After watching America’s small business innovation programs get gamed by foreign adversaries and corporate welfare recipients, I’ve seen enough. The Small Business Innovation Research program was designed to fund the next generation of American innovators; the engineers in garages across America, the defense tech startups, the genuine small businesses with breakthrough ideas. Instead, we’re subsidizing research that ends up in Beijing while a handful of “SBIR mills” pocket hundreds of millions in taxpayer dollars.
Sen. Joni Ernst’s (R-Iowa) recently released report exposes the stunning scope of this problem: six of the 25 program’s largest recipients had clear links to China yet still received nearly $180 million from the Pentagon in 2023 and 2024 and this is after due diligence systems were supposedly in place. Meanwhile, the top 20 “SBIR mills” — companies consuming the programs resources — have received $3.4 billion in Phase I and II contracts, often producing little more than policy white papers. Meanwhile genuine American, 1 a.m. in the garage startups struggle to get funding or wade through the bureaucracy.
This isn’t just waste — this is a national security crisis masquerading as an innovation development difficulty.
From my work with defense technology companies, I have witnessed this dysfunction firsthand. Foreign-backed entities arrive with sophisticated applications, complex education, prior knowledge and professional-grade documentation that’s completely disproportionate to their supposed “startup” status. They represent themselves as small American companies despite being connected to vast international networks, carefully structuring ownership just below detection thresholds.
Meanwhile, the actual American innovators — the four-person garage band of knuckle-bangers with genuine breakthroughs — face an impossible maze of paperwork and competition from entities with unlimited backing. The program has become the opposite of what Congress intended. It is corporate welfare for the connected and well-funded, instead of innovation fuel for emerging American businesses.
Beijing has weaponized America’s open innovation system against us. China announced a $138 billion government-backed venture fund in March 2025, specifically targeting quantum and AI startups, areas where Small Business Innovation Research funding has been substantial. The “state-led, enterprise-driven” model allows Chinese entities to bid strategically for U.S. intellectual property while American companies face market constraints.
The pattern of self-allowed subjugation of our technology is clear: foreign entities use American partners as nominal owners, develop technology with U.S. taxpayer funding, then commercialize innovations overseas. We are literally funding our own technological displacement.
Ernst’s Innovate Act addresses these problems with targeted reforms that the program desperately needs.
It ends corporate welfare. The bill establishes lifetime caps on how much Small Business Innovation Research program funding each company, including affiliates and subsidiaries, can receive. No more companies creating new limited liability corporations every few years to circumvent limits while genuine startups get frozen out.
It also stops foreign exploitation. The legislation creates consistent due diligence standards across all federal agencies, requires comprehensive disclosure of funding sources and decision-making authority, and implements a 10-year lookback period to catch historical relationships that current rules miss.
It also protects American intellectual property. Perhaps most importantly, the bill includes 10-year clawback provisions for intellectual property sales to countries of concern. If federally funded research ends up benefiting adversaries, taxpayers can recover their investment, with penalties.
It provides real accountability. The reforms focus the program’s funding on companies actually producing commercially viable technology for American markets, not endless research that never leaves the lab.
This isn’t partisan politics, it’s basic competence. When China is spending $55 billion on research and development in 2025 while we’re letting our innovation programs get exploited, every month of delay costs America competitive advantage.
The Small Business Innovation Research and Small Business Technology Transfer programs expire on Sept. 30. Congress has a narrow window to implement these critical reforms before reauthorization becomes more of a crisis than our innovation units. Ernst is actively negotiating bipartisan support, but time is running short to get the Innovate Act passed.
We don’t need another study or another hearing. Ernst’s report provides the evidence. The Innovate Act provides a solution. What we need is congressional action before the programs expire in five weeks.
American innovation built the modern world, but only when we funded actual Americans.
The Innovate Act ensures taxpayer dollars fuel American job creation, American commercialization and American competitive advantage.
It’s time to stop funding China’s Golden Age and start securing our own.
Tyler Beaver is principal at Executive Strategies, a Washington-based firm working with defense technology companies and small businesses navigating federal programs.
