While large corporations and VC-owned companies have a tremendous advantage in pursuing large federal contracts, the SBIR program was designed to create a level playing field for which small businesses might compete with large corporations. Letting VC backed companies have access to SBIR funding would undermine the spirit of the SBIR program. This amendment would create a loophole allowing large corporations, under the alias of a small company, to infiltrate and gain advantage in an atmosphere that was created to give the advantage to the �legitimate� small business. For example, VC-owned small businesses have access to both financial and human resources, including dedicated grant-writing and marketing personnel, resulting in an advantage over true small businesses.

The SBIR program provides funding for early stages of technology development, without requiring that the small business give up ownership or commercialization rights. It attracts innovators that might not otherwise have the opportunity to develop their ideas and inventions. While our economy is dominated by corporate leaders, it is a widely accepted belief that much of what is innovative does not come from these entities, but instead from small businesses that are the embodiment of entrepreneurship in our country.

We ask for the support of Utah�s congressional representatives to vote against this or any similar bills that hurt true, innovative small businesses.

The reason the venture capitalists can command high returns is because the projects they invest in are riskier than those typically funded by debt capitalists such as banks or family members. The equity that a venture capitalist takes from a company, e.g. from the entrepreneur's side, often leads to the venture capitalist owning majority control in the firm. Again, this is because of the very high returns venture capitalists demand.

Now, relative to SBIR, venture capitalists are seeking to change the current requirements for the firms which they own majority control in so they may participate in SBIR prgrams. I strongly disagree with their objective. The federal government funds SBIR for those companies owned by at least 51% by an individual. This is one way which our government tries to enable small business owners to grow without allowing larger firms to control the small business.

It is a fact that small businesses are the dominant entity in creating jobs in America's economy. Letting venture capitalists and larger firms control all major funding sources will surely lead to conditions where job growth will compete against preserving the venture capitalists high expected returns. SBIR funds represent capital that is risk free. In other words, when the government makes an SBIR award, it does not seek equity in the small business nor does it demand a certain return on the invested capital.

What the venture capitalists are trying to do,is access a line of risk free capital and not have to pay anything for it from their side. They have already made their investments in the enterprise to the point where (in this case under review) it has amounted to over 51%. Given that they have taken that much equity from the entrepeneur, the venture capitalist should be willing to increase the investment from "their own resources" since they essentially "own the firm".

What is being sought here by the venture capitalists is sort of like arbitrage, that is risk free capital. I believe that allowing firms with venture owned control of greater than 51% to participate in SBIR programs would be a major step backward for the small businesses of America.

If a venture firm takes 51% or more ownership in a small business, then it is their firm and they should tap their significant resources to continue to grow "their" firm. Leave the SBIR funds for those firms where the entrepreneur still has control. Why didn't the venture firm just take 49% and avoid all of this? Answer - because their demands for expected returns are unusually large. It goes back to basic investing risk and reward. The venture firms sought the big reward at a big risk. Now let's not let them get risk free capital.