Senators John Kerry [D-Mass.] and Olympia J. Snowe [R-Maine], chairman and ranking member of the Committee on Small Business and Entrepreneurship, introduced two bills this week to foster more equity investment in America’s small businesses.Yesterday, Kerry hosted a roundtable discussion with venture capital experts, business groups, venture capital firms, and successful small businesses that have received capital through government-backed private equity funds to get input on legislation to improve the Small Business Investment Company [SBIC] and New Markets Venture Capital [NMVC] programs.
“Massachusetts ranks second in the country in venture capital financings -- with more than 37,000 employed by government-backed small business investments,” said Kerry. “If not for the Small Business Investment Company program, many of these small businesses would not have access to venture capital funds. But Washington can do more to foster public-private partnerships that leverage critical venture capital for small businesses.”
“Our proposals will attract new investors to back great ideas and stimulate economic development in impoverished rural, urban and low-income areas. This will help small businesses jump-start local economies, create thousands of jobs, develop new technologies, and keep our country competitive in the global marketplace.”
“For entrepreneurs and other aspiring small-business owners, a self-evident truth since the founding of our country is that it takes money to make money,” Snowe noted. “Our legislation makes that goal a little easier for aspiring small-business owners by ensuring that our entrepreneurs have access to the resources they need, so they can continue to drive America’s economic growth and job creation.”
Since 1958, when the SBIC program was created, more than 100,000 small businesses have received $48 billion in investments. Last year, SBIC financing totaling more than $21 billion supported more than 2,000 small businesses, which employed 286,000 people.
The program was designed to help small businesses acquire venture capital through government-backed private equity funds when capital through banks and other traditional sources was not obtainable. Companies like Intel, Quiznos, Jenny Craig, Federal Express, and Outback Steakhouse are all SBIC success stories.
The Small Business Venture Capital Act of 2007 will reauthorize the SBIC program through 2010, ensuring the continued availability of needed venture capital for small firms. It will also simplify the program’s regulations, encouraging new and existing investors to increase their involvement.
Kerry and Snowe also introduced the Securing Equity for the Economic Development of Low Income Areas Act of 2007, or the SEED Act, to promote venture capital investment in rural, urban and low-income areas. The bill improves the NMVC program, which Kerry helped create in 1999.
The NMVC program was designed to promote economic development, business investment, productive wealth and stable jobs in communities where there is little to no sustainable economic activity, but many overlooked business opportunities. Unfortunately, the program expired last year.
Specifically, the SEED Act will reauthorize the program for the next three years until 2010, making it possible for the Small Business Administration to license up to 20 more NMVC funds. These funds will have the potential to leverage a total investment of $250 million in small businesses in low-income areas, with $150 million backed by the government.
Sources: U.S. Small Business Administration, U.S. Senate Committee on Small Business and Entrepreneurship
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