Friday, May 1, 2009

SBIR Reauthorization – What are the issues?

Only three months to go. Time to get serious. The House has begun the process. With any luck our legislators will actually pay attention to the issues, learn the truth, and improve the SBIR Program. We’ve got a tough battle facing us to overcome the lies being told and perception management techniques being used against us.

I actually had an Austin Business Journal reporter call me yesterday and ask me what I thought about the fact that “venture capital participating small businesses would have to leave their drug discovery innovations on the shelf because they couldn’t qualify for SBIR awards any more”.

Oh, Good Grief! She said she got the premise for the story from a Washington DC sister publication. Perception management strikes again. Boy did I give her an earful of the truth. Can’t wait to see what she actually writes in the story she said would be published today.

The VC issue dominates the SBIR reauthorization landscape. It’s important, yes. But it’s not the only issue. In a series of upcoming columns I’m going to highlight each of the issues, and shed some light on what’s important about them. Hopefully it will spur some comments and engage some debate.

Here’s the list of SBIR Reauthorization issues:

1. Eligibility (who may compete for awards)
2. Agency Allocation Base (% of R&D set-aside)
3. Award Caps for Phase I and II
4. Phase I bypassing – should it be permitted?
5. Multiple Phase II awards
6. Phase III funding and required support
7. State (FAST) and Rural Outreach support
8. Funding for SBIR/STTR administration costs
9. Streamlining the process of review and award
10. Special technology priority mandates
11. How long until we reauthorize again?

Some are more contentious than others, but all are important. We’ll discuss them one by one over the next few weeks.

I can see from this Blog’s analytics that we’re being monitored by those in Congress who really want to know what all sides think, so if you have an opinion here’s your chance to be heard. I’ll publish a comment that intelligently approaches an issue, whether or not I agree with it.

Rick Shindell published an issue of his SBIR Insider last evening. Lots of good info about what went on in those House hearings last week, including a video of Jere Glover’s testimony.

And, Rich Hendel sent out Boeing’s NSF SBIR topic interest list a few days ago. I expect to see the DOD 2009.2 interest list any day now. Write me if you’d like a copy of either of these.

Remember to keep up with what’s going on at

Finally, today’s my lovely wife Kay’s birthday, and I’m taking the rest of the day off to pay some attention to her, including dinner out and some Country/Western dancing this evening at Billy Bob’s. She’s so patient with all of my SBIR travails, I just wanted to recognize her and have y’all join me in wishing her a Happy Birthday!


Jonathan Pearl said...

Here's an Austin Business Journal note on SBIR published May 1. It's short, and mostly accurate. (But then, maybe there aren't any truly small VCs out there to qualify as small businesses in their own right.) Too bad they didn't delve more into the matter. As you point out, there are several important issues to be addressed.

Frankly, as long as we maintain Phase I for feasibility studies, avoid raising the awards too high (being sure to increase allocated percentages to prevent any decrease in the number of awards overall), better yet increase the number of awards, and rule out Phase I bypass, most of the concern over VCs is eliminated.

We all want the best science and technology to prevail! Ensuring that federal R&D dollars are available to support the earliest and highest risk stages of innovation is what it's all about. The best and easiest solution would be if VCs simply agreed to hold no more than a minority stake in SBIR firms. Then they could play as well, and we could focus on the other issues.

Let's not forget that 75% of all small businesses employ fewer than 20. Allowing 500 is overly generous. And, lest anyone think these small businesses are small fries in terms of their job creation, think of this: If your average small business added one employee this year, they'd be increasing their workforce by 5% annually. How many companies can say that?

- Fred Patterson - said...

Here's the full article that actually appeared in the Washington Business Journal:

I guess the ABJ reporter decided not to do her own version and they just reprinted the DC version.

Carl Nelson said...

"We all want the best science and technology to prevail! Ensuring that federal R&D dollars are available to support the earliest and highest risk stages of innovation is what it's all about."

Although Jonathan makes a good generic point about the purpose of federal R&D funding, that's not enough to justify a specific program like SBIR. Any diversion (micromanagement) of federal R&D should have some purpose that would not be achieved if the federal agencies were left alone to direct their R&D investments. And SBIR has never proved that required marginal benefit. When it comes to "best science," for example, small business has no competitive advantage over large entities like universities.

SBIR could, however, have a useful purpose if it exploits the competitive advantage that small business does have - agility in getting advances into marketplaces. But letting the federal agencies fund whatever they want will NOT exploit that advantage. To get something useful out of SBIR which would not have happened anyway with the federal extra-mural dollars, we need a program that targets innovations with a market future. And VCs are one agent for identifying that companies and ideas with a market future IF THE TECHNOLOGY WORKS.

Somehow Congress has to invent a program that steers any directed diversion to the highest potential early stage ideas and companies. Otherwise, continuing the present program merely pushes money into vague promises of progress by too many companies unable or unwilling to deliver any real innovation.

Arguments that SBIR is good for America because it funds "innovation" in small companies are mere fluff.