House Votes Small Business Status for Venture Capital-Owned Firms Several advocacy groups are fighting legislation that would open federal small business programs to companies that are majority-owned by venture capital firms. The provision is part of a bill expanding SBA investment programs. The House passed H.R. 3567 on Sept. 27 by a 375-72 vote. A similar bill is pending in the Senate. Biotechnology firms have been seeking the venture capital exemption, contending they need VC investment to fund their long-term research and need to be eligible for federal Small Business Innovation Research funding as well. The provision amounts to “taking appropriated dollars for small businesses and using them to enrich venture capitalists and conglomerates,” said J.R. Claeys, president of the National Association of Government Contractors. The Bush administration “strongly opposes” the provision. “By eliminating the concept of affiliation for venture capital operating companies, the provision would allow large businesses, not-for-profit organizations, and colleges and universities to own and control small businesses and benefit from programs designed for independent small businesses,” the Office of Management and Budget said in a policy statement. An amendment added by Rep. Steve Chabot, R-OH, says no company can be classified as a small business if it is controlled by a single VC investor. But several investment firms could join together to own a majority stake. The bill creates a new Angel Investment Program that would give matching funds to angel investors in small businesses. The Bush administration said it opposes that provision because it would provide government capital to wealthy investors.