Venture Funding and the NIH SBIR Program (2009) / Chapter Skim
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3 Venture Funding for NIH Phase II Winners, 1992-2002
3 Venture Funding for NIH Phase II Winners, 1992-2002
Pages 30-38
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From page 30... ...
The 234 firms identified here include all firms identified as receiving any venture capital funding. These 234 firms constitute the possible pool for firms that might be excluded from future NIH awards by the SBA ruling.
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From page 31... ...
NOTE: Table 3-1 shows all firms receiving NIH SBIR Phase II funding, and firms receiving venture capital funding as identified by VentureSource. 3.1 CONTROL AND INDIVIDUAL OWNERSHIP3 Venture funding is not in and of itself disqualifying for firms seeking SBIR funding.
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From page 32... ...
A second issue concerns the firms that are still owned by 51 percent individuals but would be deemed ineligible under the 500 employee limit as interpreted by the SBA, whereby an investor's portfolio companies can be included under the ‘informal' aspects of control used by SBA to determine affiliation. There appears to be no useful way to develop a proxy that could differentiate between VC funds that breach this component of the SBA interpretation and those that do not.5 3.2 ELIMINATION I: EFFECTIVE CONTROL The issue of control in majority venture-funded firms is exceptionally com plex.
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From page 33... ...
Thus while these criteria are not accurate in all cases, they represent the best available proxies for institutional ownership. The Committee further assumed that all venture capital firms fail to meet the individual ownership criterion themselves.
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From page 34... ...
They constitute 11.9 percent of all the 1,536 NIH Phase II winners 1992-2002 reported by SBA. For the remainder of this report, we define "Venture-funded firms" as those 183 firms that would, based on the criteria above, have been excluded from the SBIR program.
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From page 35... ...
Final review, which took a more aggressive approach by eliminating duplicate names for firms in the same state and region, generated a final list of 1,536 firms.
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From page 36... ...
capital markets is through institutional owners, pension funds, investment enti ties of various kinds, and other companies.10 However, there are also cases where publicly traded firms are still owned and controlled by a group of U.S.-based individuals. In addition, some publicly owned firms have continued to apply for and receive Phase II funding at NIH, although it is also worth noting that these numbers have declined substantially in recent years, a trend that may indicate that the impact of the ruling is only now becoming apparent.
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From page 37... ...
The 4.1 percent reflects the lower bound -- the percentage of NIH SBIR Phase II winners 1992-2002 firms that appear to have been excluded by the ruling, and are not potentially excluded by other factors. 3.4 FURTHER AWARDS TO POSSIBLY EXCLUDED FIRMS One way to test the effectiveness of our exclusion criteria is to examine whether potentially excluded firms have continued to operate within the NIH Phase II SBIR program.
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From page 38... ...
The fact that only one of the 51 firms identified as publicly traded was still applying suggests even more strongly that these firms have been largely excluded.
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