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Legislation authored by the top Democrat on the House Small Business Committee would help small, innovative firms operating in the technology space to better access equity capital.  H.R. 2489, introduced by Rep. Nydia M. Velázquez (D-NY), would incentive small business investment companies to invest in small firms that participate in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

“Early stage start-ups have vast potential to create jobs and give back to the economy,” said Rep. Velázquez. “Supporting new products fosters the emergence of new markets, forming the cornerstone of innovation and technology.”  

Through the Small Business Innovation Research Program (SBIR) and the Small Business Technology Transfer Program (STTR), small companies partner with federal agencies, receiving grants to develop products and technologies useful to both the U.S. government and the private sector.  Since their inception, SBIR and STTR programs have fostered advances in everything from medical technologies for simulation-based trainings, biotechnology such as biosensors and vertical takeoff aircrafts. 

“We’ve seen immense success with products that have hit the commercial marketplace thanks to SBIR and STTR programs,” said Rep. Velázquez. “Ensuring these companies can access capital to not only develop their products, but also commercialize them, will enhance our nation’s competitiveness and create good paying jobs.” 

Velázquez’s bill would incentive Small Business Investment Companies (SBIC) to invest in SBIR and STTR participant companies. SBICs are a network of SBA-vetted investors that were created to provide long-term capital to small businesses in America. In 2016, there were 313 privately owned SBICs investing or committing to about $27.8 billion in small businesses. 

Under current law, SBA caps the amount of money that SBICs can invest in small businesses.  This new bill would incentivize SBICs to invest in SBIR and STTR companies by excluding investments in these firms from the SBIC’s leverage calculation. With less leverage, SBICs can borrow at more favorable rates. 

“Many firms in the SBIR and STTR programs see great success developing their products, but run short on capital as they struggle to put their products on the market,” said Rep. Velázquez. “This bill would create an additional channel of capital for some of our most innovative, risk taking small firms.”

The SBIR program was established in 1982 under the Small Business Innovation Development Act. Ten years later, STTR was formed as a complementary program. Since their inception, both programs have been extended and reauthorized several times. The Small Business Committee has held multiple hearings to evaluate the state of SBIR and STTR, all while pushing ways to strengthen the initiatives.  

Created in 1958, the SBIC program has grown into a multi-billion dollar investment channel. A vital and forefront avenue for small business capital, Democrats argue that the expansion of SBICs, as proposed in H.R. 2489, will propel innovation and spur job growth.