Small Business Research and Innovation Act
On July 8, the House passed the Small Business Research and Innovation Act (HR 2965) by a vote of 386-41. The bill modernizes and reauthorizes the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs – the government’s largest small business research and development programs. The bill:
- Expands commercialization efforts to get the small businesses revolutionary technology and product into the markets
- Makes it easier for small businesses that participate in SBIR to find capital to fund these innovative breakthroughs– critical at a time of tight credit markets
- Broadens the small businesses in these programs through outreach to rural entrepreneurs, as well as small businesses owned by women, minorities and veterans
- Streamlines these key small business research and development programs to operate more efficiently, meet clear performance standards and put taxpayer dollars to the best use
Small business is the engine for the American economy, creating 60 to 80 percent of new jobs, and is key to innovation and new technology, which are critical to creating new jobs and getting the American economy back on track. By ensuring that a portion of federal research dollars go to small businesses, SBIR and STTR are critical tools for creating new jobs and fueling technological innovation. Since 1992, SBIR has provided 65,000 grants to small companies engaged in cutting edge research to cure diseases, strengthen our national defense and reduce our dependence on foreign oil. Every year, the SBIR program results in a $2.2 billion investment in small businesses, helping 1,500 new firms get off the ground. High growth start-ups – like these – have job growth rates nearly four times that of bigger firms.
Watch video highlights of the markup of the bill by the House Committee on Small Business>>
Summary:
Greater Emphasis on Commercialization
H.R. 2965 puts a greater emphasis on commercialization so that new technologies can reach the marketplace quicker. By extending to all agencies the authority to develop programs to support the commercialization of SBIR-funded research, the legislation will help more products make it across the finish line and into the marketplace. (Under current law, certain Federal agencies have the authority to develop commercialization programs.) For the first time, this measure provides dedicated funds to support commercialization.
Expand Access to Rural, Veteran, Women and Minority Firms
In order to broaden the pool of firms that participate in SBIR and STTR, the bill establishes a new grant program for outreach to firms owned by veterans, women and minorities and those located in rural areas. The Small Business Administration will make competitive grants to organizations to educate these businesses about these initiatives and help them participate.
Greater Access to Capital for Small Business
The bill would allow venture capital-backed small businesses to participate in SBIR, as long as they meet certain criteria. The bill repeals a Bush-era administrative ruling from 2003 that limited small businesses' access to venture capital. Allowing firms with venture backing to compete for SBIR grants will empower firms to access the financing they need and leave the decision as to how to raise capital to small businesses, not bureaucrats in Washington.
A recent study by the National Research Council (NRC) suggests that the 2003 ruling is preventing some of the most promising firms from participating in the program. As the NRC wrote, “Restricting access to SBIR funding for firms that benefit from venture investments would thus appear to disproportionately affect some of the most commercially promising small innovative firms.” While the bill allows small businesses with venture backing to participate, it also includes safeguards that prevent a single venture capital company from owning a majority of the small business or controlling a majority of the board of director’s seats of a participating firm.
Streamlining & Creating Efficiency to Encourage Greater Participation in SBIR and STTR
H.R. 2965 also cuts down on red tape in the SBIR and STTR programs, so that participating companies spend less time doing paperwork and more time getting products to market. By establishing a 90-day timeline for issuing a final decision on an SBIR application, the measure will help firms receive SBIR funding in a timely manner. Importantly, the bill more than doubles the size of SBIR and STTR awards (to $250,000 for early stage research and $2 million for later stage research) to bring funding levels in line with today’s technological needs.