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Venture Capital Has Its Day In Congress
By Marc Tracy
A couple days ago, the U.S. House of Representatives debated the reauthorization of the Small Business Innovation Research Program (SBIR), and the Washington Post was on the scene. We've already discussed the contentiousness of this $2.2 billion annual program, which provides federal research funding (primarily tech and life-sciences) to small businesses: one Republican congressman introduced a bill backed by the venture-capital industry that would alter the definition of small businesses under SBIR to apply to companies mostly owned by venture capitalists--they would merely have to prove that no one VC fund holds a majority stake. Predictably, the bill sent the American Small Business League practically through the roof.
Interestingly, Rep. Nydia Velazquez (D-N.Y.), who chairs the House Small Business Committee, came out in favor of the bill: "In this economy, small businesses everywhere are struggling to access capital and we should be making it easier on them, not harder." There certainly is no denying that the current definition cares less about the "small" aspect of a small business and more about its ownership. On the other hand, those venture-backed businesses do have a potential funding source that others lack, and opening the SBIR to the former would indeed take money away from the latter. Of course, VC funding is decidedly less available in the current economic climate. It is worth pointing out that VC-backed companies actually were eligible up until 2003.
So what will the outcome be? We'd bet on a compromise along the lines of an amendment introduced by Rep. Edward Markey (D-Mass.), which would allow VC-backed companies to compete for 15% of SBIR funding through the National Institutes of Health (so that would be much of the life-sciences money), and 5% of other sorts of SBIR funding. A Senate bill espouses the same idea, breaking it down 18% and 8%, respectively.
The National Venture Capital Association opposes the compromise: why, they argue, should these small businesses be treated any differently than others? We'd best every last penny we own that Lloyd Chapman's ASBL would oppose the compromise, too: why should "real" small businesses have to compete with the VC-backed ones to any extent? It's the nature of compromises that everyone's principles get betrayed in favor of something more practically workable. Such is politics!
Comments (0)July 9, 2009 6:10 PM
