Let's Not Change the SBIR Program
Editor's Note
June / July 2008
Volume 6 Number 3
The Small Business Innovation Research Program—better known as SBIR—could be in trouble. Administered by the Small Business Administration (along with its sister, the Small Business Technology Transfer [STTR] Program.) STTR has been helping entrepreneurs since 1982 by awarding grants of up to $850,000.
The SBA proudly states on its web site, "Through these two competitive programs, SBA ensures that the nation's small, high-tech, innovative businesses are a significant part of the federal government's research and development efforts.
"Eleven federal departments participate in the SBIR program; five departments participate in the STTR program awarding $2 billion to small high-tech businesses."
A government agency—the Department of Defense, for example—will determine a need that must be filled and invites entrepreneurs to satisfy that need through an R&D project. Funding is provided to entrepreneurs with a small company.
Says the SBA: "SBIR targets the entrepreneurial sector because that is where most innovation and innovators thrive. However, the risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. By reserving a specific percentage of federal R&D funds for small business, SBIR protects the small business and enables it to compete on the small level as larger businesses. SBIR funds the critical startup and development stages and encourages the commercialization of the technology."
Well, it's reauthorization time in the congress and there could very well be significant changes that will harm entrepreneurs. HR5819, overwhelmingly approved by the House, opens the SBIR program to venture capital firms of any size including those owned by large businesses. Currently, company size is limited to 500 employees.
Hap Stoller, president and CEO of TPL, Inc., an Albuquerque firm that has benefited from SBIR grants, says the SBIR program would be dominated by "small businesses" that are owned by VCs. "It is projected," he says "that the number of small businesses that will be participating in the program would drop by about two-thirds if HR5819 were to become law."
In the Senate, the situation is muddled. The version of the bill under consideration by the Small Business and Entrepreneurial Committee seems better than the House bill, although Senator Kit Bond (R-Mo.) wants to open 25 percent of the program to VC access. Senator John Kerry (D-Mass.) is working on a compromise with Bond.
Stoller is urging small technology companies that have benefited or could benefit from SBIR awards to get in touch with their representatives in Washington—senators especially—to either urge a compromise that reduces VC involvement or, better, reauthorize the existing legislation. Authorization expires on September 30.
SBIR and STTR programs have helped many fledgling technology companies to get through the Valley of Death—that vast distance between the idea and the product—and, at the same time, have provided federal agencies with the help they need to solve problems. There doesn't seem to be a down side.
We have absolutely nothing against the VC community. To the contrary, it has been invaluable in developing thriving companies by taking chances. But SBIR was set up for entrepreneurs and it has worked. Why not keep it that way?
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