to take this job, partly because we were able to reunite here in D.C.

Dr. Vicky Cattani:  Right. But it seems like you must have liked it because it’s been awhile.

Dr. Ben Schrag:  Yeah, I did. My company had gotten early funding from this program, and so I was very appreciative, and very, I knew the power of the program, I knew the kind of importance of it. So I was already definitely very intrigued by it.

Dr. Vicky Cattani:  Yeah. So what do you find most rewarding about this job?

Dr. Ben Schrag:  The best thing about this job is being able to help great people. The folks who’ve started the companies that we fund are some of the most driven, intelligent, passionate, people that I’ve ever worked with. They have the potential for huge impact on a global scale. And I think our funding is really important and can really be the difference for them. And so I think the best thing about my job is working with great people, learning from them, and being able to support them in a really meaningful way. There’s a purpose in the job, and there’s the ability to really see the impact you can have as the companies grow. So that’s really compelling to me.

Dr. Vicky Cattani:  Yeah. So on the other side of the coin, well, let me add this question, what would you say is the most challenging aspect of your job? And you cannot say, “I wish I had more money to give more people funding.”

Dr. Ben Schrag:  Yeah, I wouldn’t say that. We do the best with the budget we’re given, to the best of our ability.

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  I think one of the hardest parts about the job is, as you know, the mandate of the SBIR program is to fund high risk, and high risk means that a lot of companies fail. And we try to fund these entrepreneurs who are all in, who really put their heart and soul into these companies, and so, you know that you’re going to have people you get attached to that you really support, and are admiring of, whose companies are going to fail. And it can be personally devastating for them. And so having to go through that and knowing that that’s going to happen, and then having to try to support people through that. That’s a really hard part of the job, and you do lose sleep. If you do this job, and you get to work with the companies closely, which I think is something we try to do, which is really important, it also means that you become attached to the companies. And when they struggle, you feel it. And so I think that part is difficult.

Dr. Vicky Cattani:  Yeah, I can see that. Do you have a sense, let’s say for companies in your portfolio, do you have a sense in your, because you’ve been there for 12 years, do you have a sense of what is a percentage of companies that have not made it through maybe the three phases, if we count the Phase II B, of the program that maybe failed after phase one or phase two, do you have a sense of how many really have made it through commercializing a product that thanks to the support of NSF?

Dr. Ben Schrag:  Yeah. I mean, the closer you get to commercialization the lower their percentages get, right?

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  So it really depends on how you define success. So some companies are still around, but they maybe didn’t make it, but so they’ve ended up kind of small, and without a lot of potential, a lot of possibility to grow quickly. So I think the data on the progression between the phases is public. But that is easy to quantify, right?

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  We fund about between 10 and 20% of our phase ones, about half of those, plus or minus, get phase twos, and about, depending on the year, it’s more now, but between a third and a half of those get phase two B’s. And so that’s obviously not necessary, but getting phase two B is a pretty strong correlate, almost all the big success stories that you’ve heard about from our program got phase two B. But yeah, the ultimate success rate could be in the single digits. If you look at companies that have had scalable commercial impacts leading to a significant dollar value exit or IPO, or maybe just, revenues that are a multiple of what we put in. That’s the goal, is to have the money that they’re making revenues be a lot more than the amount of money we invested. So in that sense, then the success rate is probably below 10%, five to 10%, something like that. But it really depends on how you define it.

Dr. Vicky Cattani:  Yeah. But I’ve heard that for a lot of companies the money was important for the company to maybe explore other things, or value in other ways, even if they didn’t get to commercialize a product that they initially thought that they would.

Dr. Ben Schrag:  Yeah, I think you do run the risk of looking too narrowly at success, right?

Dr. Vicky Cattani:  Yeah, that’s why.

Dr. Ben Schrag:  Where a company fails, there’s a temptation to if the company fails, you say, “Okay, well, that was an investment I shouldn’t have made.” Or something-

Dr. Vicky Cattani:  Yeah.

Ben Schrag:  But really, I mean, our goal is to give these companies a shot-

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  And some of them will fail, but even if they fail, that doesn’t mean that our investment wasn’t a good one, right?

Dr. Vicky Cattani:  Exactly.

Dr. Ben Schrag:  It means… And the other thing is that the people who are involved, they go on, a lot of times to do, those people have been shaped, and trained, and have learned through this program. So, 3000 companies over the last decade that we’ve supported, and that’s-

Dr. Vicky Cattani:  Yeah, yeah.

Dr. Ben Schrag:  That’s five to 10,000 entrepreneurs. And most of them were first-timers. So they got that experience, and they’d go on to do great things as well.

Dr. Vicky Cattani:  Yeah. I think it really provides a valuable experience. So what are some of the 2021 NSF initiatives that entrepreneurs should take note of? Is there anything in particular that people should know?

Dr. Ben Schrag:  No, I mean, so as far as our program, we try to be pretty level. Try to keep things fairly consistent. The goal is honestly to kind of present as few shiny objects to the entrepreneurs as possible, because it tends to be that if the government’s kind of, has a very strong point of view, that a lot of entrepreneurs are attempted to kind of, instead of going after their vision, to kind of align to our vision, because they want the funding. And our goal is to really not have them try to change who they are. We want them to go after what they’re passionate about. We want to align with them. So we try not to have new initiatives in the sense of like new topics, or new focus areas that are that dramatically different.

Dr. Ben Schrag:  I will say, we continue to try to make the program better. We’ve launched a larger phase two last year, we have now the technical business assistance, so companies can put more money. We have a larger fee, so they have more money that’s kind of available to them to use for other things. And we have this tab of funding that allows them to do commercial things. So we’ve tried to make the funding a larger amount, more flexible in terms of doing commercial things, and we’ll continue to try to make the money work as hard as it can for the companies that we support.

Dr. Vicky Cattani:  Yeah. So has anything, I mean, relatively, has anything changed because of COVID, any of the interests? I know for a little bit, you had a specific, either pot of money that was going to COVID-19 specific proposals, that’s had shut down, but maybe you’re still getting a lot of COVID-19 related proposals, but now they go to the kind of the general pool of applications, is that correct?

Dr. Ben Schrag:  Yeah, we didn’t have a specific pot of money. There was a very small amount of funding that was passed by Congress, that NSF, we got a small amount. But the opportunity we had for COVID was really more of a separate review process, kind of a separate call for proposals. So we spent a lot more money finding those companies than we actually got allocated specifically for COVID. So we did use a lot of our general funding to try to support that. Yeah, COVID did, I mean, that was obviously one way it changed, it had an impact on our operations. I mean, the other thing that happened was that we had the twin challenges of both having our own internal operations change, everyone went home, and worked from home, and that’s an adjustment for every organization. I’m sure you guys saw that as well.

Dr. Vicky Cattani:  Yes.

Dr. Ben Schrag:  So we had to fight through that. And then we also saw a lot more applications just in general. I think because a lot of people were locked out of their labs.

Dr. Vicky Cattani:  Yes.

Dr. Ben Schrag:  And so I think then the opportunity cost of proposal writing was less, and so we did see a lot more applications. I’m not sure, you guys work with lots of different folks, submitting to different agencies, I’m not sure if that was across the board, but we saw the most proposals ever in fiscal year 2020, and then a very strong, last kind of 12 months of proposal numbers. So we’ve had a lot more interests, a lot more competition, and that’s been the main impact.

Dr. Vicky Cattani:  Did that affect changes in personnel that you had to do, in terms of hiring new program directors, or trying to do more panels, or did just that delay the review process?

Dr. Ben Schrag:  Yeah, the review process was a little bit delayed, I mean, just because of the numbers that were involved. It was a third more than the highest number we’d never seen before.

Dr. Vicky Cattani:  Wow, that’s a lot.

Dr. Ben Schrag:  Which is a lot. So we had been hiring, we’ve kind of been hiring consistently. We’ve hired, we’ve grown the team, since COVID started, we’ve grown the team by I think three program directors, in total numbers, and we’re continuing to hire. So I think that’s partly just that the budget has gone up the last couple of years, and partly that the number of proposals has also increased. But yeah, the team has grown, when I got to NSF and for a long time, it was right around nine or 10 full-time program directors, and I think now we have 13, so that’s been great. We’ve got great, new people we’ve brought in, who really rounded up the team, and we’ll continue to grow.

Dr. Vicky Cattani:  Great. So do you have any specific advice for a first-time SBIR, STTR applicant?

Dr. Ben Schrag:  I mean, again, my first piece of advice would be think of NSF. I think there’s a lot of agencies out there-

Dr. Vicky Cattani:  Yes.

Dr. Ben Schrag:  But I think we’ve done, I would like to think as much as anybody or more to try to make ourselves approachable to first-time applicants. Most of the companies we fund are first-time applicants, to the program in general, and the percentage of our phase one awards that go to a company, getting its first phase one award period is something over 80%, has been over 80% for awhile, which is unique in the government. So I think my advice would be again to not, especially with NSF to not assume that you need to have a huge amount of experience with this process, and to kind of approach us early. And if you’re not ready yet, then you can always pause and come back later.

Dr. Ben Schrag:  But I think a lot of folks overestimate how prepared they need to be to start that dialogue with NSF. So I would encourage folks to engage with us early. We do have a first step that’s quite lightweight called the project pitch, which doesn’t require even you to have a company on paper yet. So I think that’s a great first step, and a way to start a conversation. And I would encourage everyone to go and check out our website, and consider the project pitch as soon as you have a sense about what you think your project will be. So that’s at SeedFunds.NSF.Gov.

Dr. Vicky Cattani:  Yeah. Since you guys started the project pitch, what was it? Like a year and a half ago, or two years ago, or less?

Dr. Ben Schrag:  It was a little over two years ago now.

Dr. Vicky Cattani:  Yeah. So how has that worked for you? Do you think it is useful to go through that kind of pre-application, and screen the basic R and D and innovation of the projects?

Dr. Ben Schrag:  I think so. I mean, so again, I haven’t been through it as an applicant, so obviously, we get-

Dr. Vicky Cattani:  Yeah, yeah. I mean, on your end.

Dr. Ben Schrag:  Yeah, from our end it’s been great. I think, we have had a many-year effort to try to market the program, and bring the program to a broader audience than traditionally has participated in the program. And that really means beyond traditional SBIR companies that have done the program before, and beyond folks who know who NSF is, right?

Dr. Vicky Cattani:  Mm-hmm (affirmative).

Dr. Ben Schrag:  So we’ve gone to the technology community, the startup community. And so part of that is that you get a lot more diverse, and a new group of applicants. Once you have that, you kind of need a first step just to make sure people aren’t way off base, right?

Dr. Vicky Cattani:  Yes.

Dr. Ben Schrag:  If you have a lot of people who’ve never done the program before, it’s really important to have a very quick touch point to make sure that the people who are just never going to be a good fit, you can tell them quickly and tell them why. So I think as you have a more inexperienced group of people approaching you, you need to have a touch point early on, that really helps to get a conversation going before the bureaucracy of the full proposal starts. So I think it’s been really helpful. We had kind of thought, when we started this process, we had worried about how many people would really feel like, “Okay, it’s another step, now you’re creating more burdens for us to go through.” But we’ve heard almost none of that. Almost everyone is really happy to go through and get a quick check on their idea before they go to the full proposal.

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  So we were worried that that was going to be the downside, but actually it seems like people are very supportive of it. So we’re happy for that.

Dr. Vicky Cattani:  Yeah. It seems like it helps people conceptualize, in advance what they want to do, and I’m put it on paper, and get them started thinking about basic things, like the market, and the scope of the project.

Dr. Ben Schrag:  Yeah, exactly. One of the things about the project pitches, it allows us to start communicating what we’re about, and kind of just through the questions that are asked, for us to start having people understand what we care about, what’s important to us. So I think that’s a, part of it is us understanding them, but part of it is also, through that process, them understanding us. So I think it works both ways.

Dr. Vicky Cattani:  Do you do a lot of follow-up, one-on-one follow-up with people who may, when you send them follow-up questions, and you don’t accept the pitch on the first try, I’m wondering whether there is a lot of conversation between program directors and potential applicants?

Dr. Ben Schrag:  Yeah, there is. I mean, we have data on how many folks kind of go through that status, which we can call that incomplete, which is, “Give me more and let’s talk about it.” There’s also a way to kind of do what we call follow-up, which is to actually talking to the person on the phone. So yeah, there’s a lot of folks who use that, the numbers of those are pretty significant. And we try not to belabor it, right?

Dr. Vicky Cattani:  Right.

Dr. Ben Schrag:  So we’re not trying to give a perfect proposal before we let them move forward to the next step, but we do want to make sure that people don’t waste their time, right?

Dr. Vicky Cattani:  Right.

Dr. Ben Schrag:  So sometimes I’ll invite a full proposal, but I’ll see a big concern, a big issue, like understanding the market, that’s a big one. So we don’t typically not invite proposals if the market understanding is weak, but we will invite them, and then with the invitation, we’ll say, “Hey, look, this looks like it’s something, you should submit a full proposal, but hey, the market, it doesn’t look like you’ve done a lot of discovery, you haven’t talked to a lot of customers, you really need to do that before you submit the full proposal.” So sometimes we have that conversation while the pitch is kind of being decided. And sometimes it’s kind of a parting message with the invitation, but either way they have this new method to basically have that conversation started in a formal way, so that the folks who are going to submit a full proposal, understand the kind of rules of the game that they’re about to play.

Dr. Vicky Cattani:  That’s great. That’s really valuable. So can you explain briefly how the review process works, and how funding decisions are eventually made?

Dr. Ben Schrag:  Sure. So for the full proposal, the NSF, for all these proposals uses what we call an external peer-review process. Which means we’re going to bring in a small group of commercial, or technical experts or both, to look at your proposal, to give you feedback, to give feedback that’s going to go back to the applicant, and to also give us advice, and to help us understand the proposal. So that will typically be between three to six people for each proposal. There’ll be selected, typically, once your proposal comes in, they’ll be selected based on a group of proposals we’ve gotten, or a specific proposal. So it’s tailored toward the thing you’re doing as an applicant. So we recruit those folks when the proposals come in. We oftentimes have what we called a panel, which basically means we talk to a group of people who are all looking at some number of proposals together, we have discussions. Sometimes we just get a review by email, and then we don’t have that meeting. It depends really on the nature of the program director.

Dr. Ben Schrag:  Once that’s all done, the program director has a lot of autonomy about the, we make the funding recommendations. And so the reviewers we bring in will give scores and feedback, and they’ll also tell us what they would do, kind of informally, but the program director is not bound by that. So we make our own funding recommendations. And our boss and the grants office have to agree with us if we want to make an award. But we oftentimes, some other agencies, I think that the external reviewer is what they say is almost always what happens. And that’s not necessarily the case in NSF, the program directors here, a lot of times will make a decision that’s different than what the external review panel does.

Dr. Ben Schrag:  Part of that is because for proposals that are competitive, once the external folks have looked at things, the program directors will go back and talk and ask questions of some subset of proposals that might be fundable. And based on that, what we call due diligence, then make a final recommendation to the NSF about what to fund. The program director has a lot of autonomy, they select the reviewers and they do their own diligence. And then we have to convince our management about our funding recommendations as well, so they have to sign off. So that’s the process it’s deliberative, it’s deep, it’s lengthy, it takes a little while, but the goal is to really try to make the best decision on funding for the taxpayers.

Dr. Vicky Cattani:  Yeah, that makes sense. So are these panels convened in an ongoing basis, given that now you have applications coming in on a rolling basis, or it really depends on the program director, if he or she would rather wait until there’s a critical mass of applications, how does that work?

Dr. Ben Schrag:  The way we’ve changed our program, we can pick up a proposal as soon as it comes in, any time. We have these submission windows that happen quarterly, right?

Dr. Vicky Cattani:  Mm-hmm (affirmative).

Dr. Ben Schrag:  So theoretically you can submit any time during that quarterly window, and we can pick up the proposal any time once you’ve submitted it. Because of the workload, as I mentioned, the high workload, the most efficient way for us to do things is typically in a batch. So what most program directors are doing is a quarterly batch. Every quarter they’ll pick up all the proposals from that quarter. And you can sometimes roll things in continuously, but most of the proposals will be looked at once that quarterly window closes. And then there’ll be put into panels and reviewed. Theoretically, the goal is to become both more continuous and faster in terms of the decision, but just because of the workload and the high proposal count we have right now, quarterly is kind of the way that things are happening, because that’s the most efficient way for us to stay on top of the workload.

Dr. Vicky Cattani:  That makes sense. So do you have an example of an SBIR success story that you want to highlight, that you can tell a group that was able to leverage NSF funding to achieve some success?

Dr. Ben Schrag:  Yeah, I mean, there’s a lot of great, fantastic companies. I’ll use one that’s I think fairly, it’s fairly timely, because there’s been a lot of really cool stories from this company this year. So they’re a company called Ginkgo Bioworks that we funded over a decade ago. And they are an MIT spinout, they do synthetic biology, and they’ve had a really long road about trying to develop the technology, and develop the business model. But the cool thing about them is their technology is a platform like a lot of the companies we fund, and so it wasn’t something that, if you look at the funding, it wasn’t something that necessarily say, how to focus on diseases or diagnostics-

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  But there’s a couple of big stories about how they really had an impact during COVID in the last six months or so. Because for one, their founder was on 60 Minutes back in March, basically talking about how their technology was used to increase the amount of vaccine that could be produced, right?

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  They tripled the amount of actual vaccine, which is really important, I mean-

Dr. Vicky Cattani:  Yeah, I saw it.

Dr. Ben Schrag:  I remember those days when everyone was like, “How much vaccine can we get in one?” And that was the big deal. They also use the technology to help do pool testing for schools. So they’re partnered, for example, with the State of Massachusetts to help schools reopen. So they’re helping both on the therapeutic side of helping to vaccinate people, but also on the testing side of COVID. And again, this is based on core technology that didn’t necessarily set out to solve these problems.

Dr. Vicky Cattani:  Yeah.

Dr. Ben Schrag:  It’s just kind of the power of the kind of technology that we fund, that the technology could be adapted, where the company spent a decade working on it, and was now ready when COVID hit to make an impact. And the other thing that we really like about that company is that they had a big exit, this year. A couple months ago, they went public via ASPack, and the evaluation as of when they went public was about $16 billion. Which is a significant multiple of the entire budget of our programs since we were created. So that’s a nice commercial outcome as well.

Dr. Vicky Cattani:  Yeah, yeah. I remember I saw that. I follow your Twitter feed. So I read that, and it was pretty significant.

Dr. Ben Schrag:  Yeah, that’s an incredible company, and Jason Kelly and his whole team have just done a fantastic job.

Dr. Vicky Cattani:  Yeah, that’s good. Well, thank you so much for being with us on SBIR Land today. It was great having you here.

Dr. Ben Schrag:  Of course, thanks so much for having me.