Assisting Entrepreneurs: Examining Private And Public Resources Helping Small Businesses
Summary
Government Publishing Office print of a hearing, Assisting Entrepreneurs: Examining Private and Public Resources Helping Small Businesses, on June 13, 2023 before the House Committee on Small Business, with Chairman Roger Williams presiding. The witnesses are Chris Pilkerton of Accion Opportunity Fund, Reginald Hodges of the Training Center of Central Texas, Rich Palmer of Launchpad Ventures and Sonya Smith of the New York Small Business Development Center. In his opening statement Williams says the hearing will examine the public and private resources available to entrepreneurs. The Committee was adjourned at 4:08 p.m., and the middle of the transcript was not read for this summary.
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“Assisting Entrepreneurs: Examining Private And Public Resources Helping Small Businesses.”
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[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
ASSISTING ENTREPRENEURS: EXAMINING PRIVATE AND PUBLIC RESOURCES
HELPING SMALL BUSINESSES
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JUNE 13, 2023
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 118-018
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
52-424 WASHINGTON : 2023
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
NYDIA VELAZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MORGAN MCGARVEY, Kentucky
MARIE GLUESENKAMP PEREZ, Washington
HILLARY SCHOLTEN, Michigan
SHRI THANEDAR, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire
Ben Johnson, Majority Staff Director
Melissa Jung, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Roger Williams.............................................. 1
Hon. Nydia Velazquez............................................. 2
WITNESSES
Mr. Chris Pilkerton, Chief Legal Officer, Accion Opportunity
Fund, Tilghman, MD............................................. 5
Mr. Reginald Hodges, Owner and President, Training Center of
Central Texas, Harker Heights, TX.............................. 7
Mr. Rich Palmer, Managing Director, Launchpad Ventures,
Cambridge, MA.................................................. 8
Ms. Sonya Smith, State Director Company, New York Small Business
Development Center, Albany, NY................................. 9
APPENDIX
Prepared Statements:
Mr. Chris Pilkerton, Chief Legal Officer, Accion Opportunity
Fund, Tilghman, MD......................................... 28
Mr. Reginald Hodges, Owner and President, Training Center of
Central Texas, Harker Heights, TX.......................... 30
Mr. Rich Palmer, Managing Director, Launchpad Ventures,
Cambridge, MA.............................................. 32
Ms. Sonya Smith, State Director Company, New York Small
Business Development Center, Albany, NY.................... 36
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
National Association of Federally-Insured Credit Unions...... 43
ASSISTING ENTREPRENEURS: EXAMINING PRIVATE AND PUBLIC RESOURCES
HELPING SMALL BUSINESSES
----------
TUESDAY, JUNE 13, 2023
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 2:40 p.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams
[chairman of the Committee] presiding.
Present: Representatives Williams, Luetkemeyer, Meuser,
Salazar, Alford, Crane, Bean, LaLota, Velazquez, Landsman,
McGarvey, Perez, Scholten, Thanedar, Davids, and Pappas.
Chairman WILLIAMS. I welcome everybody here today and thank
you for the witnesses and for those who have come to hear the
hearing.
I call the Committee on Small Business to order.
Without objection, the Chair is authorized to declare the
recess of the Committee at any time.
I now recognize myself for my opening statement.
Today's hearing will focus on examining the public and
private resources available to our nation's entrepreneurs. And
anyone in our country can become an entrepreneur if they are
willing to put in hard work to bring an idea to life. That is
the beauty of our great country. For many people they do not
know where to even start as they try to accomplish this great
objective. They can talk to their network of friends and
family. They can talk to local chambers of commerce or research
what resources are available in their community, whether that
be from the private sector or the federal government.
As we have conducted hearings this year, we have too often
heard that navigating the federal bureaucracy and figuring out
what resources are available can be too challenging for many
small business owners. The data backs up this line as we have
repeated heard 70 percent of business owners give the
government a grade of C or below when asked about the
effectiveness of their programs. While some federal programs
can be beneficial to small businesses, we must ensure that they
are being utilized to create successful businesses. These are
ultimately taxpayer funded programs and it is our duty in
Congress to ensure that these dollars are being used as
effectively as possible. The government does not need to create
a new government program and expand government services
whenever a new problem arises.
Unfortunately, the SBA has done this far too many times and
too often. And while there are programs that have a proven
track record of success just as SBDCs which leverage federal
dollars to state and local partners, but there are others that
are not as effective. For example, the Community Navigators
Program received nearly $200 million over the last few years to
do substantially similar work as other counseling services at
the SBA and their performance metrics are abysmal.
As we continually look to make SBA more effective and
efficient, we must look to end this kind of duplication that is
wasting taxpayers' dollars. Additionally, we have our need to
be evaluated, and if a program is beneficial and deserves
funding it is important for us to know that if the private
sector is already stepping up to fill a specific need. In many
cases, the private sector is able to adapt more quickly to the
changing needs of small business.
If we want to help small businesses in Congress, the best
thing we can do is enacting pro-growth policies that make it
easier for them to keep their doors open. Let's not burden them
with excessive regulations. Let's lower their tax rate so they
can keep more of their hard-earned money. And let's stop the
reckless government spending that has caused high inflation and
high interest rates. This type of waste across the SBA and
other federal agencies leads to inefficiencies, the misuse of
taxpayer dollars, and a bloated federal government. Simply put,
our goal here today is to examine the landscape of the
resources that are available to help small businesses. Once we
have an idea it will make it easier for Congress to utilize
which programs are effective and which ones are duplicative of
other resources available to our nation's job creators.
Small business owners dedicate their lives and finances to
the production of services they bring to the marketplace. We
salute the small businesses who continue to fight and give
selflessly back to their communities, and we are eager to enact
policy solutions that will help pave a path towards success for
both now and success in the future.
I want to thank you all again for being here today, and I
am looking forward to today's conversation.
So, with that I will yield to our distinguished Ranking
Member from New York, Ms. Velazquez, who just got here.
Ms. VELAZQUEZ. Yes. Financial Services.
Thank you, Mr. Chairman.
America's 33 million small businesses are the cornerstones
of our local economies. When a main street business succeeds,
we see hard earned dollars get reinvested back in our
communities, along with robust job creation and local economic
growth.
Launching a small business is not for the faint of heart.
When it comes to turning a great idea into a thriving business,
entrepreneurs can face a number of challenges. But that is
where the SBA comes in. The SBA fosters a robust
entrepreneurial ecosystem, one that offers free or low-cost
counseling and training to small business owners throughout the
country. Whether it is helpoing to create a business plan,
access capital, or navigate the procurement process, the SBA
offers a wide range of resources to help small businesses
succeed. These programs have a high return on investment.
Studies have shown that entrepreneurs who receive counseling
and training are able to incase sales and create more jobs.
Every year, SBA resource partners assist more than one
million small business owners. Just imagine how powerful our
economy and workforce will be with additional resources for
SBA's programs. We could unleash the power of entrepreneurship
and innovation in communities all across the United States.
Of particular concern to me are the barriers that women,
minority, and rural entrepreneurs face each and every day. Lack
of access to capital, mentorship, and vital networks are well-
known challenges for underserved entrepreneurs.
A recent report by the Office of Advocacy confirms that
large and persistent racial disparities in business ownership
and outcomes have existed for some time in the United States.
Only 5 percent of Blacks and 8 percent of Latinos own small
businesses compared to more than 10 percent of non-Latinos/
Whites. Moreover, Black and Latino-owned businesses have lower
average sales and hire fewer employees.
Equally troubling is the fact that roughly 90 percent of
America's 12 million women entrepreneurs are sole proprietors
and stay small. Despite representing more than 50 percent of
the population, women garner roughly 2 percent of venture-
backed capital in 2022. And while rural communities have a
higher rate of self-employment, they rely more on personal
savings to launch a business and face acute workforce
challenges. We have to break down the barriers that keep women,
minority, and rural entrepreneurs from reaching their full
potential. That means providing small businesses that are often
overlooked with access to capital and arming them with the
resources and technical assistance needed to grow and prosper.
It also means filling the gaps that are not being met by the
private sector and state and local economic agencies.
I am looking forward to today's hearing and I hope to learn
more about public-private efforts that are underway to help
small businesses thrive. Thanks to all the witnesses for
participating, and I hope we have a productive discussion.
Thank you, Mr. Chairman. I yield back.
Chairman WILLIAMS. Thank you. And I will now introduce our
witnesses. But let me tell you, it is pretty simple. You have
got some lights in front of you and you are going to have 5
minutes and the lights will turn yellow. They will turn red or
whatever. And if you hear the gavel, you need to cut it off.
Okay? All right. So we appreciate you all being here.
So our first witness today is Chris Pilkerton. Mr.
Pilkerton is the chief legal officer of the Accion Opportunity
Fund located in San Jose, California. Accion Opportunity Fund
is the nation's largest nonprofit community development
financial institution concentrating on small business support
for underserved communities. Prior to his time at the Accion
Opportunity Fund Mr. Pilkerton served as acting administrator
of the Small Business Administration during the Trump
administration. During his time at the SBA, he helped
coordinate federal, state, and local economic development
efforts to help our nation's job creators. Mr. Pilkerton earned
his J.D. from Catholic University of America, a bachelor's
degree from Fairfield University, and a certificate in data
analytics from Cornell University's College of Business.
Mr. Pilkerton, thank you for being here today and we look
forward to the conversation ahead.
Our next witness today is Mr. Reginald Hodges. I have had
the pleasure of meeting Mr. Hodges several times over the last
few years through all the work he does in the great state of
Texas. He is an owner and president of the Training Center of
Central Texas College located in Harker Heights, Texas. A
Former Navy Civil Engineer Corps officer, Mr. Hodges has over
11 years of military service and over 16 years of construction
management experience. Mr. Hodges started the Training Center
of Central Texas with a vision of training men and women to
enter the solar technology field. Since opening the school, it
has expanded their curriculum to include a variety of programs
ranging from dental assistant to substation technician. Mr.
Hodges earned his Bachelor of Applied Science from the
University of North Florida and his master's degree in
electronics engineering from California Polytechnic State
University in San Luis Obispo.
So, Mr. Hodges, it is good to see you and thank you
foremost for your service being here today and we look forward
to our conversation ahead.
Our next witness is Mr. Rich Palmer. Mr. Palmer is the
managing director of Launchpad Venture Group located in Boston,
Massachusetts. Launchpad Venture Group is an angel investment
group that provides funding and counseling services to early-
stage startup companies. Mr. Palmer is also on the Public
Policy Committee of the Angel Capital Association, and prior to
his time at Launchpad Venture Group he co-founded Gravity Lead
Product Development at Relationship-Science and was the head of
the portfolio analytics for S&P Capital IQ's Quantitative
Intelligence team. Mr. Palmer earned his Bachelor of Science
from Rensselaer Polytechnic Institute. What are you all? What
is your mascot? I got you, didn't I? Okay. All right.
Polytechnic Institute and received his Master of Business
Administration from Babson College.
Mr. Palmer, thank you for being here today, and we look
forward to the conversation ahead.
And I now recognize the Ranking Member from New York, Ms.
Velazquez, to briefly introduce our last witness appearing
before us today.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
It is with greater pleasure that I introduce Sonya Smith
from my hometown state of New York. Ms. Smith is the state
director of the New York Small Business Development Center and
has in-depth knowledge of the challenges our small businesses
are facing today. She has an MBA from Albright College and has
risen through the ranks of the SBDC network. She is the first
woman an first African American to lead the New York State SBDC
and I am proud that she is testifying before our Committee
today.
Welcome, Ms. Smith. Thank you for being here. I look
forward to your testimony. I yield back.
Chairman WILLIAMS. Thank you now. And again, we all
appreciate all of you being here today.
And I now recognize Mr. Chris Pilkerton for his 5-minute
opening remarks.
STATEMENTS OF CHRIS PILKERTON, CHIEF LEGAL OFFICER, ACCION
OPPORTUNITY FUND; REGINALD HODGES, OWNER AND PRESIDENT,
TRAINING CENTER OF CENTRAL TEXAS; RICH PALMER, MANAGING
DIRECTOR, LAUNCHPAD VENTURES; SONYA SMITH, STATE DIRECTOR
COMPANY, NEW YORK SMALL BUSINESS DEVELOPMENT CENTER
STATEMENT OF CHRIS PILKERTON
Mr. PILKERTON. Thank you Chairman Williams, Ranking Member
Velazquez, and to all of the Committee Members.
Over the last several years I have spent my career focusing
on issues related to the small business community, with
particular attention to underserved populations. I served as
the General Counsel of the U.S. Small Business Administration
under Administrator Linda McMahon, as well as the Acting
Administrator of the agency from April 2019 into early 2020
when I joined the White House to advance the issues that
included access to capital and workforce development. The
lessons of those efforts and an associated bipartisan plan
going forward have been documented more specifically in a book
I have recently coauthored titled ``Underserved.''
Since leaving government, I have continued this work in
various capacities. I serve as the Chief Legal Officer for
Accion Opportunity Fund, the leading nonprofit community
development financial institution focused on small business
lending and technical assistance to underserved borrowers all
across the country. I have also cofounded and developed an
initiative called the Small Business Corps at Georgetown
University Business School, a private sector led program to
offer underserved small businesses with specific goal-focused
technical support provided by fellows who are recent college
and business school graduates. I have also worked closely with
people like the performing artist Ice Cube to identify
opportunities for underserved small businesses to scale and
participate in the Fortune 500 corporate supply chain.
While access to capital to small businesses is critical,
academic analyses have shown that technical assistance and
counseling can be amongst the most meaningful component of a
business' ability to perform, develop, scale and hire.
There are technical assistance resource partners that have
traditionally been an important part of the small business
ecosystem, organizations such as SBDCs, SCORE, Women's Business
Centers and Veterans Business Centers.
As this committee is aware, certain funds to support these
organizations are appropriated and then distributed via SBA. I
have worked with all of these organizations and have seen their
impact on the growth of individual small businesses.
Given my experience in this arena, I would recommend this
Committee consider the following methods to advance small
business technical assistance in the United States.
First, for any entity that receives technical assistance
dollars from a government grant or designated appropriation,
there must be a common menu of meaningful performance metrics
both before and after distribution of the funds. These metrics
must be reasonable and realistic, but also be significant
enough to hold grantees accountable to the provision of quality
services.
Second, technology must be central to this process from
start to finish. Not only should technology be utilized to
streamline the application process, but the actual technical
assistance provided must have a substantive online learning
component as is seen in the SBA's Ascent platform, which was
championed by Administrator McMahon and continues to be
highlighted by the agency.
Third, perhaps not dissimilar to the intent of the
Community Reinvestment Act, the government must consider ways
to engage and incentivize the private sector in this work. At
Accion Opportunity Fund, for example, we work with companies
like Federal Express and Boston Brewing Company to advance
online support and coaching opportunities for entrepreneurs.
Programs like these, or government-initiated opportunities like
the 2019 Pledge to the American Worker, can also serve as a
model of the convening power of government to engage businesses
of all sizes to advance trainings, apprenticeships, and job
placement all across the country.
Fourth, in coordination with existing resource partners,
policymakers must encourage and incorporate new and innovative
technical assistance stakeholders into this process. During my
time at SBA, for example, we pioneered a pilot program called
the Makerspace Hiring Training Collaboration and Hiring (MaTCH)
initiative, to advance the makerspace incubator system. This
pilot immediately impacted many businesses across the country
in places like California, Missouri, New Hampshire, New York,
Oklahoma, Pennsylvania and Puerto Rico.
Fifth, Congress should be a partner to the Executive Branch
as part of the trackable interagency cooperation process.
Although meetings like these are usually governed by executive
order or memoranda of understanding, on this topic a
congressionally-engaged, bipartisan working group for key
offices such as SBA, MBDA, the Department of Labor's WIOA,
various secondary education offices within the Department of
Education, could make huge strides on this topic and avoid much
of the bureaucratic disruption that can impact any
administration.
Finally, I will close by saying that all of this is doable
right now. However, these would just be part of an overall
strategy that could be developed in accordance with a
comprehensive study on these issues. Now, I know that such
studies are often frowned upon as kicking the can down the
road, but given the massive size of all of these grants and
appropriations in their entirety, such a review could set forth
a government-wide best practices approach that could maximize
measurable small business and workforce outcomes, while
ensuring the government is a responsible steward of taxpayer
dollars.
Thank you all again to all of you for your work in this
area, and I look forward to any questions.
Chairman WILLIAMS. I now recognize Mr. Reginald Hodges for
his 5-minute opening remarks.
STATEMENT OF REGINALD HODGES
Mr. HODGES. Good afternoon, Chairman Williams, Ranking
Member Velazquez, and distinguished Members of the House
Committee on Small Business.
Thank you very much for inviting me to tell our story. I am
truly honored to be here today and to share our story of the
Training Center of Central Texas. We are both a minority and
veteran-owned business since 2017. The Training Center was
honored to have had Chairman Williams address our summer
graduating class of 2021. He was called away to Washington,
D.C. for a vote on the Infrastructure bill, but he recorded an
address addressed to our students, which was a memorable moment
for our 49 graduates, mostly military veterans, of the
electrical, solar and medical technician programs.
I am Reginald Hodges, CEO and president of the Training
Center of Central Texas. I was approached by the congressional
staff to share our story of our growth and challenges of
training our students not only for careers but also for
starting their own businesses.
The Training Center offers a cost-effective, career-
focused, flexible education and prepares our students for in-
demand jobs in the solar, medical, and electrical industries.
Having been recognized for 3 years straight as the number one
trade school in our area, we would not be here today without
Brian Sunshine, a co-owner, and the first person that every
students meets when they walk through that door. And also, our
esteemed director, Jim Bondi, a retired colonel and one of the
most respected men in our Fort Cavazos community.
I enlisted in the Navy in 1994 at the Navy Recruit Training
Command at Great Lakes. There is a building there, Building
1405, located right there at Boot Camp. And they had a mural of
the first African American naval officers in the Navy's
history. They were commissioned there at Great Lakes. These 12
ensigns and 1 warrant officer went on to serve with distinction
in World War II. They called themselves the Golden 13. As I
looked up to those 13 men on a mural, I knew I wanted to be a
naval officer and I dedicated my life to that goal. The first
day I arrived at my duty station in Jacksonville, Florida, I
enrolled in classes for my associate's at the local community
college where I attended school full time at night. Full time.
After leaving the Navy in 1998, I was accepted to an
officer program at the University of North Florida. Upon
graduation with my bachelor's degree in electrical engineering,
I attended Navy OCS. The day I was commission in 2001 is still
the greatest honor I have ever had and I proudly served our
country for 11 years.
I am a person of integrity and believe in service in our
community and building the next generation of skills. I am
reminded that the students who we serve at the Training Center
are anywhere from 18 to 30 years old. They comprise 20 percent
of the population, yet they make up 100 percent of our future.
We have a strong need to equip our students with the most
enduring critical skills in health care, in the electrical
trade, and solar technicians.
At our school, these skills often get used right where our
students are in school. Our students work at nursing homes,
assisted living homes, blood drives, and actually do the
electrical wiring for Habitats for Humanities all throughout
our area. As a career school I would hope that we can obtain
from this hearing additional resources for trade schools to
partner with local businesses, school districts, and trade
organizations because by working together we can actually help
build a stronger workforce and support economic growth in our
communities.
Additionally, I hope that we can foster more programs that
are similar to the very successful Boots to Business program
for transitioning veterans but for civilians. More
specifically, high school seniors as approximately 40 percent
of small business owners do not have a college education.
However, nearly all of them have a high school education. I say
let's get the word out about the great resources that the Small
Business Administratino has because the resources are there but
few are aware.
I would like to thank you very much for this opportunity to
be here. Thank you very much, Chairman Williams, Ranking
Membmer Velazquez, and you distinguished people here on the
House Committee of Small Businesses. It has been an honor. It
is an honor. That is it. Thank you.
Chairman WILLIAMS. I am sorry. We recognize Mr. Palmer for
his 5-minute opening remarks.
STATEMENT OF RICH PALMER
Mr. PALMER. Chairman Williams, Ranking Member Velazquez,
and distinguished Members of the Committee. Thank you for the
opportunity to testify before you today. My name is Rich
Palmer, and I am the managing director of Launchpad Venture
Group and I am here on behalf of the Angel Capital Association.
I will call it the ACA. I am happy to be here to discuss how
Congress can improve the federal government's engagement with
angel investing to better facilitate the flow of capital to
small businesses.
ACA is a professional society of accredited angel investors
who make up the world's most prolific early stage investment
class. ACA represents more than 15,000 accredited angel
investors and 250 angel groups, accredited platforms, and
family offices who together deploy more than $950 million in
early stage capital every year, supporting more than 30,000
entreprenerial companies.
I have spent nearly 20 years focused on entrepenurship. At
the beginning of my career on Wall Street I eventually
cofounded Gravity, the leading company for social good using
AI. I also serve as an entrepreneur in residence at Babson
College, having invested in dozens of promising startups and
speak regularly on entrepreneurship.
In 2022, I became managing director of Launchpad Venture
Group, a nationally recognized angel network. Launchpad
currently has more than 185 active angel investors who provide
human and financial capital to help enrepenur build successful
companies. Each Launchpad Member is qualified as an accredited
investor under the definition of Rule 501 of the SEC
regulatoions.
Each year, Launchpad invests $8 to $10 million both in new
and follow-on opportunities. As one of the most active angel
networks in the United States, Launchpad exemplifies the power
of angel investing as a driver of entrepreneurship.
Angel investing supports small businesses in four distinct
ways.
First, angel investors provide crucial funding to startups
and early stage companies that may have difficulty accessing
traditional sources of capital.
Second, angel investors provide invaluable mentorship and
guidance to entrepreneurs as they often have a wealth of
experience in the industry or sector that they invest in.
Third, angel investor are willing to take on higher risks
compared to traditional investors like banks and financial
insstitutions, and thereby, enable early stage companiesi to
pursue innovatvive ideas that have the potential for
substantial growth.
Lastly, angels lend credibility to a startup. When a
reputable angel investor conducts due diligence, sits on a
board, and invests in a company, it signals to other investors,
customers, and stakeholders that the business has potential and
is worth considering.
The facts speak for themselves. A desert angel study found
that every angel investment dollar has a multiplier effect of
21X. For example, the average initial investment from a
Launchpad Member is $25,000, which creates economic value worth
more than half a million dollars per investor.
The importance of angel investing is further augmented by
the reality that existing federal resources were oriented
towards small businesses, such as the Small Business Agency
(SBA) failed to capture the entire innovation ecosystem.
The SBA is undoubtedly an important organization. However,
the SBA does not focus on the early stage innovative companies
that angel investors concentrate on. Rather, they focus on
traditional, established small businesses such as local
restaurants, flower shops, and so on. Since the SBA does not
capture the entire innovation ecosystem, SBA should begin to
leverage local angel groups and our know-how to get more
capital to entrepreneurs. Importantly, although more than 16
million Americans qualify as accredited investors, only about
16,000 are active angels. SBA could help narrow that disparity
by developing programs that leverage private investment capital
in early stage companies. Such an initiative would especially
benefit entrepreneurs of color and women who may not be able to
leverage connections or family wealth for their investment.
My colleagues and I are ready and willing to serve as a
resource of infomration and feedback as you pursue your
legislative solutions to make capital more readily available to
our Natino's entrepreneurs.
Thank you again for this opportunity to share my experience
with you. I look forward to your questions.
Chairman WILLIAMS. Thank you.
And I now recognize Ms. Sonya Smith for her 5-minute
opening remarks.
STATEMENT OF SONYA SMITH
Ms. SMITH. Thank you, Chairman Williams, Ranking Member
Velazquez, and to the House Small Business Committee Members.
Again, I am Sonya Smith, and thank you for the
introduction. I am the state director for the New York Small
Business Development Center, and with my experience of over 15
years of various roles within the SBDC, Small Business
Development and Economic Development, from my knowledge gained
from the work and experience with the SBDC, I am understanding
and learned of the importance of building an ecosystem to
provide solutions to communities, regions, states, and
nationwide.
As stated, both public and private resources can be
valuable as entrepreneurs look to start or grow their business.
We must ensure that any taxpayer dollars going towards these
efforts are being effectively used in a way that is not
duplicative of private sector initiatives.
The Small Business Administration offers a variety of
services to help educate and counsel small businesses,
including small business development centers. With over 1,000
locations nationwide, SBDCs provide valuable resources to small
businesses across the country. Through our partnership with
SBA, SBDCs are hosted by universities, colleges, state,
economic development agencies, or private entities, and our
goal is to help launch and grow small businesses.
The State of New York is one of the 63 networks represented
in the nationwide program consisting of all the states and U.S.
territories. In the state of New York there are 22 service
centers covering all 62 counties. There is no one size solution
for our organization for the 33 million small businesses of the
country. Each business owner or entrepreneur has their own
unique circumstances that may need the support and assistance
from several resources.
As one of the four resource partners of the SBA, SBDCs,
SCORE, and Women Business Centers and Veteran Business Outreach
Centers, SBDCs are a nationally accredited program that provide
one-on-one, no cost, confidential advice to small business
owners and entrepreneurs, educational training, and research
and business resources. The SBDC program offers a broad reach
of resources and opportunities to create an impact on
businesses at every stage of their business lifecycle.
The SBDCs across the country deliver high-quality services
and programming by experienced experts at each center. By
leveraging the private-public resources and partnerships, our
program services over one million small businesses nationwide
and has the opportunity to continue to serve more with the
multiplier effect.
With each SBA core dollar, federal dollars, the SBDCs match
that program with state and institution funds. It is the SBA's
largest matching grant funded program. This shows not only the
financial support from the state, local, and host institutions,
but also the value added the SBDCs provide to stakeholders in
their communities.
One of the key functsions of the SBDC is to be a trusted,
collaborator and connector. The SBDCs tie all these parts
together in terms of small business assistance across the
country, and you will see how we partner with entities at the
state level, as well as the local, city, and county development
groups to provide consistent support statwide.
The SBA congressional budget states that the Office of
Entrepreneurial Development has made noteworthy progress. The
SBDCs have provided a large share of these achievements.
Eighty-eight percent of capital infusion, 75 percent of new
business starts serving over a million clients, as well as
supporting over 5 million jobs. The success of the program is
evident and the data shows that the results increased during
the panic and the demand has stayed up as well as the results.
When small business owners and entrepreneurs need support,
one, they do not know where to go or where to start; two, there
are so many resources available that they are not sure which
one would be beneficial, too much information at once, and the
SBDCs have been known as the best kept secret, which is not a
compliment of the program with the inception year of 1979.
During the pandemic with the support of CARES Act funds,
the SBDCs were able to, for the first time, use SBA grant funds
to develop and pay for marketing and informational materials to
expand reach to communities. The reauthorization of the program
would help modernize the administrative concerns and streamline
processes and provide allocation for marketing purposes.
SBDCs collaborate with resources and private organizations,
chambers of commerce, trade and industry groups, and
associations by providing technical assistance due to staffing
capacity, training, and educational programs. We are also co-
located in these locations for accessibility.
Thank you again for your time and your work with small
busienses and taxpyaers across the country and I look forward
to your questions.
Chairman WILLIAMS. Great.
We will now move to the Member questions under the 5-minute
rule which we talked about. So I recognize myself for 5
minutes.
Mr. Hodges, we have, as we said earlier, met several times
previously. And before I get started, I want to thank you again
for your service to our country and the outreach you do to the
veterans around newly named Fort Cavazos. You know it's better
than most but our servicemen and women are such great leaders
and can do amazing things in the private sector when they are
given the right training and the right opportunities. So, one
of the most pressing things we keep hearing when we speak with
small businesses is the ability to find qualified workers.
Mr. Hodges, my question, can you describe how the Training
Center of Central Texas is able to adapt to the needs of the
small business community? And how do you ensure that you are
able to continue providing value for your customers?
Mr. HODGES. Mr. Chairman, first of all, there is a shortage
of electricians right now. While you have the infrastructure
bill, you have the renewable energy that is going on across the
country, well, 70 percent of renewable energy jobs are actually
going to be performed by electricians. And right now we have a
shortage of 60,000 electricians in the United States. As a
matter of fact, the average age of an electrician, licensed
electrician is 57 years old.
So what our school decided to do was create a program that
was a short 6 month program that actually addresses need. We
were partnered with local contractors in the area where right
now approximately of our students have actually went on to work
at this local contractor. And also, we have been partnering
with KISD in our area also to bring in newly graduated students
to actually come over to the Training Center. And the way this
is actually working is just yesterday--I am going to give you a
brief example here. Just yesterday we had two students, recent
high school students, come in to the Training Center. They
signed up for our program, for our electrician program, and
they said they did not want to go to college. They wanted a job
within the next 6 months. And when they graduate, they are
actually going to go and work for the local contractor there in
our area. And it is really a very beautiful thing that we are
doing there.
Chairman WILLIAMS. Mr. Pilkerton, you have a unique
perspective on the topics we are discussing today since you
served as the acting administrator of the SBA and now are
focusing on how the private sector can get better engaged to
help small business.
So, can you describe some of the work you did during the
time as acting administrator to coordinate public and private
partnerships without needing to spend additional federal funds?
Mr. PILKERTON. Yes, sir. Thank you for the question.
So I think what I would say from my time at SBA is really,
the big sort of takeaway from this is meeting businesses where
they are and including the components of innovation. And let me
give you an example. So all the resource partners that we have
talked about here today provide an incxredibly valuable service
to the SBA. But I do think the SBA, in order to innovate and
modernize needs to think about how those resource partners and
perhaps other resource partners could engage as part of this
sort of small business ecosystem.
So one of the examples that we used was the Ascent platform
that I mentioned before. And that was championed by
Administrator McMahon. And that was focused on women
businessese. And it was called Ascent because it was
essentially a mountain process where you would scale your
business and the technology that supported it was created by
SBA and labor but it allowed these small businesses to scale to
sort of where they were. So it is not just starting your
business but being able to get into that corporate supply chain
which is innovation.
The second thing I would say is we did a Makerspace program
which I referenced in my program. And that is really sort of
the future of local incubators. So when you talk about trying
to meet businesses where they are, Makerspaces are very
critical because they can provide not only resources but the
kind of SBA information to those businesses in a local fashion.
Chairman WILLIAMS. Also, Mr. Pilkerton, you mentioned in
your testimony the need to have consistent performance metrics
in SBA programs. Can you give us quickly some examples of
programs at the agency that have unproven track records of
success but continue to receive taxpayer dollars?
Mr. PILKERTON. So as I mentioned in my testimony, I think
that this is a huge opportunity for both the agency and this
Committee to work together to perform a study of these programs
because quite honestly, there are programs that are incredibly
impactful and there are components of those programs that are
perhaps antiquated and not meeting where the actual business
owners are.
So as I mentioned in my testimony, I know we are sort of
towards the end, I would really encourage a study to be
supported by this Committee.
Chairman WILLIAMS. Thank you very much.
I now recognize the Ranking Member for 5 minutes of
questions.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Ms. Smith, as you mentioned and I mentionend in my opening
statement, there are 33 million small businesses nationwide and
SBA resource partners provide important counseling and training
more than 1 million entrepreneurs each year. What can this
Committee do to help the SBDCs and the other resource partners
reach more small businesses?
Ms. SMITH. Thank you, Ranking Member, for the question.
So what is the main focus I think is the reauthorization of
the program to be able to assist there with not only the
administrative side and the proceses and streamlining, but also
the ability to have an allocation towards marketing and
outreach. For the first time, CARES Act funds were the only
allowable grant funds that were utilized for marketing and
outreach.
Ms. VELAZQUEZ. Thank you.
I understand that you formed, Ms. Smith, a partnership with
host universities in New York to address some of the pressing
workforce challenges facing small businesses in the state. How
have these efforts benefitted both workers and small
businesses?
Ms. SMITH. Thank you.
The apprenticeship program is a partnership with SUNY/CUNY,
so the State University of New York, the City Univerties of New
York, and Department of Labor. The main focus is the SBDCs
being a main partner with the community colleges to provide an
apprenticeship program. This is also to develop client facing.
So webinars, as well as webinars for our advsiors on workforce
development. This is the focus on how a business will register
as a site for an apprenticeship, for on-the-job training. This
will assist with the Earn as You Learn. And on the other side
of it, looking at the availability of training at the community
colleges at the colleges in the area.
So if a business has some upskill training that they would
like to do, it is participating in that and getting funds that
will help utilize and push forward the upper mobility of their
workforce.
Ms. VELAZQUEZ. Mr. Pilkerton, increasing access to capital
for the underserved has been a top priority of mine. Given the
breadth of your experience with the underserved, can you share
with this Ccommittee what more can be done to penetrate these
hard-to-reach communities? And also, how important is
counseling and technical assistance for these entrepreneurs?
Mr. PILKERTON. So thank you for the question. I will take
the last part first.
So, at Accion Opportunity Fund, we have received feedback
that 90 percent of our clients who utilize the technical
assistance would encourage others to do so. So it is clearly a
huge impact.
But to your point as far as getting access to capital in
underserved communities, one of the reasons when I left the SBA
that I came to a CDFI was to ensure that CDFIs and MDIs have
that seat at the table with other financial institutions
because the services that they provide are critical, and the
outreach that they have to these communities of color, women,
rural areas, and other groups are really kind of that piece
that is msising from the financial services system. So the more
support that they get from the private sector because they are
really engaged really enhances that opportunity.
Ms. VELAZQUEZ. Thank you.
Mr. Palmer, despite representing over 50 percent of the
population, female founders garner only 2.1 percent of venture-
backed capital in 2022, and the numbers are not better for
minority led companies. In your experience, what is being done
to increase diversity on both the investor and investment
sides?
Mr. PALMER. Thank you for that question. The Launchpad
Venture Group, which is the group I represent, I have specific
statistics. I will read them out because they are a lot better
than the 2 percent number which it is unfortunate; right? So,
about 13 percent of our founders are minority by their own
definition of that. Twenty-six percent have an immigrant on the
founding team. Thirty percnet have at least one woman on the
founding team. And about 53 percent of the comapneis that we
see--that we fund, excuse me--have a combination of those
three.
One of the things that we are seeing in the industry is on
the investor side people, you know, I said 16 million people
could be angel investors but only 16,000 are. A lot of that
feels like awareness of this opportunity. You know, I talk
about what I do on a daily basis and they say, oh, you can do
that? I can help entrepreneurs? I can make a little money? I
can do these kinds of things; right? And I think a lot of times
those opportunities were done on the golf course or behind the
scenes or any of that kind of stuff.
And so now, because of that awareness especially at
Launchpad, we are actively looking to balance and get folks in
that are female, that are minority.
Chairman WILLIAMS. Your time is up.
Mr. PALMER. Oh, excuse me. I am sorry.
Chairman WILLIAMS. Okay, no problem.
Ms. VELAZQUEZ. My time is up. I yield back.
Chairman WILLIAMS. All right, thank you.
Okay, I now recognize Mr. Luetkemeyer from the great state
of Missouri for 5 minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
The program is notorious for wasting taxpayer dollars with
duplicative programs and unnecessary red tape. One of the most
concerning examples of this within the SBA is the Community
Navigator Pilot. Although the SBA already had a high performing
program to help small businesses with training and development
(SCORE), the Democrat led American Rescue Plan established the
Community Navigator program which duplicates much of what the
SCORE program provides.
Worse in 2022, it was reported that Community Navigators
received $120 million in funding and it only helped 422 small
businesses, while SCORE successfully helped 4,000 small
businesses with $20 million, six times the money, one-sixth of
the businesses.
According to SBA's FY24 budget request they want to
decrease the SCORE program funding and increase the budget for
the Community Navigator Program.
Mr. Pilkerton, from your experience do you think that is a
good deal?
Mr. PILKERTON. Well, thank you for the question. With
respect to the Community Navigator Program, my organization did
not apply or participate so I cannot speak to the metrics that
you reference. But I can tell you this. The SCORE program is
excellent. When I was SBA administrator, I traveled the country
and I will tell you that I went to individual businesses where
the SCORE mentors knew as much about the business as the
business owners and they were just as excited about the
successes of that business. And every small business that I
went to benefited tremendously by the knowledge, the wisdom,
and real experience that these folks had had during very
successful careers.
Mr. LUETKEMEYER. I come from the Lake of the Ozarks area
there in Missouri which is a retirement area and we have lots
of retired executives there. And so that area has a SCORE
chapter. At one time it was the top SCORE chapter in the whole
United States because of so many executives retiring there and
willing to share their expertise and knowledge so it is a
really, really good program, and I really want to highlight
that.
Mr. Palmer, you were talking about developing a program for
angel investors to help leverage money with the SBA a minute
ago. Can you expand on that just a little bit?
Mr. PALMER. Sure. Thank you for the question.
So for angels, a lot of time what we are looking to do is
try to figure out what kind of risk we are underwriting; right?
The goal is to sort of help these companies grow, reach
critical mass, but also, you know, see what their natural exit
is. And that typically happens between let's say 50 and a $200
million exit. We are not talking about the unicorns, if you
know that word. They are unicorns. They are rare for a reason.
We are trying to get involved and help these companies win;
right? Which means we need to start from--if that is the end
point, we need to make sure that we are not overly sort of
taking our after-tax dollars and putting them into companies
and sort of ruining the economics for us and for the founders.
So what we kind of see is for more capital intensive but
very worthwhile businesses. Let's say robotics. Let's say AI.
Let's say chips where an angel does not have the pocket to do
it or we do not have the time to hold on to. That kind of
stuff. Working with the SBA specifically through like SBIR
grants so that the entrepreneur can hold on to more of their
company through the nondelegated funding and then we take over
at the commercialization stage.
Mr. LUETKEMEYER. Quick question for you. With regards to,
you know, the title of the hearing is with regards to inflation
problems here with the small businesses, have you seen
inflation affect the number of businesses interested in having
angel financing or increased it?
Mr. PALMER. That is a good question. We see----
Mr. LUETKEMEYER. I only ask good questions.
Mr. PALMER. No, it was a great question.
Mr. LUETKEMEYER. That is why I am on this Committee. We ask
good questions.
Mr. PALMER. Thank you.
Mr. LUETKEMEYER. We ask them of people that have got good
answers though, too.
Mr. PALMER. We see about 1,500 to 2,000 companies a year
that come through our doors. And some are ready for angel
investment and some are not. A lot are looking for it. I think
what people are recognizing now is that it is a harder funding
landscape and some of the, hmm, I will use the word
``shenanigans'' less defined of sort of the front headlines of
VC and FTX and Theranos are kind of making this a harder place
for these small companies to navigate. As the inflation
affecting the companies that come to us what might affect is
our angels' ability to actually deploy capital, especially if
about 10 percent of their, you know, we say about 10 percent of
your net worth should go into this asset class, maybe no more
because of the risk. So if something else goes down you are
overly allocated in this asset class and it could affect your
deployment.
Mr. LUETKEMEYER. Thank you. Thank you.
Mr. Hodges, thank you so much. I do not have time to ask a
question but I just want to thank you for being here today, for
what you do for a lot of individuals to get them into the
workplace. In today's world, technicians are going to be very,
very important and you are helping them get in that position
and fill a very important need. Thank you so much.
With that, Mr. Chairman, I yield back.
Chairman WILLIAMS. Thank you. And I now recognize Mr.
Landsman from the great state of Ohio for 5 minutes.
Mr. LANDSMAN. No questions.
Chairman WILLIAMS. Mr. Landsman, no questions?
All right. We recognize Mr. McGarvey from the great state
of Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman. Appreciate it. Thank
everyone so much for being here today. We really appreciate you
being in front of the Committee. This is a Committee that does
work together to try and help small businesses succeed in all
of our communities. We know what an important force and part of
the backbone of our communities that small businesses are. So
we want to talk about how we can continue to support the next
generation of those small businesses.
Small business development centers (SBDCs) offer counseling
and training to all sorts of small businesses by developing
informational tools that will provide for foundational guidance
to startups and existing businesses alike.
So Ms. Smith, one of the things you mentioned is that there
is no ``one size fits all'' approach to this. There are 33
million small businesses across the country. We cannot just
have one approach for all of them. But can you touch on how the
SBDCs work to meet entrepreneurs where they are and how this
program provides assistance to small business owners of all
backgrounds?
Ms. SMITH. Yes. Thank you for the question.
We focus on meeting people where they are, entrepreneurs
and small business owners with our outreach within the
community. Of course, during the pandemic that was a different
deployment method but we do work with a lot of chambers of
commerce, nonprofit organizations, as well as our host
institutions of higher education. The more we look at our
stakeholders and our partners in our communities is as I
mentioned a connector and a collaborator, so we meet our
community members where they are. And that is also the
diversity of our clients. The Ranking Member spoke about the
diversity of women and minorities of not understanding the
resources or not getting the same in sales and access to
capital so that can be, we call it in some of the centers, ``Be
on the street.'' So walking down to the community and the
neighborhoods in downtown, visiting the clients that we already
served, but also checking in to clients to talk about our SBDC
services. And as I mentioned, nonprofit organizations, but also
churches, areas where you may not think about small businesses,
but there are entrepreneurs and small businesses to reach.
Mr. MCGARVEY. Thank you. And we want these programs to be
successful.
Ms. SMITH. Yes.
Mr. MCGARVEY. You know, we can be critical of the
administration. When it is time, we want to also offer praise
when it is due but we want these programs to work. We want
these programs to work for our small businesses so we are
encouraging entrepreneurs and small businesses to grow.
And I did notice that the administration added a new metric
that measures client satisfaction with the small business
development centers and the SCORE was 93 percent favorable,
which when that information comes back to us is certainly an
accomplishment.
So with that score that we have gotten back, how do these
SBDCs and the other resource partners set themselves apart from
programs offered at the state and local level in the private
sector?
Ms. SMITH. Thank you. We are an accredited program of
economic development and small business development. So what
that means is a peer-to-peer method of continuous improvement
and excellence in service. And so that model is modeled after
the Baldridge standard. And so that is helpful for looking at
our networks and the consistency but also reinventing our
programs. So that is the way that we look at the excellence of
customer service and our client needs are the most important.
So how we collaborate together, co-counsel, co-advise, but look
at best practices across the nation. So that is a big thing for
us I think as state directors but all partners, is meeting the
client where, as you mentioned in the first question, meeting
them where they are but also what success means for that
client.
Mr. MCGARVEY. Thank you. I appreciate that. Because as I
said, we want these programs to work. We also want more small
businesses. We want people to have access to small business and
to entrepreneurship, particularly, traditionally, disadvantaged
groups. And so I appreciate the work there.
Mr. Hodges, just before my time expires I want to ask you a
question because I loved your statement that students who are
between the ages of 18 to 30 comprise 20 percent of our
population but 100 percent of our future. I could not agree
more with that statement. And this Committee has discussed
extensively the opportunities for students to build careers
outside of the traditional 4-year college route, and I think it
is important that we create pathways to employment and business
ownership for every kind of student.
So what are some ways that we can help more small business
partners, more small businesses partner with career and
technical education programs capable of building their skilled
work force, something I hear that small businesses in my
district, you know, clamor for on a daily basis?
Mr. HODGES. Actually, I would have to say awareness. You
know, when I look at the Small Business Administration and
everything that they are doing, you can go to the website from
the very beginning of your business all the way to closing it
out. All the information is there. But the problem is no one is
getting to that information.
I know I am going to run out of time here. But just say,
for instance, right after the pandemic we were getting a lot of
emails and marketing materials and stuff about the Disaster
Relief Fund. It was so helpful for our school. It really was.
And we took advantage of it. If that same amount of effort was
given--I am not saying it is not here, but if that same amount
of effort was given about the Small Business Administration and
all the things we can do here, it really----
Chairman WILLIAMS. Your time is up.
Mr. HODGES. It really would do a lot. Thank you.
Mr. MCGARVEY. Thank you. I yield back, Mr. Chairman.
Chairman WILLIAMS. Next, we recognize Mr. Meuser from the
great state of Pennsylvania for 5 minutes.
Mr. MEUSER. I appreciate that, Chairman. Thank you very
much. Thank you very much to our witnesses.
So I have got a number of questions. First off, I would
like to ask Mr. Pilkerton, yourself, and Ms. Smith, just
related to cybersecurity resources and access to information.
That seems to be an ongoing them here that we have got to talk
about. But do you feel that small business owners have the
sufficient awareness of what to do should they come under some
sort of cyberattack, Mr. Pilkerton?
Mr. PILKERTON. Thank you for the question.
So, there is information on the SBA website about how you
can protect your business against cyber but to the point that
was just made, that information is on the website. It goes back
to the idea that not only do you need a process, a program, a
risk protocol, but how do you communicate that to the small
business? So you have to do it in an innovative way that is
actually meeting the small business where they are.
So to answer your question, you know, I could not give you
a percentage of small businesses that are aware of the
cyberthreat, but I think it is incumbent upon the federal
government and state governments and local economic development
groups to enhance that and provide that information in an
efficient way.
Mr. MEUSER. Okay. Ms. Smith, does the SBDC offer such
information and connections?
Ms. SMITH. Yes. Talking about the public and private
partnership, that is one. We already have one established and
then developing a new one when it comes to micro enterprises.
So right now small to medium-sized businesses, we give them an
intuitive platform with partnership with an entity called
Posture. On this platform it is training on best practices and
gaining access to vital resources to help protect their data,
devices, and security instability for their operations.
On the other side from micro enterprises is really focusing
not only on cybersecurity but looking at disaster resiliency
and succession planning. So most microenterprises do not
understand cybersecurity or how to protect themselves so trying
to be more proactive than reactive.
Mr. MEUSER. Well, that sounds excellent.
So working with local chambers. I have got some excellent
chambers throughout my district. In fact, they are outstanding.
Do you find the SBA and your organizations work effectively
with the chambers?
I will ask you, Mr. Palmer.
Mr. PALMER. I have no experience with that. Sorry, but
thank you.
Mr. MEUSER. Is that right?
Okay. Mr. Pilkerton?
Mr. PILKERTON. I think they do work effectively. But I
think it would be much more effective because the chambers are
the ones that actually are working with those private sector
companies and have the ability. The U.S. Chamber has a number
of programs around this but I do agree that that could bring a
lot more private resources and also great workforce
opportunities to what Mr. Hodges was talking about.
Mr. MEUSER. County chambers for angel investors as well as
for training programs, I mean, you know, talk about know the
customer. I mean, they spend a lot of time together. They know
them extremely well.
Mr. Hodges, do you engage with the chambers?
Mr. HODGES. Yes, sir. We are very engaged with the chambers
in our area. And as a matter of fact, we are very community
focused as a trade school. And one of the reasons why we became
number one in our area is because every month on our calendars
we always reach out and do something. And through those actions
we actually do a lot of business.
Mr. MEUSER. Let me ask you both this.
Actually, Mr. Palmer, not you because you don't really work
with the chambers yet. You should change that though.
Mr. Hodges, does the SBA or do the local chambers provide
you better access for your business?
Mr. PALMER. Yes, sir. Whenever we need any type of services
for our business, one of the first people that we would
actually contact is our local chamber. Harker Heights Chamber
of Commerce as a matter of fact. And it helps us with
accounting, finding services for electrical work, and much,
much more.
Let me ask all of you this question. So the Navigator
program was introduced in, I think it was the Inflation
Reduction Act. And it cost $130 million. And it served 422 new
businesses or helped start up 422 new businesses which works
out to be about $300,000 per small business star tup. Now, they
do also do servicing on 16,000 others but you can do the math
there. That is like $8,000 per outreach. Do you think there is
a better way of spending money, particularly since it may be
very duplicative to SBDC? Comments?
Ms. SMITH. I mentioned some of what we do with our data and
the strength of the SBDC program. But Community Navigators,
those relationships were already longstanding before the
Community Navigators pilot. So some of those books and hubs we
have already worked with.
Mr. MEUSER. Thank you. I am over my time. I appreciate it.
Mr. Chairman, I yield back.
Chairman WILLIAMS. Thank you.
I now recognize Mr. Thanedar from the great state of
Michigan for 5 minutes.
Mr. THANEDAR. Thank you, Chairman. And I want to thank all
of you for being here and for your testimony.
I am an immigrant. And after getting my education I, you
know, had the entrepreneurial bug and wanted to start my own
business. And it was a little struggle getting capital. But I
was able to secure a 504 from the Small Business Administration
that helped me buy my first building for my business which made
a huge difference. And then, you now, I got another fire for
later. So it is hard to access but if you pursue it sometime
good things happen. My concern, you know, I represent Detroit
and its surrounding areas, Michigan's 13th District.
And Mr. Palmer, Ms. Smith, you know, focus on bringing
entrepreneurship. I feel like I achieved my American dream but
a lot of people in my district do not have access to it and
have difficulty having access to the American dream. And part
of the reason why I am not running my businesses and I sold
them, I decided to enter public service is because I wanted to
help out others to achieve their American dream.
Now, I see, Ms. Smith, you know, really, if you look at the
percentage of Black-owned businesses, they are substantially
lower than our Latino businesses, for example. Substantially
lower than their White counterparts. We also see lower revenues
for Black businesses. Black and Brown businesses. A lower
number of employees.
Mr. Palmer, in terms of capital, I see angel investment is
much lower in Black businesses, angel follow on investment is
substnially lower in Black businesses. And here I am trying to
promote entrepreneurship. And I see a lot. You know, I have a
woman in my district. She is an amazing baker. She bakes
amazing things. She has the technical knowledge. She has a
desire to succeed but does not have the business knowledge. And
so how does, you know, we give people who have the desire, the
skills, technical skills. How do we give them the business
skills?
Mr. Palmer, I believe you have been to Babson. I was in
Babson. I took my son there for an interview at that college.
Purely, being an entrepreneur I was excited to see a college
that is purely focused on entrepreneurship education.
Unfortunately, my son did not take my advice and chose an
alternate school, which was a good school, too. But, so in
terms of angel investment, again, what can be done to get angel
investment in poor Black and Brown communities? Where is the
problem? Is it them being educated? Are there any kind of
hurdles that we can overcome to rectify that situation? I do
not have a lot of time left but I want to let you and Ms. Smith
address some of these concerns if you can.
Mr. PALMER. Thank you. I will be as quick as I can.
So Babson College, the number one entrepreneurship school
for undergrad and grad for the past 25-30 years. Seventy
percent of the students are actually internaitnoal. And one of
the things that I do is also as an entrepreneur in residence, I
am there teaching them how to sort of even navigate which idea
to go with, let alone the process, let alone cofounders, let
alone all this stuff that they have not had experience for. So
half of it is education and the other half is access to the
funding and not putting any barriers up.
So one of the things that we do at Launchpad is you do not
need to know somebody to come in. You can go in through our
application. Granted, we have 185 Members so they are in the
community. They are mentoring. They are part of the chamber of
commerce. I should have said that before; right? But they are
out there meeting these folks before they even are ready;
right? And 70 percent of our funding each year, historically
for 20 years, actually goes into follow-on investments. Because
first you are investing in the dream. And then you are
investing in the results. So it is pretty clear the ROI of
that. But thank you for your question.
Ms. SMITH. You are out of time. Okay.
Mr. THANEDAR. Thank you. I yield back, Chair.
Chairman WILLIAMS. I now recognize Mr. Crane from Arizona,
the great state of Arizona for 5 minutes.
Mr. CRANE. Thank you, Mr. Chairman.
My first question is to Mr. Palmer. How does the government
interfere most with your ability to invest private capital into
potential businesses?
Mr. PALMER. Most is a difficult thing so I will ramble for
4 seconds; right?
So one is sort of the regulatory risks surrounding certain
businesses; right? So I will speak for our industry. We are
mostly focused in New England based companies and so a
reflection of what is going on there. You will see high tech,
you will see life sciences. You will see healthcare. And a lot
of what we have to contend with is if these companies need to
go through regulatory hurdles, if there are stages. If there is
anything like that it impacts our risk, like the risk we are
underwriting, which will impact: (a) the amount of funding we
are willing to give, evaluation, any of these kinds of things.
Second, and I think I sort of mentioned it, we usually see
angel investors invest maybe 10 percent of their net worth in
this asset class because of the risks associated with it. But
that is a relative amount. So if something happens to your
other money related to your house, related to stocks, related
to wherever else it is going, which I think the govnerment has
an imapcat on, that will affect whether we are willing or able
to put monye toward. So I think those are the two I would like
to share. Thank you again.
Mr. CRANE. Next question also to Mr. Palmer. Wh at is the
area you are seeing govnerment fail small business the most in?
Mr. PALMER. Where I am seeing it most is--and this is more
anectdotal maybe. I do not have the data to surround this but a
lot of companies that could benefit from these SBIR grants that
I have been talking about are afraid to go through the process.
They are afraid of the paperwork. They think they need to know
somebody. They had an entrepreneur that did it and they heard
about it. But however it was perceived to them it is a barrier.
And so they go with the hard way. Or they bootstrap it to the
point where they have no more money left. And so what I am
seeing there is maybe it is education, maybe it is a streamline
of this process, but those two things are sort of getting in
the way of companies. And I think that might be a failure worth
looking at.
Mr. CRANE. Follow-on question, Mr. Palmer. How efficient do
you think the U.S. government is including the SBA?
Mr. PALMER. I do not know if I can answer that question.
Not for any reason; I just do not have a good response for you.
Mr. CRANE. So you do not have an answer on whether you
think the U.S. Government is efficient or not?
Mr. PALMER. I know for Launchpad we get entrepenerurs in
and out of the process in 3 weeks or less and we judge them
based off of the returns. It is pretty simple the ROI of that.
I am not sure if I have heard ROIs for the other side.
Mr. CRANE. What about you, Mr. Hodges? What do you think?
Do you think the federal government tends to be very efficient
or not?
Mr. HODGES. In education it is a little bit different.
Like, for instance, with a trade school, our----
Mr. CRANE. Hold on real quick, Mr. Hodges. That is not the
question I asked you. I asked you, do you think the federal
government is efficient? Is run efficiently?
Mr. HODGES. Is it run efficiently? I realy cannot
effectively say.
Mr. CRANE. Okay. Does anybody on the panel know how much
national debt we have here in the federal government?
Ma'am, I saw you smile at the end. Do you want to take a
stab at it? Any idea? Just anybody, give me a ballpark. Is it,
would you say $10 trillion plus, 20 trillion plus, 30 trillion
plus?
Mr. HODGES. Thirty trillion.
Mr. CRANE. Yeah, you are right.
Does anybody know what it is going to be by January 2025
due to the bill that we passed in the House or that we passed
this last week? Anybody know? About 36 trillion.
My point is is that there are some great people that come
into this Committee who actually, and I am an entrepreneur
myself. I love entrepreneurs. I love entrepreneurship. I have
seen it lfit so many people up, seen it help so many people in
the community. My point is to this panel and this Committee and
it is going to continue to be is that the federal government
should not be heavily involved in it because it does a horrible
job with the tax dolalrs. And when all this money comes up and
nobody knows where it went, guess who gets fired? Nobody, ever.
Thank you for letting me bloviate and go long, Mr.
Chairman. I appreciate it.
Chairman WILLIAMS. I now recognize Mr. Pappas from New
Hampshire, the great state of New Hampshire for 5 minutes.
Mr. PAPPAS. Thank you very much, Mr. Chairman. I want to
thank our panel Members for their comments here today. I am
from New Hampshire where small business is big business. And
our main street economies drive our state and our regional
economy.
Ms. Smith, I am glad that you are here. I have gotten to
know the work of our small business development centers, the
way that they work closely with other resource partners in the
small business space. And just to sort of be able to measure
the impact that they make, they have helped small businesses
access more than $44 million in new capital in New Hampshire,
increase sales by $17 million, and create and retain about 760
jobs just over the last year. Overall, their economic impact
was about $207 milllion in New Hampshire's economy. That role
has expanded since the pandemic as they built new relationships
and met new entrepreneurs to be able to support.
Now, several folks have referenced the issue of duplcation
which I think is an important thing for us to focus on but I
will address a GAO study that was done about 10 years ago that
focused on duplication, fragmentation, and overlap of various
entrepreneurial development programs. No duplication was
specifically found by GAO at that time. They did find overlap
and fragmentation. Made recommendations for more collaboration
within the variety of agencies within SBA and their resource
partners. All recommendations were resolved, have not
reappeared on their annual report on duplication,
fragmentation, and overlap. So, I think that is something that
is important to reference. And what I see where I live in New
Hampshire is a great deal of collaboration among resource
partners. One bill I have introduced helps highlight that
collaboration. It is actually called the Collaborate Act, which
builds upon the collaboration between our PTACs or procurement
technical assistance centers in New Hampshire SBDC. Brings to
bear some common sense ways that these federal agenceies can
cooperate.
So I am wondering, Ms. Smith, that was a long sort of entre
there, but if you could discuss the role of SBDC as being sort
of a nexus of resource partners. And if you see any duplication
out there that we need to address or the ways that you think
that greater collaboration can be fostered between various
agencies and resource partners that do this work for our small
busineses.
Ms. SMITH. Thank you for the question. And as you
mentioned, within your state, the more resources we had during
the pandemic, the more output and success that we had to
support our small businsses. So that is a way for the support
to the SBDC program.
But as you said, the center of collaboration and a
connector for our community, we are the statewide program to
help build that federal, state, and local connection for
collaboration, the ecosystem for small business assistance and
support. With that being said, a lot of the assistance that we
provide is why we are co-locatedd with certain locatinos,
whether it is a chamber of commerce. Of course, our
institutions of higher education, PTACs, now ATACs,
accelerators on the established business side. So that whole
life cycle of a business is where SBDCs are that really trusted
partner to come and provide the technical assistance but also
connect the business owner with the resourcers that they need.
Mr. PAPPAS. Well, thanks for that comment. Small businesses
are diverse in how they are established, in terms of how they
procure capital, in terms of their day-to-day needs. And I
think we need to continue to appreciate that as we think about
the constellation of resource partners that are out there to
support them.
And I will also editorialize here a little bit and say that
I was very disappointed to see in the president's budget a cut
proposed to SBDCs, and I hope that Congress can work to
maintain or increase funding for the work that you all do which
is a lifeline.
Maybe in the remaining time I have if I could ask Mr.
Palmer a question. Congress on a bipartisan basis has been
focused on how we rebuild the nation's infrastructure, how we
invest in our industrial base, including in the semiconductor
industry. We need to see serious workforce development as part
of that. But maybe you can speak to how public dollars can be
matched with private investment in the interplay between those
pools of money.
Mr. PALMER. Sure. I think I have mentioned it, but thank
you for the question, a couple of times of underwriting the
capital intensity of certain opportunities; right? So for
semiconductors, for training these AI models that seem like
magic, it takes a significant amount of hardware, a significant
amount of money, a significant amount of energy to get to that
magic moment. And so pairing sort of that ability for a longer
time horizon and potentially deeper pockets with the stage at
which commercialization can happen and we can build, you know,
the job creation opportunities, build companies around it and
all that, I think that is how it gets paired.
Mr. PAPPAS. Thanks for those thoughts.
I yield back my time.
Mr. CRANE. I now want to recognize Ms. Salazar from Florida
for 5 minutes.
Ms. SALAZAR. Thank you. And I represent the city of Miami
which is, according to a study conducted by the federal
government is one of the best places in America to start a
small business because for immigrants and for the Hispanic
community you have your small shop or having your small
business is living the American dream. So I want to thank all
of you for coming and sharing with us your experience.
And specifically to Mr. Palmer, you said here on your
statement that the SBA should begin to leverage local angel
groups that are present in every community. So could you be a
little bit more specific as to which way we could help you
leverage those local angel groups through the SBA?
Mr. PALMER. Sure. So thank you for the question.
One of the things that we like to think about when we, you
know, I said 1,500 of 2,000 companies come and some of them are
prepared for venture scale funding, angel scale funding, and
some are not; right? And knowing the difference between those
two could be a way to say the small businesses that are the
local shops that really support that, whatever, maybe it is a
craft, maybe it is a service, but the scale sort of stops at a
certain point versus the angel and VC sort of very large scale.
They are small businesses to begin with and then they grow from
there. And so knowing how to kind of almost collaborate
together to say you belong here and you belong with me could be
one of the best ways to do it. That is joint. That is
potentially going to local angel groups. We are doing
mentorships. So if you do mentorship----
Ms. SALAZAR. To see if I understand a little bit better. If
you had to write legislation that will rule over SBA, so what
would that legislation say in order to create what you are
saying, to leverage local angel groups? Because what you are
saying here basically is that there is a disparity; that the
SBA could help narrow the disparity by developing programs that
leverage that private angel. So what are the programs that we
would have to create?
Mr. PALMER. Yeah. So in all honesty I do not know all the
existing programs, and especially not basically that may be in
your area. But still, it is finding ways. I do not see any SBA
folks at my angel group meetings out in the community when I am
watching pitch competitions which are open to the public;
right? And so knowing that we are not in the same place. I am
not sure you need to legislate it or mandate it but we are just
not in the same place and I think that is doing a disservice to
companies----
Ms. SALAZAR. And if we were to be in the same place, what
is the benefit for the community? What would be the benefit for
the community?
Mr. PALMER. So of those 2,000 companies we see, we only
invest in 2 to 5 percent of them. Some just are not ready and
some will never be sort of venture scale. Knowing that they are
not coming with us and they can go with another opportunity, I
think that is where the benefit to the community is.
Ms. SALAZAR. You said that there are 16 million, there
could be 16 million angel investors and there are only 16,000,
that is a big disparity. What is the number one cause for that
disparity?
Mr. PALMER. Awareness that you can be an angel investor and
how to do it, not, you know, like gambling or willy-nilly. Like
actually----
Ms. SALAZAR. Okay.
Mr. PALMER.--finding the companies, working together,
guiding them. We sit on the boards of our companies. We are
with them for between 5 and 10 years. I tis one of those things
that people just do not understand how the process of angel
investing sort of works. And maybe they have not had exposure
to it. But it is awareness.
Ms. SALAZAR. And how could we help you or help the
community become aware of those 60 million potential angel
investors. I am trying to figure out which way we could help
you.
Mr. PALMER. Yeah, thank you for that. I appreciate it.
Marketing. Understanding when someone goes to the SBA and
they are ventured scaled, like here is what angel investors
are. Talking to the people around you, constituents, any of
that kind of stuff. It is an awareness problem which is
effectively a marketing problem in my opinion.
Ms. SALAZAR. So you are suggesting for the SBA to become--
that is what I am trying to understand. Marketing, I did not
think we were in the business of marketing but then how could
we be within the rules?
Mr. PALMER. Without going too much farther out on a limb, I
am not actually sure.
Ms. SALAZAR. So what you are basically telling me is tat we
should be marketing to our constituents the fact that there are
angel investors. But then we are trying to figure out how to do
that.
I might flip that if I might. Please do. Maybe I am not
understanding.
Mr. PALMER. Sure. So 16,000 angel investors are part of the
ACA, or excuse me, $15,000; right: We invest about $950 million
Imagine if there were two more zeros attached to that and what
that would do. I am not sure how to solve the problem but there
is something there to unlock.
Ms. SALAZAR. Okay. Got it. Thank you. I yield back.
Mr. CRANE. I now want to recognize Ms. Gluesenkamp Perez
from Washington for 5 minutes. I apologize if I said that
wrong.
Ms. GLEUSENKAMP PEREZ. Four points. Thank you, Mr. Chair.
Mr. Hodges, thank you for being here. I am glad that the
Committee is highlighting the important work that you do in
preparing students for employment and career advancement in
healthcare and construction job trades, job market. But there
is significant pressure for young people to go to college and
pursue a 4-year degree. At the same time we know that so many
small businesses are impacted by ongoing shortages of skilled
labor and training centers like yours are important to make
sure that businesses have the skilled labor they need.
So my question, how do we confront the enormous pressure,
societal pressure, family pressure on young people to go to
college and instead get more of them to see the opportunities
in the trades? How do we set up a pipeline for them to get into
these jobs and be successful?
And beyond that, how can we help more businesses partner
with career and technical education programs to utilize the
critical skills that students are learning at centers like
yours?
Mr. HODGES. Thank you. Thank you for that question.
One of the things that we really need is a better
partnership between high schools and the training schools like
we actually have. For instance, the one thing that sets the
Training Center apart from a lot of these universities is the
fact that we can actually train our students in 6 months for
several ready jobs. And these particular jobs are in in-demand
fields. A lot of our students, they simply do not want to go
off to a university and wait 4 years to actually make a decent
living. And there are actually some great paying careers out
there in the electrical, in the trades. But the challenging
thing is right now in the high schools, there is really no push
to go into these particular trades. And so if we can get some
help bridging that gap that would be great.
Ms. GLUESENKAMP PEREZ. I would like to mention that
apprenticeship provides a really great opportunity for folks to
get on-the-job training while they learn and data shows that
businesses can get a really strong return on this. But in my
experience, I own an auto repair and machine shop with my
husband and we looked into having a 16-year-old kid come in an
apprenticeship program and we could not afford the liability
insurance and very real concerns about inviting the DOL into
our business in that way. And we decided we could not do it
until we found a private nonprofit that agreed to cover the
cost of his liability insurance to have a 16-year-old in the
shop with us. He has been with us ever since. He just bought
his first house. These are pathways to a solid middle class.
But the hurdle for small businesses to access these programs
and to engage in apprenticeship programs on the capital side
can be really intense. I wonder if you could sort of speak to
some of the broader sort of challenges that businesses face and
engaging in these apprenticeship programs.
Mr. HODGES. As far as with the trades?
Ms. GLUESENKAMP PEREZ. Well, some of the challenges that
they are going to have immediately is just typical business,
you know, as far as an entrepreneurial education,
entrepreneurial programs. But also just access to capital. One
of the challenges that you actually run into when you start a
business is just keeping your cost down. And if you can
actually have an entrepreneurial programs in high schools that
can actually show them how to put together business plans, how
to put together all of the different steps for operating a
business, I think that that would be very beneficial.
Mr. HODGES. Now, we actually are doing something very
similar to this for the Boots to Business program on our bases
here for veterans. But I believe that is sorely lacking right
now out in the regular community for civilians.
Ms. GLEUSENKAMP PEREZ. Thank you so much to all of our
witnesses for their testimony today. Thank you for the work you
are doing.
Mr. Chair, I yield back. Thank you.
Mr. CRANE. In closing I would like to thank your witnesses
for their testimony and for appearing before us today.
Without objection, Members have 5 legislative days to
submit additional materials and written questions for the
witnesses to the Chair which will be forwarded to the
witnesses. I ask the witnesses to please respond promptly.
If there is no further business, without objection, the
Committee is adjourned.
[Whereupon, at 4:08 p.m., the committee was adjourned.]
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