Senate legislation expands SBIR, gives VC firms more access

WASHINGTON, D.C. – Venture-owned companies would get a share of federal small-business funds, according to legislation that’s been sent to the full U.S. Senate.

But changes in the SBIR/STTR Reauthorization Act of 2009 (pdf) may actually be an acceptable compromise for many – including those in biotech – who worried about how much money companies owned mostly by VCs could get.

Under the legislation, the allocation for the Small Business Innovation Research program would increase gradually from 2.5 percent to 3.5 percent by 2020 (STTR’s allocation also doubles to .6 percent by 2015).

Businesses owned by venture companies, ineligible for funding for almost a decade, could now receive up to 18 percent of SBIR funding from the Department of Health and Human Services. Other departments with SBIR funding could provide eight percent of their SBIR funds to VC-owned companies.

Life-science interests have mostly supported moves to expand SBIR opportunities. But smaller biotech businesses and some in the Midwest think they’ll lose funding to better bankrolled venture-owned companies, and see their SBIR money gravitate to the East and West coasts.

BIO, the national biotech organization, seems satisfied with the Senate bill. But the problem is in the House, where legislation may emerge with fewer limits – if any — on how much SBIR funding venture-owned companies can receive. According to Venture Capital Dispatch:

It’s unclear if the House version allows SBIR grant participation – and if so how much – from venture-backed companies, though committee members appeared to respond positively to venture capitalists and their companies at recent hearings. A spokesman for the House committee said only that the bill “allows appropriate participation of venture-backed companies in the SBIR program.”