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Wednesday, June 10, 2009

Battle in Congress Over Billions in Small Business Contracts Heats-Up

June 10, 2009

Petaluma, Calif. - The National Venture Capital Association (NVCA) and its wealthiest members have stepped-up their campaign to try and participate in federal small business contracting programs. Yesterday, a bill was introduced in the House of Representatives by Congressman Sam Graves (R - MO) that could allow firms that are owned by some of the nation's wealthiest investors to receive billions of dollars in federal small business contracts.

The bill, H.R. 2767, the "Investing in Tomorrow's Technology Act," would affect small businesses involved in the government's Small Business Innovation Research (SBIR) program. The heart of the bill is a proposed change in the longstanding government definition of a small business, which currently requires that a small business be "independently owned." Congressman Graves' bill would modify the term "independently owned" to include firms that are actually not "independently owned," but owned and controlled by venture capitalists. The bill circumvents the affiliation rules currently governing venture capital ownership of a small business.

Opponents of the bill say it will essentially repeal the Small Business Act by changing the federal definition of a small business to include firms that are actually not small businesses. The American Small Business League (ASBL) is opposing the bill. The ASBL estimates that changing the federal definition of a small business to include wealthy venture capitalists could divert billions of dollars in federal contracts away from middle class firms and could devastate legitimate small businesses around the country.

Although H.R. 2767 is focused on the SBIR program, the NVCA has blanketed both the House and Senate small business committees with contributions in an effort to have legislation passed that would allow them to participate in all federal small business contracting programs. In 2007, with the help of House Small Business Committee Chair Nydia Velázquez (D - NY), H.R. 3567 passed through the House of Representatives. The bill would have allowed firms owned and controlled by some of the country's wealthiest investors to participate in all federal small business contracting programs.

Small business groups around the country became concerned about the future of federal small business contracting programs when President Obama appointed multi-millionaire venture capitalist Karen Mills, to head the Small Business Administration (SBA) and venture capitalist Winslow Sargeant to head the SBA Office of Advocacy. Both Mills and Sargeant were major contributors to President Obama's campaign. They have also been outspoken advocates of changes in federal policy and legislation that would allow venture capitalists and even some of the nation's largest venture capital firms to receive federal contracts designated for legitimate small businesses.

The ASBL is mounting a national campaign to oppose H.R. 2767 and any other legislation to amend the definition of a small business as "independently owned," to include wealthy venture capitalists.


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