SBIR Gateway
SBIR News Flash
VCs & Biotech Lobbyists Push for
Last Minute SBIR Legislation Change

Attempt to Avoid Public Hearings
September 18, 2004



Updated September 19, 2004

In the 11th hour of this Congressional session, lobbyists of influential and well-funded organizations such as the Biotechnology Industry Organization (BIO), and the National Venture Capital Association (NVCA), have been quietly working the halls of Congress in order to try and get their special interest legislation passed that will change the SBIR eligibility rules. They seek to allow large scale venture capital operating companies and/or pension plans, which would include Fortune 500 owned organizations, to own and control small businesses competing for SBIR funding.

These powerful lobbyists were successful last spring in getting some support in both the House (H.R.4149) and the Senate (S.2384). These are identical bills that do more to muddy the waters than to clarify them.

Informed sources report that the House Small Business Committee will try to move a large bill during the week of September 20, concerning the reauthorization of the SBA that would include language (perhaps stronger than the original bills) to make the changes to the SBIR program that the lobbyists want. By acting in this last minute "quiet" manner, the special interest groups will avoid hearings, studies, and public comments, all of which could threaten their special interests. The lobbyists know that there is opposition to their special interests, but also understand that the opposition will be subordinated to the more important "must pass" legislation that needs to be completed by the targeted adjournment date of Oct 1.

Compromises Sought
The opponents of this action are not against VC participation. In fact it was proposed that VCs could have majority ownership and control of a small business if the VC itself was a qualifying small business. However, this was of little interest to these VC / Biotech organizations.

Although there has been no official request for public comments nor studies on this subject, the SBIR Gateway opened an informal discussion group and non-scientific straw poll last fall. Over 78% of the companies participating voted against a proposal to allow large corporate VCs to own and control small businesses participating in SBIR competition. Only 18% supported a rule change, and the remainder didn't care.

Completely ignored by these special interest groups is the fact that large VCs can participate with "non-majority" ownership of the small business, and after phase II into phase III, the VC can own majority interest in the small business.

Many seasoned SBIR veterans believe that "slipping" this legislation through without comment, debate and studies, will result in greatly diminished opportunities for the small businesses that this program was designed to serve. In addition, rural and smaller states will be put at a major disadvantage because of the lack of institutional VC funding in those states. The result will be a widening gap between the richest SBIR states (i.e., California and Massachusetts) and the smaller rural states such as Wyoming, New Mexico, Montana and Maine.

What You Can Do
Although there is opposition to the special interests, it will be subordinated to the more important "must pass" legislation that must be completed by Congress's target adjournment date of Oct 1. For this reason, small businesses must become pro-active and take action right away.

Call your Congressional Representatives, especially those on the House Small Business Committee and the Senate Committee on Small Business and Entrepreneurship immediately! Tell them you do not want companies owned and controlled by big business competing against you or other small businesses in the SBIR program. Stress that changing the SBIR legislation warrants hearings and a full public debate in order to determine the best interests of the small businesses this program was designed to serve.

Other Sources
The Small Business Technology Coalition (SBTC) is a strong advocate for small businesses and the SBIR program. They are a non-partisan, nonprofit industry association of companies dedicated to promoting the creation and growth of research-intensive, technology-based U.S. small business.

Contact Information
A list of House and Senate contacts are available at www.zyn.com/sbir/articles/biocon-vc2.htm

Copyright 2004 Zyn Systems. All rights reserved.