SBIR coach featured in two different Business Journal editions......

Fred Patterson, the SBIR coach, was featured in a page-one article in the Austin Business Journal. Patterson also wrote an op-ed piece in the San Antonio Business Journal that appeared in Friday's edition.

Throw in another editorial by LeAnne Carlson at Cook CPAs, and I had a rare trifecta in local public relations. For a one-man PR shop, that's a good days work. Here's the full version of Christopher Calnan's article in Friday's Austin edition:

SBIR idea riles some startups
Many say proposal to award funds to VC-backed cos. not fair
Austin Business Journal - by Christopher Calnan ABJ Staff

Local officials are worried that proposed changes to the Small Business Innovation Research, or SBIR, funding program — such as increasing fund access to venture capital firms — would put nascent Texas companies at a disadvantage.

Two versions of the bill in Congress are being worked on by a conference committee, but industry observers said fewer small businesses will win grants if the proposals are adopted. And since the changes would add companies that are VC-controlled to the mix, the small number of VC firms and VC-backed businesses in Central Texas could make it more difficult for local companies to compete for the funding.

“It’s no longer a small business program rather than an innovation economy program,” said Fred Patterson, president of the North Richland Hills-based SBIR Coach.

The SBIR program, which was created in 1982, administers a $2 billion federal fund that enables 11 federal agencies to target businesses with new technology. With the program scheduled to expire July 31, federal officials are tweaking the policies before reinstating it. Pundits said it’s not a question of whether such changes will be enacted by July 31, but rather to what extent.

Venture capital firms have been lobbying for their portfolio companies to share in the SBIR program since an administrative court ruling limited their participation in 2003.

Businesses that are owned 50 percent or more by a VC firm are barred from applying for SBIR grants. And that’s the way it should stay, said Gary Mardsen, CEO of Austin-based Trout Green Technologies Inc.

Trout Green, which was founded in 2002 and develops optics and sensors for the military, has received about 90 percent of its funding from the SBIR program — mostly through the U.S. Department of Defense, he said.

In addition to increasing the competition for grants, allowing VC-controlled companies to apply for SBIR grants would relegate small businesses to acting as shills for larger businesses and chill the creative climate for independent companies, Mardsen said.

The SBIR program “really is the engine of technology growth in this country,” he said. “To me, the stakes are high.”

The effort to restore eligibility to VC-backed companies comes after VC investments hit a 12-year low during the first quarter, with $3 billion invested nationally in 549 deals. Venture capital fundraising in the second quarter dropped to levels not seen since 2003, according to the National Venture Capital Association.

“A small business is a small business. It shouldn’t matter how you’re financed,” National Venture Capital Association President Mark Heesen said.

Texas companies have received about $650 million in SBIR grants during the last 10 years, making the Lone Star state the country’s seventh-largest recipient, said Erika Sumner, vice president of public policy for the Austin Chamber of Commerce.

The chamber supports loosening the limitations on VC-backed companies because it would improve the quality of the applications, Sumner said.

SBIR awards Phase 1 grants of up to $100,000 and Phase 2 grants of up to $750,000.

The House legislation calls for Phase 1 grants of $250,000 and Phase 2 grants of up to $2 million. The Senate version would increase Phase 1 grants to $150,000 and Phase 2 grants to $1 million. The Senate version also extends the program to 2023.

Patterson said the House version of the bill would be “very damaging” to the funding of small companies.

“The VC community is always trying to reduce risk and let the government take on the validation,” he said. “I don’t think that’s something we should promote. It just goes counter to what I believe is in the best interest of this country.”