SBIR Gateway VC Discussion Group
(Archived May 2004)
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Updated 05/22/0499 messages
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Richard Schlecht San Jose, CA
Msg 81 of 99
What are VCs for but to provide funds for THEIR clients. Since they are the owners they do not fall into the purview or spirit of the act. This would just take limited funds away from a true small business. I see no difference between this case and a subsidiary.
Vote:   NO 
Dov Jacobson Berkeley Lake, GA
Msg 82 of 99
VC's who have the ability ($$) to lobby for this rule also have the ability to lobby for acceptance of their proposals.

Does anyone doubt that, like so many other government contracts, SBIRs will soon be awarded not on their merits alone but on the campaign contributions of the proposer?

Vote:   NO 
Carl Nelson Washington, DC
Msg 83 of 99
Dov, I doubt it. I do have to defend the federal bureaucrats. Politics will NOT enter at the retail level in SBIR. For all my complaining about the agencies' ignoring an opportunity to foster real innovation by real innovators, I know of no situations where politics has affected an award selection. They fund their mediocrities for honest reasons. The selectors are mid-level technocrats with no loyalty to any polity or region. The awards are too small to attract graft even if you believe that VCs would traffic in such influence. Although there are a few instances of SBIR companies getting post-SBIR awards from earmarked appropriations, that does NOT affect the awards with SBIR money.
Name withheld by request Dallas, TX
Msg 84 of 99
R&D dollars are too scarce to be given to companies that already have funding. For the businesses without VC funding, SBIR/STTR represents one of the few avenues to fund innovative entrepreneurs.
Vote:   NO 
Michael Zeece Lincoln, NE
Msg 85 of 99
Changing the rules to permit VC competition in phase I and II funding will alter the landscape of activity supported by this Federal funding opportunity. Presently, SBIR programs represent a unique opportunity for development of “academic” ideas into technological achievements. Enabling VC to compete for federal funding will effectively limit the number of funded projects to those with the largest market potential. The net result will be stifled creativity, inhibited innovation and derailed development of more difficult, but promising technologies. This proposal is in direct contrast to the philosophy of SBIR programs.
Vote:   NO 
Name withheld by request Chino, CA
Msg 86 of 99
NO. Furthermore, people are wearing rose-colored glasses in this forum by believing that SBIR provides a level playing field. A lot of SBIR's are directed through political deals and solely benefit one company and should never be awarded under taxpayer money. Most SBIR's are created on the behalf a small company that wants money and knows a sponsor. Allowing VC into the mix tilts this to the point where the VC companies will be those with the political connections in order to get more SBIR's written to their liking.
Vote:   NO 
Name withheld by request Cambridge, MA
Msg 87 of 99
No, a VC funded business already has funding, and does not need the help. If so they are being mismanaged and should be out of business.

A small business with no VC money with few people needs all the help it can get! We are fighting big companies and VC funded start-ups, and hence the odds are stacked against us to begin with.

Vote:   NO 
David M. Gange Pennington, NJ
Msg 88 of 99
The playing field is already tilted hugely in favor companies with VC funding. They don't need taxpayer support as well.
Vote:   NO 
Mark Marchionni Arlington, MA
Msg 89 of 99
I wish to submit the following comments on the SBIR eligibility requirements pertaining to company ownership by individuals.

The SBIR program has made possible the growth and survival of emerging companies for decades. In helping to create new jobs and advance innovative technology this program has been an essential part of growing and maintaining a vibrant and competitive economy in the United States.

The National Institutes of Health has administered an SBIR program for decades, and this source of funding has been instrumental to emerging companies in a growing biotechnology industry. Many of these companies have been owned in part or were started by venture capital firms. From my personal experience, I was one of the first scientific staff members to join Cambridge NeuroScience, Inc. (CNSI) in 1987, shortly after the company was started by the venture capital firm Warburg Pincus. Prior to the initial public offering, Warburg retained majority ownership of CNSI and we submitted and were funded for more than 10 NIH SBIR grants (5 Phase I and 5 Phase 2). I was the Principal Investigator on two such grants. These funds were critical in creating the jobs to grow the company from 18 (when I joined) to more than 60 at the time of the IPO. By virtue of this SBIR support, several product candidates advanced into clinical trails or were partnered with major pharmaceutical companies as part of Phase III commercialization. Thus, not only has it been accepted practice for the NIH SBIR program to support the growth of emerging biotechnology companies, but it has helped to accomplish the mission of the NIH and create new jobs as well.

At the current time, I submit that the Small Business Administration and the NIH need to support the growth of new jobs in this essential economic sector—biotechnology. Many have lost their jobs in the recent economic decline and tax revenues need to be spent wisely to stimulate job growth. Biotechnology represents a sector of the economy where the US has a clear competitive advantage, and provides an important opportunity to revitalize economic growth. Further, a very sizeable percentage of all drugs produced in the past decade have been discovered at small companies. Since companies that are controlled by venture capital firms often represent some of the more innovative and competitive start-ups, policies that support collaboration between these companies and government agencies would represent prudent and productive use of tax revenues. It is these very companies that have the greatest chance of advancing their technology through to commercialization. Therefore, I offer my very strong support for producing a wording of the eligibility requirements that would enable the NIH to include in the SBIR program emerging companies that are majority owned by venture capital firms.

Thank you for your support. Very truly,

Mark A. Marchionni, Ph.D. President

Vote:   YES 
Eugene Watson Laramie, WY
Msg 90 of 99
Further to my earlier comments, I am pasting in below comments I have sent to Senator Enzi' staffer on the Senate Committee on Small Business and Entrepreneurship.
I appreciate you responding to my concerns regarding VC participation in the SBIR and STTR programs - it helps me understand where this issue is focused. It is my view that, whether valid or not (and I don't concede that it is), the argument made by the VC's, that small businesses owned and controlled by them have a higher probability of successful commercialization than those small businesses lacking their huge financial resources, completly ignores the intent and purpose of the SBIR program. The program was devised to provide a means for small businesses lacking access to start-up capital to have the opportunity to compete for federal R&D funding. VC owned and controlled small businesses obviously were not, and are not, included in the original legislative intention. I fail to see the difference between applying the VC argument to the VC case and applying it to the case of IBM, GM, Intel, or any large commercial enterprise owning and controlling a small business and demanding SBIR eligibility? Of course, VC's (and all others) are now, and always have been, able to own a minority, non-controlling interest in SBIR eligible small businesses. And all VC owned and controlled businesses are eligible to compete for the 97.5% of the SBIR agency budgets that aren't set-aside for small businesses - why do they need to come after the other 2.5% and cut off those small businesses that don't have adequate capital? Seems greedy to me - and against the legislative intent and spirit of the SBIR program.

My opposition to this move to change the eligibility rules is primarily driven by my conviction that Wyoming small businesses will particularly suffer if this fatal breach in the integrity of the SBIR/STTR programs occurs and VC's are allowed to own and control SBIR-eligible small businesses. In my opinion, if the SBIR eligibility rules are altered to allow VC participation, the SBIR program as we know it will disappear and ALL Wyoming small businesses will eventually be crowded out of the competition since NONE of our small businesses have attracted VC participation nor is it likely that any will, at least in the near future. Without adequate financial resources, our small businesses will be unable to compete with those states in which the VC's are concentrated. And the SBIR program is a zero sum process - any grant going elsewhere is one less grant coming to Wyoming.

But aside from our parochial Wyoming interests, my concerns also extend to preserving the integrity of the program for the benefit of all of the country's small businesses who are, after all, the primary engine of new job creation and economic growth.

If you haven't already done so, I urge you to go to the following websites and carefully follow the discussion on this issue. /articles/vc/

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updated 05/22/04
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