STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
House Committee on Small Business
Markup of H.R. 3567, “The Small Business Investment Expansion Act of 2007”
September 20, 2007

In today’s markup, the Committee will address issues to strengthen and update the SBA’s venture capital programs.  Perhaps none of the SBA’s directives have proven more important than the investment mission, because without this vital resource, no business can grow.  Were it not for the SBA’s access to capital programs many of our nation’s leading companies would have never become as successful as they are today.  Apple, Costco, Federal Express, and Intel are just a few of the companies that have benefited from the SBA’s investment programs. 

For the SBA’s investment mission to have continued success, however, it will be vital that the agency’s programs be updated and simplified to meet the growing economic challenges they were originally intended to address.  Over the past five years the amount of venture capital going to startup small businesses under the SBA’s flagship equity investment program, the SBIC program, has steadily declined.  This has not only limited the ability of small businesses to expand and grow, but also has hindered their ability to generate innovative new ideas and new products. 

Almost equally troubling has been the decline in the SBA’s ability to provide equity capital for socially and economically disadvantaged small businesses.  Without funding, however, the New Markets Venture Capital program has lacked the resources to license new venture capital companies or expand into new low income communities. 

In its brief history, however, the New Markets program has proven its potential to develop vibrant small businesses that can dramatically improve the economic conditions in low income communities. 

Most notably, the SBA has continued to apply outdated and unreasonable affiliation policies against venture capital companies and has effectively stifled the free flow of venture capital to small businesses.  These policies are not only inconsistent with the affiliation rules that the agency follows in other contexts, but are also unreasonable.  These polices impede the flow of venture capital to small businesses for minimal benefit. 

The Small Business Investment Expansion Act that we will mark up today is an important step toward reversing these problems.  This legislation will renew our commitment toward small business investment by providing much needed simplifications to the SBIC and New Markets programs. 
A new Angel Investment Program will be established to would fill the gap in seed capital that was created by the elimination of the Participating Securities program.  The bill also features a renewed focus on providing equity capital to businesses in low-income areas and minority-owned businesses – two key sectors of the small business community that have continued to face particularly high barriers to securing venture capital. 

Small businesses deserve our efforts to listen to their problems and remove barriers.  Such cooperation is good for all of us because it is these businesses that are the most innovative, that create new jobs, and produce half our income.  They deserve our best efforts. 

As this country continues to rely on entrepreneurs to spur economic development and create jobs, the need for venture capital will only continue to grow.  The progress that this Committee has made in addressing this is a testament to the Committee’s hard work and cooperation. 

I would like to specifically thank our Ranking Member Chabot, and his staff for their willingness to work together on this legislation.  Also, thanks to Mr. Altmire, the Chair of our Subcommittee on Investigations and Oversight, who with Mr. Graves from Missouri introduced Small Business Investment Expansion Act of 2007.   But as significant as the work we have done to date is, there is still more to do.  I look forward to our continuing collaboration to do what best serves our nation’s small businesses.