Friday, June 26, 2009

Policy Tracker

Bills differ on SBIR awards to VC-owned firms

By Kent Hoover

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The U.S. House and Senate are taking different approaches on whether small companies that are majority-owned by venture capital firms should be eligible for Small Business Innovation Research awards.

In 2003, an administrative law judge ruled that VC-controlled firms did not qualify as small businesses, knocking them out of consideration for SBIR awards. VC-owned firms, particularly in the biotechnology industry, have been pushing Congress to restore their ability to compete for SBIR awards ever since.

In response, the House Small Business Committee is considering legislation that would make small companies owned by venture capital firms eligible for SBIR awards as long as no single VC firm has a majority stake in the company. VC firms controlled by large businesses couldn’t own more than 20 percent of SBIR-eligible companies under the House bill.

“Opening up the SBIR program is exactly the kind of legislation Congress should be passing to help small businesses create new, good-paying jobs,” said bill sponsor Rep. Sam Graves, R-Mo.

The Senate Small Business and Entrepreneurship Committee’s bill would open only a limited number of SBIR awards to VC-owned companies. Its legislation would allow the National Institutes of Health to award up to 18 percent of its SBIR awards to small companies majority-owned by VC firms. Other agencies could award up to 8 percent of their SBIR dollars to such companies.

“This bill strikes a fair compromise on the issue of eligibility requirements, allowing some new firms to participate while not changing the nature of these successful programs,” said committee chair Sen. Mary Landrieu, D-La.

Some small business groups oppose making VC-owned firms eligible for SBIR awards, contending they aren’t small businesses any more if they sell a majority stake to larger entities.

For more information on the SBIR program, see www.sba.gov/sbir.