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February 18, 2005


Jeff Donohue

Another major issue that is running through the SBIR program is the issue of "what companies are eligible?" One of the requirements is that the entity be majority American owned, which has been interpreted to mean 51% or more owned by U.S. citizens who are "natural persons". That definition cuts out many small businesses that are venture funded. (Usually, the funds will end up with a majority stake, and the funds are typically LPs or LLCs and therefore not "natural persons.") The rules can also technically disqualify companies that should otherwise qualify when their shareholders engage in estate planning (trusts aren't "natural persons", for instance).

I'm not aware of any rescissions occuring, but it's a possibility. I know that the National Venture Capital Association is working hard to fix this, and I wish them a lot of luck.

- Jeff Donohue

[My personal view and not the view of my employer, a biotech that doesn't qualify for SBIR awards no matter how you define "person"...]

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