Hopes and Cures

House Small Business Committee Holds Hearing on the Reauthorization of the Small Business Innovation Research Program 

Witness List 

March 13, 2008 

Chairwoman Velazquez’s (NY-12) led a lively hearing on the SBIR program in helping small businesses support promising research. She emphasized the importance of reinstating eligibility of majority venture capital-backed companies and highlighted the remedy offered in the draft bill.  Ranking Member Chabot (OH-1) echoed the importance of the program.   

Up first, on his own panel, Small Business Administrator Steven Preston discussed the current eligibility standards for small businesses, on both VC ownership and affiliation.  Not one to shy away from tough questions, Velazquez held Preston to the coals. Administrator Preston did say he would be open to working on the eligibility and size standard of smaller business that depend on venture capital.  However, he held fast to the notion that companies that have investments from ‘large venture capitalists’ should not be able to participate. When asked if there should be an asset test to determine eligibility by majority venture backed companies, Administrator Preston said he would like to work with the Committee to find a fair standard but was not sure if an asset limit is appropriate.  

During the question and answer period on the second panel, Chairwoman Velázquez asked about businesses being able to access non-SBIR research dollars, or 97.5% of an agency’s external research budget (a point raised by Preston).  Mr. Greenwood (BIO) explained that only 0.4% of those funds are given to businesses (small and large).  The rest are given to universities. Mr. Greenwood described how SBIR serves to fill the ‘valley of death’ funding gap for early stage research that is too high-risk for venture capital investment. 

Both Mr. Greenwood and Mr. Heesen (NVCA) explained the complexity and nonsensical nature of the affiliation rules and the majority ownership issues as they currently exist.  Mr. Greenwood and Mr. Leahey (MDMA) discussed the high risk nature of biotechnology research, highlighting the large number of failures that occur before success – of 150 molecules, only one will make it to FDA approval.  

Mr. Greenwood made the point that both SBIR and VCs should be encouraged to work together with small businesses to help NIH carry out its mission: ‘cure diseases’.   

Mr. Mark Skinner of SSTI and Dr. Charles Matthews of the University of Cincinnati Center for Entrepreneurship focused on the importance of state partnerships and reinstating the FAST program.