The Federal Government: What’s Ahead for Innovation

Welcome back to our second Annual SBA Innovation Ecosystem Summit. I'm Jennifer Shi, Director of Ecosystem Development for the Office of Investment and Innovation at the SBA and really hope you enjoy your time in the breakout rooms. We're going to continue on with our main Stage programming now. And as a reminder, this event does have closed captions. If you need it, just click the CC button down here at the bottom of the screen. We also have two chat options. Most of us are hanging out on the Stage chat, so make sure you find the tab on your screen that says Stage to click on it to join the conversation. And if you experience technical difficulties at any point, just try refreshing your screen. That usually takes care of the issue. Or you can email support S U P P O R T at EST Us and we'll do our best to troubleshoot. We also encourage you to share your learnings and highlights from this conference on social media using the hashtag ESOSummit22 and tag USBIRgov on Twitter. So this next panel is very exciting. It's going to highlight what's ahead for innovation from a federal government perspective. And with that I'm going to welcome to the stage our moderator, Melissa Roberts Chapman, Director for Regional Entrepreneurship at the Federation of American Scientists. Melissa has worked at the nexus of policy, entrepreneurship, innovation and economic development throughout her career and prior to joining Federation of American Scientists, Melissa was a Senior Program Officer at the Kauffman foundation where she led a grant making team focused on building more inclusive, collaborative and vibrant entrepreneurial ecosystems in the heartland. And I had the great pleasure of getting to recruit her to be reviewers for our past prize competitions as well as actually getting to meet MRC in person in Kansas City not too long ago. So a reminder to put your questions in the hop in chat or or Q and A and over to you. Thanks Melissa.

Excellent. Well, thanks Jen. Good afternoon. My name is Melissa Roberts Chapman and as Jen said, Director of the Federation of American Scientists, where I lead our team's work on entrepreneurship and ecosystems. So over the past two days we've heard a lot about federal funding supporting American innovation in different ways and with me now are some amazing guests who are looking at the big picture and can help us understand what's really ahead for the future future of innovation in America. So first, our panelist is Jason Rakji. He is the previous director and a co founder of AF Ventures and AFWorks, both of which are the innovation arms for the US Air Force. In addition to this, it was just announced last week that Jason will be serving as the Director for the brand new Office of Strategic Capital. This new organization was created by the Department of Defense to root more private sector money towards key technology areas like quantum computing and advanced materials. Congratulations, Jason, and welcome to the panel. Our second panelist is Adair Morse. Adair is the Deputy Assistant Secretary of Capital Access at the Office of Domestic Finance. She is also Associate professor of Finance at the Haas School of Business at the University of California at Berkeley and a Fellow at the Berkeley center for Law and Business. Morse holds a PhD in Finance from the Ross School of Business at the University of Michigan and Master's degrees in Statistics and Agricultural Economics from Purdue University. Her research covers the areas of household finance, impact investing, entrepreneurship, corruption, and asset management. So welcome my fellow Midwesterner to the stage. And then finally, Tyaganandagopal. Dr. Thyaga Nandagopal works in the National Science Foundation's Directorate of Technology Innovation and Partnerships, where he is the Division Director for the Division of Innovation and Technology Ecosystems. And before joining NSF, Dr. Nandagopal spent 10 years as a member of the technical staff at Bell Labs, and he holds 38 patents. How accomplished? Thanks all three of you for joining us today. We're really looking forward to an exciting conversation. And I'm going to start right away with our first question. And just to set a little context, we all know that entrepreneurship, and specifically the rate of firm formation, has trended down over the last 30 to 40 years. And today, collectively, billions of dollars are being spent to improve and increase the level of innovation and commercialization that we have across the country. And you can name programs that are like the Build Back Better Regional Challenge or the NSF Engines Program. You can name programs that have been part of our ecosystems for a long time. You know, like the EDA's build to scale Challenge, the Growth Accelerators Program, or even just the SBDC Network. So with all of this funding out there in the ecosystem, when you look across the landscape, what makes you optimistic about our future?

Well, I can go first, since I seem to have you off mute first. I think it is a very optimistic time, mainly because there is recognition from all quarters of not just the private sector, but also the federal government that entrepreneurship in some sense, is very critical for helping the nation stay ahead of everybody else in this competitiveness game. Right. And again, and I say everybody else, I'm clearly talking about every other country in the world which has seen the US Formula, studied it carefully, and they have seen it play out in Japan and South Korea and other countries, and they're now saying, okay, maybe that's exactly what we need to do. We need to keep investing in R D. We need to keep investing in business creation because that's what keeps the US Ahead of the pack. And when they start doing it, clearly it starts creating a competition for talent, it starts creating a competition for capital. And we are seeing the science in terms of how, how many people, talented people are coming to, migrating to our shores. Right. And what other options they have. And that has in turn created a sense of urgency for lawmakers on the Hill and successive administrations of all part of both parties to say that entrepreneurs, small businesses and medium businesses are in some sense the backbone that we really need to support and scale as quickly as possible. And I think that recognition and support is essentially why I feel highly optimistic that, you know, this is, we are starting a big movement now.

That's great. And Adair, what makes you optimistic?

Yeah, tagging on that. Let me just dig into some specifics. I think the landscape right now with the private sector, looking at the IRA and the bil, the infrastructure package and chips, the opportunities for investment have never been more out there. As we look at the transition economy, as we look at the lessons that we've learned on supply chain and the need for resiliency and the need to change our supply chain also in reflecting the transition that we're going through with regards to the energy transition and the accompanying sector landscape. But that is all that's out there. That's out there. And then the federal government is saying, is it not just out there, but we're putting the money out there in the public sector to stimulate the private sectors to come in and do this innovation, to do the partnerships with us in energy and in EV in resources, there's a lot of conversation about energy and EV and all the pieces that go into the EV transition. There's so many innovation and SME sectors that are at play there. But also think about resources, things like I love to talk about natural rubber and bioplastics and nature based materials and climate, smart, aggressive vertical farming, nutrition, et cetera. There's so much going on in innovation and all these sector housing, manufactured housing solutions, all of this leads to different kind of development across the country, a democratization of the innovation economy, because it is a transition that involves a whole landscape of the United States coming to bear in this transition and entrepreneurship being everywhere. Finally, I guess beyond those pieces, I should just say one thing about infrastructure. Infrastructure. We think of infrastructure as being a government thing, but if you combine infrastructure with the need for the transition economy, green steel and cement and fibers and packaging and supply chains and other things, the opportunities there just keep going and going. I think that that's where I would like to, you know, just to say I, you know, the stats, Melissa, that you said, maybe, maybe that's true, but that's not the way it feels.

Right.

It doesn't feel like we're in any downhill where there's so much going on. There's such a good time to be in the innovation sector.

Excellent. And Jason, the last point is yours. What makes you optimistic?

I mean, I'll hesitate to repeat my fellow panelists here, but I think just from the lens of the Department of Defense, you know, one of the things that makes me really excited to work with the innovation sector and some of the new policies and programs we're bringing to bear is that for a long time the department has had the mantle of carrying technologies, emerging technologies forward for the country. But all too often we, we left a lot of those technologies advanced but not commercialized. And finding ways to help drive commercialization of the investments to support the value capture from the value creation that the country has invested in is now something that with the department is, is extremely focused on and working with our interagency partners. You know, through this program, I've had, I've had the great opportunity to, to meet and get to know folks like Adair who've helped the DoD think about ways to carry these technologies over the proverbial, proverbial valley of death. And I think from a, from, from an ecosystem perspective, in order to create, in order to capture value from, from all the value that the taxpayer has created through these investments by finding ways to drive capital, drive, influence and support companies who are working on really hard problems, doing really difficult things. Many of the companies are baked with founders who've spent their entire academic and industrial careers working on these technologies. Give them an opportunity to really bring those to bear and support not only national security, but economic prosperity is something that I am deeply excited about and working off of the great programs that have already come to bear and trying to help accelerate the technologies into products and goods in support of the consumer and of the department is going to be hopefully a revolution in finance available to companies that are in this space. And I am really excited about seeing these things get over the line.

That's great. So building on your comments, Jason, about the importance of interagency relationships and collaboration, I'm curious, how do you think about each of you, all these programs that are, that are Created today, working together across the government to make a real impact. You know, I think about all of the down payments that we're making on kind of our national cluster and innovation ecosystems right now in the form of these massive funding commitments. You know, how. How will the government work together across the many different agencies to ensure that, you know, there's sustainability to these efforts and that these clusters continue not just to be seeded, but to grow over time?

I think just on the note of the interagency relationships and something to highlight for the community was the first big program activity that we had the opportunity to launch within the Office of Strategic Capital was a partnership with OI on an SBIC initiative focused on critical technologies. There's an extremely exciting opportunity for the department to learn from the SBA's work in this space, to partner on driving these capital instruments in support of our critical technology areas. Things like, if anybody's interested, what are your critical technology areas? There's 14. They're all published. It's all public things like advanced materials, biotech, quantum. The opportunity that we have to partner and rely on expertise is something that is an incredible opportunity for the government to work across the interagency in a way that we can really link these things together. You know, all of our departments maybe are doing something in the innovation space, but all of us have. Have actually very strong focus in one key area and so, you know, opportunities to execute the Office of Strategic Capital. We're going to be working closely with treasury, with omb, with SBA and other government agencies, certainly Commerce after this. And talking at the Microelectronics Commons initiative, which is a result of chips that Adair had mentioned earlier. And the reason why the department and these other agencies who are experts in finance and capital markets are partnering is because the Department brings a significant amount of DoD technical expertise, owning technological development and really carrying the mantle for the country in a lot of these key technology areas, as well as caters to an extremely important customer segment, and that's our military services and our, in our, our national security posture globally. So, you know, I think the opportunity we have from a DOD at the lens looking in, it's something I've been really excited to see working with my interagency partners, is that everybody's coming to the table trying to bring their strengths and understanding how we can collaborate on some of these programs. And it's from a very selfish lens in the department. We, we've benefited greatly from these partnerships already and are looking forward to continuing that work.

I can jump and add A few more comments to what Jason just said, but he pretty well summed that up. But I was just emailing Jason this morning about the SSBCI program in which state venture capital programs might be interested in hearing how you could think about using. I'm just going to say the word engineering, but that's not the right term. But engineering expertise that might be in a Defense or a Energy DOE or in some Commerce or USDA or one of the departments that brings that scientific engineering skills with the finance geeks, the SBA and Treasury and other folks like that. Obviously some of the departments have finance geeks too, but we do the financial programs and how to combine that and I would be remorse if I didn't mention skills. Labor DOE has programs and apprenticeship. Of course Department of Labor and Department of Education have programs Commerce in their EDA programs. All these focus on scaling the population to where the population can most be advantage for their households to grasp this innovation economy as a vc and you care, you care that the labor is going to be there for your companies that you start. So combining all these efforts is what we've been doing since I got here at treasury about almost 2 years ago now and really trying to work toward how we can do a better job of bringing the whole package and doing also regional place based strategies is another way that we focus in on bringing the whole package to the population and again the innovation economy and the private money embedded in that is critical and the expertise that the innovation intermediaries bring to the table.

Yeah, I'd say that I agree with everything that has been said and I'll call out specifically the role of SBA and EDA in acting as a glue for this particular community coordinating activities across the federal government. I think Jennifer has done, you know, and her team have done a fantastic job in you know, linking up for example the NSF Engines program with the BBBRC and of course with the upcoming regional technology hubs. And obviously I've been having those regular conversations, you know, and I'm looking forward to working with Jason and his team because you know these are, there are some overlapping interests in investments in critical technologies and bringing technologies to market as quickly as possible. Taking graduated SBAR companies for example that need access to greater capital to scale up in this critical tech. So I think that is something that is happening on a organic basis I think through the efforts of coordinating entities and people. One thing I would say though there's always the one challenge to watch for is the, is the fading that will happen over time. Most of these relationships happen because there are motivated individuals and again, there are a lot of them in the federal government who really care about, are passionate about the mission of these agencies and how they can make this mission succeed better by building better effective partnerships. And of course, if you think of us as a social network, each of us are connected to each other and we have these connections. The strength of the social network is in the, is in the level of interactions. And how that level of interactions, however, are triggered, are prompted by you, the listeners, the stakeholders. We like to. We are here to serve you right, and the more we serve you, the stronger these relationships become among the agencies. So in some sense we want you to do the job of holding us accountable for maintaining these relationships. So when you kind of prompt us, hey, what happened? How are these two groups working together? It prompts us to reminder re strengthen those alliances, those friendships and those networks that we have between the agencies. So that's a job for you to play to help us succeed as well.

That's great. And I think that's a good reminder for ecosystem builders. I've been one for a long time and so often you're heads down, you're focused on the work of helping entrepreneurs in your place. And the way that you interact with these federal government programs is responding as an emergency during a 60 day kind of time period. But it's a great reminder that this is not just a single funding program here or there. Those are representative of not just ongoing relationships across the federal government, but an ongoing focus point for these different agencies. There are people running these programs and managing communities of awardees. So there's always more opportunities to engage, to start conversations. And so kind of keeping with that same thing theme, the audience in front of us is really America's boots on the ground when it comes to helping encourage and guide entrepreneurs across the country. So based on the information that you have and what you see sitting in D.C. what advice would you give our ecosystem builders across the country? How should they think differently? What should they think more critically about? What would you like to see more of to help you meet the goals that you've set for our country?

I can perhaps go first this time. So let me lay the setting again of the transition economy. Things are changing. There's lots of opportunity. That means a lot of things. That means that the federal government needs help structuring financially and that you can bring that to bear.

Right?

There's lots of programs, there's lots of funding opportunities out there across the board and bringing to bear the structures and working with the federal government in the co investment and leveraging opportunities is the thing that's really important on the innovation side in a way that private sector has not been involved in the innovation side before. Case in point is Jason's new office in dod, new things coming to bear and it's across the board with different agencies, including in treasury with the ssbci. Second, because it's transition, it's not a zero sum game, the transition everyone wins together. So the snowball effect of jumping in and really moving across, moving the economy in different ways with different innovation, different supply chains, different breakthroughs is not a zero sum game. And we should all work together as best we can to move that everywhere in the country. The interesting and wonderful part of this transition is that it is not geographically limited, but is going to be powerful across all states and territories and hopefully has spillovers to the tribal nations who we should be supporting deeply as well. Then finally, what else you can do? Hold forums, gather, do more gathering over different programs. Do more helping to think about how programs can be building wealth for disadvantaged community during this transition. It's not just about when we talk about the just transition. It's not just that there are communities that are going to face climate events. It's that we could actually mobilize the new opportunities to build wealth, entrepreneurial wealth for communities that typically get skipped over, disadvantaged in other ways. I'd like to leave with that thought of really, let's figure out how to make the transition and these opportunities, new manufacturing, new supply chains, all of that work for the country as a whole and help the federal government with all kinds of partnerships and bringing what you have to bear to work with what we're bringing to bear. Thanks.

I'll amplify everything that Adair said and I'll add one additional emphasis area for esos to focus on. And I think the federal government is the source of large amounts of investment. Right. And across the different agencies that you know, that many of you typically work with. And the thing to remember, at least from my vantage point, is the federal government comes in much later in the innovation game. Right. So before we can fund somebody like, you know, with a lot more money, there has to be a lot of legwork done to build the supporting infrastructure. Right. To build those relationships and often that and even teach people about the value of entrepreneurship, which is. Which are all the things that you do. And I'm sure you know this and this doesn't have to be repeated, but that it really hinges on the support from the Local governments and the state governments to a large extent. So they become vital partners which federal government doesn't often really directly engage. Right. And often the conduits for such engagements are through organizations like you. And I think esos should really try hard to build those strong relationships with the local and state governments because they essentially create the foundation on which you can take additional federal investment and build a much stronger regional innovation ecosystem.

I am just, I think it is such a cool way to think about it, the way that the community is engaging on this topics right now about how, as Dare said, this transition economy is one where everybody can be a winner. And that is such a rare thing, to be honest. That is not normally how the economy works, but with the revitalization of programs that helped us grow significantly post World War II. But doing it in a modern approach, understand, understanding the difference in the economic conditions that exist today and how much value we can drive for all of our critical stakeholders. I mean, it's such an incredible. It's such an incredible opportunity. This is a great time to be in government, to be honest, to be building ecosystems, to be honest, because you have an opportunity now to get out to the, the community and bring folks in who traditionally would not be well represented. You have an opportunity to get out and bring in people who traditionally have never thought about doing this work because the government is leaning forward and creating the economic conditions, I think to make some of these areas truly attractive to a wide variety of individuals and attempting the best we can to build it in a way that supports the community writ large. And collaborating across the government to be able to bring those to bear is something that I think is just to take a second, a really, really great opportunity. It is a really great time to be part of doing this work. I would ask the ecosystem builders out there to continue to work with the US Government as we launch new things and try new things and experiment and exchange and provide feedback to the wider community, provide feedback directly to the USG folks in dc, feedback directly to us in the Department of Defense on how we can do our job better. That is our role. You know, we here, we sit here to serve the community. We think we've got some really great opportunities to roll out, but at the same time, we know there's a lot more we can be doing. And so working, providing the forms, working with the communities, but also trying to take the time and energy to relay that feedback back to the government, I think is extremely, extremely important.

Thanks to all of you. Yeah, we have time for just one last Question. And so I'm going to ask each of you for a lightning round to limit Your answ to 30 seconds. I know this is going to be hard because we're talking about systemic issues here, but I feel as though you're up to the challenge. So, you know, one of the things that's been mentioned a number of times in this conversation is the supply chain opportunity and the kind of growth opportunities that are available for small businesses. And I think this is very notable because the way that we've talked about innovation in the past has really left a lot of folks behind. They've made people feel like if you don't have a PhD in biology, you know, maybe there isn't a place for you in the innovation ecosystem. So in this new age, you know, put, put a, put an exclamation point on us, what opportunities are there to become both more competitive and more inclusive and equitable as we build the kind of economic system that's going to take us into the future?

I'll take my first cut at this one. The National Science foundation is typically known for supporting the kind of research that usually employs PhDs and the like and it produces more PhDs in return. However, I would say the creation of this new directorate that I'm part of, the Technology Innovation and Partnerships Directorate, is an intentional effort by the NSF in recognition of the fact that innovation no longer requires a PhD and it doesn't have to happen through a traditional pathway. Right. And therefore what I would say is stay tuned to the programs that we are launching, the NSF Regional Innovation Engines being the very first one. We have another program for workforce development called excellent Experiential learning for emerging and novel technologies. There are many more to come and we are trying to change the culture then this narrative that requires people to expect high levels of achievements to be recognized as innovators. So we are cognizant of the fact and I know that there's a cultural change that needs to happen. But stay tuned and we'll promise you more action from our side.

We have an economy that has tremendous natural resources and a tremendous creative education and human capital environment. These things combined into the transition economy mean we need to find better ways than we have to to use the natural resources in our inputs. And those are, that's a local statement to use regional focus in our supply chain and to make sure that labor everywhere is part of that new innovations impetus to bring the movement up everywhere across the United States. And I think it works in this transition, in this resource based need with the energy moving as well as the supply chain.

Yes.

Well.

And Jason, I hate to and not give you an opportunity to answer that question, but I think we're out of time. I want to make sure we keep the conference on schedule. But thanks to all of you for your really thoughtful comments today, all the work that you're doing and we're going to take your charge. We're going to be vocal, we're going to tell you what we need on the ground and we're going to get involved. Thank you so much.

Thank you, Melissa, Jason Adair and Tiaga, our audience, let's give them an emoji or a GIPHY round of applause. Also, thank you to Jennifer. She for sharing those links in the chat. As Britain Ellswick stated, Jennifer is the unsung hero of that session. And if you're like Kenny Mitchell in the chat and have infinite tabs open because of all the links that are being shared, we're actually compiling these links which will be available to you on the americaseed Fund US website. So bookmark that site, then come back to it and access all the links that we're sharing today. If you've just joined during the session. Welcome to the SBA Innovation Ecosystem Summit. We're going to take a brief break and when we come back, Jennifer, she will lead a fireside chat discussion with Jordan Blaschik, COO and co founder of America's Frontier Fund.

Stay tuned.