The SBIR Clock is Ticking

Members of the Senate Small Business and Entrepreneurship Committee and the House Small Business, and Science and Technology Committees are meeting, yet again, to see if this time they can resolve the impasse of two very different SBIR reauthorization bills, (Senate S.1233 and House H.R.2965).

You will recall that Rep. Nydia Velazquez (D-NY), chairwoman of the House Small Business Committee, holds the very anti-small business view that VC-owned technology companies should be able to participate fully in SBIR/STTR competition. Amazingly, she has for the last two years, prohibited any testimony on behalf of small businesses in her committee and also on the floor of the House. In contrast, the Senate’s bill preserves most of the SBIR program for small company by capping participation of VC’s, a compromise that last year was agreeable to both the VC and small business lobbies. But the Velazquez would not budge from her position.

Will this year be different?

When the full House considered its SBIR reauthorization bill, Velazquez got the Rules Committee to prohibit consideration of a Edward Markey (D-MA)-led amendment that would have made the bill similar to the Senate version. She did this because it was widely expected that the Markey amendment was favored by most members of the House and would have passed.

Several House members, led by Markey, who disagree with the obstructionist Velazquez and do not like her bullying, are trying an end run around her by sending a letter to Senator Mary Landrieu (D-LA), Chair of the Senate Small Business and Entrepreneurship Committee, expressing their support for the Senate’s SBIR reauthorization bill. This letter represents an attempt to let the Senate conference committee members know that most Representatives disagree with Velazquez’s bill.

The more members of the House who sign the letter, the greater chance that the conference committee will approve S.1233 as the final version. You can help by emailing the Markey letter to your Representative and ask that s/he sign on this week. Time is of the essence since an acceptable compromise must be made by next Tuesday, July 28. While you are at it, ask your Rep to consider how they are going to explain to small businesses in their state why they voted against small businesses so that rich VC’s could have access to more Federal funds.

SBIR updates and links for contacting your Representatives and Senators can be found on www.SBIRreauthorization.com.

© 2009 Steven S. Clark, PhD, some rights reserved.  Articles contained herein, are meant to be distributed freely to interested parties. However, any use, including excerpts from any article, must credit Steven S. Clark and provide a link to the original article published in BioScience Biz.

Disclaimer: The authors used their best efforts in collecting and preparing the information published herein. However, neither Steven S. Clark, nor other authors, assume, and hereby disclaim, any and all liability for any loss or damage caused by errors or omissions, whether such errors or omissions resulted from negligence, accident, or other causes.

Comments

[Jonathan Pearl]

And just why in the midst of this is our very own Tom Still, head of the Wisconsin Technology Council representing BIO and NVCA instead of the needs and interests of WI high-tech businesses?

In a letter sent before the house vote on H.R. 2965 he wrote: "Why isn't Wisconsin getting more grants? Perhaps because fewer companies can quality as a "small business." Perhaps he should spend more time talking with successful Wisconsin small business, like the dozens of us who have received SBIR contracts and grants in the past few years.

He cites both BIO and NVCA in his letter, but fails to mention a single WI SBIR firm. It's as if we don't even exist to the WTC. I suspect he'd get a rather different few and more helpful suggestions on how to raise the stature of WI by listening to those who have done it, rather than heeding the self-interest of large venture capital associations.

There is a dangerous set of assumptions that Tom Still seems to be sustaining that: the best science is conducted at universities and guided by peer-review; and that investment from large Venture Capital firms can serve as a meaningful proxy for the value of innovative ideas. Both assumptions are verifiably and patently false! The three decades success of SBIR disproves them. And according to the major National Academies report on Venture Capital and the NIH, more non-VC-backed firms commercialize the results of their SBIR efforts than VC-backed firms do.

The principal issues however focus not on VC ownership but rather on retaining the proven effective three-tiered system of SBIR, preserving the integrity of Phase I for required feasibility studies prior to advancing to Phase II, and on keeping award sizes reasonable (more at the Senate's proposals than the House's), because more SBIRs means more good ideas have a chance to reach the marketplace where they will save money, save lives, and create jobs.

[Peter Heinecke]

I don't understand why allowing VC funded companies to participate in the SBIR process is "anti-small business"; the SBIR rules already allow companies with up to 500 employees to participate -- most VC funded companies are much, much smaller than that. Why should companies be penalized just because they are able to raise capital from sources other than the government?

[Mark Stidham, Ph.D.]

Steven,

Please entertain the possibility that VC-backed companies are not ‘anti-small business’. In our company, our initial funding was from SBIRs. These led to the development of assets and capabilities that attracted VC investment. But the resulting investment is reserved for clinical development of the assets. You are probably aware of the high cost of drug development, and I can assure you, it is no joke. Also you must be aware that the skills and experience needed for drug development are different than those of research. For those of us remaining in research, we need funding for early stage research as much as any small business not receiving VC investment.

Of course, drug development is not completely divorced from research, and a small level of effort from research is still required for the development projects. Meanwhile, the development team helps research by providing an important perspective on the requirements for a development candidate. Thus, a small business that has both research and development functions makes a stronger company than either alone. Still, a company with 35 employees is a small business by any standards. A world comprised of pure research or pure development companies is a less sustainable world than one in which both functions exist together under the same roof. It occurs in large companies; is it your belief that it cannot and should not exist in small companies?

I hesitate to generalize the real motives behind the anti-VC sentiment. On the face of it, the argument looks like government grants should be reserved for those who cannot get funding elsewhere. Or is it that the VC-backed companies have resources that make them more competitive for funding than those without VC backing? If it is the former, why is VC-backing the only constraint? Are not small businesses owned and backed by multimillionaires at a similar advantage? If it is the latter, then perhaps the advantages of a small business connected to a university should be similarly restricted. We have no such connections to universities, and I dare say that this is a big disadvantage that is based on the taxpayer’s back and unfair to those without such connections.

I am not complaining, because we have benefitted and grown out of the SBIR cauldron. The process has helped us in many ways beyond the financing, and I am grateful. But the vitriolic disparaging of VC-backed small businesses is misplaced. You must also be at a loss to explain NIH’s advocacy of VC-backed companies. Is it your view that NIH is in the back pocket of…who?

I would be interested in hearing your reaction.