Mapping the “Valley of Death”: Managing Selection and Technology Advancement in NASA's Small Business Innovation Research Program

In this paper, we determine the risk mitigation process inherent in managing a portfolio of technologies diverse in both their readiness for infusion and the nature of the performing organization, focusing on the so-called “valley of death” in which the technology's principles have been proven but prototypes have yet to be developed. Using the Technology Readiness Levels (TRLs) of projects funded by the National Aeronautics and Space Administration Small Business Innovation Research program, a two-stage competitive process, we find that the result of selection of the first round is a tendency toward larger companies. In the second round of funding, technology maturity is a stronger determinant of selection and company headcount is no longer a statistically significant driver. This combination allows the program to manage risk and deliver real technical advancement from even the smallest companies. We find that technologies typically advance from TRL 2, concept formulation, at the program's outset to roughly TRL 5, component validation, at the program's conclusion; these outcomes precede economic benefits from the subsidy. These findings illuminate a mechanism to address risk as well as demonstrating the technical outcomes of a managed early-stage technology program.