Two bills to renew SBIR program clash on venture capital inclusion — MedCity Morning Read, June 29, 2009

WASHINGTON, D.C. — Two bills aimed at renewing the Small Business Innovation Research (SBIR) grant program are at odds about how much grant money companies that have received venture capital investments should be able to get.

One bill to renew the SBIR program was unanimously passed by the House Committee on Small Business on Thursday, according to the Wall Street Journal’s Capital Venture Dispatch blog. The House bill is friendlier to venture capitalists and their portfolio companies than a bill moving through the Senate, the Journal blog has said previously.

The House bill would reverse a Small Business Administration policy in place since 2003 that keeps venture-backed firms from getting SBIR funding, the blog said. Under this bill, grant amounts from the SBIR program and from its sister program, the Small Business Technology Transfer (STTR) program, would not be capped when awarded to companies in which venture capital firms have invested.

The Senate version of the bill, which is awaiting a floor vote, proposes an 8 percent cap for each federal agency that provides SBIR funding except for the Department of Health and Human Services, which has proposed a cap of 18 percent.

The House bill does include some restrictions to insure that truly small businesses continue to get the research and technology grants.

“Perhaps most importantly, the legislation restores the pre-2003 eligibility rules permitting small businesses with venture capital investment to qualify for SBIR awards,” Rep. Nydia Velazquez, the New York Democrat who chairs the House small business committee, told the Wall Street Journal.

Life sciences interests have largely supported expanding SBIR/STTR funding to include venture-backed companies. However, some smaller biotech companies — especially Midwest companies that tend to get less venture capital investment than those in New York and California — see the expansion as a potential death knell for small business and innovation funding.

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