Many entrepreneurs breathed a sign of relief when Congress reauthorized the Small Business Innovation Research program for five years. If only it were that simple. One of the most important waysthat small businesses get money to develop their new technologies is through the SBIR grant program (Small Business Innovation Research). “S” does stand for small in this case. But apparently the SMALL Business Administration, which considers a small company anything under 500 employees, is proposing new rules that seem to violate the intent of the law producing unintended consequences (how often have we seen that recently).
Historically, the SBIR program, which provides over $2.2 billion in research dollars through 11 agencies, is charged with setting aside two percent of that amount specifically for small businesses (remember that’s small as in <500 employees). Under the current rules, a company that applies for a grant must be majority-owned by an American citizen, a permanent resident, or an American company. The new rules create a new type of company called a “domestic business concern.” What this means is that the company must be organized and operate, for the most part, in the U.S. but can have majority ownership in the hands of non-American citizens. Isn’t that great? Now American technology entrepreneurs will be competing with the rest of the world for American tax dollars for research. What’s wrong with this picture?