SBIR Gateway VC Discussion Group
(Archived May 2004)
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The comments below are the views of submitter and do not necessarily reflect that of Zyn Systems or the SBIR Gateway.
Please address your questions to: [email protected] .| Updated 05/22/04 | 99 messages |
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10/27/03
13:41:34 |
Name withheld by request |
Watertown, MA
Msg 31 of 99 |
I am opposed to this for the following reasons:
1) The proposed change does not meet SBIR�s primary
objective, which is to provide "seed capital" to match
up small innovators and entrepreneurs who lack access
to capital for their innovations with federal agency
R&D needs. This has little or nothing to do with
providing a federal cushion for venture capitalists.
Venture companies invest in the top 1% of technologies
they review. At most, venture capital is funding
primarily for commercializing a technology for which
feasibility has already been demonstrated. This may be
appropriate for �Phase III commercialization� of SBIR
awards, but it has no place whatsoever in the earlier
Phases, I and II, of this federal program.
2) The proposed changes will fundamentally alter the
basic nature of SBIR from its role as the premier
federal program supporting cutting-edge research to a
mechanism to support languishing venture funded
projects in order to reduce the investment risk of
venture capital.
3) The primary beneficiaries of the SBIR program are
supposed to be the applicant small business firm and
the federal agency, not institutional investors.
4) The proposed change will open the SBIR program to
large corporations that do investment funding. Firms
like General Electric, Intel, Bank of America and many
others which already recognize the benefits of SBIR
funded research will stop being Phase III partners and
will simply apply for their own SBIR research using
their own venture funded �small companies�. Very large
conglomerates will be able to apply through their
individual components pretending to be �Small
Businesses�.
5) The existing interpretation of SBIR eligibility
requirements does not prohibit venture capital
investments into firms participating in the SBIR
program. Up to 49% of a company's stock can be owned by
a venture capital firm. This provides great
opportunities for investors while helping small
business owners keep control of their firms.
6) Allowing majority control of SBIR companies by
venture capital firms would create an uneven playing
field for true small businesses competing for the
research grants and contracts. Small companies
proposing novel ideas with little preliminary data
would be competing with firms that have already spent
millions of dollars on the technology before submitting
a proposal.
7) Only 2.5% of federal government R&D funding is
allocated to SBIR. The venture funded firms are
eligible to apply for, and control, much of the
remaining 97.5%.
8) There have been no hearings and no public debate of
this fundamental change. To allow such a fundamental
change in the SBIR program without appropriate hearings
sets a very dangerous precedent that would start an
avalanche of other proposals to modify the eligibility
requirements of the SBIR and other SBA programs by
other large business lobbying groups.
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| Vote: NO | |  Return |
10/27/03
13:53:27 |
Carl Nelson |
Washington, DC
Msg 32 of 99 |
| Ann Eskesen makes some good arguments from her actual
data. But after she concludes the question is
minuscule, she says the opening should not be made
because the effect would be more than minuscule (sort
of, maybe). She says that SBIR should cling to three
principles: 1. technical excellence as the ONLY
criterion of selection for award ; 2. bipartisan
support of this very important national resource; 3.
complete integrity in the conduct of the program. OK,
sounds good for a stump speech.
Unfortunately, technical excellence as the only
criterion has led to awards going mostly to hobbyists
whose results have no more than sporadic impact. Not
only is the impact low, it is apparently so low that
the advocates fight to dilute or kill every attempt to
measure it. Bipartisan support is mere politics, not a
goal of a national program for economic growth from
technology. Complete integrity the program already
has in the hands of the civil servants who have no
incentive to act in anyone�s economic interest. Terms
like technical excellence and bipartisan support and
complete integrity hardly exceed platitudes.
If SBIR is to have any national value-added (not just
a political handout to a favored class of companies),
it has to have some criteria beyond technical
excellence. That excellence has to have some potential
impact, and the more impact, the more likely a project
should be to get nursery funding. And who has a view
of what�s likely to have impact? VCs, for one group.
The government, which has never shown much ability to
pick winners and losers in economic competition, must
find an inviting entry for VC money. Merely hoping for
diffusion of the excellent technology into the
economic mainstream, or any other mainstream, has
failed to produce much so far.
[email protected]
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| Vote: YES | | | Return |
10/28/03
06:24:09 |
Matthias Pohl |
Greenville South, SC
Msg 33 of 99 |
| I would like to offer the obervation that the byline
used on the SBIR Gateway (http://www.zyn.com/sbir/)
to link to this discussion forum is misleading (at
best).
The link reads: "Bio VCs Lobby Congress for Exemption
from SBIR Eligibility Standards"; the byline below
then continues: "To permit ownership & control by
large firms".
This is excatly what the proposed change is NOT
about. Fact of the matter is that most VC funds are
limited partnerships with maybe one or two handful of
partners. They are not large companies! And the
change in SBIR eligibility by BIO/NVCA and others is
not about getting large companies access to a meager
$100,000. Whoever thinks that large companies (or VC
funds) would invest in a small business just to get
access to SBIR funds as a means of return of
investment has a lot to learn.
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| Vote: YES | | | Return |
10/28/03
11:28:44 |
Name withheld by request |
, PA
Msg 34 of 99 |
We work with both VC-funded and non-VC funded early
stage companies on a variety of projects (including
SBIRs), mostly in the biomedical field where timelines
are long and costs to reach the partnering or
commercialization stage are high. In our experience,
just because a company has raised venture capital once
does not at all guarantee that it will be able to
raise continued rounds and it is therefore
inappropriate to assume that a company funded by a
large VC firm should not need the type of early
stage "seed funding" represented by the SBIR program.
In fact, in terms of the goal of building successful
tax-paying early stage businesses, use of the SBIR
program to enter a 2nd product into the pipeline while
using VC funds for the 1st product is an excellent way
to help balance the portfolio and decrease the risk
that the business will fold if the first product
unexpectedly encounters adverse events, placebo
effects, or other scientific hurdles that the company
cannot always either anticipate or control for. The
500 person size limit for the applicant company is a
better choice of discriminator than how big the VC
firm is that provides the risk capital. In most cases,
if the firm is toward the high end of the size range
and has solid assurance of continued funding from a
large VC, they drop out as SBIR applicants because the
time and effort required to write a competitive
application become too large compared with the benefit
in terms of dollars received!
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| Vote: YES | | | Return |
10/28/03
14:45:56 |
Anne-Marie Stomp |
Moncure, NC
Msg 35 of 99 |
The business model of VC firms requires a 20-30 fold
ROI. For life science companies, this means the only
viable companies in the eyes of the institutional VC
firms are those with pharmaceutical applications. That
leaves the rest of the applications: industrial
enzymes, agbiotech, cell and tissue engineering,
nanotechnology, small molecules, polymers, largely
underserved because of severe funding limitations. If
the SBIR/STTR Programs become open game for VC funded
companies, the decrease in SBIR/STTR funding rates will
significantly reduce the amount of innovative
technologies in non-pharmaceutical sectors from being
developed. Approving this change to the
Reauthorization will just funnel more money to the VC
and pharmaceutical firms at the expense of other
industrial sectors. I have first-hand knowledge of how
this all works becuase in 1998 I founded a VC funded
company and saw the myopic focus on only pharma
applications occur to the detriment of development of
additional, hob-creating applications. In my second
company, the SBIR/STTR Program provides the only truly
viable alternative to VC funding, an alternative which
in my case would not work because the VCs already got
the application they want in my first company.
Changing the rules will greatly increase the difficulty
I will have in securing resources for other non-pharma
applications. Please do not chage the rules.
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| Vote: NO | | | Return |
10/30/03
11:34:58 |
Tom Herlihy |
Greensboro, NC
Msg 36 of 99 |
Spirit of SBIR is small biz -(hence the name). We
need to keep it that way
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| Vote: NO | | | Return |
10/30/03
12:52:27 |
Name withheld by request |
Springfield, VA
Msg 37 of 99 |
The SBIR area already has a great disparity of
competion by allowing companies with 499 individuals
compete head to head with companies with 10 or less in
the company. The proposed ruling adds one more sector
of the business population that has an unfair
advantage by relying on the funding and business plan
expertise of venture captialists. This ruling thus
goes directly against the spirit of the SBIR program
which seeks innovation from SMALL businesses as good
business sense for growing small businesses in the
American economy.
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| Vote: NO | | | Return |
10/30/03
15:58:55 |
Name withheld by request |
Missoula, MT
Msg 38 of 99 |
No, VC organizations should not be allowed to compete
for SBIR funding.
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| Vote: NO | | | Return |
10/30/03
20:29:45 |
F. David Doty |
Columbia, SC
Msg 39 of 99 |
| What more can I say? More than 30 individuals before
me have so eloquently laid out the case to retain the
current rules, while the hand full of comments from
the VC and Bio-tech lobbyists ring hollow.
The current system really works. It supports the hard-
working, small-business innovators that have been
responsible for most of the true innovation in this
country over at least the last decade on a miniscule
amount of money. The rate of return on these dollars
to our nation is enormous. What is really needed is a
doubling of the set-aside for SBIR, not some mechanism
to drain some of the funds away to less efficient
research settings.
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| Vote: NO | | | Return |
10/31/03
07:28:07 |
Name withheld by request |
Ronan, MT
Msg 40 of 99 |
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| Vote: NO | | | Return |
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