SBIR grants: Successfully funded academic collaboration

This case shows a relatively small company that has emphasized product sales since its inception in 1985. It has leveraged $40,500 of Vermont’s EPSCoR “Phase O” grants to obtain $3.6 million in federal SBIR grants. With SBIR support it developed an innovative line of microminiature, digital wireless sensors, which it is manufacturing. These sensors can autonomously and automatically collect and report data in a variety of applications. Unlike most research companies, MicroStrain, started by a graduate student, has emphasized product sales since its inception in 1985. Its sensors have been used to protect the Liberty Bell during a move and to determine the need for major retrofit of a bridge linking Philadelphia and Camden. Current development projects include power-harvesting wireless sensors for use aboard Navy ships and damage-tracking wireless sensors for use on Navy aircraft. Although annual revenues are relatively small ($3 million in 2004), the company can document many millions of dollars of savings achieved by users of its wireless sensor networks. A little more than a quarter of the company’s revenue comes from government sources.
 

SBIR Case Study: MicroStrain, Inc.

Rosalie Ruegg

TIA Consulting
 

THE COMPANY
 

While pursuing a graduate degree in mechanical engineering at the University of Vermont, Steve Arms witnessed an incident that led him to his future business. During a horse vaulting gymnastics competition, a friend flipping off the back of a horse injured the anterior cruciate ligaments in both knees when she landed. That set Steve, an avid sportsman himself, wondering about the amount of strain a human knee can take and how to measure that strain. Soon he was making tiny devices called “sensors” in his dorm room to measure biomechanical strain, and soon afterward he was making money for graduate school by selling sensors around the world—the first a tiny sensor designed for arthroscopic implantation on human knee ligaments.
 

In 1985, Steve Arms left graduate school to start his company, MicroStrain, Inc. “In many ways,” he said, “an excellent time to start a business is when you first leave school and it is easier to take the risk, the opportunity cost is small, and one is used to living on a budget.” He operated the business out of his home at first.
 

The company is not a university spin-off, but the company has a number of academic collaborators. Among them are the University of Vermont, Carnegie Mellon, the University of Arizona, Penn State, and Dartmouth University.
 

He located the company in Vermont to be close to family and friends, and to continue to enjoy the excellent quality of life offered by that location. In the longer run, the location has proven positive for high employee retention.
 

From its initial focus on microsensors with biomechanical applications, MicroStrain moved into producing microsensors for a variety of applications. Its sensor networks are in defense applications, security systems, assembly line testing, condition-based maintenance, and applications that increase the smartness of machines, structures, and materials.
 

MICROSTRAIN, INC.: COMPANY FACTS AT A GLANCE
 

  • Address: 310 Hurricane Lane, Suite 4, Williston, VT 05495-3211

  • Telephone: 802-862-6629

  • Year Started: 1985

  • Ownership: Privately held

  • Revenue: Approx. $3.0 million in 2004

    • Revenue share from SBIR/STTR and other government grants: approx. 25 percent

    • Revenue share from sale of product and contract research: approx. 75 percent

  • Number of Employees: 22

  • SIC: Primary SIC: 3823 Industrial Instruments for Measurement, Display, and Control of Process Variables, and Related Products
     

Secondary SICs:
 

3625 Relays and Industrial Controls

3679 Electronic Components, not elsewhere classified

3812 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical Systems and Instruments

3823 8711 Engineering Services
 

  • Technology Focus: Wireless sensors and sensor networks for monitoring strain, loads, temperature, and orientation

  • Application Areas: Condition-based maintenance; smart machines, smart structures, and smart materials; vibration and acoustic noise testing; sports performance and sports medicine analysis; security systems; assembly line testing

  • Funding Sources: Product sales, contract research, and federal government grants

  • Number of SBIR Grants:

    • From NSF: 3 Phase I, 3 Phase II, and 3 Phase IIB

    • From other agencies: 6 Phase I, 2 Phase II, 1 Phase III
       

The company has grown to approximately 22 employees, including mechanical and electrical engineers. It occupies 4,200 square feet of industrial space near Burlington, Vermont. Its annual sales revenue was recently reported as $3.0 million in 2004, with revenues growing at about 30 percent per year. Revenues are expected to reach $4.0 million in 2005.
 

THE TECHNOLOGY AND ITS USES
 

A “sensor” is a device that detects a change in a physical stimulus, such as sound, electric charge, magnetic flux, optical wave velocity, thermal flux, or mechanical force, and turns it into a signal that can be measured and recorded. Often, a given stimulus may be measured by using different physical phenomena, and, hence, detected by different kinds of sensors. The best sensor depends on the application and consideration of a host of other variables.
 

MicroStrain focuses on producing smarter and smaller sensors, capable of operating in scaleable networks. Its technology goal is to provide networks of smart wireless sensing nodes that can be used to perform testing and evaluation automatically and autonomously in the field and to report resulting data to decision-makers in a timely and convenient manner. The data can be used to monitor structural health and maintenance requirements of such things as bridges, roads, trains, dams, buildings, ground vehicles, aircraft, and watercraft. The resulting reports can alert those responsible for problems before they become serious or even turn into disasters. They can eliminate unnecessary maintenance and improve the safety and reliability of transportation and military system infrastructure while reducing overall costs.
 

Among the features that determine how useful sensors will be for the type of system monitoring function described above are the degree to which the sensors are integrated into the structures, machinery, and environments they are to monitor; the degree to which the systems are autonomous, i.e., operate on their own with little need for frequent servicing; and the degree to which they provide efficient and effective delivery of sensed information back to users. MicroStrain’s research has focused on improving its technology with respect to each of these performance features.
 

Another way to look at it is that MicroStrain has addressed barriers that were impeding the wider use of networks of sensors. For example, MicroStrain was one of the first sensor companies to add wireless capability. Wireless technology overcomes the barrier imposed by the long wire bundles that are costly to install, tend to break, have connector failures, and are costly to maintain. A recently passed international standard for wireless sensors (IEEE 802.15-4) is expected to facilitate wider acceptance of wireless networks.
 

A barrier to the use of wireless sensor networks is the time and cost of changing batteries. MicroStrain is an innovator in making its networks autonomous, without need of battery changes, by pursuing two strategies: First, it has adopted various passive energy harvesting systems to supply power, such as by using piezoelectric materials to convert strain energy from a structure into electrical energy for powering a wireless sensing node, or by harvesting energy from vibrating machinery and rotating structures, or by using solar cells. Second, the company has reduced the need for power consumption by such strategies as using sleep modes for the networks in-between data samples.
 

A recent newsworthy application of MicroStrain’s sensors was to assist the National Park Service to move the Liberty Bell into a new museum. The Bell has a hairline fracture that extends from its famous larger crack, making the Bell quite frail. MicroStrain applied its wireless sensors developed as part of an NSF SBIR grant to detect motion in the crack and fracture as small as 1/100th the width of a human hair. During a lifting operation at the end of the move, the sensors detected shearing motions of about 15 microns (roughly half the width of a human hair) at the visible crack with simultaneous strain activity at the hairline crack’s tip. MicroStrain’s engineers stopped the riggers during this activity, and the sensor readings returned to baseline. Further lifting proceeded very slowly, and no further readings of concern were observed. The Bell was protected by this early warning detection system, which saved it by literally splitting hairs.
 

Another newsworthy application by the company of a sensor network was to the Ben Franklin Bridge which links Philadelphia and Camden, New Jersey, across the Delaware River. The bridge carries automobile, train, and pedestrian traffic. At issue was the possible need for major and costly structural upgrades to accommodate strains on the bridge from high-speed commuter trains crossing the bridge. MicroStrain placed a wireless network of strain sensors on the tracks of the commuter train to generate the data needed to assess the added strain to the bridge. “For a cost of only about $20,000 for installing the wireless sensor network, millions were saved in unnecessary retrofit costs,” explained Mr. Arms.
 

In the future, military systems will benefit from the cost-saving information from MicroStrain’s sensor networks. Current development projects include power-harvesting wireless sensors for use aboard Navy ships and damage-tracking wireless sensors for use on Navy aircraft. Mr. Arms explained that the data collected in this application is expected to result in recognition that the lives of the aircraft can be safely extended, avoiding billions of dollars of replacement costs.
 

THE ROLE OF SBIR IN COMPANY FUNDING
 

Early on, SBIR funding played an important role in supporting company research. While in graduate school at the University of Vermont, Mr. Arms was involved in proposal writing. He also had learned of the SBIR program. “Were it not for this,” he said, “the application process may have seemed intimidating.” He tapped Vermont’s EPSCoR17 Phase O grants to leverage his ability to gain federal SBIR grants. EPSCoR Phase O grants provide about $10,000 per grant. According to Mr. Arms, these Phase O grants helped the company get preliminary data for convincing results and helped it write competitive proposals. The company has leveraged a total of $40,500 in EPSCoR grants to obtain $3.6 million in SBIR funds.
 

According to Mr. Arms, he found the NSF SBIR program with its “more open topics” particularly helpful in the early stages when the company was building capacity. “The open topics allowed the company to pursue the technical development that best fit its know-how,” he explained. “Now the company is better able to respond to the solicitations of the Navy and the other agencies that issue very specific topics.”
 

The company regards the receipt of an SBIR grant as “a strong positive factor that is helpful in seeking other funding,” said Mr. Arms. “It is used not only to fund the development of new products but as a marketing tool,” he continued, pointing out that the company issues a press release whenever it receives an SBIR grant.
 

MicroStrain has received a total of nine Phase I SBIR grants, five Phase II grants, three Phase IIB supplemental grants, and one Phase III grant. It has received SBIR grants from the National Science Foundation (NSF), Navy, Army, and the Department of Health and Human Services. The amount the company has received in SBIR grants since its founding in 1985 totals about $3.6 million.
 

MicroStrain, Inc.: SBIR/STTR Grants from NSF and Other Agencies.
 

According to Mr. Arms, the receipt of additional SBIR grants in the future is hoped for as a means to enable it to continue to innovate and stay at the forefront of its field. The company is targeting about 25 percent of its total funding to come from SBIR grants in the coming years.
 

BUSINESS STRATEGY, COMMERCIALIZATION, AND BENEFITS
 

The company operates at an applied R&D level, and, unlike most R&D-based companies, has had sales from its beginning. Mr. Arms, the company founder, and president emphasized his belief in the need to produce a product “to make it real as soon as possible.” Continuing, Mr. Arms said, “Having products lets people know you know how to commercialize and that you intend to do it.”
 

Mr. Arms sees the company’s main competitive advantage as its role as an integrator of networked sensors. “Our goal is to produce the ideal wireless sensor networks,” he explained, “smart, tiny in size, networked and scalable in number, able to run on very little power, software programmable from a remote site, capable of fast, accurate data delivery over the long run, capable of automated data analysis and reporting, low in cost to purchase and install, and with essentially no maintenance costs.” These features are important because they help to overcome the multiple barriers that were impeding the wider acceptance of sensors.
 

While the company sells its sensors mainly in domestic markets, it has from the beginning shipped sensors to customers around the world. Now the company sees market potential, particularly in Japan and China. Patenting is reportedly very important to the company’s commercialization strategy.
 

MicroStrain has received a number of grants in recognition of outstanding new product development in the sensors industry. It has received seven new product grants in the “Best of Sensors Expo” competition. Products that have been recognized by grants include the company’s V-Link/G-Link/SG-Link microdata-logging transceivers for high-speed sensor data logging and bidirectional wireless communications; its WWSN wireless Web sensor networks for remote, internet-enabled, ad hoc sensor node monitoring; its FAS-G gyro enhanced MEMS-based inclinometer; its MG-DVRT microgauging linear displacement sensor; its 3DM-G gyro enhanced MEMS-based orientation sensor; its EMBEDSENSE embeddable sensing RFID tag; AGILE-Link frequency-agile wireless sensor networks; and INERTIA-LINK wireless inertial sensor.
 

Society stands to benefit in a variety of ways from improved sensors and networks of sensors. Structures, such as buildings, bridges, and dams, as well as transportation and industrial equipment should have fewer catastrophic failures because managers will be alerted to emerging problems in time to take preventative action. Homeland security should be enhanced by smarter networks of sensor-based warning systems. Manufacturing productivity may be increased by better planning of required maintenance and avoidance of costly, unplanned downtime. In general, integration of smart sensor networks into civilian and military structures and infrastructure, transportation equipment, machinery, and even the human body can conserve resources, improve performance, and increase safety.
 

VIEWS ON THE SBIR PROGRAM AND ITS PROCESSES
 

Mr. Arms made the following several observations about the SBIR program and its processes, some of which focused on the NSF program, some on the Navy program.
 

Topic Specification
 

Mr. Arms contrasted the “open topics” of NSF with the “very specific topics” of the Navy and other agencies, noting the former is particularly important to a company when it is “building capacity,” while the latter is important when the company is positioned to generate a variety of new products.
 

Financing Gap
 

Mr. Arms noted that “early on in the life of the company the funding gap was very difficult, but now the company is able to bridge the gap using its sales revenue.”
 

Value of Keeping Phase I Grants as Prerequisite to Phase II
 

“Phase I grants are important for getting a reaction to an area; to understanding better a technology’s potential,” said Mr. Arms. “I would not want to see this phase eliminated or bypassed.”
 

Size of Grants
 

“It is great that the agencies are beginning to increase the size of their grants,” commented Mr. Arms. “I especially like the NSF’s Phase IIB match grant; it fits well with my company’s commercial emphasis.”
 

Application Process
 

Mr. Arms finds the Navy’s SBIR application process particularly agreeable, calling it “the best!”
 

Value of Commercialization Assistance
 

The company has not participated in an NSF-sponsored commercialization assistance program, but it has participated in Navy-sponsored opportunity forums and in NSF conferences. It has found the networking provided by these forums and conferences to be very valuable. In fact, it was at an NSF-sponsored conference that MicroStrain made contact with Caterpillar Company, leading it to become a participant in a joint venture led by Caterpillar and sponsored by the Advanced Technology Program.
 

Observations about NSF’s and Navy’s SBIR Program Manager Systems

“The way NSF conferences facilitate face to face meetings between program managers, who have extensive business experience, with budding entrepreneur-scientists is excellent,” Mr. Arms said. He expressed special enthusiasm for the Navy program managers, calling them “extremely knowledgeable and focused.”
 

NSF’s Student and Teacher Programs (outside SBIR)
 

Like several of the other companies interviewed, MicroStrain has used the NSF students program, “but, regretfully, not the teacher program.” Like the other companies that have used these programs, Mr. Arms said MicroStrain had found the NSF students program valuable. “I think it would be a great thing to expand this idea to the other agencies,” he suggested.
 

SUMMARY
 

This case shows a still-small company that has emphasized product sales since its inception in 1985. It has leveraged $40,500 of Vermont’s EPSCoR “Phase O” grants to obtain $3.6 million in federal SBIR grants. With SBIR support it developed an innovative line of microminiature, digital wireless sensors, which it is manufacturing. These sensors can autonomously and automatically collect and report data in a variety of applications. Unlike most research companies, MicroStrain, started by a graduate student, has emphasized product sales since its inception in 1985. Its sensors have been used to protect the Liberty Bell during a move and to determine the need for major retrofit of a bridge linking Philadelphia and Camden. Current development projects include power-harvesting wireless sensors for use aboard Navy ships and damage-tracking wireless sensors for use on Navy aircraft. Although annual revenues are relatively small ($3 million in 2004), the company can document many millions of dollars of savings achieved by users of its wireless sensor networks. A little more than a quarter of the company’s revenue comes from government sources.


Source: National Research Council (US) Committee for Capitalizing on Science, Technology, and Innovation: An Assessment of the Small Business Innovation Research Program; Wessner CW, editor. An Assessment of the SBIR Program. Washington (DC): National Academies Press (US); 2008. C, Case Studies. Available from: http://www.ncbi.nlm.nih.gov/books/NBK23754/

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