Venture Funding and the NIH SBIR Program (2009) / Chapter Skim
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2 Study Methodology
2 Study Methodology
Pages 22-29
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From page 22... ...
In order to establish the distribution of venture funding prior to the SBA ruling,1 this research initially focused on firms winning Phase II awards from 1992-2002 inclusive. Phase II awards were selected for study because they account for the largest amount of NIH SBIR funding.
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From page 23... ...
The firms winning Phase II awards also constitute the universe of firms ad dressed by the NRC's Phase II Survey,2 and the NIH Phase II Survey,3 which provide the best available data on outcomes from the SBIR program. These data will be critical to the second phase of the analysis, identifying impacts.
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From page 24... ...
Conversely, 51 percent ownership is not necessarily required in order to exert effective control. However, both because the SBA ruling focuses on 51 percent ownership and because any statistical analysis must find ways to draw bright lines through murky questions, this study assumes that the critical delineator for the purpose of access to SBIR is 51 percent ownership.
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From page 25... ...
14 It is important to note that these categories of majority venture funded firms as opposed to venture-funded firms are frequently not static. As often happens in the biotechnology industry, a company may have some venture funding and be eligible for SBIR Phase I and Phase II awards, but then receive venture capital additional funding and become ineligible for further SBIR funding.
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From page 26... ...
Table 2-1 shows that overall, about 12 percent of firms that won SBIR Phase II awards from 1992-2002 inclusive were also venture capital-funded. In addition, firms that were more prolific in winning SBIR awards were also more successful in attracting significant venture capital funding: 35 (17.5 percent)
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From page 27... ...
and the NRC 496 responses from 368 firms.19 Together, the surveys generated responses covering at least one project from 861 firms that received Phase II awards during this period.20 Firm-level Outcomes While the NRC/NIH data provide important insights into outcomes from specific surveyed projects, it is also useful to generate a different perspective based on the development of the firm, rather than an individual project. Utilizing the Hoover's database of small firms, we developed a dataset of current revenue and employee data, which provides a useful proxy for the overall commercial success of the firm.21 Unfortunately, Hoover's does not maintain time-series data on individual firms, so our metrics were based on the size of firm revenues and number of employees as of the most recent data available from Hoover's (in most cases, for 2006)
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From page 28... ...
As noted earlier, BIO and other groups have claimed that the exclusion of venture funded companies from SBIR will result in a critical "gap" in the funding flow, one that may prevent important discoveries from being commercialized. To substantiate these claims, BIO conducted telephone and Internet surveys of its "emerging company" membership -- defined as firms with fewer than 350 employees and no marketable products.23 The surveys suggest that a large 23 BIO appears to have contacted all 650 firms that make up its emerging company membership, with a response rate of about 41 percent.
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From page 29... ...
BIO also conducted six case studies designed to show that promising lines of early-stage research have been abandoned or delayed as a result of the ruling. These cases, however, do not provide counterfactual evidence based on products that were funded prior to the SBA ruling, which would have been excluded by the ruling.
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