Encouraging Small Business Innovation Act

Mr. Speaker, I rise in support of H.R. 206, the Encouraging Small Business Innovation Act.

The Small Business Innovation Research program, or SBIR, and the Small Business Technology Transfer program, or STTR, were established to spur innovation and job creation throughout the country. Since their inception, these programs have awarded over $40 billion to small innovative firms, including $34 million in California's 48th District. Together, these programs are some of the Federal Government's largest technology development programs.

For many research companies in my district and around the country, these two programs serve as a gateway to the Federal contracting field. The continued success of these programs depends on three primary factors:

First, the program must remain highly competitive;

Second, applicants and awardees must have access to financing of all types, including venture capital;

Third, we must ensure these products make it to the market.

But the lack of competitiveness and diversity continue to raise questions, with the participation of women-owned and minority-owned firms in these programs declining.

According to the Small Business Administration's annual report for fiscal year 2013, only 15 percent of total award dollars went to women- owned small businesses, and only 10 percent to socially or economically disadvantaged small and HUBZone-certified small businesses.

This bill addresses both issues by requiring participating agencies to use part of their SBIR allocation to conduct outreach to minorities and underrepresented States by removing the waiver of this requirement from statute.

To address the need for outside financing, this bill includes small business investment companies in the SBIR and STTR programs as possible investors and increases the capital levels that can be invested by private investors.

Finally, H.R. 206 also provides an avenue for more experienced SBIR and STTR companies to mentor newer companies. It is clear that the SBIR and STTR programs have promoted our shared goal of fostering innovation, but we must continue to provide vigilant oversight of these programs to ensure their maximum effectiveness.

Mr. Speaker, I include in the Record a letter of support from the Small Business Investor Alliance.

Small Business Investor Alliance,

January 14, 2019.

Hon. Harley Rouda,

House of Representatives,

Washington, DC.

Dear Representative Rouda: Since 1958, the Small Business

Investor Alliance (SBIA) has been the voice of Small Business

Investment Companies (SBICs). We write in support of H.R.

206, the Encouraging Small Business Innovation Act, which is

being considered by the House of Representatives today. The

bill is a simple, modest improvement to the Small Business

Investment Act of 1958 that would encourage more investment

in job-creating American small businesses.

SBICs are highly-regulated private funds that invest

exclusively in domestic small businesses, with at least 25%

of their investments in even smaller enterprises. The nearly

$28 billion SBIC debenture program is a market-driven

platform that serves an important public purpose of

facilitating private investment in domestic small businesses.

After raising private capital and successfully navigating a

rigorous licensing process, a licensed SBIC is permitted to

access a line of credit (leverage) to increase the amount of

capital to be invested in domestic small businesses.

Generally, the ratio of leverage to private capital is a

little less than 2:1, with some strategies utilizing an even

lower leverage ratio. With the private capital in a first-

loss position, a modest leverage ratio, and the benefits of

the portfolio effect, the program operates by law at zero

subsidy, further exhibiting effective protection for the

American taxpayer. As a testament to the underlying structure

of the SBIC program, it is one of the few government programs

that was able to continue to operate at zero subsidy through

the Great Recession.

H.R. 206 seeks to encourage more investment in Small

Business Innovation Research (SBIR) and Small Business

Technology Transfer (STTR) companies. The stated mission of

the SBIR and STTR programs is to ``support scientific

excellence and technological innovation through the

investment of Federal research funds in critical American

priorities to build a strong national economy.'' Both

programs seek to increase private sector commercialization of

innovations arising out of federal research and development.

H.R. 206 would include SBICs in SBIR and STTR and would allow

SBICs to exclude a percentage of their SBIR and STTR

investments from their leverage calculation, with the goal of

spurring more investment in technology and innovation.

H.R 206 would make thoughtful improvements to the SBIC

program and thereby help domestic small businesses. SBIA

thanks you for your leadership on this legislation and for

your commitment to expanding economic opportunity in America.

We look forward to working with you during the 116th Congress

to continue strengthening the SBIC program.

Sincerely,

Brett Palmer,

President, Small Business Investor Alliance.

Mr. Speaker, in closing, I want to thank Chairwoman Velazquez for her support and leadership of innovative small business. I also want to thank Representative Espaillat for his work on this issue in the last Congress, and I urge Members to support this legislation.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 206) to amend the small business laws to create certain requirements with respect to the SBIR and STTR program, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the measure under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 206, the Encouraging Small Business Innovation Act of 2019. For almost 40 years, our Nation has experienced increased innovation and job creation through the Small Business Innovation Research program and the Small Business Technology Transfer program.

As a direct result of these programs, breakthroughs have been made in a wide range of sectors, from agriculture,

to energy, and most notably, healthcare. Research conducted by SBIR and STTR awardees has helped address our country's most important technological and research-based challenges while generating tremendous economic growth and employment opportunities.

These programs encourage small firms, where much of today's cutting- edge ideas are born, to explore their potential while also providing the incentive to profit from its commercialization.

Yet, as with any program, improvements can be made to further strengthen the program and its impact on our economy.

By incentivizing more experienced SBIR and STTR firms to mentor newer companies and rewarding mentors through a past-performance rating increase, Congressman Rouda's legislation, H.R. 206, positively promotes integrating these program participants into the larger Federal marketplace.

Just as we are concerned with the broader ability of SBIR and STTR firms to compete more broadly, it is important to ensure the participation of all businesses within the program. Just like with geography, when it comes to demographics, it is important that the SBIR and STTR are serving all entrepreneurs.

This measure requires participating agencies to use part of their SBIR allocation to conduct outreach to minorities and underrepresented States by removing the waiver of this requirement from the statute. Doing so, guarantees that a wide range of ideas are provided the opportunity to thrive.

Finally, H.R. 206 requires an annual summit of these agencies to share best practices to improve data collection and streamline processes across the programs. As a result, I believe this bill is crucial to modernizing the program and preserving our Nation's competitiveness.

Mr. Speaker, I urge Members to support this legislation, and I reserve the balance of my time.

Mr. Speaker, I yield 3 minutes to the gentleman from California (Mr. Rouda), who is the author of this bill.

Mr. Speaker, I yield myself the balance of my time to close.

Mr. Speaker, I want to thank the gentleman from California (Mr. Rouda) for introducing today's bill to increase the assistance to SBIR and STTR firms.

Since their inception, over $40 billion in awards have been made, proving their success as a funding source for small innovative firms.

As we have done before, we must ensure the longevity of the program by guaranteeing it reflects modern R&D practices. It must also optimize participation through mentorship incentives and Phase 3 awards, in addition to including small business investment companies in the SBIR and STTR programs to stimulate investment.

This bill achieves this goal and guarantees the program meets the needs of our next generation of SBIR and STTR firms. H.R. 206 makes certain that the program remains a catalyst for not just innovation, but also the economic empowerment and job creation that is associated with these scientific advances.

Mr. Speaker, I urge Members to support this bill, and I yield back the balance of my time.

Mr. Speaker, I want to thank the new Chair of the House Small Business Committee Congresswoman Nydia Velazquez for her leadership on this issue and for working with me during the 115th Congress when the Encouraging Small Business Innovation Act first passed in the House. I also want to congratulate Congressman Rouda on his success in moving this issue forward in the 116th Congress and thank him for his commitment to spur innovation and address the issue of underrepresentation of minorities in the small business community.

The Encouraging Small Business Innovation Act is thoughtful and constructive legislation. Even in this modern day, we have heard from many minority and women-owned small businesses that they continue to face institutional challenges to growing their businesses. A 2013 report commissioned by the Small Business Administration found that women-owned small businesses do not have equal access to capital from the private sector as compared to their male peers. Furthermore, the Small Business Administration's own Office of Advocacy has said that, ``There are fewer minority-owned businesses representing high-patenting industries than in all industries.''

Through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, the Small Business Administration works with partners in eleven federal agencies ranging from the Department of Agriculture to NASA to support small businesses, especially those that are owned by members of identified disadvantaged communities. While these programs have made some headway in encouraging innovation and entrepreneurship among women and many minority communities, this vital investment can only be used for research and development. There is no consideration given for testing and evaluation, an extremely resource-heavy task for small businesses. What good is a product or a method when you don't know if it works effectively or efficiently? The Small Business Innovation Act addresses this problem by including ``testing'' and ``evaluation'' among the activities for which SBIR and STTR applicants can seek funding. This will empower more underrepresented entrepreneurs to develop new products, expand upon new ideas, and gain respected external validators.

The Small Business Innovation Act also includes a number of other provisions that I believe will significantly help expand entrepreneurship in underserved communities. For example, the bill incentivizes mentorship with previous SBIR- and STTR-recipient companies that have found success in the programs to impart their knowledge and share their experience. It also welcomes investment by Small Business Investment Companies into SBIR and STTR projects, which will increase the investment of capital from more diverse streams of funding. The bill also prioritizes data collection and reporting, ensuring that evaluation of the program leads to increased efficiency and additional participation. Finally, and most importantly, the bill makes explicit commitments to increasing the participation of underserved populations in the small business community.

So again, I thank my colleague, Mr. Rouda, and Chairwoman Velazquez for taking up this important cause and I congratulate them both on a job well done.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 206, the Encouraging Small Business Innovation Act.

I want to commend Mr. Rouda on his work to improve the Small Business Innovation Research program and the Small Business Technology Transfer program, or SBIR and STTR as they are more commonly known.

These critical programs provide exceptionally innovative small firms with the kick-start they need to develop the next big thing and turn their companies from small businesses into large ones. These innovations have saved lives on the battlefield, in the hospital room, and made immeasurable advancements in communication technology and countless other improvements to technologies we all use on a daily basis.

Among other things, this straightforward bill updates and harmonizes the definition of research and development in the Small Business Act, providing an avenue for more experienced SBIR companies to mentor newer companies, and improves oversight.

Furthermore, this bill encourages collaboration and sharing of best practices among Federal agencies to enhance the efficacy of the SBIR and STTR programs. Federal agencies housing these programs would be required to meet annually to discuss potential data collection and reporting process improvements, ideas to increase small business participation, and will be required to update Congress on the outcomes and recommendations arising from these meetings.

Mr. Speaker, I urge my colleagues to support this legislation, and I reserve the balance of my time.

Mr. Speaker, I yield myself the balance of my time to close.

Mr. Speaker, the SBIR and STTR programs are often the first place small innovative companies come to do business with the Federal Government. They are widely popular here on Capitol Hill, in the administration, and in the industrial base as well. They provide that initial kick-start of funding for ideas that could change the world, literally, for the better.

Mr. Speaker, the reforms contained in H.R. 206 make it easier for those ideas to become a reality. Therefore, I urge my colleagues to support this bipartisan legislation, and I yield back the balance of my time.

Madam Speaker, I want to state my support for H.R. 206, the Encouraging Small Business Innovators Act and H.R. 246, the Stimulating Innovation through Procurement Act of 2019. I thank Chairwoman Velazquez, Congressman Rouda, Congresswoman Finkenauer and other colleagues on both committees for their work to advance these bills to the House Floor.

Through competitive research and development grants and contracts, the SBIR and STTR programs provide opportunities for innovative small businesses to participate in the federal research and development enterprise. The Federal R&D enterprise supports innovation by funding the best and brightest at our great research institutions, our national labs, and small businesses across all sectors of our economy. The SBIR and STTR programs have proven to be an important part of that investment. Over the years, the Science Committee has supported strong funding as well as improvements in policy and oversight for the SBIR and STTR programs. Last Congress, several important pilot programs were extended and other updates were made in law that help make the programs more effective and efficient. These include supporting more early-state funding for small business innovators, providing funding for important agency outreach and program administration, and streamlining reporting requirements.

The Science Committee considered several of the provisions in H.R. 246 in the 115th Congress. As these two bills advance, the Committee looks forward to working with our colleagues on the Small Business Committee to review and adopt policy changes in the SBIR and STTR programs that continue to strengthen the partnership between innovative small business and our federal research agencies. Further, I hope we will continue working together to ensure that the agencies prioritize outreach and other activities to increase the participation of women and minority-owned innovative small businesses in the SBIR and STTR programs.

I urge my colleagues to support H.R. 206 and H.R. 246.