Small Bio speaks out on changing the SBIR eligibility rules

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Watch out BIG BIO, small bio has a bigger voice than you might think! Responding to the call to action from the SBTC, a group of FIFTY small biotech and medical device businesses have signed a letter to Chairman David Wu (House Science & Technology’s Technology & Innovation Subcommittee) saying, in effect, “BIG BIO doesn’t speak for us! Changing the SBIR rules will be harmful to the innovation economy being supported by the majority of small biotech businesses!”

Here’s the body of their letter:

The undersigned leaders of small biotechnology and medical device companies from throughout the U.S. respectfully request your assistance in opposing legislation that would give companies owned by venture capital (VC) firms unlimited access to the SBIR program.

Last year the House of Representatives passed HR 5819 that, if it had become law, would likely have permitted companies with tens of millions in financing to win an unlimited number of SBIR grants of unlimited dollar amounts. NIH grant reviewers in particular typically give significant weight to the preliminary data generated by applicants. Exceptionally well capitalized companies with expansive laboratory infrastructure and scientific personnel necessarily have an advantage in competing for these awards.

If VC owned firms are permitted to win the lion’s share of the mere 2.8% SBIR/ STTR set aside this would effectively shut out most of the small companies for which the SBIR program was originally created. This would have profound consequences to our nation’s economy and health care system. Companies in fields traditionally out of favor with VC firms, including vaccine development, orphan diseases, biodefense, diagnostics, research tools, and most early stage, high risk R&D, but which play a critical role in solving technical challenges facing the US, will be particularly disadvantaged if deep pocketed VC owned companies are permitted to usurp the SBIR program.

To the extent that the law is changed to permit more VC participation in SBIR it is imperative that safeguards be put in place to protect access to the program by firms that lack VC financing. These safeguards should include, at a minimum, the following:

(1) Caps on award size and total dollars awarded to any one firm should be established. Agencies would be permitted to exceed these caps only with funds taken from outside of the SBIR/STTR set aside;

(2) Limits should be placed on the overall percentage of the SBIR pool that may go to VC owned firms for at least the first few years to gauge the impact and any consequences of these changes;

(3) The SBIR/STTR set aside should be increased by at least a few percentage points to compensate for the increased competition in the program.

The above protections would expand access to the SBIR program while protecting small biotech companies that do not have VC investors, which includes the vast majority of emerging biotech firms.

Thank you for your consideration of our views.

Unlike others who have already made up their minds without knowing all the facts, Chairman Wu has been open to hearing both sides of this debate, and we applaud his refreshing willingness to include small businesses in discussions that involve them. Gee, what a concept!

If you agree with these sentiments, please copy the letter onto your own letterhead, add your own words for emphasis, and send it off to your Congressional Representatives and Senators. You’ll find contact information on www.SBIRreauthorization.com. You’ll also find this letter there complete with the fifty original signatories.

The National Small Business Association (NSBA) will hold its annual Washington Presentation, which includes a White House briefing, on June 9th and 10th. This year the focus will be on SBIR Reauthorization and Economic Stimulus procurement opportunities. The SBIR Coach will be there. See details at http://www.nsba.biz/wp. You’re invited to join us.
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