It’s baaack! Rep. Sam Graves, R-Mo., introduced a bill this week in Congress that would make significant changes to two of the government’s most successful small business programs: the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program.
The most controversial provision would re-open these key government conduits of small business research grants to more venture capital firms. The Small Business Administration (SBA), which oversees the program, limited venture capital firm participation in 2003 because of its interpretation of what constitutes a “small business.”
The turf war has been underway ever since. But this time around, the venture capital industry’s chances of winning are greater than ever. In fact, it’s almost a lock. It’s not so much that the arguments have changed, or the playing field. But, as a result of the November elections, the key players have. Now, venture capital interests clearly have the upper hand.
This bill has long been a top priority for the powerful National Venture Capital Association (NVCA) and the equally influential Biotechnology Industry Organization (BIO). The bill failed in previous sessions because small business groups and principally the Bush administration SBA opposed the VC provision.
Although Graves has sponsored the bill, House Small Business Committee Chairman Nydia M. Velazquez, D-N.Y., is once again quarterbacking the measure. She steamrolled it through her chamber last year — it passed the House virtually without debate in a week — and she is well on her way to doing it again.
The committee held a hearing on the bill last week (June 4); has scheduled a mark-up this week and will likely send it to the House floor in the next week or so. Once again, the hearing was only open to the venture capital community. Small business groups have tried to testify in the past, but have always been excluded. That alone sends up a red flag.
In any event, the Senate has been the major hurdle. The bill has died there repeatedly, largely because Sen. John Kerry, D-Mass., who chaired the Senate small business committee, was wary of the VC provision. But Kerry has moved on. The committee is now chaired by Sen. Mary Landrieu, D-La., and she’s co-sponsoring the Senate version of the measure with the committee’s ranking member Olympia J. Snowe, R-Maine.
Another key obstacle, SBA Administrator Steven Preston, who strongly opposed the change, left with the Bush administration. His job has gone to Obama appointee Karen Mills, who is a former venture capitalist and has strong ties to the industry.
Finally there is the president. Obama sees himself as the technology and innovation president and is enamored with the venture capital industry. He’s apparently bought into high-minded arguments about the role venture capital plays in the development of new technologies and products.
And those arguments are true, to an extent. Google, Genentech, Intel, Cisco, Starbucks, Microsoft, and FedEx are all venture capital success stories. But what this debate is really about are profits and return on investment.