As a follow-up to my post last Friday about SBIR tips (and to the comment about watching the requirements about ownership and size of the company), I wanted to point out that the Small Business Adminstration (SBA) has extended the time to comment on a proposal to change the way a business' size is calculated, particularly the participation of businesses majority-owned by Venture Capital Companies in the SBIR program. The new deadline for providing a comment is April 3, 2005.
The SBA is pondering whether to exclude VC companies investing in the SBIR grant applicant from the pool of "affiliates" of that applicant, which would affect the size of the applicant and possibly keep more companies eligible for the grants. As noted in the comments, obtaining VC funds is often crucial for start-up biotech companies and the VCs often own more than 50% of the company because of their investment. Yet, start-up biotechs often look to SBIR grants to start some of their research (and the VC money goes toward some operational costs, facilities, etc., that the SBIR money wouldn't cover). Many of these VC companies are arms of large corporations, so if you count the number of employees in that VC company in calculating whether the applicant fits as a "small business," they're automatically out of the running. Several large pharmaceutical companies, for instance, have established specific divisions or subsidiaries that are created to invest in start-up companies.
The SBA is specifically looking for any information on how widespread VC funding is for companies that would otherwise be eligible for Phase I or II grants, and what role this financing takes. Implementing this would certainly open up the number of companies who could qualify for SBIR grants, but it remains to be seen as to whether these companies really would take advantage of it. For some VC-backed companies, they likely would thank their lucky starts and flock to the SBIR solicitations. Many others may not, preferring to utilize only private funding without any interference with government agencies checking into how they're spending the money, etc.
I'm looking forward to the analysis that the SBA may conduct, if it looks like a change in the rule regarding VC-backed companies should be considered. If it looks like a proposed rule is needed, under the Regulatory Flexibility Act, the SBA will conduct a study on the economic impact of the rule change on small business. Though some of these study results don't really shed much light on an issue, sometimes you can get some meaty data.
As a side note, you can find out some of the quirky things that the public can comment on by going to the rulemaking and commenting site for the US Government (if you don't regularly read the Federal Register, this is an easy site to bookmark). For instance, starting today, you can comment on a proposal to change the drawbrige operating regulations the govern the operations of the drawbridge over the Mitchell River in Chatham, MA.
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