A bill restoring crucial federal funding to defense startups in Southern California is on its way to the president's desk after making it through Congress on Tuesday.

The Small Business Innovation and Economic Security Act was passed following a months-long impasse over funding the Small Business Innovation Research (SBIR), the Small Business Technology Transfer (STTR) and related programs.

The dispute imperiled funding that was deemed essential for Southern California's resurgent defense and aerospace sectors.

The bipartisan bill, which extends the programs through 2031, was passed by the Senate this month and, after delays due to the Iran war, was approved by the House on Tuesday.

President Trump has vowed to not sign any legislation until Congress approves the SAVE America Act, which would require proof of citizenship to vote — a measure strongly opposed by Democrats.

However, the SBIR reauthorization bill can become law before the end of the month without his signature. The White House did not respond to a request for comment.

The SBA programs provide more than $4 billion in seed funding to private startups across various industries that provide valuable services to the government and public, stimulate the economy and help maintain the country's competitive edge.

The money is awarded by multiple agencies, including the Health and Human Services and Energy departments and NASA, with the military distributing the largest portion. The SBA funding ran out Sept. 30 as lawmakers clashed over proposed reforms.

The money has helped launch defense and aerospace startups across Southern California founded by SpaceX alumni and other entrepreneurs.

In 2024, 71 California companies received $173 million of the SBA funding awarded by SpaceWERX, an El Segundo-based arm of the U.S. Space Force that supports defense startups, as well as aerospace startups that also have defense businesses.

Local SBA funding recipients include Costa Mesa autonomous weapons maker Anduril Industries, now valued at more than $30 billion, and satellite platform manufacturers K2 Space in Torrance and Apex Space in Los Angeles.

Sen. Joni Ernst (R-Iowa), chair of the Senate Committee on Small Business and Entrepreneurship, held up reauthorizing the program over concerns that some startups had become too reliant on the money instead of developing viable commercial businesses. She proposed a bill with a $75-million lifetime funding cap for individual companies.

Sen. Ed Markey (D-Mass.), the committee's ranking Democrat, opposed her bill, contending it would crimp innovation. Several companies in Massachusetts also would have been hit hard by the funding limits.

The compromise bill includes no lifetime caps but requires departments to set limits on how many times companies can apply each year for the SBA funding, prioritizing startups new to the programs.

The bill also establishes a Strategic Breakthrough Allocation program that awards up to $30 million in SBA funding to a single company provided it can bring in matching funding.

It is intended to assist startups to become commercially viable after they run through their SBIR or STTR funding, both of which are intended to fund feasibility studies and prototypes. (STTR also funding requires a partnership with a research institution.)

Other provisions in the bill include new due diligence standards to prevent any tech from falling into the hands of adversaries such as China — another concern of Ernst.

"After working across the aisle, these necessary reforms will strengthen the integrity of America's seed fund while unlocking new innovation," Ernst said in a statement. "Now, with these commonsense changes, America's seed fund can serve our truly small businesses."

Markey lauded the bipartisan agreement but said he was disappointed at the "unnecessary suffering" caused by the programs' longest ever shutdown.

"This much-improved re-authorization has come a long way from early proposals that would have immediately kicked dozens of U.S. small businesses out of the programs and severely limited the ability of hundreds more to grow and thrive," he said in a statement.

David Rothzeid, principal at Shield Capital, a Silicon Valley venture capital firm that invested in Apex Space, said the bill would promote innovation across the government.

"It's a recognition of the SBIR program to scale new and exciting technologies," he said. "Companies can get back to work."

Former SpaceX engineer Josh Giegel said he was encouraged by the bill's passage.

In 2023, he launched North Hollywood tech company Gambit, which has developed software to allow autonomous drones, vehicles and other military equipment to communicate during battle without human intervention.

After receiving $3.3 million in SBIR money early on from the Air Force, he had expected to apply for $5 million in additional SBA funding, before the impasse halted the program.

Over the last few months, Gambit was able to secure other military funding to test its technology in the field. But Giegel still plans to seek SBA dollars for new research and development, assuming the bill becomes law.

"It's potentially more fuel to the fire," he said.

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