SB 1325 (Gonzalez) — Assembly Committee on Jobs, Economic Development, and the Economy (June 21, 2022)
Summary
This is an Assembly Committee on Jobs, Economic Development, and the Economy analysis of SB 1325 (Gonzalez), as amended May 19, 2022, for a hearing on June 21, 2022 before Chair Sabrina Cervantes. The bill establishes the California Techquity Innovation Program, administered by GO-Biz, to provide grants and investments that advance equity in technology-based businesses. Grants would go to technology accelerators, incubators, higher education institutions, local governments and underrepresented venture capital managers, and the bill creates a California Techquity Innovation Fund. The analysis cites a 2021 study on Latino-owned businesses and Crunchbase data on funding to Black and Latinx founders. The fiscal effect is listed as unknown, with registered support from Small Business Majority and TechNet, among others, and no opposition on file.
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Date of Hearing: June 21, 2022
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Sabrina Cervantes, Chair
SB 1325 (Gonzalez) – As Amended May 19, 2022
SENATE VOTE:
SUBJECT: California Techquity Innovation Program
POLICY FRAME: Entrepreneurship offers one of the most effective means of helping individuals and
families achieve financial security. Family-owned and other small businesses play essential roles in
stabilizing neighborhoods and creating local job opportunities. In fact, research shows that net new job
growth is highest among small businesses, especially those with 20 or fewer employees. For businesses
in technology sectors, the economic rewards are particularly high for founders and workers.
While there are many advantages to having small businesses within our state, these same businesses face
unique challenges in accessing capital. In 2022, California will begin receiving upwards of $1.1 billion in
federal funding to enhance financing programs and support the longer-term economic growth of the
state’s 4.1 million small businesses. However, money is not enough. Two of the largest challenges
facing the deployment of these funds are how to help small businesses become finance-ready and connect
these businesses with appropriate private lenders.
California currently operates a $17 million grant program to fund nonprofit technical assistance providers,
including Small Business Development Centers and chambers of commerce, among others. Last year $35
million was included in the state budget for “boot camps” to facilitate business start-ups. Through these
existing programs, small businesses may access a range of services, including one-on-one counseling,
workshops, and help with government contracting. However, neither of these programs are especially
focused, nor do they have the capacity to provide statewide coverage for business start-ups in the
technology sectors. Beginning in 2021 and further advanced through proposals in the 2022-23 budget, the
state regionalized its innovation/technology hub program to provide modest stipends to facilitators and
coordinators of technology assets, business groups, and venture capitalists. The revamped innovation hub
program, similar to the other state small business assistance programs, emphasize underserved geographic
areas and undercapitalized business owners and entrepreneurs.
SB 1325 proposes to fill a key gap in the state’s technical assistance network by funding small business
technology accelerators and incubators for diverse business owners and supporting underrepresented
venture capital managers to gain experience in the market.
The analysis includes information on current small business technical assistance programs, the unique
needs of technology start-ups, and the California economy, including economic disparities among
Californians. There is no known opposition to this bill. Comment 8 includes technical amendments.
SUMMARY: SB 1325 establishes the California Techquity Innovation Program, administered by GO-
Biz, to provide grants and investments that advance equity in technology-based businesses, as specified.
Specifically, this bill:
1) Requires GO-Biz to establish and administer the California Techquity Innovation Program, which
provides grants or investments that advance equity in tech entrepreneurship in California, and support
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underserved and underrepresented entrepreneurs, technology accelerators, incubators, fully accredited
institutions of higher education, local governments, and public-private partnerships that support,
advise, and uplift underrepresented entrepreneurs.
2) Requires GO-Biz to provide grants for the following purposes:
a) Financial grants for technology accelerators, incubators, fully accredited institutions of higher
education, local governments, and public-private partnerships that support minority-led, women-
led, and lesbian, gay, bisexual, or transgender persons-led technology businesses and technology
businesses led by persons with disabilities.
b) Financial grants for underrepresented venture capital managers and underserved entrepreneurs
developing economic opportunities based in California.
c) Financial grants to fund regional workforce development partnerships that advance equity in tech
employment.
d) Financial grants to fund research to evaluate the effectiveness of investing in equity
entrepreneurship and workforce, including establishing partnerships with local, fully accredited
institutions of higher education to lead these studies.
3) Requires GO-Biz to provide priority to applicants that do all of the following:
a) Provide services, technical assistance, and support that is not currently or adequately provided by a
regional Inclusive Innovation Hub to underrepresented entrepreneurs.
b) Demonstrate access to matching funds from local or federal programs, public-private partnerships,
or venture capital managers who support underserved, equity-forward entrepreneurs.
4) Requires GO-Biz to establish guidelines in order to maintain oversight of the California Techquity
Innovation Program, including, but not limited to, guidelines for grant approval, program operations,
and reporting by grant recipients.
5) Establishes the California Techquity Innovation Fund in the State Treasury. Moneys in the fund are
subject to appropriation Legislature.
EXISTING LAW:
1) Establishes the Governor’s Office of Business and Economic Development (GO-Biz) within the
Governor’s Office for the purpose of serving as the lead state entity for economic strategy and
marketing of California on issues relating to business development, private sector investments, and
economic growth.
2) Establishes the Office of the Small Business Advocate within GO-Biz to serve as the principal
advocate in the state on behalf of small businesses, including, but not limited to, advisory participation
in the consideration of all legislation and administrative regulations that affect small businesses, and
advocacy on state policy and programs related to small businesses.
3) Authorizes the Office of the Small Business Advocate to administer grant programs, including, but
not limited to:
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a) The Small Business Technical Assistance Expansion Program to provide technical assistance to
small businesses through partnership agreements with one or more small business technical
assistance centers.
b) The California Dream Fund to provide microgrants to individuals from underserved small
business groups participating in intensive start-up business training programs
c) The California Microbusiness COVID-19 Relief Grant Program to provide grants to
microbusinesses (under five employees) through county and related nonprofit intermediaries.
d) The California Small Business COVID-19 Relief Grant to provide grants to qualified small
businesses affected by COVID-19 in order to support their continued operation.
e) The California Venues Grant Program to provide grants to eligible independent live events that
have been affected by COVID-19 in order to support their continued operation.
f) The California Nonprofit Performing Arts to provide grants to eligible nonprofit performing arts
organizations to encourage workforce development.
g) The Capital Infusion Program to provide technical assistance to small businesses that are seeking
capital through contracts with Small Business Development Centers.
FISCAL EFFECT: Unknown
COMMENTS:
1) Lack of Diversity Within the Tech Sector: While the number of women and individuals of color
who own and work in tech-based industries has increased, significant disparities remain. Given the
importance of these industry sectors within the state’s overall economy, the success of these
businesses lies at the core of the state’s economic prosperity and resiliency.
A 2021 study, Closing the Capital Gap – Fueling the Promise of Latino Owned Businesses, found that
if the full business potential of Latino-owned firms was unlocked and Latinos reached revenue parity
with white-owned businesses, it would add an additional $1.4 trillion to the US economy. In order to
reach parity, diverse business owners must be able to access venture and other equity-type capital.
The study also documented the significant disparities between Latino-owned and White-owned
businesses, including:
Mature Latino-owned businesses were less likely to have part of their business owned by
mainstream tech-business investors, such as private equity, venture capital, or angel investors.
This underrepresentation of mainstream tech-business investors existed, regardless of the funding
and development stage of the Latino-owned business, including funding rounds for seed/angel
capital, early stage capital, and late stage. The study found that less than 2% of investment
funding rounds included Latino-owned businesses.
Small Latino-owned businesses with less than $1 million in revenue predominantly rely on
personal and higher-cost sources of capital, including personal savings, home equity loans, friend
and family, and payday loans.
These different investment paths have a direct impact on business valuations. According to
Crunchbase data, “the average valuation of a Latino-owned business in 2020 was approximately $572
million verses $1.2 billion for a nondiverse-owned business.” Other findings from the 2020 report,
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Crunchbase Diversity Spotlight 2020: Funding to Black and Latinx founders, based on the experience
of nearly 1,000 Black- and Latino-founded firms:
So far in 2020, Black and Latinx founders have raised $2.3 billion, representing 2.6% of total
venture capital raised through Aug. 31, 2020.
Since 2015, over $15 billion has been raised by Black and Latinx founders, representing 2.4% of
the total venture capital raised in that time.
Funding to Black and Latinx founders surpassed $1 billion in 2014, although that still represents a
fraction of the funding raised by US-based startups. Funding to underrepresented founders peaked
at $4 billion in 2018—the same year funding to venture-backed startups peaked in the US at $141
billion.
The San Francisco Bay Area ranks first in investing in Black- and Latinx- founded companies,
with $4.6 billion since 2015. That represents 1.8% of the venture capital invested in the Bay Area
from 2015 to August 2020.
The Greater New York area has the second-highest investment in Black- and Latinx-founded
companies at $4.4 billion, representing 5.2% of its total venture funding.
Greater Boston, Los Angeles, Seattle, and Atlanta round out the top six regions with the highest
investment in Black and Latinx founders. The highest percentage by region is Greater Atlanta,
with 5.5% of venture capital going to the area’s Black and Latinx founders.
For Black- and Latinx-founded companies, 36% have a female founder, a much higher percentage
than found more broadly in the US at 21% for companies with their first funding since 2015. The
majority of these female founders are Black and Latinx.
According to the author, “these appalling and disparate realities demonstrate the need to equalize
access to funding and open doors to opportunities for minority-led, LGBTQ-led, and women-led tech
businesses. Immediate action by both the public and private sectors is needed to advance equity and
support more inclusive tech ecosystems.
While some private entities, accelerators, and incubators are working on expanding equity in the tech
space, there is still a substantial gap that requires intervention at the state and local levels. State
investment in small businesses and diverse tech entrepreneurs will undoubtedly result in positive
returns for our economy, boost our pandemic recovery, and benefit our communities and small
businesses with the numerous advantages of a diverse workforce and business leadership.”
2) The Challenge of Income Inequality during COVID-19: While California’s dominance in
innovation-based industries is unquestionable, the divide between the middle- and lower-income
households and the top-income earners is accelerating. Even when California’s unemployment rate
was at historic lows pre-pandemic, unemployment within certain geographic regions and population
groups remained significantly higher, as did the number of people in the state who were not
participating in the core economy.
The coronavirus has deepened California’s income inequality, with the state’s most vulnerable being
at the greatest risk for poor health outcomes, having the least amount of savings to survive its
economic impacts, and being most likely to work in low-paid and least protected essential businesses.
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A closer look at disaggregated employment data reveals a bifurcated economic recovery. In March
2020, California reported an unemployment rate of 5.1% as compared to the US rate of 4.5%. From
the employment side, this represents 18.1 million people in California, with 82.5% being employed in
full-time work (based on a 12-month moving average). During this same period, three of California’s
58 counties had unemployment, below 3.0%, with San Mateo County reporting the lowest at 2.5%
(based on not seasonally adjusted data). Colusa County (21.4%) was reported as having the highest
unemployment rate among counties in March 2020.
Two years later (March 2022), statewide unemployment is 4.9%, just slightly lower than 5.1%
reported in March 2020. As noted in the prior comment, employment by industry sector is up in every
sector, and three of the 11 sectors having recovered all jobs. However, the disparities have grown.
Chart 1 – Selected Data on Unemployment shows geographic and demographic unemployment-
related information for the year the World Health Organization announced that the COVID-19 was a
global pandemic and the following two years.
Chart 1 - Selected Data on Unemployment (March 2020, 2021, and 2022)
Unemployment Rate (Not Seasonally Adjusted)
Unemployment Rate (Not Seasonally Adjusted)
(12 month moving average)
March March March March March March
2020 2021 2022 2020 2021 2022
California 5.1% 8.2% 4.2% California 4.1% 11.1% 6.3%
(comparable rate) (comparable rate)
Colusa County 21.4% 15.4% 12.5% Blacks 5.2% 13.9% 10.5%
Imperial County 20.4% 15.7% 12.3% Hispanics 4.7% 12.5% 6.9%
Los Angeles County 5.6% 10.9% 4.9% Whites 4.0% 10.8% 5.9%
Orange County 4.19% 7.0% 3.1% 16 to 19 years old 15.1% 24.5% 13.6%
Riverside County 4.7% 7.7% 4.3% 20 to 24 years old 7.6% 17.5% 10.1%
Sacramento County 4.3% 7.4% 4.0% 25 to 34 years old 4.1% 11.7% 6.1%
San Bernardino County 4.4% 7.8% 4.3%
San Francisco City & *The Employment Development Department reports
3.5% 6% 2.5%
County a March 2021 (12-month moving average) Labor
San Mateo County 2.5% 5.0% 2.3% Participation Rate (LPR) of 61.8%. The LPR for
veterans is 43.2% vs nonveterans LPR of 64.6%.
Tulare County 13.2% 11.6% 8.4%
Source: www.edd.ca.gov
As illustrated in Chart 1, the disparities among population groups continued, and most cases increased
for certain areas of the state and individuals from certain demographics. For example, unemployment
among Blacks in March 2020 was at a historic low of 5.2%, which was still above the state average of
4.1%. One year into COVID-19 and the disparity between the rate of Black unemployment and the
statewide rate substantially increased (13.9% compared to 11.1%). Two years since the beginning of
the pandemic, the unemployment rate for Blacks is reported as 10.5% versus 6.3% for the workforce
as a whole. From the start of the pandemic to March 2022, the disparity between the unemployment
rate for Blacks has grown from 1.1% in March 2020 to 2.8% in March 2021 to 4.2% in March 2022.
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Reports on May 2022 unemployment continued along similar trends with overall state unemployment
down 0.5% from March (4.6%) and 42,900 jobs being added. San Mateo had the lowest
unemployment rate of 1.7% and Imperial County the highest at 11.0%. For Blacks, however, the
unemployment was only down to 9.6% and 6.0% was reported for Hispanic workers. [The
comparable unemployment rate for demographic comparisons was 5.5%.] Again, the highest
unemployment was among 16-19 and 20-24 year olds.
The disparities shown in these charts are driven by and also influence a range of poor economic and
societal outcomes, including, but not limited to, limited educational attainment, economic insecurity,
poor health outcomes, negative engagements with law enforcement, and lack of a safety net for the
elderly and individuals with special needs. COVID-19 magnified these effects, further putting strains
on already struggling low-wage workers, particularly in the Black and Latinx communities.
The California Latino Economic Institute released a policy brief in December 2020, which provides
further data on the disparate and growing negative impact of COVID-19 on Latinos in California.
Among other findings, the briefing noted the following:
Latinos are overrepresented among California’s COVID-19 cases and deaths—59% of cases and
49% of the state’s deaths.
Latino overrepresentation in California’s cases has increased since April 2020.
Nearly 12% of California Latinos are currently uninsured—double the rate of other groups.
Latino unemployment rates are double those from the same time last year.
Nearly two-thirds of California Latinos report experiencing a loss of employment income since
March 2020.
Over 40% of Latinos currently report that it is somewhat or very difficult to pay their usual
household expenses in the last seven days.
Over three-quarters of California small business owners report that COVID-19 has had a moderate
to large effect on their businesses.
This and other reports have highlighted many contributing factors to these health disparities, including
the impact of low household incomes and lack of employment security. During COVID, Latinos and
Blacks have comprised a significant component of the state’s essential workforce. While a majority
of White workers held jobs that allowed them to work from home and decrease potential COVID-19
exposure, Latinos and Blacks, more commonly held jobs in high-risk environments.
This increased exposure to COVID-19, combined with the socio-economic impacts on underlying
health, resulted in a statistically higher number of cases and deaths compared to the group’s percent of
the population. Chart 2 provides information from the California Department of Public Health
relating to COVID-19 cases in California by race and ethnicity. Data is current as of June 13, 2022.
Chart 2 - COVID-19 Case Loads and Outcomes by Race and Ethnicity
Race/Ethnicity Percent Percent Percent CA
No. Deaths
Cases Deaths population
Latino 46.4% 39,479 43.7% 38.9%
White 24.9% 31,392 34.7% 36.6%
Asian 9.6% 9,8173 10.9% 15.4%
African American 5.3% 6,308 7.0% 6.0%
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Multi-Race 1.1% 1,436 1.6% 2.2%
American Indian or Alaska Native 0.4% 445 0.5% 0.5%
Native Hawaiian & other Pacific Islander 0.7% 581 0.6% 0.3%
Other 11.6% 972 1.1% ---
Total with data 100% 90,430 100% 100%
Source: California Department of Public Health, accessed June 9, 2022
The chart above, All Cases and Deaths Associated with COVID-19 by Race and Ethnicity, represents
data from 9,106,031 total cases, with 19% of those cases missing race/ethnicity. There are a total of
91,006 deaths, with approximately 1% of those deaths are missing race/ethnicity classifications.
3) California’s Use of Federal SSBCI Funds: The American Rescue Plan Act of 2021 included $10
billion for the reauthorization of the State Small Business Credit Initiative of 2010. California
anticipates receiving approximately $1.8 billion in federal SSBCI funding. Chart 3 outlines
California’s anticipated federal SSBCI funding.
Federal law required each application to include detailed information on how SSBCI funds will
provide access to capital for small businesses in underserved communities and to business owners
who are from groups who meet the definition of socially and economically disadvantaged individuals,
also referred to as SEDI. According to the SSBCI Guidelines:
A “Socially and economically disadvantaged individual” means an individual who is a socially
disadvantaged individual or an economically disadvantaged individual, as defined in the Small
Business Act.
“Underserved communities” mean small businesses located in low- and moderate-income,
minority, and other underserved communities, including women- and minority-owned small
businesses.
“Treasury encourages states to consider the following areas when including plans regarding ‘other
underserved communities’ in their report: rural communities; communities undergoing economic
transitions, including communities impacted by the shift towards a net-zero economy or
deindustrialization; and communities surrounding Minority-Serving Institutions.”
Under the SEDI incentive formula, California could receive up to $99.8 million for expending 48.87%
of SSBCI Capital funds in SEDI eligible businesses during the first tranche of SSBCI deployment.
States and tribal governments will receive SSBCI funds from the US Treasury in three tranches. In
order to access the next tranche of funding, the state or tribal government must demonstrate that at
least 80% of the current tranche of funding has been encumbered and/or used. To facilitate the
drawing down of federal funding, the IBank and CBCFA have stated that they will have an MOU in
place to enhance their ability to transfer moneys between programs.
Chart 3 - California’s Estimated SSBCI Funding*
Categories of Funding Funding Available
Total Federal Funding Authorized $10,000,000,000
Total CA SSBCI Allocation $1,181,997,613
Subtotal CA Prorated SSBCI Allocation $894,973,879
Subtotal CA SSBCI SEDI Allocation $187,189,392
Subtotal CA SSBCI SEDI Performance Allocation $99,834,342
Funding is Distributed in Three Tranches. States Funding in 80% Target
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Must Encumber 80% of their Funds to Access Tranche
Next Tranche of Funding
Tranche 1 $357,113,879 $285,691,104
Tranche 2 $407,031,050 $661,315,944
Tranche 3 $417,852,683
*This is based on California’s allocation as of January 2022.
Source: Document submitted to the Legislature by the IBank and CPCFA, January 7, 2022
California’s application proposes to fund three existing small business capital programs and create at
least one additional program. Chart 4 provides further details on California’s proposed allocation
plan.
Chart 4 - California’s Proposed SSBCI Allocation Plan*
Existing Programs Funded Funding Allocated
Small Business Loan Guarantee (IBank) $390,998, 806
California Capital Access Program (CPCFA) $118,199,762
California Capital Access – Collateral Support Program (CPCFA) $472,799,045
New Program(s) Funded Funding Allocated
Venture Capital (IBank) $200,000,000
Loan Participation (CPCFA) – under consideration
Total CA SSBCI Allocation $1,181,997,613
*This is based on California’s allocation as of January 2022.
Source: Document submitted to the Legislature by the IBank and CPCFA, January 7, 2022
Another key aspect of SSBCI are the leverage ratios. At a minimum, $1 of public expenditure must
result in $1 of new private investments. In the aggregate, the state’s SSBCI programs are required to
target an overall leverage ratio of at least $10 of new private investment for each $1 of public funds.
These leverage requirements, coupled with a drive to utilize SSBCI funds quickly in order to access
the next tranche of funds, create tension between undertaking strategic actions to reach small business
borrowers in underserved communities and from SEDI-eligible businesses. The Legislature, as the
policy-making body, should send clear signals about how to approach these multifaceted goals.
The $200 million proposed for the Venture Capital program administered through the IBank will play
a crucial part in California reaching its private capital leverage requirements. Given the lack of
diversity within the venture capital ecosystem, SB 1325 can play an important role in ensuring these
funds go to more diverse founders and asset managers.
4) The Governor’s Office of Business and Economic Development: In April 2010, the Governor’s
Office of Economic Development was established to provide a one-stop-shop for serving the needs of
businesses and economic developers. While initially established through Executive Order S-01-10,
the office was later codified and renamed GO-Biz. [AB 29 (John A. Pérez), Chapter 475, Statutes of
2010]
GO-Biz carries out its mission through multiple functional areas, including but not limited to the
following units: California Business Investment Unit, Zero Emission Vehicles, the Office of Permit
Assistance, the Office of the Small Business Advocate, International Affairs and Trade, the California
Competes Tax Credit Program, the Community and Local Equity Grants Unit, and the Community-
Based Solutions Unit. GO-Biz provides a range of programs and services that support business
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development, including assisting small businesses in understanding and complying with state
regulations, permitting assistance for new and expanding businesses, and assisting the state in building
out its zero-emission vehicle infrastructure.
In 2021, GO-Biz published and has since updated the California Business Come Back Guide to assist
businesses in identifying relevant new and existing state funding resources for recovery and success.
State resources are listed by agency, as well as by program. A particularly useful chart within the
guide includes information on total funds, maximum awards, eligibility, timing, and contact
information.
GO-Biz has historically used a service delivery model that flows across and through different GO-Biz
units, depending on the business’ needs. For example, a foreign company planning to expand in
California may initially become acquainted with GO-Biz through an in-bound trade mission hosted by
the International Trade and Investment Office but may ultimately be further assisted by the California
Business Investment Program and the Office of Permit Assistance.
5) The Role of Small Businesses within the California Economy: California’s dominance in many
economic areas is based, in part, on the significant role small businesses play in the state’s $3.1
trillion economy. Two studies, one by the US Census Bureau and another by the Kaufman
Foundation, found that net job growth was strongest among businesses with less than 20 employees.
Among other advantages, small businesses are crucial in the state’s international competitiveness, and
they are an important means for dispersing the economic positive impacts of trade within the
California economy.
In 2018 (most recent full set of data), of the 4.4 million firms in California, there were 3.4 million
nonemployer firms as compared to 954,632 employer firms.
Total revenues for nonemployer sole proprietorships, across all industry sectors, were $189 billion
in receipts in 2017.
Businesses with less than five employees are classified as microenterprises. In 2017, there were
473,641 microenterprises that had one or more employees.
Microenterprises, including both nonemployer and up-to-5-employee businesses, comprise the
single largest segment of the California business community, representing 89.0% (3.9 million) of
all businesses in the state.
Microenterprises have many unique features and provide important benefits to local communities,
according to a recent study from the Microenterprise Fund for Innovation, Effectiveness, Learning,
and Dissemination (FIELD) at the Aspen Institute. These benefits include:
Providing products and services tailored to meet local and neighborhood needs.
Stimulating an inflow of revenues to and within local communities.
Serving as catalysts for neighborhood reengagement.
Revitalizing neighborhoods that may otherwise have vacant storefronts.
Providing role models and support for future entrepreneurs.
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Excluding sole proprietorships, businesses with less than 20 employees comprise over 88.6% of all
businesses and employ approximately 17.4% of all workers. Businesses with less than 100 employees
represent 97.3% of all businesses and employ 34.5% of the workforce.
The chart below displays 2018 data (the most recent full set of data) on California employer
businesses, including payrolls, employment, and the number of firms, which may comprise one or
more establishments.
2018 Business Profile by Size (excludes nonemployer firms)
Area Employment Number Percent of Percent of Annual
Employees
Description Size of Firms Firms Jobs Payroll ($1,000)
United States Total 6,075,937 130,881,471 $7,097,310,272
12.8% 11.6%
California Total 779,825 15,223,664 $1,020,958,926
U.S. Firms U.S. Jobs
61.8% of 4.5% of
United States 0-4 3,757,163 5,967,955 $287,379,518
U.S. Firms U.S. Jobs
62.2% of 4.9% of
California 0-4 485,387 746,240 $46,663,550
CA Firms CA Jobs
89.0% of 16.3% of
United States <20 5,411,180 21,337,272 $898,874,051
U.S. Firms U.S. Jobs
88.7% of 17.4% of
California <20 692,139 2,650,204 $130,748,308
CA Firms CA Jobs
98.1% of 32.7% of
United States 0-99 5,962,057 42,918,809 $1,859,572,577
U.S. Firms U.S. Jobs
97.4% of 34.2% of
California 0-99 759,654 5,214,752 $261,490,973
CA Firms CA Jobs
99.6% of 46.7% of
United States <500 6,055,421 61,244,031 $2,819,089,905
U.S Firms U.S. Jobs
99.1% of 48.2% of
California <500 773,386 7,339,390 $395,286,015
CA Firms CA Jobs
0.33% of 53.2% of
United States 500+ 20,516 69,637,440 $4,278,220,367
U.S. Firms U.S. Jobs
0.82% of 51.7% of
California 500+ 6,439 7,884,274 $625,672,911
CA Firms CA Jobs
Source: https://www.census.gov/data/tables/2018/econ/nonemployer-statistics/2018... l
These nonemployer and small employer firms create jobs, generate taxes, support important industry
sectors, and revitalize communities. While their small size allows them to be more flexible in meeting
niche foreign and domestic market needs, it also results in certain market challenges.
These challenges include having difficulty meeting the procedural requirements of the state’s complex
regulatory structure and the traditional credit and collateral requirements of mainstream financial
institutions. Specialized technical assistance, access to credit enhancements, and targeting state
procurement activities help many small businesses overcome or at least minimize these difficulties.
6) Related Budget Proposals: The Governor’s proposed budget for 2022-23 requests $20 million to
expand the number of Inclusive Innovation Hubs (iHub2) from 10 to 13 and regionalize the program
into the same 13 regions used for the California Economic Resiliency Fund (CERF) Program.
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The requested statutory changes would also rebrand the program as the Accelerate CA: Inclusive
Innovation Hub program, require existing iHub2 to apply to participate in the new program, and
establish an Entrepreneurship Fund that offers five businesses from each Hub a $100,000 grant.
Below is a breakdown of the funding:
$13,000,000—Funding for each Hub at $250,000 per year for four years.
$6,500,000—Entrepreneurship Fund, seed funding of up to $100,000 per business for five small
businesses incubated at each of Hubs.**
$500,000—Administrative costs for CalOSBA to administer, monitor, and report on the
Entrepreneurship Fund and the Hubs.
The intent of the initial iHub Program was to” improve the state’s national and global competitiveness
by stimulating partnerships, economic development, and job creation around specific research clusters
throughout the state.” The first 5 iHubs operated through a cooperative agreement between GO-Biz,
with each iHub focusing on a different technology-based industry sector, including advanced
manufacturing and biopharma. The iHubs worked through a network of partners, including local
government entities, public universities, research institutions, venture capital networks, and economic
development organizations. No funding was provided by the state, but the industry-focused networks
were allowed to brand themselves as an iHub and annually attend meetings at GO-Biz. The iHub
agreement has a 2020 expiration date.
A proposal in the 2021-22 Budget provided $2.5 million to revive and rebrand the iHub program as
the iHub2 Program, shifted from an industry focus to a place-based service area program with a focus
on serving business owners from historically undercapitalized groups, including women- and
minority-owned businesses. The first round of iHub2 designations was announced in April 2022.
In the related 2022-23 Finance Letter, it states the “CalOSBA believes that each region identified on
the CERF map should have an Inclusive Innovation Hub as an anchor for strong innovation and
startup business activity incentivized to focus on diversity, equity and inclusion in the state’s tech and
science-based startup ecosystem. CalOSBA will extend the competitive bid process to award grants
to qualified place-based entities that can meet the program objectives as currently established,
awarding a total of thirteen Hubs.”
**The operational mechanics of the $100,000 grants to five incubated businesses per Hub created
concerns among some analysts and Members. Ultimately, the Legislature rejected the $100,000
entrepreneurship grants, but approval of the other components appears to be moving forward.
7) IHubs vs. Techquity Funding: The differences between the current iHub program and the funding
proposed by Techquity can be organized around two issues: Focus and Structure.
While the initial iHub program maintained an industry focus with a network that operated as a
formalized industry cluster, program changes in the 2021-22 Budget shifted to a service area model
that includes business assistance to multiple industry sectors within a region.
What is similar is the focus on historically undercapitalized business owner groups, which makes
sense as these are the same small businesses most impacted by COVID-19 and those that will require
assistance in accessing the new SSBCI funding.
SB 1325
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Structurally, the iHub2 program and the Techquity program fund different things. The iHub program
is funding a coordinator of an informal network of resources intended to meet the needs of multiple
small businesses. The program proposed in SB 1325 funds individual members of a potential iHub
network, namely the business incubators and accelerators. In fact, the existing alignment of their
purposes should create a positive symbiotic relationship.
8) Proposed Amendments: Below is a list of amendments the committee members may wish to review
when considering the bill.
a) Make implementation contingent upon appropriation of funding
b) Transfer implementation of the program from GO-Biz to the Office of the Small Business
Advocate, which is consistent with the current iHub program.
c) Require the first RFP being released within 120 days of funding being provided.
d) Provide additional key program elements, including:
i) Requiring applicants have prior experience in undertaking the grant activity and a fiscal agent
that can accept nonfederal funds.
ii) Authorizing multiyear grants, limited administrative costs, and partner organizations to help
demonstrate organizational capacity to deliver on the grant.
e) Require annual reporting to the Legislature and posting of the report on the Advocate’s website.
9) Related Legislation: Below is a list of bills from the current and prior sessions.
a) AB 29 (John A. Pérez, Feuer, and V. Manuel Pérez) Office of Business and Economic
Development: This bill established GO-Biz to include the newly codified California Business
Investment Services and the existing Office of the Small Business Advocate. Status: Signed by
the Governor, Chapter 475, Statutes of 2011.
b) SB 294 (Price) CalPERS Emerging Manager: This bill requires the California Public
Employees' Retirement System and California State Teachers Retirement Board to develop a five-
year strategic plan for emerging investment manager participation across all asset classes and to
report to the Legislature annually on the progress of the plan, as specified. Signed by the
Governor, Chapter 701, Statutes of 2011.
c) AB 1072 (Reyes) Small Business Technical Assistance Expansion Program: This bill makes
program improvements to the Small Business Technical Assistance Expansion Program and
reinforces the ability of the DGS Office of Small Business and DVBE Services to work with
awarding departments on procurement certification and targeted outreach. The bill also creates a
more decisive programmatic relationship between the state’s small business procurement
advocates and the statewide network of 80+ small business technical assistance centers which
participate in the Small Business Technical Assistance Expansion Program.
REGISTERED SUPPORT / OPPOSITION:
Support
Alliance for Socal Innovation
Biosciencela
California Legislative Women's Caucus
SB 1325
Page 13
California Life Sciences
Central City Association of Los Angeles
City of Long Beach
Fresno Metro Black Chamber of Commerce
National Women's Political Caucus of California
Pledgela
Small Business Majority
Starburst Accelerator
Technet-technology Network
Opposition
None on file
Analysis Prepared by: Toni Symonds / J., E.D., & E. / (916) 319-2090
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