Anyone opposed to increased access to capital?

Landrieu to Introduce Bill Increasing Loan Limits for Small Businesses.
(Thanks to Fred Patterson, the SBIR Coach, for spotting this):

Included in the bill is language to remove the "Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR) contracting exemption that was included in the Recovery Act." If you haven't been following along, someone (mysteriously, multiple hearings have been unable to unmask the culprit, as noone is taking credit) inserted language into H.R. 1, the American Recovery and Reinvestment Act, that effectively exempted $229 million of stimulus funds from being spent on small high-tech businesses for R&D under the SBIR/STTR funding mechansims (known as R41/R42 and R43/R44).

This action was arguably illegal, certainly unethical, as the language was inserted while the bill was under the authority of a conference committee, after having been passed by both Houses of Congress without it. As per the rules of Congress, the purview of a conference committee is to reconcile differences between House & Senate versions of a bill, not to introduce any substantive changes that were not a part of either bill.

If Landrieu's new bill passes, those $229 million* will be restored as per statutory requirements under the Small Business Act and numerous SBIR/STTR reauthorizations to set aside a small percentage (currently 2.8% total for both programs) of certain federal agencies' extramural R&D budget to provide seed (Phase I) and transition-to-commercialization (Phase II) funding for small business-led efforts. American recovery & reinvestment: it's even in the title of the act.

Access to capital means much more than providing loans to small businesses. And it means more than letting Venture Capital interest and investment serve as a proxy for a business' worth. There is a reason that SBIR/STTR have been so successful in stimulating the creation of new technologies, and getting those technologies to the end users where they will have the greatest effect, more effective than Venture Capital.

I've said it before, but it warrants repeating: it's all about seed funding, and continued support to get those sprouts to market!

* UPDATE * Actually the language of Landrieu's bill, S. 1832, would only restore $150m of the stimulus funds to SBIR/STTR. Apparently, according to Fred Patterson, this may have been a compromise NIH was willing to agree to. Considering Jo Anne Goodnight's current detail, away from her desk as NIH Coordinator for SBIR/STTR, to the Senate's Committee on Small Business & Entrepreneurship, it's not too far fetched that there is close (albeit tight-lipped) coordination between the activities of the SBE and NIH administrative personnel.

DoD-only SBIR reauthorization for 1 year!

Rick Shindell gives the scoop (via SBIR Insider):

Wednesday, October 7, 2009 the House & Senate Armed Service Committees reached agreement on the conference report to H.R. 2647, the Fiscal Year 2010 National Defense Authorization Act (NDAA).

In this conference report ... there are 2 pages of language that in essence, reauthorize the DoD's SBIR and STTR programs for 1 year (ending September 30, 2010), and extending the Commercialization Pilot Program (CPP) for the same period.

This has no effect on the other ten agency SBIR/STTR programs that will expire on October 31, 2009 unless extended by another CR or reauthorized.

The NDAA should come to the floor of both bodies quickly for a vote, perhaps Thursday. There are some provisions that are controversial and a few that the President didn't want, so the bill's passage and the President's signing, although likely, will not be a slam dunk. We have a copy of the SBIR portion of the report at http://www.zyn.com/sbir/insider/SBIR-Armed_Services_Report-100709.pdf

... Obviously the Senate Armed Services Committee (SASC) and the House Armed Services Committee (HASC) actions reflect a vote of "no confidence" in the ability or likelihood of the other committees to reach SBIR reauthorization in a timely manner.

INSIDE STUFF: Senator Carl Levin (D-MI), chair of the SASC, who is also a member of the SBE, worked closely with SBE committee chair Mary Landrieu (D-LA) as did their staffers, to incorporate the entirety of the Senate's SBIR reauthorization bill (S.1233) into the NDAA. Some SBIR changes were made by the SASC including making the reauthorization for 14 years, making the CPP permanent (rather than its pilot program status), and expanding the CPP to the STTR program.

... Once it came to light that this action was for real and was gaining traction, HSBC chair Nydia Velazquez (D-NY), and HS&T subcommittee chair David Wu (D-OR) fired off a strong letter of complaint to HASC chair Ike Skelton (D-MO) and ranking member Buck McKeon (R-CA), along with a CC to Nancy Pelosi. (see http://www.zyn.com/sbir/insider/HASC_letter-9-25-09.pdf )

In the House, there was great pressure on Armed Services to stand down on the SBIR issue. Chairman Skelton would not cave but he would compromise. The 14 years were reduced to 1, CPP was also only 1 year and was not expanded to STTR.

This compromise should serve notice the other House committees that SBIR must be reauthorized properly or the DoD may run with their own program next year.

NIH Director seeks comments!

NIH Director Welcomes Public Comments (via Genetic Alliance)

Earlier this month, National Institutes of Health (NIH) Director Dr. Francis Collins held a town hall meeting with constituency groups to outline a vision for the NIH, including putting science to work for the benefit of healthcare reform and advocating for a stronger US global health presence. In addition to responding to input during the meeting, Dr. Collins invited members of constituency groups to follow up with additional comments about issues facing their organization or community that should be brought to the attention of Dr. Collins and the NIH. The Institute is accepting comments on a rolling basis, and Genetic Alliance is collecting individual responses to inform our comments until Friday, October 9.

To submit your comments, please send them to the NIH at NIH-LISTENS@nih.gov and copy NCIAdvocacy@mail.nih.gov. To submit them to Genetic Alliance, please send them to Kristi Zonno, Director of Genetics and Health Policy, at kzonno@geneticalliance.org.

Sprouting Seeds

My friend, the SBIR Coach, recently posted reflections from attending the Conference of the National Association of Seed and Venture Funds (NASVF). He mentioned a recent conversation he had with Laurence Briggs, CEO of a private investor network:

What they look for is a proved-out concept for a product or solution addressing a significant market with scalability, and a good coachable team appropriate for their stage of development.

I read those words, and wonder at the first requirement for private investment: a proved-out concept. The image that comes to mind, reasonably enough I presume, is that of a seed, for a seed undoubtedly predates such proof.

Last I checked my botany, a seed by itself is anything but proved-out, especially the seed of a new hybrid or an untested variety. But what a wonderful package it is! All potential and for explosive growth at that. A seed is quite resilient, enduring a great many torments, even years of neglect. But a seed needs a few things to realize that potential.

1. A seed needs warmth and moisture to sprout, which provides proof of its viability.
2. But a viable seed may still die without the proper nurturing. Once we've obtained proof of viability, the seed needs the suitable conditions to root and leaf and grow. This is the testing stage, where a viable seed is coaxed into a relatively mature specimen, a prototype if you will of the field or forest it might become. Now we have a plant, but what sort of fruits will it produce?
3. If a mature specimen warrants our further interest, we need to attend to the task of reproducing it, distributing it, continuing to examine and study it to discover the ideal conditions and create them in field or farm or greenhouse.

You may notice something in the image: It mirrors the process of seed capital as represented by SBIR.

1. Phase I is the seed-sprouting stage, where we take an unproven concept and prove it out.
2. Phase II is the stage where a viable seed is taken to prototype.
3. Phase III is the stage where a prototype is brought to commercialization in a broader market.

It would seem then that Phase I, the true seed stage, is the untouchable part to private investors. The greatest value of SBIR is its ability to leverage public funding, through a highly competitive process to identify the most promising kernels of ideas, along with the appropriate team to take it from unproven concept, through proof, prototype, then commercialization.

If SBIR is transformed--as many in the House Small Business & Science Committees are intending and entrenched to do--to preference the later stages of business development and growth (the stages preferred by Angels and VCs), then what source would remain for the true seed stage of innovation?

Some might argue that seeds are in too great abundance to be sorted by non-experts. Surely, it is the risk factor involved that stays many Angels and VCs from entering the fray at this early stage. Yet innovative science and technology take time, sustained effort, and commitment: often more of these three than most realize or would care to support.

This is perhaps the genius of SBIR: it allows Program Managers to define high priorities for their particular programs, to solicit proposals that address those specific priorities, have these proposals evaluated by experts, if not experts in the fields of research at least expert in the problems that need resolution. It permits federal agencies that spend billions of taxpayer dollars to reserve a small portion of those funds for work by small businesses, to serve the greater good, to stimulate innovations that might otherwise sprout and die on the sidewalks of neglect and indirection, ones which large corporations and universities have not or could not achieve.

It focuses the minds of innovative researchers to solve realworld problems, fertilizing the growth of the entrepreneurs who will create and lead new industries built on new technologies that remain unimaginable today. Innovation by definition has no peers. Again, I ask, if SBIR will no longer support this earliest stage, then who or what will?