BIO Asks Congress to Unblock SBIR Funds for Majority VC-owned Small Firms

The Biotechnology Industry Association is prodding Congress to pass legislation that would allow venture-capital majority-owned companies to be eligible to receive Federal Small Business Innovation Grants.

The biotech trade association last week said it has gathered a petition with the signatures of some 280 bio industry executives seeking to overturn what it considers a new interpretation of Small Business Association regulations barring companies that are 51-percent owned by venture capital firms from eligibility for SBIR grants, which are typically in the range of $100,000 or more.

It is arguable whether or not government funding agencies are taking a narrower view of what is or isn't a small company. Steve Berberich of the Business Gazette of Maryland, in an article published July 22, covers both sides of the issue.

New Biology Economy take: Federal funding has become a critical part of the innovation process in biology, that is clear. These funds allow small companies to diversify their efforts or engage in projects they might otherwise not be able to pursue. Venture capital funding provides a more solid financial foundation for early-stage companies, but also starts the clock ticking on commercialization and sets a horizon for an exit of the funders. SBIR funds take some of the risk out of early-stage projects.

BIO is making a greedy grab for funding that should go to worthwhile projects that are otherwise unfundable. If a company has progressed with its commercialization efforts to the point where it is majority-owned by VC, then it is clear that the company has cleared certain hurdles and can be regarded as having the promise, but certainly not a guarantee, of being able to enter the marketplace. VC is high risk/high return capital and most investors in this market understand that a .300 batting average is outstanding and that one home run in 10 investments is an enviable track record.

A way around the logjam that BIO is complaining about is to spin-off efforts that are so important that the only way to fund them is through SBIRs. And, in the final analysis, shouldn't anything paid for with taxpayers' money ultimately benefit the public domain?