Following up on our February 4th report on the debate regarding the future of the SBIR Program,  the House Committee on Small Business held a hearing on March 13th to consider changes to modernize the program, according to a press release issued by the House Committee on Small Business.  SBA Administrator Steven Preston was subpoenaed to appear before the Committee.

The chief items up for consideration by the Committee were as follows: (i) increasing size limits on SBIR grants during the first two phases of the program, potentially doubling the size of the awards, and (ii) changing the definition of small business to include businesses majority-owned by venture capital firms, reported Kent Hoover for the Dallas Business Journal. 

Hoover reported on the second topic of consideration:

The committee also wants to change the SBA’s rules defining what types of companies qualify as a small business in order to allow small companies that are majority-owned by venture capital firms to receive SBIR awards.

These types of companies routinely received SBIR awards until 2003, when the SBA ruled that venture capital firms don’t qualify as individuals under the agency’s eligibility rules for the SBIR program. . .  . Many biotech companies contend the ruling ignores the realities of their industry, where small businesses must get outside capital in order to research and develop new drugs and other treatments. The Biotechnology Industry Organization and the National Venture Capital Association have been lobbying Congress to overturn the SBA’s ruling. . . . .

The House overwhelming passed legislation last September to allow small companies majority-owned by VC firms to be eligible for SBIR awards as long as no single VC owned more than 50 percent. The Senate didn’t act on the bill, so the House is taking another stab at it this year.

BioOptics World ran an article this month on the SBA reauthorization battle.  I was actually interviewed for the article, but my interview did not make it into the published article.  Anyway, Author Susan Reiss reported as follows on the status of SBA reauthorization:

One Hill observer says that the venture-capital issue will boil down to whether Congress wants to emphasize the “S” or the “B” in SBIR. At this point the House and Senate don’t agree on whether they should change the program to address the venture-capital issue. A bill introduced last fall by John Kerry (D-Mass.), chairman of the Senate Committee on Small Business and Entrepreneurship, and ranking member Olympia Snowe (R-Maine) that tried to bridge a middle ground passed in the Senate but failed in the House. An alternative bill was approved in the House, but failed in the Senate.

This year the Senate has yet to hold hearings on SBIR reauthorization, although an aide to Kerry on the Small Business Committee says Kerry is committed to reauthorizing the program. . . .

Reiss further noted:

To lessen impact of the venture-capital issue, some observers have suggested creating a separate program for innovation development at NIH. “NIH is concerned about the path to commercialization. Instead of trying to fit a square peg in a round hole, let’s look at a commercialization program,” suggests James Morrison, a senior advisor for the Small Business Technology Council.

But the chance that someone will devise an entirely new program that addresses the needs of NIH is unlikely. At this point it’s unclear where on the spectrum the House and Senate will meet to reauthorize SBIR, but as Brown notes, “it would be devastating to have a gap in the program.”

Video of the hearing and and copies of written testimony by witnesses are available for review at the Small Business Committee website.

I am interested to hear any comments on the current proposal to the House Committee.  It is a well-established fact that BIO strongly supports the idea of changing the SBIR rules to allow venture-backed companies to recieve SBIR grants.   But the Dallas Business Journal article suggests that some biotech companies may actually oppose BIO’s position.  Is there any truth to this?  If you oppose the changing the rules to allow venture-backed companies to participate, I would like to hear your argument.  Please write us and let us know your position. 

Also, what about the idea of developing a new program at NIH?  Is this a workable or even advisable solution?  Why or why not?  Any comments we receive on this issue will be shared with blog readers, so we welcome the feedback.