Politics has reared its head again, as Congress attempts to enforce existing eligibility rules that say a company funded by SBIR has to be majority-owned by individuals, and not majority-owned by investors. Opposition to this rule is coming from investors, particularly in the biotechnology industry, no doubt because it is difficult for any business in that industry to bootstrap a startup, relying instead on investment capital.
About 12 federal agencies participate in the SBIR program, each with annual budgets of over $100 million. The biggest is the Department of Defense, followed by the National Institute of Health; the National Aeronautics and Space Administration (NASA) and the National Science Foundation.
Under the SBIR program, government agencies post topics that they want to see specific proposals on, usually seeking a very specific result. The first phase is to propose a feasibility study, which if funded, results in a report. The second phase is a proof of concept for a working model; at the end of that phase, the company should have something that will allow it to get additional funding from the government or the private sector. SBIR is not meant to cover the commercialization phase of product development, so companies usually try to win that funding from the investment community or from large private contractors.
For the robotics industry, SBIR has had a long history of successful support.
“There is always a political discussion surrounding the program,” says Fred Patterson, who has been a management consultant for nearly 20 years, specializing in the SBIR program (http://www.SBIRcoach.com). “The eligibility rules have always said that a company has to be majority-owned by individuals, but the National Institute of Health in particular has not paid much attention to that rule,” Patterson says. Now that Congress has told NIH to enforce the rule, “The biotech community has said ‘no fair’.”
Recently, SBIR was recently extended to 2009, so that the political battle would not occur in an election year.
In the early days of SBIR, funding was set at 1% of the R&D budgets of the participating agencies. Today the program is funded with 2.5% of R&D budgets and the proposal is to raise that to 5%, which would substantially boost the federal government’s level of support. “My prediction is that is what’s going to happen,” Patterson says.
“SBIR is probably the best thing Congress has ever done to support small business. There are hundreds of companies that have gotten their start and are still thriving because SBIR gave them the seed money that no other source was going to provide,” Patterson says.
Possibly the eligibility rules could be made different for NIH, acknowledging the different investment pattern of the biotech industry. Whatever the decision, it is clear that SBIR is of tremendous assistance to small business, including of course the robotics industry.
John P Desmond is a contributing editor to Robotics Trends. He can be reached at: