Venture Capital Control of Small Firms Is Debated The biotechnology industry is divided over whether small companies that are controlled by venture capital firms should be eligible for Small Business Innovation Research grants, according to witnesses at a hearing of the House Subcommittee on Environment, Technology, and Standards. The subcommittee heard testimony on a bill sponsored by Rep. Sam Graves (R-MO) that would permit VC-owned firms to qualify for the grants. Sen. Christopher Bond (R-MO) has introduced a companion bill in the Senate. Graves’s bill would allow small VC-backed companies to be eligible for SBIR grants as long as no single VC fund holds a majority interest in the company and the fund is not owned by a large business. Carol Nacy, CEO of Sequella Inc. of Rockville, MD, testified that many biotech companies need SBIR grants because venture capital investors support “clinical development and commercialization, not the high-risk discovery research or early translational research before the clinic: research into new targets of interest to government is last on priority list with venture capital money.” Dr. Ron Cohen, CEO of Acorda Technologies in Hawthorne, NY, said, “Biotechnology companies must rely on venture investments and grant sources for sufficient funding. The biotechnology industry is unique in that it takes a large amount of capital – at least hundreds of millions of dollars – to develop a drug from concept through to market.” But Jonathan Cohen, CEO of 20/20 Gene Systems of Rockville, MD, said venture capital-backed firms would have an unfair advantage in the SBIR application process. ”Because the SBIR application process is resource intensive, especially at NIH [National Institutes of Health], opening up the program to companies owned and controlled by deep-pocketed investment houses presents a genuine risk that a significant percentage of available funds will be siphoned away from the very companies for which the SBIR program was created to support.” Fredric Abramson, founder and CEO of AlphaGenics of Rockville, MD, said, “Permitting venture-backed companies to siphon off SBIR funds will, in my opinion, erode America’s competitive technology position in the world.”