This week, the SBIR reauthorization bill is expected to reach the Senate for a vote. The SBIR bill proposes to raise the amount of Phase I grants from $100K to $300K and Phase II grants from $750K to $2.2M. In addition, it would allow federal agencies to provide more funding. More importantly for venture-backed startups, they would now be eligible for the SBIR grants.

These changes are viewed favorably by VC firms, as it would mean additional funding vehicle for some of their portfolio companies. VCs also believe a portion of SBIR funding should go to entities that have a better chance of actually introducing new technology to market (i.e., venture-backed startups), rather than simply individuals or firms that just conduct basic research.

Not surprisingly, these changes are opposed by small businesses and research firms who rely almost exclusively on the SBIR for funding. They are particularly concerned that with the larger grant amounts, fewer SBIR grants would be available to them.

In my opinion, it is exactly this competition that will make for a better SBIR program. From a market efficiency standpoint, it will ensure that the best ideas get funding.

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