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NAS Study on SBIR Adds Hope for the VC Industry

Jonathan Ortmans, President, Public Forum Institute

As the deadline for the reauthorization of the Small Business Innovation Research (SBIR) program approaches, evidence is mounting on both sides of the debate that has been pushing the decision about the future of SBIR back since March. This time, a new study supports the positions of the Venture Capital industry which hopes to gain access to SBIR funds.

In the study “Venture Funding and the NIH SBIR Program,” the National Academy of Sciences (NAS) presents its new findings on the SBIR program. Commissioned by the NIH, the study looks at the impact of not allowing firms majority owned and controlled by venture capital companies to participate in the SBIR program at NIH, as it has been the case since 2002. It reports that restricting access to SBIR funding for firms that benefit from venture investments disproportionately affect some of the most commercially promising small innovative businesses, potential diminishing the positive impact of the nation’s R&D investments in the biomedical arena. Although the report acknowledges the difficulty of the study’s methodology, it recommends consideration to at least permitting a limited number of majority venture-funded firms with significant commercialization potential to compete for SBIR funding.

The NAS study will provide Congress with another source of information to consider as it makes vital decisions around SBIR reauthorization, according to Sens. Landrieu and Snowe from the Senate Small Business Committee. Since the SBIR program was established in 1982, it has awarded more than $24 billion to more than 100,000 projects. It is deemed to play an important role in stimulating innovation and allowing small firms to meet federal R&D needs. In 2002, the Small Business Administration clarified that SBIR agencies could not give SBIR grants to companies in which venture capital firms had a controlling interest. The NAS study found that the SBA directive appears to limit opportunities to exploit the nation’s substantial investments in research at NIH

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