PETALUMA, Calif. - A new bill set to be voted on by the full Senate could be the beginning of the end for
millions of small businesses nationwide. The bill, S. 3362, passed through
the Senate Committee on Small Business and Entrepreneurship prior to the
congressional summer recess. Under the bill, firms that are owned up to
nearly 100 percent by some of the nation's wealthiest venture capitalists
would be allowed to compete head-to-head with legitimate small businesses
for federal small business contracts.

    As passed through committee, S. 3362 would allow firms majority owned
by venture capitalists to be awarded up to 18 percent of the Small Business
Innovation Research (SBIR) program budget for the National Institutes of
Health (NIH) and up to 8 percent for all other federal agencies. The law
would allow groups of venture capital firms, otherwise known as syndicates,
to own a majority interest in a small business, while still being
considered a small business for the purposes of participation in federal
contracting programs. Under S. 3362, no single venture capital operating
company would be allowed to own more than 49 percent of a small business
and qualify for small business programs.

    Small business advocates are concerned that the new legislation will
set a dangerous precedent for venture capital participation in all federal
programs designed for small businesses. Last year, the House of
Representatives passed H.R. 3567, which as originally written, would have
amended the Small Business Act to allow firms owned up to 51 percent by a
single venture capital firm to qualify as a small business. Small business
advocates see the "handwriting on the wall," as Congress may be moving to
amend the Small Business Act to allow firms that are owned and controlled
by some of the nation's wealthiest venture capitalists to participate in
federal small business contracting programs.

    For several years, venture capitalists have blanketed Congress with
millions of dollars in contributions in an effort to force legislators to
pass legislation to allow billionaire venture capitalists to participate in
federal small business contracting programs. Small business advocates and
owners are concerned that Democratic leaders in Congress are virtually
selling small business programs to the venture capital industry.

    "At a time when our nation is in one of the worst economic downturns in
its history, small businesses across America now more than ever need the
benefits of federal small business contracting programs," American Small
Business League President Lloyd Chapman said. "If S. 3362 becomes law, Bill
Gates, Warren Buffet and Donald Trump will all be able to participate in
federal small business programs and I can assure you that is not what
Congress had in mind when they passed the Small Business Act."