SBIR Gateway VC Discussion Group
(Archived May 2004)
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The comments below are the views of submitter and do not necessarily reflect that of Zyn Systems or the SBIR Gateway. Please address your questions to: info@zyn.com .
Updated 05/22/0499 messages
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10/17/03
  13:50:07
Brigitte Van der Haegen Tucson, AZ
Msg 11 of 99
I vote NO to any changes. If VC's have money to invest in a small business they should also have enough funds to invest in the business R&D! To use government funds to supplement their investment is plain ridiculous.
Vote:   NO 
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10/17/03
  14:44:31
John Cole Issaquah, WA
Msg 12 of 99
Arguments Against Allowing VC-owned Firms into SBIR Program

First, the SBIR program is poorly matched to the goals of VC-funded firms. VCs are interested in growing rapidly and "cashing out" as soon a possible. The three year schedule for SBIR projects is far too slow for VCs, and VCs prefer the shoot the "walking wounded" that are not highly successful instead of nurturing them to a moderate success, as we all saw in the last technology bubble. Our company would be dead if we had been VC funded because of the time required to develop our products; with patience, now we are a world-class supplier of accelerometers for industrial and military products. It is likely that only the highly successful SBIR projects meeting VC success criteria would create continuing US jobs.

Second, I believe that VCs would be motivated to set up companies to act as SBIR "proposal mills", with the sole objective of acquiring SBIR contracts without any intention to produce products. The work would be used only to develop, evaluate and patent technology using government funding without any follow-on. Such work has the same commercialization gap present in university research, a gap the SBIR program was originally created to close. Some companies exploited this strategy successfully in the 1980s, and in the early 1990s Congress required Phase III success reports on previous Phase II efforts to be included with subsequent proposals so that this strategy was easily identified.

And third, the megabucks available to VCs would allow them to "buy into" SBIR contracts unfairly, so that the competition would be between small, individually owned companies and VC-owned small companies with the capital of a large company. Such unequal competition is the reason that Congress set up small-business "set-asides". VCs are essentially small-business conglomerates and do not have the same limited resources as independent small businesses.

I believe that the successful SBIR program will be subverted if VCs are allowed to own companies that compete in it.

John Cole, President
Silicon Designs, Inc.
jcole@silicondesigns.com

Vote:   NO 
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10/17/03
  17:05:13
Robert M. Pearson Medford, OR
Msg 13 of 99
Having successfully competed for SBIR awards I know how difficult it is for an individual or very small company (less than 5 people) to win an award under the present system. Only a small fraction of present proposals are funded. If this change is adopted it will all but eliminate the individual and very small company from the SBIR process.

Any company with 500 employees is not small and should have ample resources to compete. If anything eligibility size in SBIR awards should be reduced not increased. In my opinion VC companies and venture capitalists in general are universally greedy they do not need access to one of the only sources of capital available to a hard working scientist of engineer who happens to have a good idea and can successfully compete under the present SBIR eligibility rules.

Venture capitalists have ample opportunity to enter into the process during Phases II and III of the SBIR process under certain rules which should not be relaxed, but changed in a manner that will help the individual award holder.

Vote:   NO 
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10/17/03
  17:40:51
Name withheld by request Seattle, WA
Msg 14 of 99
Vote No!
Vote:   NO 
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10/17/03
  20:06:03
Lawrence C. Farrar Butte, MT
Msg 15 of 99
NO ON THE RULE CHANGE

The SBIR program is an enabling force in the development of new technologies and fosters competition among the best small technology businesses in America. The SBIR program is a valuable asset to job creation and is an investment in our future. The recent attack by the Venture Capital institutions is threat to this program and, if the Venture Capital community is allowed to prevail, it will undermine the foundations of this valuable and successful program.

The SBIR program intent is to provide entrepreneurs with capital to pursuer high-risk, high-payoff concepts, and make available the resources to assist in the development of these concepts into new technologies and businesses. Venture Capitalists have their own venue to develop funding for promising technology businesses, both large and small.

The funding process and, generally speaking, the business model for SBIR companies differs substantially from the Venture Capital model. It is essential that we insure that the SBIR program does not just simply become another source of money for Venture Capitalists. The SBIR program is just too valuable of a national resource to be consumed by the voracious appetite of the Venture Capital community.

Take action to defeat this effort!!!

Vote:   NO 
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10/18/03
  10:05:32
Philip Schaefer Weaverville, NC
Msg 16 of 99
From what I can see, I must agree with what most other small business owners say about this issue. Clearly, it opens the door for abuse of the SBIR process and could easily drive out of business many small, innovative companies without such private funding.
Vote:   NO 
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10/18/03
  10:42:49
Scott Thacher San Diego, CA
Msg 17 of 99
Some questions. I am still thinking.

1. Does the size of the institutional investor make a difference? A seed fund may be very small, and very important to development of small companies which also utilize SBIR funds.
2. What percentage of SBIR grants actually does go to companies with more than 50% ownership by VC funds. Is this therefore a serious problem for the small company (like ours)?
3. What would this provision do, if anything, to companies with ongoing SBIR funding (like us) who plan to seek venture capital? Would this discourage venture investors from getting involved?

Vote:    
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10/18/03
  21:17:35
Name withheld by request Santa Fe, NM
Msg 18 of 99
Vote No.
Vote:   NO 
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10/19/03
  10:49:15
Name withheld by request NorthHuntingdon, PA
Msg 19 of 99
Vote No.
Vote:   NO 
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10/19/03
  20:15:12
Hong Ming Chen San Marino, CA
Msg 20 of 99
Vote No.
Vote:   NO 
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