As head of The Investment Division of the U.S. Small Business Administration, I am proud to present the results of the Small Business Investment Company Program for Fiscal Year 2012 in our Annual Report . We have achieved record success for a third year in a row, providing the capital small businesses need to fuel their growth and create jobs. This Annual Report reflects our commitment to the continued growth of the SBIC Program.
With the economy still in recovery, SBA’s mission of supporting small businesses and the Americans they employ has never been more critical. Small businesses are responsible for creating over 60% of the country’s net new private sector jobs each year. Yet despite their importance to the health of the overall economy, many small businesses struggle to access the capital they need to expand operations, build new facilities and hire new staff.
In FY 2012, the SBIC Program channeled more than $3 billion to over 1,000 small businesses. And we estimate these financings created or sustained over 65,000 jobs. We achieved these results at zero cost to the taxpayers, thanks to the public-private partnership at the program’s core. Even in an era of tightening budgets, SBA is able to efficiently harness the talent of professional investment managers to expand the pool of capital available at the smaller-end of the market.
Critical to the success of the program is attracting private capital to the funds. The Annual Report analyzes in detail the financial returns to private investors participating in the program and found that these returns compare very favorably to the private equity industry as a whole, and demonstrate that private investors can significantly improve their return by accessing SBA leverage.
As we look to the future, we are investing heavily in improved data management systems, both to enhance our own underwriting processes, but also to provide current and future program participants additional data for more informed investment decisions.
In line with the SBA’s agency-wide commitment to transparency in government, the report was prepared with U.S. taxpayers in mind. We hope all of our stakeholders find this SBIC Program Annual Report useful in evaluating the program’s past, but also in helping to shape its future.
Today, SBA welcomed Adam Becker, Clay Johnson and Jed Wood as part of the Presidential Innovation Fellows program which pairs innovators from the private sector, non-profits, or academia with innovators in government to collaborate on game-changing solutions.
SBA’s Presidential Innovation Fellows will specifically work on the RFP-EZ program, which will create a platform that makes it easier for innovative small businesses to sell to the federal government. This program also helps enable agencies to quickly source low-cost, high-impact information technology solutions.
Often times, we hear from companies that the federal government is too difficult or too complicated to work with, especially when it comes to doing business. The SBA’s Presidential Innovation Fellows will work to streamline this process through the RFP-EZ program. The end result is better and less expensive products and services for the federal government, saving taxpayer dollars and easier access to the government marketplace for high-growth start-ups, helping to fuel job growth throughout the country.
Below is more information about SBA’s Presidential Innovation Fellows:
Adam Becker is a software developer and entrepreneur. He co-founded and served as Chief Technology Officer of a civic-oriented startup called GovHub that aims to facilitate communication between citizens and their elected officials in local government. Previously, Adam built a wealth of experience in different web development projects, with his very first effort being a website for his junior-high punk band.
Clay Johnson's career at the intersection of government and technology began as the Director of Sunlight Labs at the Sunlight Foundation, where he built a community of 2,000 developers, designers and technologists dedicated to helping government be more open and transparent with its stakeholders. After Sunlight, Clay worked as the director of Engagement at Expert Labs where he worked with federal agencies to help embrace and use social media. Recently, Clay wrote the bestselling book The Information Diet, which explores the parallels between our media and food consumption. Clay was named the Google/O’Reilly Open Source Organizer of the year in 2009, was one of Federal Computing Week’s Fed 100 in 2010, and won the CampaignTech Innovator award in 2011.
Jed Wood is an interaction designer, developer, and entrepreneur. Having built experience as a usability expert, he wandered into geekier pastures of writing actual code. He has spent the past decade bridging the gap between design and programming by creating rapid prototypes and production applications. Jed co-founded Lime & Chile, building three web applications that were later acquired. Most recently, he was part of the Labs team at Gravity Tank.
Follow SBA’s Presidential Innovation Fellows’ progress on the RFP-EZ program via Twitter.
Remember when Congress voted to reauthorize the Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) programs and the President signed the bill into law back in December, 2011? Implementing laws however, and doing it right, often takes just a little more time.
The programs are important to small businesses, each year providing more than $2 billion of R&D funding to innovative small business across a broad range of technologies. After a long series of temporary reauthorizations, this reauthorization will last six years, much to the appreciation of all parties involved.
Passage of the reauthorization made it necessary for SBA to modify the governing body of rules for SBIR/STTR before the changes could actually take effect, which involves amending the SBIR and STTR policy directives that provide the specifics and guidance to federal agencies on how to administer the program.
We are pleased to report that on August 6th we will publish in The Federal Register the changes to the SBIR and STTR policy directives to implement the changes made by Congress in the reauthorization. The pre-publication documents can be downloaded here:
The changes to the policy directives are significant. Key changes include:
- Increase in the set asides for the SBIR program, increasing over time from 2.5 percent of extramural R&D to 3.2 percent for SBIR, and from .3 percent to .45 percent for STTR
- Requirements for more streamlining and simplification of the program
- Caps on the amounts of individual awards
- More support for commercialization efforts and enhanced provisions for Phase III transitions
- Greater reporting from agencies to increase accountability in the program
- Stronger measures to prevent fraud, waste, and abuse in the program
- Administrative funding for initiatives at agencies to support all of the above efforts
These changes are effective with the publication of the policy directive, although SBA will continue to consider comments submitted by interested parties. That makes the policy directives slightly different from the more standard rules and regulations associated with new laws or reauthorizations. In most cases the process of rulemaking, governed by the Administrative Procedures Act, leads agencies to publish proposed rules and put them out for public comment. After the public comment period, the executive branch makes changes, and then publishes a final set of rules. The rules take effect after those final rules are published.
In the case of the policy directives, they take effect once they are published. In the case of this reauthorization, the deadlines mandated by Congress did not allow time for public comment before the drafting of the directives began. But public input is still very important, so SBA has decided to run a 60 day public comment period, which will end on October 5, 2012.
The critical advantage of this approach is that key provisions can help small businesses get started faster in their quest for funding under the programs.
To provide fair opportunity and transparency for the comment period, SBA plans to hold two webinars on the following dates:
Thursday, August 23, 2012 at 2:00 p.m. EDT
Wednesday, August 29, 2012 at 2:00 p.m. EDT
If you are interested in attending one of the webinars, please pre-register by sending an e-mail to firstname.lastname@example.org. You must include the date of the webinar for which you wish to participate, the participant's name, title, organization affiliation, address, telephone number, and email address. An email containing the call details will be sent out to those who registered prior to the webinar. Questions on the SBIR and STTR policy directives may be submitted to SBIRComments@sba.gov to be answered during the Q&A portion of the webinar.
The statute itself was over 100 pages long, and as a result, the required changes in the policy directives are long as well. To make it easier for small businesses to digest, we’ve done a few things:
- A synopsis of Key Changes appears here http://www.sba.gov/about-sba-info/174308
- Frequently Asked Questions (FAQs) are posted here http://www.sba.gov/about-sba-info/174306 and will be updated as more questions are added from commenters.
- In the preambles to the policy directive notices, we attempted to give the context for the key changes, discuss alternatives considered, and provide further opportunity for feedback and improvement.
It is important to highlight that while the directives are effective at the time of publication, not everything is implemented immediately. The summary of key changes contains an implementation calendar; however the exact timing of efforts may vary by individual agency.
One of SBA’s key roles going forward will be providing oversight on the implementation and reporting back to Congress and the public on the progress made.
SBA has just concluded the public comment period for the size rules on the SBIR program. As we had hoped, the input and comments we received on the rules were robust and included a wide range of opinions. As we now begin the process of digesting the comments and evaluating how to change the proposed rules, I’d like to take this opportunity to let people know where we go from here.
Here are four things you should know about the proposed SBIR size rules:
SBA was given a tight, congressionally mandated timeline. Congress gave SBA aggressive deadlines to draft the rules and get them out to the public. And we had significant work to do to turn the statute into detailed, practicable working regulations. In order to meet these deadlines, SBA took the approach of drafting the rules and as quickly as possible putting them out for public comment in order to get reaction and input that will shape what the final rules look like.
SBA wanted to quickly get proposed rules out for comment, and then use feedback to shape the final rule. From Day 1, we made it clear that public input is critical, and we proactively encouraged more than 10,000 small businesses to submit comments on the rules. We received over 250 comments on the proposed rules. In addition, we had four roundtables and webinars with participation of more than 100 small businesses and other stakeholders. This input was critical and extremely valuable, and I want to thank everyone who took the time to participate and voice their opinion. The feedback we received was passionate and diverse. Now we are going to make sure that the comments we received inform and shape the final rules that we develop.
SBA is dedicated to streamlining and simplifying the SBIR program. The existing rules are complex. Streamlining and simplifying government programs, especially ones touching small business is a priority across the Administration. While you might need a Ph.D. to do the research, you shouldn’t need a Ph.D. in grant writing or federal regulations to apply. Streamlining and simplifying is a priority for all aspects of the program, not just the size rules.
SBA is committed to the SBIR program. Over the past few years, we have committed greater senior management attention, and more resources to the SBIR program than ever before. We relaunched SBIR.gov and made significant improvements to Tech Net. We created the SBIR Hall of Fame to recognize firms with extraordinary success in research, innovation, and commercialization and restarted the Tibbetts Award program in 2011. We are also delivering on our commitment to get the size rules and policy directives drafted quickly.
Our task now is to fully digest all of the comments, and to use this feedback to modify the rules. After we make changes to the rules, we will seek review and substantive input from all of the participating agencies, as well as other parts of the executive branch. Our goal is to meet the statutory deadline of issuing final rules by the end of December 2012.
The SBIR and STTR policy Directives will come out in the coming days. We look forward to a comparable amount of input and comments.