STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
House Committee on Small Business
Markup of HR 5819, “The SBIR/STTR Reauthorization Act”
April 17, 2008

Today, the Committee will address legislation that will modernize and reauthorize the Small Business Innovation Research and Small Business Technology Transfer programs.  These programs – which help spur innovation and job creation throughout the country – were last updated eight years ago.  During that time, the needs of small research firms have changed dramatically.  It is well past the time that we update the tools and resources they depend on.

Research conducted by SBIR and STTR awardees has helped address our country’s most important research and development challenges.  This includes strengthening our national security and our public health infrastructure.

The continued success of the SBIR and STTR programs is dependant on three primary issues.  First, the program must remain highly competitive. Second, applicants and awardees must have access to financing of all types, including venture capital.  Small firms must not be penalized for accepting the investments they need to advance their R&D efforts.  Third, more needs to be done to bring these breakthrough products to the market.  We must promote greater commercialization in these initiatives.

The reauthorization legislation that we will mark up today is an important step toward securing the future success of these important programs.  We have worked closely with our colleagues on the Committee on Science and Technology. To this end, we have taken the legislation they marked-up up yesterday afternoon and incorporated it into the consolidated bill before us today.   We have also included amendments from Representatives Wilson and Smith that were adopted in the Science Committee’s markup yesterday.

Among the most notable legislative changes to the programs are increases in the set-asides for both SBIR and STTR.  This will allow more small firms to participate in Federal R&D activities.  This is especially important for SBIR, where we raised the set-aside level from 2.5 percent to 3 percent.  The bill also raises award sizes – but places substantial notification and reporting requirements on agencies seeking to exceed these limits.  This will ensure that jumbo awards are being reviewed and overseen.
Perhaps most importantly, the legislation restores the 2003 eligibility rules permitting small businesses with venture capital investment to qualify for SBIR awards.  This is not a groundbreaking change.  We are simply reinstating the policies that were in place up to 2003.  We have done so in a balanced manner and included important safeguards and protections.

Small businesses are the focus of this policy.  A single venture capital firm cannot own a majority of an SBIR awardee, nor can they have a majority of seats on its board of directors.  In addition, limitations are placed on the venture capital company, including its size and its control by larger corporations.  Overall, this once again gives entrepreneurs – not Washington, DC bureaucrats – the final say on how their company should be financed.

HR 5819 takes steps to develop the next generation of small research firms.  It will do so by providing resources to increase SBIR and STTR applications from rural areas and from those owned by women, service-disabled veterans and minorities.  It makes resources available that small businesses need to transition SBIR funded research from the laboratory to the marketplace.  This includes making commercialization a priority – and supplying the resources for transition assistance, programmatic expertise, mentoring activities, and the facilitation of key business partnerships.

HR 5819 will enable more small research companies to advance the innovations that have made our economy so diverse and vibrant.  It has the support of the Biotechnology Industry Organization and the National Venture Capital Association.  In passing this bill we will ensure that SBIR and STTR awards remain competitive, fund top-notch research, and produce cutting-edge breakthroughs.  Doing so will continue to help create high paying jobs, reduce our trade deficit and emphasize the importance of math and science education to America’s students.