Charting a Course Through Defense Contracting: Strategies for Small Business Success

Unlock the secrets of navigating the defense contracting sphere as a small business with our expert guest Devin Florzak. Gain invaluable insights into leveraging government initiatives like the SBIR and STTR programs to catapult your company into the big leagues, following in the footsteps of trailblazers like Qualcomm and iRobot. We delve into the nuances of the funding process and share essential tips on crafting compelling proposals that stand out to agencies. If you're an entrepreneur dreaming of transforming your innovative ideas into commercial successes, this is an episode you cannot afford to miss.

From discussing the treacherous path of funding and product development to examining the global economic landscape, we cover ground that's as diverse as it is critical. You'll hear personal accounts of navigating the challenging phases of SBIR funding, strategies for maximizing your proposals' potential, and an exploration of how global events shape the defense industry. We bring it all back home with reflections on Taiwan's delicate position in international relations and the surprising international influence of nations as small as Nauru. Prepare to have your view on the intersection of entrepreneurship and geopolitics entirely reshaped.

• Hosted by: Terrell Cummings & Devon Florczak
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Transcript

Speaker 2: 0:21

Hello and welcome back to the Country Intelligence Report. We are your hosts Spencer Bentley, devin Florzak and Terrell Cummings. This week we will be exploring a pretty interesting conversation topic that we have been sort of broaching in various ways on the show here around all of the intricacies that go into defense contracting and some of the vehicles available for small businesses to enter into this world, and sort of just demystifying a lot of the questions and concerns that small businesses may have as they look to enter into federal contracting. And, specifically, we will be discussing the world of SBIRs and STTRs. These are the SBIRs, the Small Business Innovation Research Program, and STTRs, the Small Business Technology Transfer. And to get us started, we will hand it over to Devin Florzak, who will just sort of introduce us to the programs and give us a better understanding of who, therefore, why they exist and how they can be leveraged by small businesses.

Speaker 3: 1:39

Devin yeah, I think we can look at this as a more alternative way of doing business with the Department of Defense and Department of Energy. You know, obviously the more traditional way is scanning for contracts, looking for sources sought, seeing what organizations are looking for, searching for all those RFPs, trying to find all that. But these two programs seem to be more specific towards the R&D side of things. You know pretty much in general. It's more so for you know, if you have an idea and you think it could be funded by the government, you think the government could use it, you think it could also be potentially commercialized. You know these are the programs for you. So, for the SBIR sponsors, as you mentioned, you know it's the Small Business Innovation Research Program and it's essentially a government initiative that encourages, you know, small businesses in the United States to engage in R&D. You know, with the potential for commercialization, of course. You know, with all R&D, you know there's a lot of companies that start just from doing R&D. One of the big ones is Qualcomm. There's actually an SBIR Hall of Fame and, funny enough, they were inducted to it in 2011,. You know, back in the 1980s, you know, essentially they started with an idea of initially developing commuter trips and they applied for some SBIR grants. You know at the time they had 35 employees and now they're workforces of over 17,000 people. So you know pretty big company now. And they started off with the Moz Begans of you know being a small business going through the SBIR program, you know just starting with one idea and then now they have a company that holds over 13,000 patents, so it's pretty big.

Speaker 3: 3:36

Another one is, you know iRobot. You know everyone knows the Roomba but it's one of those companies where you know makes really generic products but then also does things with the DOD and DOE you know similar to like you know 3M. You know 3M we see. You know they have their paper products but then they also do some projects for, you know, space exploration. So a lot of these companies you know from the front end.

Speaker 3: 4:05

You know they offer commercial products but a lot of them did get their start with funding from, you know, the government and working on, you know, more military based applications. So with you know iRobot, you know they've used SBIRs to initially help the military buy, make different types of autonomous robotics throughout the years. You know one of the main ones was the PACBOT which is being used for bomb disposal right now. And then they also assisted with something called the Sea Glider, which is an autonomous underwater vehicle. It's an AUV instead of a UAV. So you know, these companies again, you know it seems like a lot of them you know, have these ideas that they want to assist the government with. But, you know, try to better the world and then they end up commercially commercializing some of these things. And, you know, bring more commercial products Once they actually get that backing from the government. Yeah, that's fascinating.

Speaker 2: 5:07

Yeah, definitely a unique vehicle that I'm sure you know that the average small business may not know about, and this one sort of being oriented towards more innovation and products and less, towards, you know, services, it makes it really unique, I think. And seeing these success stories as well, I think, could be really enlightening for the engineers and the innovators out there that may have a good idea but aren't quite sure how to get in front of the proper audience in the federal government. This is a really great, great program here. So why don't you, you know, sort of walk us through how they should understand the application process and, you know, even as it comes to finding and responding to these solicitations?

Speaker 3: 6:03

Yeah, yeah, so solicitations seem to be found just on SBIR and STTR specific government websites. So DOE has their own solicitation sort of you know portals that you can go under and you can kind of see, you know the ideas that they're looking to be formed. When I've looked at these and you know, I've, you know, talked with a couple of companies that have been through the, the Sibir process, sbir, typically a lot of these solicitations are really generic and then they leave it up to the company, to, you know, use their imagination and, you know, try to get it done. So you know they might, you know these solicitations might just be a page long and say, you know, hey, we're looking for this. They don't really mention you know how it should be done, but they're just wondering if someone could figure out and get it done.

Speaker 3: 6:56

So yeah, there are these portals out there for both the DOD and DOE and, like I said before, you know, companies have also approached, you know, sbir and STTR with the DOE and DOD with their own ideas. So you know these two, you know programs are pretty much open to interpretation and you can even apply for your own idea. So you know, obviously that takes a little bit more legwork, and then you do the marketing work as well, to see if there's eventually, you know, any organization that will fund that research. But you know, like we said, if we, you know, if you have an idea, you know you might be able to, you know, get it funded through one of these.

Speaker 2: 7:41

One of these programs that makes sense. Yeah, so you know we sort of understand how to find these solicitations and the structure of them. What about how? How should they go about understanding the proposal process, specifically writing a strong proposal?

Speaker 3: 7:59

Yeah, yeah.

Speaker 3: 7:59

So I think you know, when it was explained to me before, that a lot of these you know proposals that are written and they're written more so like a you know university research paper.

Speaker 3: 8:13

It's very detailed, very technical language. You know, straight to the point and you know, obviously a lot of these papers go out to an audience, you know a more government audience that you know has to review it and understand what you're trying to do in a concise manner, because you know they need to figure out, you know who could actually accomplish a task at hand and at the same time, you know see if you know their application might have any merit with how it's described. So I think that you know when you're writing these proposals I have, you know we obviously we haven't actually done any of this. We've talked in the companies, though that do have their own SBIR applications out there and you know, like I said, it seems like it's more so through a you know university research paper lens, where you know you have to be, like I said, very concise, to the point and you know make sure that you're explaining everything clearly.

Speaker 2: 9:12

It makes sense. So you have to have sort of a high technical acumen and understand and be able to express your idea, probably in a very granular way. So you have to have a very strong command of the technical aspects of your idea, which makes sense given the vehicle that you're applying towards you know. So then, how? Then? You know you've written the proposal, you're in the process of writing the proposal. How do they go about sort of demonstrating the project's viability? You know, is it something where you have to lay it out completely in the proposal, is it? You know, I'm not sure about the structure of this particular program, but what insights do you have on the viability aspects of it?

Speaker 3: 9:59

Yeah, yeah. So typically you know goals are set in the proposal on. You know they're more so technical goals where you know you might say if you're working on an application that say, for example, one of the ones I was familiar with which I was talking to you guys before, was this company that was trying to pretty much be able to spray paint that allergist-based material onto aircraft and be able to quickly repair them without leaving the tarmac. And so one of their goals by the band be able to create a sort of laser system that only uses like a thousand watts of energy or less. Pretty much. I think they're more so very technical goals.

Speaker 3: 10:51

And at that point you're kind of defined the constraints of your project and saying if we want this sort of product to work in a real-life scenario, it needs to be, for that example, it needs to be low energy, low resource cost and you need to be able to do it over and over and over again. So, like I said, one of those goals might be low energy, a thousand watts of power used or less per spray, for example. Low resource cost. Make sure that every time you do spray the material it might be low cost. So keep that sort of per unit price down. And then time time can be a factor. You could say it will take a goal, could be like, by the time that you set up the equipment, you fix the piece of the aircraft and then by the time it dries and it's good to go, you could say keep it under an hour, something like that. So yeah, I would say when you're writing these proposals, you want to keep it very technically-based, keep your goals related to the application, if that kind of makes sense.

Speaker 2: 12:06

Yeah, makes sense. So that's great, A lot of the insights you're providing around how exactly to get these applications going and how to strengthen the proposal, things like that. So let's then sort of pivot towards the funding and how the funding sort of plays out, because this is, I think, one of the most crucial aspects of these sort of programs is you have this great idea, you're able to write to it effectively, but then the funding can be prohibitive depending on how it's structured within the program itself, and that can be a huge mitigating factor for small businesses out there looking to leverage something like this. So why don't you sort of walk us through how the funding works?

Speaker 3: 13:00

Yeah, at least with SBIR, which again I think I'm more familiar with, potentially working with that one company. Like you said, I think funding can be very prohibitive. With SBIR specifically, there are three phases of funding. Phase one is sort of your intro phase. That's where you develop your proof of concept, it's what they call, it's your feasibility study phase. So this is where you're trying to aim and establish your technical merit for the project and then also explain, if you're able to essentially make a proof of concept, what can be the commercial potential of the project. And so this phase here it's usually not a lot of money. From what I've seen, it's usually around somewhere around half a million dollars or less, and it's typically they typically only give you six to 12 months to get it done, and so it's usually a short time period, quick turnaround, not a lot of funding, which can be stressful for companies. The one company that I was talking with is essentially one guy working on this laser application for the Air Force and he had his normal job and he said that he would go in after his job and work on it on the weekends, whenever you got time. Because, like I said, that phase one funding is not a lot of money and it's not a lot of time. So after you got done working eight to five on his normal job, he'd be there six to 10, six to 12, pretty much every night and on the weekends as well. And that's where I think a lot of these applications in phase one are born from. It's just people with ideas that want to actually grind and put in the hours to get it done. So if you're someone like that and you have an idea where it's going to be a time commitment but you think you can get it done in half a year, that might be for you and then for phase two.

Speaker 3: 15:12

So, like I said, three phases. Phase two is more so focused on the development of the product and here this is where you need to do some marketing and do some legwork on trying to figure out what agencies, what offices, what said those agencies might fund your product, and this is more so talking with those potential clients and trying to source that funding. So, of course, you know, with this I usually get more funding. You know, get up to the seven figure range and they typically cover, you know, longer periods. You know one to yours, two years, three years, etc. And then three years are sorry.

Speaker 3: 15:50

The phase three is the more so. The commercialization phase. So this is where you're actually expanding your product to, you know, be developed commercially. So whether it be, you know, for wide use in the government or you know wide use just in the general public domain, you know this is where you know you're you're actually expanding and you know your R and D work is pretty much done. I mean you're just, you know, sort of expanding your product, you know. So, obviously, the, you know the phase one, you know funding, that's pretty open and obviously that's where you have to start. But you know, if you have a dream and you know you think the government can fund it and can use that product, or you know the general public domain to use that product, you know I think SPR is a great place to start.

Speaker 2: 16:36

That's great. Yeah, that makes a lot of sense. And you know the it seems like this is sort of structured in such a way that they're really trying to sort of weed out some of the more viable ideas and structuring the funding to help sort of facilitate that, which makes sense given that it's tiered. But yeah, just it's my understanding, just based off of the reading that we've done, that the third tier is actually not really funded by the programs but by the other sources. So, like you said, when that marketing kicks in on phase two, you're really trying to sell your product to these other agencies within the government and they sort of take on the financial aspects of funding it from that point forward, which makes a lot of sense.

Speaker 3: 17:39

Yeah, and I think you know we've gone to these different conferences and I was talking to this guy at the Department of Energy Conference and he was saying that he had four SBIR phase one proposals out there.

Speaker 3: 17:55

So you know, I think it's something that you know, people have these ideas and they sort of fire them out there if a lot of volume, and you know hoping one sticks on and then you know, if they get one, you know they could, they could work on that proposal for you know, six to 12 months with phase one funding and you know hope to expand it to two and three.

Speaker 3: 18:14

But you know, I think the real challenge is, you know, getting that that phase one over to phase two and three. I think when I was talking with the one company that was working on their laser application with the Air Force, I think there are some wild statistic that you know only like five or 10% of the phase one funded projects actually make it to phase two. So it's I think it's pretty challenging. I might be off that statistic but you know, from what I know and from what I've heard, you know it's very tough to make it to phase two, but not to discourage anyone. But you know, if you have a good enough idea and a good enough proof of concept and you know you could find, you know people actually fund it because they'll make use out of it. You know, great, you know. I think this is a great program to use.

Speaker 2: 19:04

Yeah, yeah. And all the more reason to make sure that you know you're you do have a viable idea before entering into this process. You know it only makes sense that it would become increasingly you know more difficult as you get further along in the program. But that should be all the more sort of motivation for you inventors out there to come with your idea as fully baked as you can and leverage these different vehicles as much as you can. So just to round this conversation out, what are the types of projects that typically get funded? Because it seems like such a wide, open vehicle that can allow for a lot of different ideas to sort of get their legs underneath them. But just so we can help focus some of our listeners out there on what is truly viable for this sort of program, can you give us a little insight into what sort of projects get typically?

Speaker 3: 20:16

funded. Yeah, I mean honestly, I think pretty much anything gets funded as long as you can find an actual use case for it. The idea is that we've looked up very generic they all said life sciences, things involving technology, I think, involving energy or defense specifically. I feel like it's more so for niche ideas, like I mentioned before, the one company working with their laser application for the Air Force, things like that, where it's niche, but it actually solves a critical problem that the government is seeing, whether that be in defense or energy or even in health at that age. So you need to think really broad or you can think really small and say, hey, it looks like there's a problem here and there's a market for government customers that could have some use in getting this problem solved, albeit it might be small. I think the government is just looking for problem solvers and in-rays in general to give funding to make everyone's lives easier, makes sense.

Speaker 2: 21:33

Well, there you have it, folks a very, very powerful set of programs that you should definitely read up on and take advantage of if you are so inclined to the SBIR Small Business Innovation Research Program and the STTR Small Business Technology Transfer Program. Definitely worth the time if you are someone who is looking to get that big idea of yours off the ground and find a viable customer within the federal government. So, switching lanes, here we're going to go to our new segment of just sort of discussing things that have been on our mind, quick little tidbits that we've been interested in throughout the week, and Dev and I'll kick it over to you, man, what's been on your mind that you really can't let go of this week.

Speaker 3: 22:29

Yeah, my one buddy came through last week and he was talking about his podcast I forget what it's called should really be down or something. He was talking about Taiwan and Spencer. Like you mentioned before, they just selected a new president that seemed to be more democratic, more anti-Eastern business philosophies and whatnot, which I think I saw some news stories about. But he was talking about this podcast and how it keeps him in the loop and I feel like, just in general, there's a lot of global news that is being brought more so to the mainstream. My buddy, he's a PT by train, so he works at the YMCA and trains people, but it seems like not like people like him, but it seems like there's more of a spotlight on just general issues, more related to our industry and defense and just global contract, which I thought was kind of interesting.

Speaker 2: 23:38

It is interesting and me being sort of an international relations nerd myself, I find it kind of refreshing that people are getting more clued in to the world around them. It's becoming an increasingly small world. With the information revolution still roaring ahead and I think, especially with all of these different conflicts and things that have been in the news, it just expands the lens for everyone to understand that, especially as Americans, that it's a very interconnected world. At this point the things that happen overseas have direct impacts on us in one way or another. The thing that I couldn't let go of as well is it's also related to Taiwan. It's funny that you brought that up.

Speaker 2: 24:41

Taiwan is an interesting case on the international stage. They are extremely important in a lot of ways to the global economy, but they're sort of persona non grata in a lot of ways to these more formal institutions because of their contentious relationship with China and China's sort of insistence that they not be recognized formally. So it's sort of a mishmash of states and nation states globally that have ties to Taiwan. For example, america has sort of this position of I forget the exact terminology, but basically it's a lack of acknowledgement formally, but informally we have really direct ties with them and it's just indicative of how the rest of Taiwan's partners have structured their relationships with them. And it's a small group because obviously China has a lot of influence in the world and one of their allies, I should say, sort of formally cut ties with them because of the election of their president, and it's this small Pacific island nation called Nauru.

Speaker 2: 26:07

It wouldn't make any other news. It wouldn't make news in any other circumstance, rather. But because Taiwan is such a strange sort of example of how international relations could play out when it comes to large power politics, this small little Pacific island nation has been on the news suddenly because it basically conceded to China's demands and decided to formally part ways with this newly elected president. But yeah, little things like that. We'll see how this plays out. He's unapologetically Taiwanese and very much disagrees with a lot of the Chinese government's way of doing business, to put it lightly. So we'll see how this plays out and I'm sure we'll continue to touch on this through the years as this continues to unfold for us. But yeah, well, thank you folks, that's what we have for this episode and we will be seeing you the next time Over.

Speaker 1: 27:23

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