In a victory for small biotech, the U.S. House passed a bill that allows small companies to be eligible for federal small-business programs even if they're majority-owned by VC firms. Biotechs can often go for a decade or more before marketing a product, and they rely on investment from VC firms to keep the company going through the early stages of drug development. However, by the time a biotech has a marketed drug, VCs can own a large chunk. This means that the small company isn't eligible for Small Business Innovation Research (SBIR) awards.
The new legislation will lift current restrictions, giving small biotechs access to SBIR awards as long as VC firms own less than half of the company. "Private investment in small business is a good thing and should be encouraged, not discouraged," said Rep. Sam Graves (R-MO), the bill's co-sponsor. However, among other concerns, critics say opening up SBIR awards to more established companies will make competition harder for small start-ups.
- read the Baltimore Business Journal article