THE BLOG

Venture Capitalists Try to Buy Into Small Business Contracting Programs with Millions in Campaign Contributions

10/11/2008 05:12 am ET | Updated May 25, 2011

A new bill set to be voted on by the full Senate could be the beginning of the end for millions of small businesses nationwide. The bill, S. 3362, passed through the Senate Committee on Small Business and Entrepreneurship prior to the congressional summer recess. Under the bill, firms that are owned up to nearly 100 percent by some of the nation's wealthiest venture capitalists would be allowed to compete head-to-head with legitimate small businesses for federal small business contracts.

As passed through committee, S. 3362 would allow firms majority owned by venture capitalists to be awarded up to 18 percent of the Small Business Innovation Research (SBIR) program budget for the National Institutes of Health (NIH) and up to 8 percent for all other federal agencies. The law would allow groups of venture capital firms, otherwise known as syndicates, to own a majority interest in a small business, while still being considered a small business for the purposes of participation in federal contracting programs. Under S. 3362, no single venture capital operating company would be allowed to own more than 49 percent of a small business and qualify for small business programs.

Small business advocates are concerned that the new legislation will set a dangerous precedent for venture capital participation in all federal programs designed for small businesses. Last year, the House of Representatives passed H.R. 3567, which as originally written, would have amended the Small Business Act to allow firms owned up to 51 percent by a single venture capital firm to qualify as a small business. Small business advocates see the "handwriting on the wall," as Congress may be moving to amend the Small Business Act to allow firms that are owned and controlled by some of the nation's wealthiest venture capitalists to participate in federal small business contracting programs.

For several years, venture capitalists have blanketed Congress with millions of dollars in contributions in an effort to force legislators to pass legislation to allow billionaire venture capitalists to participate in federal small business contracting programs. Small business advocates and owners are concerned that Democratic leaders in Congress are virtually selling small business programs to the venture capital industry.

At a time when our nation is in one of the worst economic downturns in its history, small businesses across America now more than ever need the benefits of federal small business contracting programs. If S. 3362 becomes law, Bill Gates, Warren Buffet and Donald Trump will all be able to participate in federal small business programs and I can assure you that is not what Congress had in mind when they passed the Small Business Act.