Shaheen: SBIR funding ‘good news’ for N.H. businesses

After years of short-term extensions, two popular federal programs that make it easier for innovative small businesses to win federal grants have secured long-term reauthorization.The Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs, which were set to expire Dec. 16, have been reauthorized for six years. The funding levels set aside for small businesses will also be increased over that period.”I am so pleased that we have a six-year reauthorization for the SBIR program,” U.S. Sen. Jeanne Shaheen, D-N.H., told NHBR. “I think that’s very good news for businesses in New Hampshire and across the country, and it’s good news for innovation and job creation.”Through the SBIR program, participating federal agencies set aside 2.5 percent of their R&D budgets for competitive grants to small defense and high-tech companies. STTR is similar but smaller, setting aside an additional 0.3 percent of grants for partnerships between small businesses and nonprofit research institutions.Since its inception, New Hampshire firms have been quite successful at winning SBIR grants, with awards to firms in the state totaling $370 million, which Shaheen attributes to the state’s “innovative” and “entrepreneurial” economy.The programs have been praised by both sides of the aisle for spurring job creation and innovation, but have been squeaking by on short-term extensions for years as Congress has been unable to reach a compromise on what the terms of the programs should be.”Unfortunately, I think it’s something that got bogged down not on partisan differences, because we generally had broad bipartisan support in the Senate, (but) there was a difference in opinion in the Senate and House,” said Shaheen, who has been a longtime proponent of SBIR.The Senate and House have historically disagreed on numerous aspects of the programs — from how long their reauthorization should be to how many phases they should encompass and whether there should be a cap on the number of awards a company can receive.As a result, the programs have been temporarily extended 14 times since 2008, a tenuousness that has made it difficult for the agencies and companies to plan for the future.”Of course we’re enormously pleased that it’s going towards stability,” said Bill Hersman, a physics professor at the University of New Hampshire and owner of Durham-based Xemed, a firm developing a new method for producing gases that can be used to diagnose lung disease with magnetic resonance imaging.”I realized that the projects I was working on academically could be advanced much faster and with greater quality if they were done in an entrepreneurial environment in addition to an academic environment,” said Hersman. Since he founded the company in 2004, it has won 23 SBIR grants totaling $10.5 million and now employs 10.Still, some of the SBIR grants his company has applied for have received very high scores but have been stalled in an unfunded holding period, he said. That’s probably due to a multitude of factors, but the biggest is almost definitely the agencies’ uncertainty in not knowing where their budgets will be a year or two down the road, he said.Securing this long-term reauthorization hasn’t been all smooth sailing this time around. Once the long-term reauthorization amendment passed the Senate as part of the National Defense Authorization Act of 2012, it still had to be synched with the House version of the bill that differed widely on several fronts. The House version, for example, called for just a three-year extension of SBIR, while the Senate amendment initially sought an eight-year extension.And once they had compromised, it still wasn’t clear whether it would pass, since the president had threatened to veto the NDAA because of some of its provisions relating to detaining suspected terrorists. But after some of the language of the provisions was updated, the president rescinded the veto threat.”I think persistence has been important,” said Shaheen. “Also hearing from the business community that this has been important to them. One of the things that’s critical to the economy, how to compete globally, how we continue to get the country out of the recession we were in, is innovation — it’s innovation that’s going to allow for job creation.”Among the terms of the compromise:The SBIR allocation will be raised from 2.5 percent to 3.2 percent and the STTR allocation from 0.3 percent to 0.45 percent over the six-year period, which Shaheen said would amount to $641 million extra a year for small businesses.Funding available for majority-owned venture capital firms will be increased to 25 percent for three participating agencies and 15 percent for the remainder.The programs will remain merit-based, with no cap on the number of awards a company can receive.Both Phase I and Phase II award levels, which have not been raised since 1982, will be increased from $100,000 to $150,000 for Phase I and from $750,000 to $1 million for Phase II, allowing for an additional Phase II for projects that demonstrate particular promise.Most agencies will be required to complete their review process for applicants within 90 days, to give small businesses more certainty as to when they can expect a decision on their awards.Performance-based standards will be introduced to encourage companies to focus on commercialization through Phase III of the program.Hersman is pleased that SBIR has finally been reauthorized in the long term, but has some trepidation about the increased funds for private equity companies.”I’m extremely happy that the funding level has been bumped up, but I understand that we will be competing with VC-backed small businesses, which could be an asymmetric advantage they enjoy with more resources to write polished proposals that are professionally edited,” said Hersman. “So there may be a period of time before the (allotment for the) SBIR program increases that we actually experience increased competition.”But, he said, “We’re still happy it’s funded for the long term. It’s meeting the objective that it was originally intended for — it’s inspiring individuals to become entrepreneurs, it’s motivating academics to transition new technologies out of the academic labs and into the marketplace, and creating jobs, and small businesses are likely to thrive and expand and become commercially independent.””This is one of those programs that makes sense for a lot of reasons,” said Shaheen. “It supports small businesses, it doesn’t add to the bottom line of the cost of programs … and it creates jobs, and particularly now, that’s so critical.” — KATHLEEN CALLAHAN/NEW HAMPSHIRE BUSINESS REVIEW

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