I don't have much time to give you an extensive blog about the issue but I did want to bring this to your attention. Here's the nutshell.
The NIH's SBIR (Small Business Innovation Research Program) funding mechanism has been an important one for small businesses who are not big/mature/saavy/desperate-enough to land venture capital funding, have very limited access to other NIH funding, and have tapped out the available angel/seed/friends_n_family resources at their disposal.
Since 2003, one of the hallmarks of the rather small SBIR funding pot ($2.2 billion a year) has been that it was not available to companies that are majority-backed by venture capital. Before 2003, venture-backed firms were allowed to participate in the SBIR program.
The program is scheduled to expire next month and so is up for renewal. The House committee responsible for the program has proposed that the VC-restriction be removed thus re-opening the program to a whole slew of companies previously ineligible. The House just passed this bill. A senate version of the bill tries to reach a compromise by limiting the amount available to venture-backed firms.
Whatever your opinion on the judiciousness of this move, there is no doubt that opening up eligibility to the program will dilute the available funding.
Here is a link to yesterday's article on the subject in the Washington Post.
Fellow blogger Steven S. Clark (BioScience Biz) has a just posted his most recent update and opinion on the matter that is well worth the read.