Kerry Opening Statement on Venture Capital and Entrepreneurial Development Markup
Good morning. Let me call this markup to order. Before us today are three bills:
# S. 1662, the Small Business Venture Capital Act of 2007, which reauthorizes the Small Business Investment Company program,
# S. 1663, the Securing Equity for the Economic Development of Low Income Areas Act of 2007, or the "SEED Act," which reauthorizes the New Markets Venture Capital program,
# And last, S. 1671, the Entrepreneurial Development Act, which reauthorizes and expands the Small Business Administration's entrepreneurial development programs.
I am hopeful that we will get a quorum as quickly as we did for the markup a few weeks ago, on May 16th, of the Small Business Loan Reauthorization bill. Once we get a quorum of seven, we can start voting on the substitute amendments. And then when we have ten members, we can take roll call votes on the two underlying bills.
To be specific, we will vote on the substitute amendment that Senator Snowe and I are offering to S. 1662, the Small Business Venture Capital Act of 2007, which incorporates the New Markets Venture Capital bill and the changes we made based on feedback from the roundtable we had last week. And then, we will take a roll call vote on that bill. Then, we will vote on the substitute amendment that Senator Snowe and I are offering to S. 1671, the Entrepreneurial Development Act, and then finally, we will vote on that bill.
While we wait for members to show up, I want to thank Senator Snowe and her staff for all the work they put into developing these bills, and for the groundwork that Senator Snowe laid last year.
Let me summarize the two venture capital bills. The provisions in S. 1662 regarding the Small Business Investment Company (SBIC) programs have three objectives: to simplify the SBIC Debenture program so that it is more attractive to investors, to tweak the SBIC Participating Securities program so that it allows the last operating funds to make follow-on investments while still allowing the SBA to stabilize losses, and, overall, to use these changes as a way to restore the reputation of and confidence in the SBIC program.
As for the New Markets Venture Capital program, we reauthorize the program through 2010, allowing it to start anywhere from 10 to 20 more funds. This is important, because, as we heard at the roundtable from Dr. Julia Rubin, the country's expert on this type of venture capital, without this government partnership, these investments would not be done. While angel investors will make small financings, they do not have the time or breadth of expertise to compensate for what may be lacking as the company develops a sophisticated management and marketing team. The bill aligns the New Markets Venture Capital program with the New Markets Tax Credit program, as Congress intended, by adopting its definition of low-income community and its targeted populations as eligible investments for portfolio companies. As we heard in the roundtable, a geographic area is "too blunt" as an instrument to meet the objectives of the program.
The bill also aligns the New Markets Venture Capital program with its sister program at the Department of Agriculture, adopting its rules for operations assistance grants. These changes will make it easier to attract investors, and easier to attract interested fund managers.
The manager's amendment makes six technical changes to the venture capital bills, and makes one addition, affecting both programs. Specifically, the amendment adds a provision that increases the maximum amount allowed to be invested in one company from 20 percent to 30 percent of the private capital. This will bring the programs more in line with the private sector practices, which allows 20-25 percent of the entire fund to be invested in one company. This change has the added benefit of streamlining the program for both the SBA and the funds by eliminating the administrative burden of applying for exceptions to exceed the amount, which is time-consuming for the Agency and has left firms waiting as long as two months for a reply. For the small businesses, it allows them to receive more funding without having to identify a different investor, which, as we heard in the roundtable from one small business, is extremely time-consuming and expensive.
In everyone's briefing book, there is an outline that lists the specific changes in the amendment.
Though many of you are familiar with the provisions in the Entrepreneurial Development Act, because you voted for most of them last year as part of S. 3778, let me summarize them. The bill reauthorizes and expands the Small Business Administration's entrepreneurial development programs. In particular, it supports women and minority small business ownership opportunities by boosting Small Business Development Centers, Women's Business Centers, SCORE, and other counseling and assistance programs.
It also creates three new programs in support of Native American entrepreneurship, an area that the SBA has not adequately served in the past. This bill also takes step to improve small business ownership by minorities in highly skilled fields such as engineering, manufacturing, science and technology, and guide them towards entrepreneurship as a career option. Traditionally, minority-owned businesses are disproportionately represented in the service sectors. Promoting entrepreneurial education to undergraduate students will help expand business ownership beyond the service sectors to higher growth technical and financial sectors. I am also pleased that this bill will provide additional regulatory assistance and information about available health care options to small businesses. These are important issues, which affect small businesses every day, and should be addressed.
Investing in these core small business assistance programs is critical to creating jobs and boosting our economy. This Committee has long sought to make these kinds of improvements. Almost all of these provisions unanimously passed the Committee on Small Business and Entrepreneurship last Congress, and I am pleased that we are moving forward on these once again.
The substitute amendment to this bill makes a number of technical changes and outlines a few additional criteria for grants for Women's Business Centers.
I now turn to our Ranking Member, Senator Snowe, for any remarks she may have.