Comment on FR Doc # 2012-11586

As development moves forward in time, costs escalate, and funding sources change. Initially, government funds early R&D, then angels might get involved, then VCs, then the public markets. Each successive investor class in a growth company’s history provides approximately 10x the capital of the previous, e.g. $100k from SBIR can accomplish an early proof-of-concept, $1M from angel investors can get to significant development milestones, $10M from VCs can get to market, and $100M from the public markets can fuel geographic and product line growth. Moving backward along this continuum is nonsense. Given a limited pool of funding, SBA’s goal must be to maximize the impact of these funds. There are currently hundreds of VC-backed firms that are barely operating, the so-called “walking dead”. Some have had >$100M of cash invested and, in the case of therapeutic developers, have nothing in the clinic. How much does a $100k award move their needle? Not one bit. But that won’t stop them from hiring a team of grant writers to try to keep the lights on for another year while they attempt to minimize their losses and liquidate. Opening the SBIR program to such firms creates a perverse economic incentive for the walking dead, and decreases the impact of the SBIR program by reducing funding to firms where it could have a real impact. Whether firms are owned by single or syndicates of financial investors is largely irrelevant. Compare the walking dead to a 6-person company with an idea and some promising data: $100k will allow them to get to proof-of-principle and dramatically increase the value of their company. Of course on paper, they’ll have a tough time competing against professional grant writers backed by a 100-person company and $100M of invested capital. If study sections were perfect, they could see through grantsmanship and focus entirely on the value of the idea. Unfortunately, reviewers regularly assume that VCs always make good choices. Study sections aren’t perfect