• Exceptionally high “bum rate” for investment funds;

  • Significant investment by venture capital companies (VCCs), many of whom are not owned at least 51 percent by natural persons;

  • Multiple rounds of venture capital financing required; and

  • Except for the smallest service-oriented entities, majority ownership and control by natural persons or business concerns majority owned by natural persons is extremely unlikely for R&D companies with significant market potential.

Given that the landscape for small business entities in the public health and biotechnology sector presents unique challenges, NIH is concerned that SBA’s new eligibility rule, while opening the field somewhat, leaves out many small concerns, and, in turn, substantially damages the NIH’s SBIR program. By limiting eligibility to concerns that are owned at least 51 percent by natural persons, or another concern that is itself owned 51 percent by natural persons, the rule disqualifies many highly-deserving small entities. Perversely, this rule dries up Federal funding for early-stage ideas from small concerns that, by attracting, substantial VCC funding, show strong signs of likely success. Many of these concerns are the very entities that, with SBIR funding, offer significant promise for progress in improving public health. NIH believes that the current rule undermines the statutory purposes of the SBIR program to “stimulate technological innovation” and to “increase private sector commercialization of innovations derived from Federal R/R&D, thereby increasing competition, productivity and economic growth.” Furthermore, it undermines NIH’s ability to award SBIR funds to those applicants whom we believe are most likely to improve human health, which is the mission of NIH.


NTH shares SBA’s commitment to ensuring that only small business concerns receive SBIR awards. To advance this goal, and ensure that NIH also meets its need to support deserving R/R&D in the biotechnology field, I ask SBA to consider a waiver from certain eligibility standards for some concerns. Specifically, in addition to applicants eligible under current rules, the NIH requests that SBA permit it to award funds to small businesses when:

A concern is owned and controlled, at least in part, by a single VCC or multiple VCCs, provided that at least 51 percent of the concern is owned by U.S. individuals and/or VCC(s) that are owned no more than 49 percent by foreign business entities or individuals, and, provided further, that applicable small business affiliation standards are satisfied.

While many details of this proposal remain to be discussed between our two agencies, and its precise formulation may change as we work together, please understand that NTH aims to ensure that small business concerns with substantial VCC support in the biotechnology and public health R/R&D arena are able to receive SBIR awards from NIH. We do not aim to include concerns that are owned and controlled by large companies and believe that adherence to existing affiliation rules will limit this risk.


As additional background, I note that this request is not unprecedented. In the past, SBA waived SBIR program parameters and granted NIH the opportunity to make SBIR awards for certain



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