03/16/2009 05:12 am ET Updated May 25, 2011

Venture Capitalists Succeed in Buying Legislation and Top Spot at SBA

The National Venture Capital Association (NVCA) and some of the wealthiest venture capitalists in America have set their sights on taking over federal small business contracting programs. The NVCA and its members have contributed millions of dollars to key members of Congress and President Barack Obama.

According to, the venture capital industry has contributed over $3.2 million to key members of Congress, including $1.2 million to President Obama alone. Millions more in contributions from individual venture capitalists are difficult if not impossible to track.

The NVCA and wealthy investors have blanketed the House and Senate small business committees with political contributions. Small business advocates have accused the NVCA of attempting to buy legislation that could divert billions of dollars in federal small business contracts to firms controlled by wealthy investors while destroying thousands of legitimate, hardworking small businesses in the process.

The NVCA and its members appear to be getting their monies worth from Congress. The House Committee on Small Business passed two bills H.R. 3567 and H.R. 5819, which would have allowed wealthy venture capitalists to move in on federal contracts designated for small businesses. The venture capitalists have focused their efforts on modifying the 55-year-old federal definition of a small business as "independently owned." The NVCA is pushing to have the Small Business Act modified to allow firms that are owned and controlled by wealthy investors to qualify as "independently owned."

The Bush White House, the Small Business Administration (SBA), the United States Chamber of Commerce, the American Small Business League (ASBL), the National Association of Government Contractors, the National Small Businesses Association, and hundreds of individual chambers of commerce across the country came out in opposition of both pro-venture capitalist bills.

The Chair of the Senate Committee on Small Business and Entrepreneurship, Senator John Kerry (D - MA) received more than $680,000 in contributions from venture capitalists. His committee passed a bill that would have allowed syndicates of wealthy venture capitalists to own nearly 100 percent of a firm and still be considered a small business under the Small Business Innovative Research (SBIR) program. Kerry's pro-venture capital bill was opposed by the SBIR community and did not receive a single endorsement from a major small business organization. Small business advocates point to Kerry's pro-venture capital bill as a means for billionaire investors to legally receive federal contracts designated for small businesses.

The NVCA may try to have its legislative agenda slipped into the economic stimulus plan at the last minute to avoid objections from Congressional opponents and small business advocates.

If the NVCA is successful, the volume of federal small business contracts awarded to legitimate small business in every state could drop dramatically. Venture capital controlled firms masquerading as legitimate small businesses would dominate small business contracting programs with every federal agency and prime contractors.

In addition to the NVCA's success with Congress, after receiving millions of dollars in contributions from the venture capital industry President Obama appointed mult-millionaire venture capitalist and heir to the multi-billion dollar Tootsie Roll fortune, Karen Mills, to head the SBA. Karen Mills herself contributed $28,500 to the Obama campaign during the 2008 election cycle.

The most recent U.S. Census Bureau statistics indicate that businesses with less than 20 employees account for 90 percent of all U.S. firms and are responsible for more than 97 percent of all new jobs in America.

Legislation and policies that would reduce the volume of federal contracts obtained by legitimate small businesses could be devastating to our national economy at a time when America is facing one of the most devastating economic catastrophes in its history.

The ASBL has mounted a national campaign to coordinate the efforts of small business groups and chambers of commerce around the country to fight the NVCA's campaign to take over federal small business contracting programs.