The SBIR program has made possible the growth and survival of emerging companies for decades. In helping to create new jobs and advance innovative technology this program has been an essential part of growing and maintaining a vibrant and competitive economy in the United States.

The National Institutes of Health has administered an SBIR program for decades, and this source of funding has been instrumental to emerging companies in a growing biotechnology industry. Many of these companies have been owned in part or were started by venture capital firms. From my personal experience, I was one of the first scientific staff members to join Cambridge NeuroScience, Inc. (CNSI) in 1987, shortly after the company was started by the venture capital firm Warburg Pincus. Prior to the initial public offering, Warburg retained majority ownership of CNSI and we submitted and were funded for more than 10 NIH SBIR grants (5 Phase I and 5 Phase 2). I was the Principal Investigator on two such grants. These funds were critical in creating the jobs to grow the company from 18 (when I joined) to more than 60 at the time of the IPO. By virtue of this SBIR support, several product candidates advanced into clinical trails or were partnered with major pharmaceutical companies as part of Phase III commercialization. Thus, not only has it been accepted practice for the NIH SBIR program to support the growth of emerging biotechnology companies, but it has helped to accomplish the mission of the NIH and create new jobs as well.

At the current time, I submit that the Small Business Administration and the NIH need to support the growth of new jobs in this essential economic sector�biotechnology. Many have lost their jobs in the recent economic decline and tax revenues need to be spent wisely to stimulate job growth. Biotechnology represents a sector of the economy where the US has a clear competitive advantage, and provides an important opportunity to revitalize economic growth. Further, a very sizeable percentage of all drugs produced in the past decade have been discovered at small companies. Since companies that are controlled by venture capital firms often represent some of the more innovative and competitive start-ups, policies that support collaboration between these companies and government agencies would represent prudent and productive use of tax revenues. It is these very companies that have the greatest chance of advancing their technology through to commercialization. Therefore, I offer my very strong support for producing a wording of the eligibility requirements that would enable the NIH to include in the SBIR program emerging companies that are majority owned by venture capital firms.

Thank you for your support. Very truly,

Mark A. Marchionni, Ph.D. President

I appreciate you responding to my concerns regarding VC participation in the SBIR and STTR programs - it helps me understand where this issue is focused. It is my view that, whether valid or not (and I don't concede that it is), the argument made by the VC's, that small businesses owned and controlled by them have a higher probability of successful commercialization than those small businesses lacking their huge financial resources, completly ignores the intent and purpose of the SBIR program. The program was devised to provide a means for small businesses lacking access to start-up capital to have the opportunity to compete for federal R&D funding. VC owned and controlled small businesses obviously were not, and are not, included in the original legislative intention. I fail to see the difference between applying the VC argument to the VC case and applying it to the case of IBM, GM, Intel, or any large commercial enterprise owning and controlling a small business and demanding SBIR eligibility? Of course, VC's (and all others) are now, and always have been, able to own a minority, non-controlling interest in SBIR eligible small businesses. And all VC owned and controlled businesses are eligible to compete for the 97.5% of the SBIR agency budgets that aren't set-aside for small businesses - why do they need to come after the other 2.5% and cut off those small businesses that don't have adequate capital? Seems greedy to me - and against the legislative intent and spirit of the SBIR program.

My opposition to this move to change the eligibility rules is primarily driven by my conviction that Wyoming small businesses will particularly suffer if this fatal breach in the integrity of the SBIR/STTR programs occurs and VC's are allowed to own and control SBIR-eligible small businesses. In my opinion, if the SBIR eligibility rules are altered to allow VC participation, the SBIR program as we know it will disappear and ALL Wyoming small businesses will eventually be crowded out of the competition since NONE of our small businesses have attracted VC participation nor is it likely that any will, at least in the near future. Without adequate financial resources, our small businesses will be unable to compete with those states in which the VC's are concentrated. And the SBIR program is a zero sum process - any grant going elsewhere is one less grant coming to Wyoming.

But aside from our parochial Wyoming interests, my concerns also extend to preserving the integrity of the program for the benefit of all of the country's small businesses who are, after all, the primary engine of new job creation and economic growth.

If you haven't already done so, I urge you to go to the following websites and carefully follow the discussion on this issue.

www.zyn.com/sbir/articles/bnews-vc2-S.htm
www.zyn.com/sbir /articles/vc/