Not in this century. For better or worse, politicians have built-in incentives to add new programs, not to improve or abolish old ones. Simplifying a regulation or streamlining a procedure seldom gets a politician any publicity or power; starting a new multimillion-dollar loan program does. On the bright side, some of those new loan programs -- or the hundreds of other programs around -- are helpful. Some are run by smart people who understand entrepreneurial businesses -- and some can give your company a real competitive advantage. If you don't believe that's possible, read the stories that follow.
In Oregon, Sandra Suran thinks she can make it easier for CEOs to learn what the state has to offer -- she wants to implement a computerized information system to help small-business owners find what they need. In the meantime, unfortunately, there's no easy way to find the most useful programs. Government agencies typically have little incentive to coordinate their public-information efforts or to eliminate ineffective programs. And public officials rarely know everything that's available, or which program might be effective for any given company. Without such comprehensive information, is it really worth the bother of checking out government programs?
Ask Scott Wauben. Wauben is president of Long Beach Valve & Fitting Co., a $6-million distributor of industrial fittings. He's also a self-described "doubting Thomas" and "no fan of government bureaucrats" -- until he discovered the California Export Finance Office (see "Export Promotion: Two Steps Forward, One Step Back," page 6). Without CEFO's financial assistance, Wauben would have had to stop making large sales to South Korea, a major market, when Korea imposed new currency restrictions on imports about two years ago. Wauben can't say he'd like to see CEFO replicated elsewhere, however. "My competitors face the same hidden trade barriers I do," he says cheerfully. "Hopefully, they're in states that aren't as receptive."
Hopefully for Wauben. But what if he -- or someone like him -- is your competitor?
FINANCING RESEARCH: SURPRISE! A FEDERAL PROGRAM THAT WORKS
If you have the idea, SBIR may have the money
"Money down the sewer." That's what Ronald Reagan's science adviser originally thought of a program called Small Business Innovation Research (SBIR). And he wasn't alone: before SBIR was enacted in 1982, all of the federal agencies involved opposed it.
Here's why. Under SBIR, the 11 largest federal agencies sponsoring research must set aside 1.25% of their external-research budgets for companies with 500 or fewer employees. Since the agencies include such big spenders as the Department of Defense, the money involved is substantial: in 1988 that tiny percentage came to about $400 million. SBIR proponents thought the set-aside would help small technology companies break into the federal research establishment. Opponents thought they didn't deserve to be included.
The opponents were wrong. SBIR participants have done so well that even Reagan's adviser changed his mind and later testified in favor of extending the program. And the federal agencies? Last year their project officers told the U.S. General Accounting Office that on average SBIR projects were of higher quality than those performed by traditional government contractors such as large corporations or universities. SBIR researchers were judged more creative, more skilled, more likely to use appropriate research methods, and more effective in project management. And the projects were more likely to lead to invention and commercialization of new products.
Granted, the program is too young to have much of a track record. Most SBIR recipients haven't yet gone from R&D to marketable products or services. Even so, preliminary studies suggest that prospects for commercialization are better than predicted. While the SBA once anticipated that about 6% to 8% of the projects would lead to successful commercial sales, it now estimates the proportion at 20% to 25%.
All this success hasn't gone unnoticed. Consultants offer SBIR-proposal assistance; there's an SBIR newsletter; there's even an SBIR specialist at one of the Big Eight accounting firms. More than a dozen states have begun offering application assistance, while several provide additional funding to award-winners. And those winners often find that the awards help interest venture capitalists or big corporations. "It's a tremendous way to get recognition and credibility," says Jan Zimmerman, cofounder of Emerson & Stern Associates Inc., a 15-person speech-and-language software development company in San Diego. She thinks the firm's 17 SBIR awards have made it easier to find corporate partners.
Other SBIR participants are equally effusive. Take Arent Kits van Heyningen, CEO of KVH Industries Inc., a $6-million Middletown, R.I., manufacturer of navigational equipment, which appeared on INC.'s 1988 list of the nation's fastest-growing private companies. "This is probably the best thing that ever happened" in the federal government, says Kits van Heyningen, who has funded about 20% of his company's R&D through three SBIR awards. "I personally think the program is unbelievably effective." SBIR even has some reluctant converts, such as Del Bloem, of ICS Medical Corp., in Schaumburg, Ill. "The government really ought not to be judging what research projects should be funded," says Bloem, who used SBIR grants to develop a new generation of his $2-million company's inner-ear-testing devices. "But with all that said, I may go back and try to get some more of that money. . . . I really have to say that the government was remarkably helpful and patient."
What SBIR offers these CEOs is hard to find in the private sector: seed money for high-risk, high-payoff early-stage R&D. A grant allows executives to worry less about the products paying today's bills and more about tomorrow's big hit. "The SBIR lets you bypass the chicken and go directly to get the egg," explains David Colvin, president of Triangle Research & Development Corp., in Raleigh, N.C., a 30-time winner.
