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SBIR/STTR Reauthorization Focus of Roundtable Discussion

Mark Marich

PDE staff were on hand earlier this week for a roundtable held by the Senate Small Business and Entrepreneurship Committee. Our report of the roundtable--SBIR and STTR Reauthorization: Ensuring a Strong Future for Small Business in Federal Research and Development--follows:

The U.S. Senate Committee on Small Business and Entrepreneurship held a roundtable on June 4, discussing the efficacy of the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program, in an effort to decide whether or not they should be reauthorized on July 31, 2009, when they are set to expire.

A wide variety of government and private sector representatives were in attendance: Dr. Charless Wessner (National Academy of Science), Cheryl Williams (Government Accountability Office), Dr. Sally Rockey (National Institutes of Health), Linda Oliver (Dept. of Defense), Jere Glover (Small Business Technology Council), Kunal Mehra (Scientific Systems Company) and Kathy Wyatt (Louisiana Tech University).

The discussion centered around several topics, including how long the authorization period should be, whether or not firms should be allowed to exceed caps, and the role venture capitalist-backed firms should play in the programs.

Cheryl Williams from the GAO shared findings of a study analyzing the impact of venture capitalist-backed firms on the programs. She found that in both the Department of Defense (DOD) and National Institutes of Health (NIH) showed an increasing share of program funds were being allocated to venture capitalist-backed firms. This specific funding is also concentrated in ten states, with California and Massachusetts accounting for one-third of the total amount.

Kathy Wyatt, director of the Small Business Development Center at Louisiana Tech University, interpreted this data as harmful to rural companies, saying that as more and more venture-capitalist-backed companies competed for the same funding, rural companies will be left out.

“It is critically important that we have this program (for rural businesses) to help overcome these difficulties,” Wyatt said.

And it’s not just the businesses that would be negatively impacted, she said, but the entire rural communities. As her university has seen an influx of research funds, a number of big companies have followed, setting up satellite offices in the area.

However, another similar study completed by the National Academy of Sciences (NAS)--which we featured recently--led to different conclusions.

The main difference was the rate of funds being awarded to venture-capitalist-backed firms. Dr. Charles Wessner, director of technology, innovation and entrepreneurship at NAS, said he didn’t find as high a percentage of funds being awarded to venture-capitalist-backed funds. He also didn’t hear any complaints about the role such firms were playing, in terms of monopolizing funds.

Wessner did find what he called a “significant impact on commercialization” by venture-capitalist-backed firms, because their presence in the market does exclude some firms with less capital. However, he said while venture-capitalist-backed firms tend to make more sales in the long-run, non venture-capitalist-backed firms in the program have a higher success rate of making it to market.

The final suggestion from Wessner, which was supported by many others at the roundtable, was to reauthorize the programs, allowing all firms access to funds, no matter how they are backed, and for agencies to have the discretion of who ultimately receives these funds rather than the legislature.

“We need to maintain open competition based on scientific merit,” he said. “(It should be about) scale, stability, continuity and integration.”

[Reported by Paige Ingram] 

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