09/11/08 Business Start-up Hurdles in Underserved Communities: Access to Venture Capital and Entrepreneurship Training Hearing
09/09/08 Opportunities and Challenges for Women Entrepreneurs on the 20th Anniversary of the Women's Business Ownership Act Roundtable
07/30/08 S.3362, A bill to reauthorize and improve the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs Markup
06/25/08 Examining Solutions to Cope with the Rise in Home Heating Oil Prices Hearing
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Press Room: Statements
October 18, 2007
Kerry Opening Statement at SBIR Program Roundtable (Part II)
Good morning. I want to welcome each of you to the roundtable this morning and thank you for taking the time to be here. I thank those in the audience who have also taken the time to be here today and invite you to submit comments for the record. That offer also extends to anyone who could not be here but would like to weigh in. We will leave the record open for two weeks.
As most of you know, the Small Business Innovation Research program, more commonly referred to as the S B I R program, expires next year, on September 30, 2008. This is the second roundtable this Congress that we are holding on SBIR reauthorization. The first was held this summer, in August, and focused on the study of the National Academies of Science, which I am pleased concluded that the SBIR program is working well and should be reauthorized. If Dr. Wessner and his team are here, I thank them again for their work.
I am particularly proud to welcome Dr. Fanucci of Kazak Compsites and Mr. Mehra of Scientific Systems, both based in Woburn, Massachusetts, and Mr. Haber of InfoSciTex, which is located in Waltham, Massachusetts. Their firms are doing exciting research, in the areas of defense and health and alternative energy, and I know they will help the Committee understand what firms face in the valley of death, their views on the role of venture capital firms in the SBIR program, and how we can protect their data rights.
While the venture capital issue is the most controversial we will discuss today, the Committee continues to hear that the “valley of death” is the hardest issue we are facing. The SBIR program over its 25 years has built an impressive breadth of small, high-tech firms with important technologies, and we need to figure out how to improve the program so that they commercialize in a more seamless way. We need to take the government’s investment a step further. There’s a lot of pressure for SBIR firms to commercialize, and they seem to be held to a higher standard than universities and large firms. Is it reasonable to expect them at the end of a Phase II to be far enough along to commercialize? I look forward to your comments.
Today, participants will also have the opportunity to explain their position on why the definition of a small business should or should not be changed to allow small firms majority owned and controlled by venture capital firms to participate in the SBIR program. That will be the second portion of today’s roundtable. While I am not able to stay for that portion, I would like to ask the representatives of the SBA to lay out the facts on the definition of a small business and the eligibility rules for participation. There is great frustration that some continue to mislead with statements that firms with venture capital investment are not allowed to participate in the SBIR program at all, or any other Federal small business program for that matter. That is not true, and it has never been true. In fact, the GAO did a study of awards at DoD and NIH, the two largest SBIR agencies in 2006, looking at the two years before the SBA issued a clarification of who is eligible to receive SBIR awards, and the two years after, and it found that number of awards and dollars that were going to firms with venture capital actually increased after the clarification. Some have tried to undermine that study, calling it “inconclusive.” To address that, GAO is in the audience if anyone would like to ask how they arrived at the data.
I would also like to clarify that this is not about being for or against venture capital. As far as I know, everyone on this Committee, and small businesses in general, support venture capital. They take active efforts to make sure small businesses have access to it, including on the venture capital bill we just did in this committee in June, and acknowledge its critical contribution to a strong economy. We are also extremely supportive of the biotechnology industry. To name a few examples, I have been an active and long supporter of tax incentives to help these firms and others in research and development attract capital and have supported use of stem cells for research.
Another important issue that has not been given adequate consideration – and the final issue to be addressed today -- is data rights. SBIR firms are pressured too often by the agencies and by the prime contractors to relinquish their intellectual property. A take-it-or-leave-it approach, often. This is unfair and wasteful. If the agencies or primes don’t take the SBIR technology, they often spend more money and waste time to duplicate the research. It also wastes the money of small businesses who, if they have it, spend thousands and thousands of dollars for attorneys to fight to keep their data rights when they enter into a contract. Congress intended for these firms to keep their rights, and I am hopeful that we can build a record of examples of what is happening and how we can improve the situation.
With that, I open the roundtable up to the participants, asking them please to describe the “valley of death.” If you have a comment, please turn your name plate on its side, and we will call on you.