Small Business Innovation Research Program SBIR Policy Landscape

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Small Business Innovation Research
Program (SBIR)Policy Landscape Funding
Opportunities for Cleantech CompaniesA
History, The Future, and Impact on VCs

• Prepared by Fabiani Company
• Washington, D.C.

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Basics of The SBIR Program, History Rational
For Its Creation

• Created in 1982 by Congress Government Agencies
  with gt100M in RD to set aside 1.25 for firms
  with lt500 employees
• Established a 3 Phase System
• Phase I -- 100,000 (6 months) for concept
  evaluation, feasibility
• Phase II -- 750,000 (up to 2 years) to perform
  principal RD
• Phase III Aim is commercialization, funding
  likely private
• Goal to increase small business participation in
  federal RD
• Goal of Expanding high-tech employment Every
  Member of Congress endorses policies to increase
  job growth (Probably Even Yours)

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History Rational Contd

• SBIR program has been praised for helping
  agencies a) meet mission requirements and b)
  develop high quality technologies with benefits
  to public and private sectors
• GAO estimates up to 50 of SBIR projects have
  resulted in sales or private sector investment
• To date, roughly 100,000 SBIR grants have been
  awarded with a value in excess of 21 Billion.
• Federal RD dollars allocated for SBIRs has
  increased from 1.25 to 2.5.

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History Rational Contd

• Today, 11 Federal Agencies (and Subdivisions)
  make SBIR Awards Departments of Energy,
  Defense, Agriculture, Education, Health Human
  Services, Homeland Security, Transportation,
  NASA, EPA, Commerce, and National Science
  Foundation NEARLY ALL HAVE CLEANTECH
  REQUIREMENTS

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Recent History and Present Day for SBIR Program

• The SBIR program was scheduled to sunset in
  September, 2008.
• Congress still has not reauthorized the SBIR
  program Dont Worry
• Question Why Hasnt Congress Passed A Long-Term
  SBIR Reauthorization???
• Answer There is concern over the role of VC
  funding in the financing of companies applying
  for SBIRs. Politics of regionality and Rural
  States v Urban States

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VC No Longer Classified as an Individual Many
VC Backed Companies Lose out on SBIRs

• Under Current SBIR law/SBA regulations, companies
  applying for SBIR funds must be a) independently
  owned and operated, b) not dominant in their
  field of proposed research, c) for profit d)
  have 500 or fewer employees and e) have at least
  51 ownership and performance by one or more US
  citizens or lawful permanent residents.
• Under the 1982 law, VC investment was encouraged
  but could not exceed 49 of the investment in a
  company seeking SBIR funding.

7
SBIR Program in the 2000s Loss of SBIR Funding
for Many VC Backed Companies

• In 1982, Congress thought Uncle Sam should be
  Americas VC VC community dramatically
  different today
• Little to no attention was paid to whether
  companies applying for SBIR funds had 5 VC
  backing or 95 VC backing.
• But role of VC community began to change over
  time
• SBA ALJ rulings in 2001 and 2003 concluded that a
  small business receiving greater than 51 of its
  financing from VC sources could not pursue SBIRs.

8
VC Backed Companies Are Facing The Birthers
Contd

• Under these rulings, venture capital firms could
  not be considered individuals for the purpose
  of satisfying the ownership criteria of the SBIR
  program.
• Therefore, small businesses with greater than 51
  of their financing coming from VCs have been
  prohibited from applying for SBIRS since 2003
  even if a start-up was majority VC backed without
  any particular VC contributing 51 or more.

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Where Are We Now???Waiting for Congress

• The House and Senate have both passed versions of
  SBIR Reauthorization with fewer restrictions on
  VC contributions.
• House version is more pro-VC than Senate.
• Final Version will be more pro-VC than Senate,
  not sure how closely it will mirror the House
  version.

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Comparisons of House and Senate Bills

• House HR 2965
• Allows for greater than 50 ownership by VCs so
  long as one VC does not control gt than 50 of
  company 1 VC cant have gt50 of board control

• Senate HR 2965
• Permits NIH to award up to 18 of its SBIR
  funding to VC majority owned small firms so long
  as no 1 VC firm controls more than 49 of the
  SBIR applicant Allows other agencies to award up
  to 8 of SBIR funds to VC majority owned small
  firms so long as no 1 VC firm controls more than
  49 of the SBIR applicant.

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Comparisons of House and Senate Bills Contd

• House HR 2965
• Extends Program thru September, 2011
• Increases Phase I Award to 250,000
• Increases Phase II Award to 2,000,000 (2.25M
  for veteran ownership)
• Does Not Increase set-aside for RD beyond 2.5

• Senate HR 2965
• Extends Program thru September, 2017
• Increases Phase I Award to 150,000
• Increases Phase II Awards to 1,000,000
• Increases federal set aside to 3.5 of federal
  RD by 2020

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Topics of Recent DOE SBIR Awards

• Battery Development
• Advanced Coal Research/Cleaner Coal
• Greener Lighting
• Fuel Cells Hydrogen Infrastructure
• Hybrid and PHEV Storage
• Wind, Solar, Geothermal
• High Temperature Superconductivity

• Greener Petro Shale
• Biofuels from Bio-mass
• Medical Sciences
• Remote Sensing
• Vehicle Efficiency
• Nuclear Energy Systems
• Fusion
• Hazardous Site Remediation
• Atmospheric Sensors