Mr. Sean Greene
Associate Administrator for Investment & Special Advisor of Innovation, United States Small Business Administration
TESTIMONY OF SEAN GREENE ASSOCIATE ADMINISTRATOR FOR INVESTMENT AND SENIOR ADVISOR FOR INNOVATION POLICY U.S. SMALL BUSINESS ADMINISTRATION BEFORE THE U.S. SENATE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
NOVEMBER 29, 2012
Chair Landrieu, Ranking Member Snowe and members of the Committee. I’m pleased to testify before you.
I want to thank you for calling this hearing, and for your strong support of SBA and your commitment to reaching entrepreneurs in new, creative and more effective ways.
One of my main focuses at SBA is specifically on high-growth entrepreneurship. As you know, high growth small businesses create the vast majority of net new jobs in our economy, but we know they have different needs in order to grow and succeed.
To address the needs of these businesses, the Administration created Start-up America, a major initiative focused on high-growth companies and entrepreneurship.
And one of the first things we did as part of Start-Up America is we went around the country and we listened to our “customers.” In total, we met with more than 1,000 entrepreneurs, investors and other key stakeholders.
What we heard was that there are many challenges, ranging from access to capital to difficulty attracting the right human capital. And that there are many opportunities for the public and private sectors to work together to address these challenges. And based on the feedback we heard, we acted. We worked to make significant improvements to our core programs that support high growth entrepreneurship. At the heart of these improvements have been efforts to streamline, simplify and strengthen our programs.
One of the programs where we have made great strides – and where legislative changes that this committee has sponsored and supported could allow us to do even more – is with the Small Business Investment Company (SBIC) program.
As many here today know, the SBICs are part of a unique program at SBA that puts long-term patient investment capital into America’s small businesses, allowing them to grow and create jobs. Today, the SBIC program serves as a model of a successful public-private partnership.
The program, which has been around since 1958, is totally market-driven. We don’t make investment decisions; experienced private fund managers do.
Today, the program oversees more than 300 SBA-licensed funds, which invest in a wide array of small businesses, such as JSI Store Fixtures in Milo, Maine, which has more than doubled its workforce from 80 to 200 employees since receiving SBIC investment in 2006. The Company recently won an award from the Small Business Investor Alliance as the SBIC portfolio company of the year.
In Fiscal Year 2012 (FY 2012), I am proud to tell you that the SBIC debenture program and its stakeholders had their third consecutive record-breaking year. The program reached record levels in terms of number of SBICs licensed, the amount of commitments of both private capital and SBA-guaranteed leverage and, most importantly, the amount of financing provided to America’s small businesses. We have also streamlined the application process over the past four years. It used to take almost 15 months to get a new SBIC fund licensed. We have gotten that down to a little more than 5 months.
And we believe that two legislative changes that have been offered in the SUCCESS Act, the RESTART Act, and other pieces of legislation would allow this program to reach even more high growth small businesses.
One change would increase the SBIC Debenture program authorization from $3 billion to $4 billion. While SBA has never hit our $3 billion annual authorization limit, we have grown the program significantly in recent years.
The second change that the Administration supports increases the amount of leverage by licensees under common control from $225 million to $350 million, with appropriate safeguards. Some of our best performing fund managers have multiple funds, but many are capped out at the current limit.
We believe these modest changes will allow the program to continue to grow without any significant additional risk to the taxpayer, allowing us to keep this program at zero subsidy.
Another set of programs that is essential to our innovative small businesses are our Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Since Congress’s passing of the comprehensive reauthorization of the two programs last year, we have been working hard on the rule makings, and we are in the final stages of the process. We also have a new Policy Directive implementing the legislation in effect and have taken public comment on that. In the previous Reauthorization, implementation of a new Policy Directives took 2 years; this time we got it done in 7 months. While there is lots of work in the actual implementation of the law across the participating agencies, SBA has been staying on top of it and feels good about the progress that has been made. Most importantly, small businesses have a new sense of confidence knowing that there is a long-term authorization in place. And I want to specifically thank the committee for their work in making that all possible.
In addition to these programs, SBA is looking to continue its role as advocates for small businesses and startups. We’ve been listening, and we’ve been taking action as a result. The Administration has instituted a Presidential Innovation Fellows program to bring entrepreneurs into the government to help solve problems and implement innovative approaches. I know there is legislation before this committee that would expand on this very idea, and we look forward to working with you on that.
We have been working with other agency partners on everything from ideas around immigration reform to reducing the regulatory burden on small businesses, to supporting accelerator and mentorship programs around the country … and will continue to partner as we address these difficult issues.
In closing, Chair Landrieu, I once shared with you my favorite definition of an entrepreneur – “one who does more than anyone thought possible, with less than everyone thought necessary.” As a former entrepreneur in the private sector, it is exactly this spirit that we are bringing to SBA. Taking more entrepreneurial approaches, and doing more than anyone thought possible, to help our nations entrepreneurs.
I look forward in working with you on policies that will help us achieve this goal. Thank you and I am happy to answer any questions.