Are Venture Capitalists Small Business Owners?

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Do today's cash-wielding, yacht-navigating venture capitalists qualify as small business owners? Can a startup that's received tens of millions of dollars in venture capital still be considered a small business? Those are among the questions being posed by critics of the Small Business Investment Expansion Act, a bill that's currently pending in the House of Representatives.

The act would allow companies with venture firms as their majority owners to qualify as small businesses under federal contracting standards. In other words, forget Mom & Pop startups -- the principals of large venture capital funds could soon become the prime beneficiaries of small business contracts.

Proponents of the bill argue that capital intensive industries like biotech and need the backing of well-funded VC firms to get started and keep pace with global competitors. Critics — like the Small Business Administration, for one -- argue that small business set-asides were never intended to benefit venture firms, whose portfolio companies often employ hundreds of workers. There are a few interesting takes on the subject here and here.

After years of debate over the definition of a small business in federal contracting, this act seems to have opened the door for more controversy. What do you think? Should venture-backed companies be eligible for small business contracts from the government? How do you define a small business?