Billion Dollar Venture Capital Firms to Receive Government Small Business Contracts Under New Bill

PETALUMA, CA--(Marketwire - April 14, 2008) - The following is a statement from the American Small Business League:

A new bill set to come out of the House Committee on Small Business will allow the largest venture capital firms in the nation to participate in federal programs designed to assist small businesses.

On its surface, the bill appears to be designed to expand the federal government's Small Business Innovation Research program (SBIR). However, opponents believe the actual purpose of the bill is to create a new loophole that will allow multi-billion dollar venture capital firms to receive billions of dollars in federal small business contracts every year.

Critics of the new bill say it will essentially repeal the Small Business Act and could have devastating consequences for thousands of small businesses across the country. The key provision of the bill will amend the Small Business Act by changing the definition of a small business as "independently owned and operated" to include firms owned up to 49.9 percent by a venture capital firm.

Current federal law requires that 23 percent or approximately $135 billion a year in federal contracts and subcontracts be awarded to small businesses. Small business advocates are concerned that the bill will allow a small number of firms backed by billionaire investors to dominate federal small business contracting programs, and force thousands of legitimate small businesses out of business in every state.

This will be the second time in less than a year that the House Committee on Small Business chaired by Congresswoman Nydia M. Velázquez (D - NY) has proposed legislation that could allow the nation's wealthiest venture capital firms to participate in federal small business contracting programs. In September of 2007, Rep. Velázquez and the House Committee on Small Business passed H.R. 3567, the Small Business Investment Expansion Act of 2007, through the house in record time.

In its original form, H.R. 3567 would have allowed venture capital firms to own a controlling interest in a firm, while still allowing those firms to participate in federal small business programs. H.R. 3567 appears to have stalled out in the Senate after dozens of small business groups around the country voiced strong opposition to it.

The American Small Business League led the fight against H.R. 3567 and strongly opposed Velázquez's efforts to allow venture capital firms to participate in federal small business programs. The ASBL has launched a national campaign to defeat this new bill.

"This is the second time Rep. Velázquez has tried to create a loophole that will allow billionaire venture capitalists to steal federal small business contracts," said Lloyd Chapman, President of the ASBL. "Velázquez is masquerading as a small business advocate while taking contributions from the National Venture Capital Association and then trying to pass legislation to give them billions of dollars in federal small business contracts. When congress passed the Small Business Act, I guarantee you that it was not their intention to allow billion dollar venture capital firms to receive federal small business contracts. This is a prime example of what the American people hate about Congress and the special interest groups. Representative Velázquez and the billion dollar venture capital firms that think they can buy legislation to steal federal small business contracts from America's 26 million small businesses are in for a fight."

Contact Information: Contact: Christopher Gunn Communications Director American Small Business League (707) 789-9575