The House Bill
Rep. Renee Ellmers (R-NC), chairwoman of the House Small Business Subcommittee on Healthcare and Technology, introduced the Creating Jobs Through Small Business Innovation Act (HR 1425). Maximum award guidelines would be raised for all agencies to $250,000 for phase 1 and up to $1 million for phase 2 and would have to increase annually based on inflation.
Perhaps most importantly, the House would allow NIH and NSF, as well as NASA and the energy department, to award up to 45% of their SBIR funds to small businesses majority-owned by multiple venture capital firms, hedge funds, or private equity firms. All other federal agencies could set aside up to 35% of their funds to such businesses. At present, VC-backed companies can access SBIR funds as long as venture firms own up to 49% of a small business; majority VC-owned businesses are not considered “small” businesses, according to the US Small Business Administration.
The House also would allow businesses to pursue phase 2 funds directly as well as divert 3% of SBIR funding to NIH administrative use. The latter change would effectively wipe out about 200 grants a year, according to the Small Biotechnology Business Coalition, which opposes the bill.
Also, the House bill blocks businesses from receiving funding if the aggregate amount it has already amounts to more than 50% of the amount received by businesses, or more than 50% of the number of such awards given out by that agency, during the previous fiscal year in the state with the median total of SBIR funding.
That limit, and the removal of the phase 1 requirement, are among reasons why HR 1425 has drawn fire from a bipartisan quartet that said proposed changes would force agencies to approve less-than-best proposals once top companies exhausted their limit. They also predict that it would lower the quality of the technologies funded since phase 1 SBIR companies must prove the feasibility of their innovations.
“The government’s return on investment under SBIR comes from developing feasible concepts. Without the proving ground of phase 1, the program will likely produce less commercialized products, and will risk wasting taxpayer money,” the four members of Congress noted.