STATEMENT
of the
Honorable Nydia M. Velàzquez, Chair
House Committee on Small Business
Hearing to Consider Legislation Improving the SBA’s Investment Programs

In today’s hearing, the Committee will examine a proposal to improve the Small Business Administration’s existing investment programs and establish a new Angel Investment Program.  These enhancements, which expand access to venture capital, will help modernize the SBA so that its service-offerings meet the needs of America’s entrepreneurs.   

In June, this Committee received testimony from key members of the investment community who described the challenges facing our nation’s small businesses.  Small businesses rely on venture capital investment to fund their pursuit of new ideas.  Indeed, many well known companies began as small businesses that grew to prominence with the help of venture capital. 

Several companies like Google, IBM, and Microsoft would not be the industry leaders they are today if it were not for venture capital investment.  Yet, despite this importance, it remains extremely difficult for small businesses to attract investment.  This is particularly true for two key segments of the business community – early stage businesses and those located in low-income areas.

Over the last five years, there has been a steady movement of venture capital away from small business startups and toward later stage businesses.  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.  Venture capital represents the lifeblood for these businesses, and without it, these startup companies will never reach their full potential.

Perhaps no federal agency is better positioned to address these problems than the SBA.  Unfortunately, the Administration has failed to press these advantages for the benefit of the small business community. It continues to withhold the support necessary for the New Markets program to achieve its full potential.  Similarly, SBA has failed to explore new strategies that have proven successful at increasing venture capital investment in startups.  And, perhaps most notably, the agency continues to follow outdated policies that restrict the flow of venture capital and other forms of investment to small firms. 

The Committee Print being considered will begin to reverse these policies. This proposal would renew our commitment to increase investment in low income areas by restoring funding for the NMVC program.  It also features a renewed focus on small manufacturing companies, providing much needed help to communities that have suffered from a loss of their industries.

A new Angel Investment Program would also be established.  This would fill the void for seed capital that has been created by the elimination of the Participating Securities program.  This emerging strategy is already enjoying widespread success in the private sector and will be a vital step in ensuring that startup and early stage businesses have the capital they need to grow stronger.

The proposal will simplify and streamline the treatment of small businesses receiving venture capital investment.  This change will ensure that entrepreneurs have unimpeded access to this key form of financing.  Together, these initiatives will strengthen the SBA’s commitment to improving investments in small businesses and dramatically improve innovation among our nation’s entrepreneurs.

Our small businesses have always been the incubators for new ideas – and investment has been the fuel for this great engine of American economic development.  As this country continues to rely on entrepreneurs to spur economic development and create jobs, the need for equity capital will only continue to grow.  

I would like to extend our thanks to all of the witnesses who will be testifying today.  I am sure that their unique view and comments on the proposed legislation will be insightful as the Committee moves forward in the legislative process on this very important subject.