Venture Capital Is Issue in Innovation Research The Obama administration has not yet developed a position on the key issue in the Small Business Innovation Research Program: whether grants should be given to companies controlled by venture capital investors. Edsel Brown Jr., SBA assistant administrator for technology, said the administration is reviewing the issue. SBA’s new administrator, Karen Mills, formerly headed a venture capital firm. The House Small Business Committee held its first hearing on the SBIR program April 22. Chairwoman Nydia Velazquez, D-NY, said the committee will continue discussions and hopes for House passage of a reauthorization bill before July 31, when the authority for SBIR expires. The House passed legislation last year making VC-controlled companies eligible, but the Senate did not act. “SBIR-backed firms should have access to all the tools they need, including venture capital,” Velazqeuz said. “At a time when capital is increasingly hard to come by, it doesn’t make sense to limit funding options for small businesses.  It should be up to entrepreneurs themselves—not Washington bureaucrats—to decide how these firms are financed.” Since 2003 SBA has prohibited grants to firms that are more than 50% owned by VC investors. Biotechnology executive Rachel King, CEO of GlycoMimetics Inc., told the committee that policy “ignores the realities of the marketplace where small biotechnology firms must raise tens of millions of dollars to conduct incredibly capital-intensive research.” But some small business advocates contend the venture-backed companies will take grant money away from independent entrepreneurs. The Senate Small Business Committee floated a compromise proposal in July. Its bill would prohibit grants to firms controlled by a single VC investor, but would allow those controlled by more than one VC investor to participate in the program. The House voted to triple the maximum SBIR grants, to $300,000 in Phase I and $2.25 million in Phase II. Eleven federal agencies participate in the SBIR program, doling out more than $2 billion in grants each year. The agencies are currently required to spend to 2.5% of their R&D dollars on SBIR. Several members of Congress have favored raising that quota.