Thursday, June 18, 2009

It's All about Deal Flow - Where's the SBIR Money Gonna Go?

I agree with others in our Advocacy in thinking we've been focusing on the wrong message. We've been pleading not to un-level the SBIR competitive playing field. We've eloquently elaborated on the logic of fostering innovation via SBIR and being fair to start-up businesses with an idea for new technology development and no other way to get funding. Yadda yadda yadda. Good logical arguments, but they're getting little or no traction. Why not? They don't relate to what a legislator cares about -- how much money will flow to his/her State?

If companies with VC majority funding wind up getting SBIR awards, then more Federal R&D money will flow to States where companies with VC seed investment are located. Want to see a map showing the distribution? Click HERE to download it. (It's also viewable on the website along with some tabular data and messages about it from Advocacy leaders.)

The numbers show the deal count. The colors show the dollars. The lighter the color of the state, the more VC-involved money flow. Change the SBIR eligibility rules as the House would have us do, and the States with virtually no VC deal flow will inevitably lose Federal R&D money flow. Bummer!

OK! So, who's going to vote to have fewer Federal R&D dollars coming to their State? Step up -- let's see a show of hands! (Looking around...) No one?    ;-)

This message will resonate. Watch for the tell-tale furrowed brow when you show this to your Congress-person and Senators. Stress that H.R. 2767 must be amended or defeated. (See links to the text of all of the bills on


The most important ones with contention:

Will we increase the Allocation Base?
The House says NO; the Senate says YES.

Will we increase the Award caps?
Both say YES, but the House wants them higher than the Senate.

  • Increasing the award caps without increasing the allocation base will inevitably result in a reduction of awards. Do we really want reduced deal flow? The States that get few awards will get even fewer!

Will we allow a bypass of Phase I?
The House provides a way to actually do it! The Senate doesn't.

  • I call this the "Missouri Clause". Phase I is a vetting step for the Agency. You say you've already demonstrated feasibility? OK... "Show Me!"

Will we allow multiple Phase IIs?
The House says YES. The Senate doesn't make such allowance.

  • Follow-on projects are Phase III not II. The meager funds in the allocation base should not be used for follow-on work, even if it's further development.

When will we go through this Reauthorization process again?
The House says in two years so we can assess the impact of the changes! The Senate says not 'til 2023.

  • Assess impact in two years? Really? How? It'll take almost a year to start the first project under new rules. Three years to finish an SBIR project. Another year to evaluate results of ANY kind, but probably three to five to get statistical validity. That's five years at a minimum, but more like eight. Two years? Get real.

I don't want us to be perceived as a one-note chorus, so help me out here. Let's see some good commentary on these other issues.

But, focus on the deal flow. Where's the money gonna go?

"Why, its gotta go to OUR State of course!"   Me-yow!*
[* See the June 14th column:
    It’s all about herding cats and pushing wet noodles]


Carl Nelson said...

The more stress put on internal distribution, the weaker the argument for a program to advance national competitiveness. Is SBIR a nation-wide competition for the best innovation or just another "fair share" program for both small business and political jursidictions?

Anonymous said...

Another excellent post by the Coach. Thanks.
Over half of all Venture Capital financing goes to companies in just three places: Silicon Valley, Boston, and New York City. By contrast, SBIR funding is spread more evenly throughout cities of all sizes across the US – a much better approach to support Innovation and stimulate the US Economy. Innovative small businesses in locations across the US will lose Federal SBIR grant funding to companies in Silicon Valley, Boston, New York, and a few other metropolitan centers if Venture Capital backed companies are allowed to compete for SBIR grant funds.
Thanks to the previous commenter for reminding all of us that SBIR should be a nationwide competition... like it CURRENTLY is.