NY Times, Oct. 25, First Business Page
Representative Jason Altmire, a Pennsylvania Democrat, says he was just trying to help the small technology companies blossoming in his district, just north of Pittsburgh.
So when two of his constituents argued that small businesses should be able to qualify for federal research grants without being penalized for accepting venture capital money, he agreed to introduce legislation that would help them.
His bill, the Small Business Expansion Act of 2007, sailed through the Small Business Committee and then the full House of Representatives on a 325-to-73 vote last month. But the House adopted an important change as the measure came up for a vote — it specified that a small business could not give up an ownership stake of “50 percent or more” to a venture capital firm.
The amendment was meant to satisfy critics, among them officials of the Small Business Administration who argued that allowing venture capitalists to pour unlimited amounts of money into these fledgling businesses would fundamentally alter the concept of a small — and independent — business.
But as the legislation awaits Senate action, opponents argue that the amendment did not resolve their concerns. The S.B.A., they say, has long had discretion in determining whether venture capital’s support of a small business represents an investment or whether it crosses the line into control of the company. The legislation, they say, takes away that discretion by spelling out a particular percentage.
In addition, the critics say they fear that the bill will clear the way for venture capital firms to use their investment to take a controlling stake, giving them the potential to masquerade as small firms and tap into billions of dollars in federal research grants and contracts.
Is it possible to discuss this question intelligently without falling back on folklore, mythology, and stereotypes about small businesses -- or venture capitalists? I doubt it, but -- the merits of the legislation aside -- it's a good thing that Rep. Altmire appears to be trying.