On December 27, 2012, the US Small Business Administration (SBA) published a final rule to amend regulations governing eligibility for the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs and to implement provisions of the SBIR/STTR Reauthorization Act of 2011. The Reauthorization was included in the FY12 National Defense Authorization Act (NDAA), which reauthorized the SBIR Program for six years and now allows small firms that are majority-owned by venture capital operating companies (VCOCs), hedge funds, or private equity firms to compete for SBIR grants.
This advisory briefly summarizes the most important changes to the SBIR eligibility rules and discusses how investments in or acquisitions of SBIR-funded companies may be affected.
Final Rules – What Will Change?
The final rule implementing the SBIR/STTR Reauthorization is effective January 28, 2013. When the final rule is effective and integrated into the federal agency grant cycle process, multiple VCOCs, hedge funds, and private equity firms will be able to take majority positions in SBIR applicants, provided that no single firm owns a majority interest in the SBIR applicant. As described below, so long as each investment firm owns and controls only a minority share of voting stock under the minority ownership rule, the investor will be able to include the SBIR applicant in its portfolio without aggregating the employees of its other portfolio companies with the SBIR applicant’s employees for purposes of the SBIR affiliation determination.
To read the full, original article click on this link: Small Business Administration Final SBIR Rules
