Schumer: Too Many Startup Small Biz Fall Into "Valley of Death" and Fail Before Consumers Ever See Their Products- Schumer Intro's Legislation to Bridge Gap Between Lab and Marketplace, Potentially Creating Thousands of Jobs Across NY

Press Release

Today, U.S. Senator Charles E. Schumer announced that he is introducing new legislation to help small businesses across New York cross what has become known as the "valley of death" -- the time between the research and development phase of a product and its commercialization. Schumer said that New York has hundreds of businesses that, given the chance, could produce successful products and grow into major industries, but because they don't have the means to commercialize a development, they fail. The legislation, introduced by Rep. Paul Tonko in the House of Representatives, would allow companies that have already received certain grants from the Small Business Administration (SBA) to compete for a new pot of funding specifically designed to help companies cross through the valley of death, and help our small businesses become the next GE, Google, IBM, etc. Schumer unveiled his proposal to help small businesses grow during a conference call where he produced a county by county report of businesses in each county that would be helped by the proposed law.

Schumer said: "In New York we have fantastic, innovative companies, and smart eager consumers -- but there is a huge gap that separates the two groups and prevents them from connecting. This legislation aims to bridge that gap, and help bring high paying, high tech jobs to New York. I would also like to acknowledge Congressman Tonko, who introduced this legislation in the House, for his tremendous vision on this issue."

Congressman Tonko said: "America's small businesses are the backbone of her economy," said Congressman Paul Tonko. "There is an abundance of success stories where federal research and development funding has led to promising prototypes. However, the federal government then drops its commitment -- leaving scientists and engineers to come up with sophisticated business plans on their own. We need a robust, passionate resolve to advance some of these high-risk, high-reward opportunities to help create jobs and grow the economy. This bill does just that and I commend Senator Schumer for his leadership on this jobs bill in the Senate."

Mark Alsberge, VP Medical and Regulatory Affairs, Transonic Systems, Inc., Ithaca NY said: "A bill such as proposed by Senator Schumer will have a direct impact on Transonic System's ability to successfully commercialize new medical products. Transonic is developing two products for children who suffer from hydrocephalus or who are in intensive care units for heart problems. These products were initiated under NIH/ SBIR grants and will be able to enter the marketplace sooner with the help of the additional proposed grants. Bridging the gap between product development and commercialization is normally a slow process. These additional grants will jump start Transonic's effort to hire new staff and expand its facilities in order to rapidly commercialize these products."

Stan Hall from Research Associates of Syracuse in Rome, NY said: "Current electronic warfare training is unable to replicate an integrated air defense. Under SBIR AF 06-045: Network Electronic Warfare Training System (NEWTS), Research Associates of Syracuse (RAS) has been developing the capability to increase US and Allied combat aircraft threat training capabilities substantially via simulated threats. In Phase II of the SBIR, RAS has developed and demonstrated the viability of algorithms to replicate an integrated air defense threat system using an existing DoD simulation in a laboratory environment. Funding provided by this legislation will allow RAS to demonstrate the capability in hardware and provide verifiable evidence to the services that training will be significantly improved at lower cost, and thereby provide justification to field the NEWTS System."

Mike Fend of Progressive Expert Consulting in Syracuse said: "Innovation is about finding creative new ways to meet challenges, and small companies like PEC have been innovation leaders with help from the Small Business Innovation Research grants. The SBIR program has allowed us to develop new approaches to language and culture training for the federal government, and the best part of the work we do is knowing that the people we train have received the best training possible to help them serve the American people. Senator Schumer's legislation would allow us to expand the impact of our work in exciting new ways, allowing us to take a specialized and targeted application and broaden it for a wider audience. The potential for job growth is tremendous -- and some of the brightest talent is right here in Central New York at some of our nation's finest colleges and universities, including Cornell, RIT and Syracuse University. The legislation being introduced by Senator Schumer would provide PEC and other growing small business with the tools needed to recruit a highly skilled workforce and expand our marketing reach to multiple sectors."

Dave Apkarian, President of TransTech Systems in Schenectady, NY said: "This bill could be the single most significant step forward relating to small business commercialization of technology and research today. It would immediately create jobs and pump much needed support into local economies through quality local companies. It's a homerun!"

Historically America's small businesses have been the leading driver of economic growth- generally responsible for somewhere between 60-80% of all U.S. job creation. But starting up a small business contains many pitfalls and risks, one of the most perilous being the process of moving a product from the research lab to the marketplace. Many entrepreneurs across the country and in New York have created a technologically advanced product but lack the significant resources to get the product on the market and into the hands of consumers. The gap between research and development and the commercialization of a project is commonly known as the "Valley of Death," because promising start ups so commonly fail in that period.

Schumer's bill, The Small Business Innovation to Job Creation Act of 2010, works to bridge the gap between the two phases so that hundreds of New York entrepreneurs can get their business up and running. The legislation provides a competitive grant funding opportunity for those recipients of Small Business Innovative Research (SBIR) Phase II funding from 2007 or 2008. This funding would help take products that the federal government has already provided funding for through the final step, to market, where the company the developed it can finally earn revenue. It will only provide funding to companies that have already passed the rigorous SBA vetting process.

If a small business received a Small Business Innovative Research Phase II Grant, a widely available, competitive program that allows entrepreneurs to research new technologies, in 2007 or 2008 they would become eligible for additional funding. The additional money would be specifically targeted toward business development as opposed to research. Simply put, the new aspect of this program would allow businesses who have been successful in the research phase of the program the opportunity to receive additional investment to move their products into the marketplace. Instead of simply investing in research, the Small Business Administration would be investing in business development. There are businesses in every state of the country that could benefit from this new initiative, and X number of businesses in New York. In fact, every region of New York would have businesses eligible for the program.

SBIR is a highly competitive program that encourages small business to explore their technological potential and provides the incentive to profit from its commercialization. By including qualified small businesses in the nation's R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs. SBIR targets the entrepreneurial sector because that is where most innovation and innovators thrive. However, the risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. By reserving a specific percentage of federal R&D funds for small business, SBIR protects the small business and enables it to compete on the same level as larger businesses. SBIR funds the critical startup and development stages of the technology.

Since its enactment in 1982, as part of the Small Business Innovation Development Act, SBIR has helped thousands of small businesses to compete for federal research and development awards. Their contributions have enhanced the nation's defense, protected our environment, advanced health care, and improved our ability to manage information and manipulate data.

There are currently three phases of SBIR grants:

· Phase I is the startup phase. Awards of up to $100,000 for approximately 6 months support exploration of the technical merit or feasibility of an idea or technology.

· Phase II awards of up to $750,000, for as many as 2 years, expand Phase I results. During this time, the R&D work is performed and the developer evaluates commercialization potential. Only Phase I award winners are considered for Phase II.

· Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. No SBIR funds support this phase, and this is where Schumer's bill would step in. Currently the small business must find funding in the private sector or other non-SBIR federal agency funding.

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