Venture Capital - Wednesday, July 9, 2008
VC-backed? No Federal Funds For You
The Journal covers the fight is brewing between VCs and some small businesses over the issue of VC-controlled companies' eligibility for federal aid. Companies majority owned by venture capitalists were barred from the program since 2003.
The Small Business Innovation Research program distributes billions in grants but only if you have not taken VC funds. Now some in congress have taken up the cause of VC-backed companies - could lobbyists be involved?
Here's one quote that makes the case for the change:
"That irks executives at venture-backed companies like Applied Genetic Technologies Corp., a small gene-therapy start-up in Alachua, Fla., that is working on cures for rare eye diseases and other ailments. Five years ago, the company had a small-business grant for more than $500,000 revoked because it had recently crossed the 51% VC-ownership threshold. The funding was for research into therapies for Pompe disease, a rare muscle disorder that is often fatal in children."
Read - WSJ
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Companies which are majority owned by third party investors should be allowed to receive government funding - but only if the government has the right to receive convertible debt - the same as the VC.
This government convertible debt should be collateralized by any IP the company may have.
Posted by: Elliott Dahan at July 31, 2008 07:59 PM
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