[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





 AMERICA'S INNOVATION CHALLENGE: WHAT OBSTACLES DO ENTREPRENEURS FACE?

=======================================================================

                                HEARING

                               before the

                SUBCOMMITTEE ON TARP, FINANCIAL SERVICES
              AND BAILOUTS OF PUBLIC AND PRIVATE PROGRAMS

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 2, 2011

                               __________

                           Serial No. 112-92

                               __________

Printed for the use of the Committee on Oversight and Government Reform








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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

  Subcommittee on TARP, Financial Services and Bailouts of Public and 
                            Private Programs

              PATRICK T. McHENRY, North Carolina, Chairman
FRANK C. GUINTA, New Hampshire,      MIKE QUIGLEY, Illinois, Ranking 
    Vice Chairman                        Minority Member
ANN MARIE BUERKLE, New York          CAROLYN B. MALONEY, New York
JUSTIN AMASH, Michigan               PETER WELCH, Vermont
PATRICK MEEHAN, Pennsylvania         JOHN A. YARMUTH, Kentucky
JOE WALSH, Illinois                  JACKIE SPEIER, California
TREY GOWDY, South Carolina           JIM COOPER, Tennessee
DENNIS A. ROSS, Florida











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 2, 2011.................................     1
Statement of:
    Koester, Eric, co-founder and CEO, Zaarly, Inc.; Lonna J. 
      Williams, CEO, Ridge Diagnostics; and TSVI Goldenberg, CEO, 
      eemRa......................................................     9
        Goldenberg, TSVI.........................................    30
        Koester, Eric............................................     9
        Williams, Lonna J........................................    18
Letters, statements, etc., submitted for the record by:
    Goldenberg, TSVI, CEO, eemRa, prepared statement of..........    32
    Koester, Eric, co-founder and CEO, Zaarly, Inc., prepared 
      statement of...............................................    12
    McHenry, Hon. Patrick T., a Representative in Congress from 
      the State of North Carolina, prepared statement of.........     4
    Williams, Lonna J., CEO, Ridge Diagnostics, prepared 
      statement of...............................................    21

 
 AMERICA'S INNOVATION CHALLENGE: WHAT OBSTACLES DO ENTREPRENEURS FACE?

                              ----------                              


                      WEDNESDAY, NOVEMBER 2, 2011

                  House of Representatives,
      Subcommittee on TARP, Financial Services and 
           Bailouts of Public and Private Programs,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:33 a.m. in 
room 2203, Rayburn House Office Building, Hon. Patrick T. 
McHenry (chairman of the subcommittee) presiding.
    Present: Representatives McHenry, Amash, Meehan, Guinta, 
Maloney, Quigley, and Yarmuth.
    Staff present: Will L. Boyington, staff assistant; Molly 
Boyl, parliamentarian; Peter Haller, senior counsel; 
Christopher Hixon, deputy chief counsel, oversight; Hudson T. 
Hollister, counsel; Rebecca Watkins, press secretary; Jeff 
Wease, deputy CIO; Jaron Bourke, minority director of 
administration; Adam Koshkin, minority staff assistant; Jason 
Powell, minority senior counsel; Brian Quinn and Davida Walsh, 
minority counsels; and Rory Sheehan, minority new media press 
secretary.
    Mr. McHenry. The committee will now come to order.
    This is the Subcommittee on TARP, Financial Services and 
Bailouts of Public and Private Programs. Today's hearing is on 
America's Innovation Challenge: What Obstacles Do Entrepreneurs 
Face?
    It is the tradition of this subcommittee to begin with the 
Oversight and Government Reform Committee's Mission Statement.
    We exist to secure two fundamental principles. First, 
Americans have the right to know that the money Washington 
takes from them is well spent. Second, Americans deserve an 
efficient, effective government that works for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect these rights. Our solemn responsibility is to 
hold government accountable to taxpayers because taxpayers have 
a right to know what they get from their government.
    We will work tirelessly in partnership with citizen 
watchdogs to deliver the facts to the American people and bring 
genuine reform to the Federal bureaucracy. This is the mission 
of the Oversight and Government Reform Committee.
    I will recognize myself for 5 minutes for an opening 
statement.
    Over 2 years into an economic recovery, America's labor and 
capital markets continue to face unprecedented challenges. 
Nearly 14 million Americans remain officially unemployed, an 
additional 11 million underemployed, and small businesses 
continue to struggle to access capital despite endless numbers 
of government initiatives. Fixing our capital markets and 
economy will not occur overnight, nor will it be achieved with 
more government regulation.
    Today's oversight hearing serves as part two in our capital 
formation series, examining government barriers to small 
business, capital formation and growth. The origin of these 
barriers to capital formation rest in two major Federal 
securities laws: the Securities Act of 1933 and the Securities 
Exchange Act of 1934, they have not been substantially updated 
since a gallon of gasoline cost 10 cents, 31 percent of 
American households had a telephone, and the national debt was 
just $22.5 billion.
    Today, gas prices are 35 times that per gallon and nearly 
every American owns a phone. In fact, most households have 
access to the internet in their pockets. The national debt, 
well, that is maybe for a different hearing.
    While the comparison of then and now is nostalgic, the 
ramifications of not modernizing our securities regulations 
have led to registration and reporting requirements so onerous 
and costly that small companies have great difficulty raising 
capital.
    For instance, if a startup company offers an equity stake 
to investors through a medium like Facebook or Twitter, it is 
presumably in violation of SEC regulations for such 
communication and offerings. However, soliciting money for 
one's favorite charity or political candidate, it is perfectly 
legal using the internet medium and that is clearly saying 
something is wrong. When politics exceeds where business is, 
there is something wrong culturally with that.
    Since September when this subcommittee had its first 
hearing to address barriers to capital formation, the House 
Financial Services Committee approved four pieces of 
legislation with bipartisan support that will modernize SEC 
regulations to promote rather than hinder small business access 
to capital financing. The full House is expected to vote on all 
four of these this week.
    The Small Company Capital Formation Act of 2011, sponsored 
by Congressman Schweikert of Arizona, would authorize the SEC 
to exempt from registration any class of securities so long as 
the 12-month aggregate offering does not exceed $50 million.
    Congressman Himes of Connecticut sponsored legislation to 
raise the bank shareholder threshold for SEC registration from 
$500 to $2,000. The SEC has neglected to update this threshold 
for nearly 50 years.
    The Access to Capital Job Creators Act, sponsored by 
Congressman McCarthy of California, removes a regulatory ban 
that prevents small, privately held companies from using 
advertisements to solicit investors.
    Last, my legislation, the Entrepreneur Access to Capital 
Act, which I introduced a few weeks ago, removes SEC 
restrictions on crowd funding to allow entrepreneurs to raise 
capital from everyday investors. This legislation simply 
extends the same characteristics of crowd sourcing or crowd 
funding today that is limited to the realm of charities and the 
arts through online communication social networking. This would 
allow small businesses and innovators to raise capital.
    Already, this is prevalent in Europe and Asia and has 
proven that broadening communication and investment 
capabilities between investors and entrepreneurs can have a 
positive impact on capital formation, the lifeblood of our 
economy.
    Each of these bills strengthens the mission of the SEC to 
protect investors, maintain fair, orderly and efficient markets 
and facilitates capital formation. Federal and State regulators 
remain empowered to fight deceit, misrepresentation and other 
fraud in the sale of securities.
    This is an important piece. This key mandate for investor 
protection in each capital formation bill is why all four drew 
broad, bipartisan support from Members of Congress on both 
sides of the aisle and marketplace participants. While the 
bills approved by the House Financial Services Committee serve 
as a solid first step, there is more to do. That is what this 
hearing is about today.
    I look forward to the SEC to complete its review of 
regulatory burdens on small business capital formation, which 
they have pledged to do, including the exemption of credit 
investors and employees from outdated 500-shareholder cap 
limitations.
    Today's witnesses serve as real life examples of businesses 
that face barriers when raising capital and would benefit from 
simple, modern updates to SEC regulations. I am interested to 
hear what each of you have to say about the various bills 
before Congress and the additional ideas that you have for 
businesses that face the challenge of raising capital and the 
immediate effects it would have from responsible securities 
laws and what the SEC can do to protect investors and increase 
access to capital. This was a very important note in order for 
us to reduce the unemployment rate and get people working 
again.
    [The prepared statement of Hon. Patrick T. McHenry 
follows:]




    Mr. McHenry. With that, I recognize Mr. Quigley of 
Illinois, the ranking member.
    Mr. Quigley. Thank you, Mr. Chairman. Thank you for holding 
this hearing and for your recent bipartisan work to spur 
capital formation for startup businesses through crowd funding 
legislation.
    I thank our witnesses for being here today.
    We recognize that the number one priority of this Congress 
has to be lowering the 9 percent unemployment rate. For 
businesses to expand and hire new workers, they need capital. A 
July 2010 report by the Chamber of Commerce states ``Clearly, 
any strategy to jump start the economy must have a robust small 
business component that allows entrepreneurs to access capital 
and retain existing cash-flow from operations in order to 
start, grow and expand their enterprises.''
    That is why I am pleased to see that both President Obama 
and Chairman McHenry have found common ground on the idea of 
crowd funding. To the extent that crowd funding can match ready 
capital with quality investment opportunities, it will be a 
success. The question should not be whether to allow crowd 
funding but under what terms it should move forward and what 
other ideas we should consider.
    After exploring crowd funding with the help of expert 
testimony, at our September 5th hearing, I am encouraged that 
many of the potential problems with crowd funding were 
addressed when the chairman's legislation was taken up by the 
Financial Services Committee.
    Still, some issues remain. For example, there are 
legitimate concerns that exempting crowd funding from 
securities regulation would open or expand opportunities for 
fraud. Just as water standards keep our water safe to drink, 
financial regulations protect us against unsafe financial 
products.
    Crowd funding might also expose ordinary investors to a 
level of risk that is unacceptable and not accompanied by 
standard registration and disclosure. We have to be careful to 
ensure that investors fully understand the risk of investing in 
these financial products.
    There is also the issue of State preemption. We have to 
carefully consider what role State securities administrators 
should play in managing fraud concerns and maintaining the 
integrity of the securities market.
    Finally, although I think it is wonderful that we are 
exploring crowd funding as one way to encourage business 
innovation in this country, an important point to remember is 
that crowd funding is not a panacea for the state of the U.S. 
economy, job growth or even the capital needs of small and 
startup businesses.
    The challenges facing small businesses and entrepreneurs in 
the United States are varied and so too should be our 
strategies. For example, Ms. Williams, as I understand it, will 
testify about how her business' initial achievements were made 
possible through small government-sponsored grant programs such 
as the Small Business Innovation Research Program.
    I hope that all of our witnesses can touch on how a multi-
pronged approach to capital formation can reach the most 
potential entrepreneurs. I also hope they can help us explore 
how the strategies the President laid out in his Jobs Act will 
help small business and entrepreneurs overcome some of the 
obstacles they are facing and spur American innovation.
    I thank the chairman again for calling this timely hearing 
and I yield back.
    Mr. McHenry. I thank the ranking member. Members have 7 
days to submit opening statements for the record.
    I will now recognize the panel. Our first panelist today is 
Mr. Eric Koester who is the chief operating officer and co-
founder of Zaarly, which is a Web site. Ms. Lonna Williams is 
the chief executive officer of Ridge Diagnostics. Dr. Tsvi 
Goldenberg is the chief executive officer of eemRa.
    Without objection, I ask unanimous consent that the panel 
may each have 6 minutes for their opening comments.
    I will now recognize Mr. Koester. If you could summarize 
your opening statement, you have 6 minutes. Then we will have 
plenty of time for questions.

 STATEMENT OF ERIC KOESTER, CO-FOUNDER AND CEO, ZAARLY, INC.; 
LONNA J. WILLIAMS, CEO, RIDGE DIAGNOSTICS; AND TSVI GOLDENBERG, 
                           CEO, eemRa

                   STATEMENT OF ERIC KOESTER

    Mr. Koester. Good morning, Chairman McHenry, Ranking Member 
Quigley and members of the committee.
    My name is Eric Koester and I am one of the co-founders and 
the chief operating officer of Zaarly, a real-time, online 
commerce marketplace.
    Zaarly represents an early success story of our innovation 
economy, having been formed just this past March, launched the 
product in May, added over 100,000 users just this past summer, 
and hired 30 employees with hopes of hiring more.
    This past month, we were able to announce that we had 
raised venture capital funding and were fortunate to add Meg 
Whitman to our board, who we hope can help us take this product 
from early adoption to mass scale.
    I hope to provide a bit of a unique vantage point to the 
challenges faced by entrepreneurs because of my background. 
During my career as an attorney specializing in advising 
entrepreneurs, small businesses and startups, I was able to 
work with hundreds of entrepreneurs across dozens of 
industries. Then I too followed the allure of the American 
dream and left the practice of law to launch my own company, 
Zaarly.
    As a result of these experiences, I think I do have an 
insight to the challenges faced by today's entrepreneurs. 
Today, my testimony will focus on three key areas: one, what 
are the key challenges broadly faced by today's entrepreneurs; 
two, an examination of the broad landscape that is facing 
today's entrepreneurs and small business owners; and finally, 
how some enhancements to today's regulatory scheme can help aid 
entrepreneurs.
    The first question is what are the overall key challenges 
faced by some entrepreneurs today? I think the important one 
discussed by this committee today has to do with fundraising 
and opportunities to get access to capital.
    The second one is really an access to talent. Zaarly has 
hired 30 new employees just this past year and if I had the 
opportunity to hire 10 more qualified engineers, I certainly 
would. I think this can be addressed in a number of different 
ways, but I do think looking at opportunities for immigration 
reform and continuing to invest in education, sciences and more 
innovation opportunities will help that.
    The third opportunity and challenge faced by small 
businesses and entrepreneurs is streamlining the paperwork, the 
formation in the regulatory scheme that we face.
    The fourth is an open and free internet, cell phone and 
data opportunity and access to those resources.
    Finally, I think the largest challenge we as entrepreneurs 
face is the general challenges of operating a business, getting 
more customers and making them love our products.
    Starting a business is obviously never easy. There are 
thousands of ways for businesses to misstep from team dynamics 
to market forces to the inability to find financing. The 
reforms being discussed by the committee will not necessarily 
make starting or expanding a business any easier. There are 
still thousands of ways for businesses to misstep and thousands 
of ways for businesses to fail.
    However, the reason these reforms are important are that 
they do allow another opportunity for businesses to expand and 
potentially succeed, to find new sources of capital, to raise 
additional cushion to hire more employees, or provide an 
additional runway for the business model to be expanded. By 
providing these additional avenues to access to funds this is 
the opportunity I think businesses will now have to expand and 
grow.
    What are the key challenges faced by entrepreneurs and 
business founders today that are different from the days when, 
as Chairman McHenry noted, gas was 35 cents a gallon? My time 
advising entrepreneurs and small business owners has been 
important in noting my views. Just as important, I have been 
fortunate to learn firsthand in the founding of Zaarly what 
some of those challenges are.
    The first lesson about today's landscape is that starting a 
business is now cheaper than ever before, although there is not 
an easy way to start a business without access to some capital. 
Today, businesses, with the help of technology, have been able 
to be started for as little as $5,000 and expanded into tens of 
thousands of dollars.
    While technology has been able to reduce these costs for 
things such as bookkeeping, advertising, data storage and 
equipment rental, today's technology businesses and other 
businesses still do require technology and capital to expand 
those businesses and exceed beyond that early proving point.
    The second challenge in expanding the opportunity for 
businesses today is the explosion of the freelance economy. 
Today, 1 of every 10 workers for companies is not an employee 
of the company they work for. These individuals are independent 
contractors, freelancers and individual entrepreneurs that can 
help these businesses be more effective and efficient. This 
trend is only expected to continue with careers such as 
graphics design, software development, photography, writers and 
artists, all expect to see their ranks grow by as much as 10 
percent in the next 10 years.
    These individuals are entrepreneurs and small business 
owners who do require access to capital to grow and expand as 
our economy needs them more and more.
    The next new change in the landscape has been the emergency 
of international competition that affects businesses even 
earlier and earlier. Two examples of the innovation economy, 
Groupon and Living Social, have seen international copycats pop 
in as few as months after they launched their businesses. 
Leading businesses such as Zaarly and those on the panel today 
need to launch faster, quicker and gain access to capital soon.
    Finally, I would like to note that it is important that 
these innovation reforms be expanded to allow crowd funding and 
similar tools. They eliminate the restriction of general 
solicitation and they align with the current provisions to 
expand the credit investor rules.
    Ultimately, I believe these reforms will open new channels 
for fundraising and allow businesses such as ours to succeed.
    Thank you and I look forward to questions.
    [The prepared statement of Mr. Koester follows:]



    Mr. McHenry. Thank you, Mr. Koester.
    Ms. Williams.
    The lights in front of you, I didn't point this out, red, 
yellow and green, 1 minute remaining, the yellow light will 
come on, and means to wrap it up, you have a minute to go. The 
red light obviously still means stop.
    Thank you.

                 STATEMENT OF LONNA J. WILLIAMS

    Ms. Williams. Thank you. I am very pleased to be here today 
and recognize all of you.
    I am glad to hear you are all recognizing the challenges 
that entrepreneurs have today in sourcing capital. These are 
very unique times for this. The things I will talk about today 
really are in contrast to what you just heard because I am a 
life sciences entrepreneur. We are creating products that are 
medical products of which we need to train physicians to use as 
well as go through the research and development stages to get 
them to the useful, marketable tools for physicians.
    I am Lonna Williams. I am the CEO of Ridge Diagnostics. 
Ridge is an early stage life science company with a mission to 
develop objective, diagnostic and therapy management blood 
tests for neuropsychiatric disorders. Neuropsychiatric 
disorders are things like bipolar disorder, schizophrenia and 
very importantly, depression. Our testing also impacts the 
medication selection and efficacy of those particular drugs 
used for those disorders.
    This climate has created what I call a near perfect storm 
for medical product innovation. As you know, most innovation 
comes from small companies in this country and many of the jobs 
created are coming from small companies as well. We are facing 
growing issues.
    I am going to talk about Ridge but most medical companies 
that are at the same stage as mine are facing these growing 
issues like questionable hurdles at FDA, some are known, some 
are not known; a very slow Patent and Trademark Office that has 
prevented us from issuing a number of different studies and 
publishing our work because it took 2\1/2\ years to get the 
first Office Action from the USPTO, so it slowed down our 
ability to move forward with our technology and our 
publications.
    Also there is an unknown path to reimbursement. There are 
methods of getting reimbursement yet still some of it is 
unknown. Ultimately, the real crux is the limited sources of 
capital available to us to grow our companies. We can work 
through just about anything if we have the time and money to be 
able to do that.
    A little bit about Ridge, who we are and what we do, all of 
us that are engaged in our board of directors, our senior 
management team are serial entrepreneurs. We have been engaged 
in over 20 companies in the aggregate startup or have founded 
or have managed since the mid-1980's. We have also had 
experience in large, multinational companies. We all agree we 
are facing a very unique time as it relates to our traditional 
means of funding.
    Ridge is providing blood tests that will create objective 
diagnosis for depression. That really is useful for a variety 
of reasons. First is serving the under served that don't have 
access to specialty medical care. It will create a substantial 
number of jobs because this is a very, very large problem we 
are trying to solve. The scope and size of this is huge.
    Twenty million adults suffer from depression in the United 
States and 6 million teens very year. That is about 1 in 10 
Americans that are taking antidepressants today. That is more 
than cancer, cardiovascular disease and AIDS. With that number 
of prescriptions being written, it is truly a health care 
crisis.
    We are finding in the last few years, antidepressants have 
been at least in the top three of all prescription drugs 
written in the United States and the single most prescribed 
drug for people age 18 to 44. I have read a number of different 
statistics but one in particular recently published was that 
antidepressant use has increased by 400 percent between 2005 
and 2008. With these numbers we are looking at this broad 
prescription rate, yet no objective tools to diagnose 
depression or to help choose or select the therapy that might 
be the most effective.
    Our system is paying for treatment, whether it be the right 
treatment or not, but it is not paying for the early stages of 
accurate diagnosis and prevention.
    What we know is that 50 percent of all of the cases of 
depression are missed by primary care physicians, so it is not 
as easy to diagnose as the pharmaceutical advertisements seem 
to make it. We know that 50 percent of those initial 200-plus 
million prescriptions written for antidepressants fail.
    We have a significant problem in financing a company and a 
product that can add objectivity to this large, costly 
situation we are facing. Traditionally, venture capital has 
played a role in taking technologies like mine to the mass 
markets. We start out in the early phases of our companies 
being funded by angel investors, by friends and families, 
ourselves, by government grant programs like the SBIR Program 
from which we received a National Science Foundation Grant. We 
also have a study on teenagers being funded by NIH.
    Those grants are very helpful but they don't give us enough 
capital, if you will, to continue on with studies and to make 
our products commercially available and to be able to educate 
physicians in a way where they can start adopting the 
technologies.
    Diagnostics are very, very useful. However, they are not 
contributing yet to the high cost of care because although 60 
to 70 percent of all decisions in health care are made by some 
kind of diagnostic test. Diagnostics only account for 2.3 
percent of all national health care spending and only 1.6 
percent of Medicare spending. Having more diagnostics on the 
market is going to bend the cost down curve by identifying the 
right patient and perhaps providing the right drug at the right 
time. It is not going to contribute to the overall higher cost 
of care.
    Last, I would like to say that because we are without 
venture capital funds, it is important for us to look to other 
means of capital. Certainly the crowd funding initiative is one 
that could be very important for us but we also have looked to 
large corporations because this is where our options have left 
us.
    That comes at a high cost because it does affect autonomy 
and autonomy is where innovation comes from and it does affect 
job creation. As you know, most jobs are created by small 
companies. I have just a couple of facts I want to share with 
you that I received from the Kauffman Foundation related to 
this specifically. This is in a report they published in March. 
From 1980 to 2005, firms less than 5 years old accounted for 
all net job growth in the United States.
    I will end by saying that we think these additional forms 
of capital that will replace venture capital for companies like 
ours will certainly help to change the curve related to slower 
job growth, certainly will rapidly bring products that are 
efficient and cost effective to care, especially to the 
underserved, and will help to bend the health care cost curve 
down as related to a disease area that affects 1 in 10 
Americans.
    Thank you.
    [The prepared statement of Ms. Williams follows:]



    
    Mr. McHenry. Thank you, Ms. Williams.
    Dr. Goldenberg.

                  STATEMENT OF TSVI GOLDENBERG

    Dr. Goldenberg. Chairman McHenry, Ranking Member Quigley 
and other distinguished House Members, it is a distinct honor 
and privilege to testify before this committee.
    I want to share with you my firsthand experience as an 
entrepreneur and to help you understand the challenges 
entrepreneurs face today.
    For over 20 years, I have been a co-founder and executive 
of a medical device company, biotech company and most recently, 
a healthcare IT company located in San Diego. I am here today 
to describe how difficult life is in the valley of death of 
healthcare startup companies. I will compare and contrast my 
experience funding startup companies 20 years ago to the 
difficulties I am currently encountering.
    Before I go to the present, I want to go back to the past. 
My goal here is to convince you of the need for Congress to act 
to create new opportunities for funding which is vital to the 
advancement of medical technology and essentially create an 
unfettered access for all Americans to their own medical 
records.
    One of the companies I co-founded in the late 1980's was 
Advanced Interventional Systems, AIS. During the late 1980's, 
the standard of care in cardiology for treating blocked 
coronary arteries was to perform coronary artery bypass 
surgery, a medical procedure performed to relieve angina and 
reduce the risk of death from coronary artery disease.
    AIS was a part of a new wave of companies that pioneered 
coronary angioplasty. Angioplasty as you may know is the 
technique of widening a narrowed or obstructed blood vessel, 
typically occurring as the result of atherosclerosis. My co-
founder and I launched AIS with just $3 million series A 
investment from VCs. This initial investment allowed us to hire 
a core team who developed a catheter prototype for animal 
study. There was also sufficient funding from this initial 
infusion of funds for our first submission to the FDA 
requesting permission to initiate clinical trials in several 
hospitals.
    Today, angioplasty is the standard of care of cardiology. 
What was initiated and developed by many small startup 
companies developed into a multibillion dollar industry. 
Angioplasty has saved lives, lowered health care costs and 
created many thousands of jobs.
    This success would not have been possible without the 
initial investment from a group of VCs who were willing to come 
in at the startup stage with a long term view to success. 
Unfortunately, this would not happen today. VCs have drifted to 
a later stage safe zone and shy away from the risk associated 
with the early stage of venture.
    Let us fast forward to the present. The company that we are 
trying to currently fund, eemRa, is a consumer-centered, 
healthcare information, financial services portal. It is 
designed to operate as a key element of the Health Information 
Exchange or HIE.
    HIEs were created by the High Tech Act to serve the 
community which will demonstrate the future meaningful use of 
electronic medical records exchanged among hospitals, clinics 
and labs. eemRa's goal is to develop access for Americans to 
all their health related information. As medical insurance 
premiums are increasing, a growing number of Americans are 
choosing high deductible plans to lower their medical insurance 
costs.
    Our mission is to act as a single service provider for 
consumers that aggregates information from providers and 
insurers. Our portal will enable the consumer to compare the 
cost of healthcare services at different providers. For 
example, if a patient needs a battery of blood tests, he or she 
could go into our portal to compare the cost of getting the 
blood tests at one lab versus an alternative. This is valuable 
to those with high deductible insurance plans and the average 
struggling American trying to make ends meet.
    Yet, despite our innovative technology that can increase 
patient control of their healthcare, eemRa faces funding 
difficulties in this economic climate. If Congress were to pass 
some of the bills being considered, we could start immediately 
hiring 15 people with a $3 million investment to start our 
operation. eemRa is not alone. The American Recovery and 
Reinvestment Act of 2009 has been producing large numbers of 
discoveries and inventions. This is great. However, in order 
for these discoveries to be developed into devices, drugs and 
software, startup companies are needed to commercialize these 
discoveries and inventions.
    Large companies are unwilling or incapable of handling high 
risk/high gain endeavors. Their complex hierarchies are unable 
to move fast enough to provide the intense concentration of 
effort needed to execute early stage projects.
    As you can see from my example, the severe shortage of 
capital funding has slowed the formation of startup companies 
to a trickle of what it has been. The result is the American 
people are being hurt by the lack of creation of small 
companies which produces technology that increases the quality 
of life while also producing high paying jobs.
    Additionally, until ARRA discoveries are moved into 
commercialization, the public is not really benefiting from 
ARRA.
    In closing, I encourage this committee and Congress to 
promptly act to advance legislation that will allow capital to 
flow to emerging companies and startups.
    Thank you.
    [The prepared statement of Dr. Goldenberg follows:]



    
    Mr. McHenry. Thank you. I thank the panel for their 
testimony.
    The normal tradition is the chairman asks questions first, 
then the ranking member and we go back and forth from there. At 
this time, because of Mr. Quigley's schedule, I would like to 
recognize him and I will then ask questions and go through the 
normal path of Republicans, Democrats in that order.
    With that, Mr. Quigley is recognized.
    Mr. Quigley. Thank you, Mr. Chairman.
    You all make a compelling case for trying to find new ways 
to raise venture capital, capital to do all of the job creation 
ideas you have brought forward. This is different, and because 
you have gone through this I will start with you, Mr. Koester. 
Here we are talking about the potential for less sophisticated 
investors and at the same time, less regulation. We want this 
to work and I am for this.
    If you are in our shoes, how do you try to protect those 
new investors in terms of the advice they might need? You are 
used to more sophisticated investors perhaps who are doing more 
due diligence. How do we protect them? What are your thoughts? 
Then we will go to the other witnesses.
    The President's suggestion was a maximum of $10,000. Some 
have suggested a low of $100. What are your thoughts having 
been through this?
    Mr. Koester. Thank you. That is a great question.
    I think that the key lesson that we can take is what has 
happened with the information explosion the internet has 
brought. I think even among sophisticated investors, we have 
actually seen a dissemination of information that allows 
investors to make better decisions among private companies 
today.
    A great example is the company called AngelList , which 
actually assembles and aggregates startup companies looking for 
financing among accredited investors. That tool actually now 
allows you to take information, such as the profile of the 
entrepreneurs being invested in, potentially their social 
network blogging about them, and then also when one investor 
has met with that team and validated they are a sophisticated 
team or an investment they would make, that kind of information 
is able to be assimilated into the reputation of that startup 
company that then assists the other investors.
    What I think really is happening is that by allowing kind 
of the dissemination of this information across a number of 
tools, I think you will start to see what is similar to 
reputation on the Internet where now you can snap your fingers 
and suddenly know if someone is qualified to take a loan or if 
someone is qualified to essentially do work on your house.
    I think that same level of information will start to be a 
sign to startup companies so that we can take all this 
information from a credit score of an entrepreneur to his prior 
businesses successes, aggregate that information and give you a 
risk profile on that startup company. I think you will see that 
from the crowd funding discussion you had by allowing 
entrepreneurs to essentially understand this sector which would 
be the early stage crowd funding.
    I think you will start to see some interesting innovations 
that will allow reputation to help these businesses make those 
decisions.
    Mr. Quigley. Ms. Williams.
    Ms. Williams. I agree. I think there are a number of means 
that we can use to disclose information about our companies in 
a way where we can provide enough information that these 
reasonably informed investors can make a decision on their own.
    Like they are making decisions going to the stock market 
and buying something on the public market, they are making a 
decision based on something that exists that they feel is 
worthwhile.
    We have 20-plus individual investors in our company now. 
They are accredited investors but we provide them with a number 
of disclosure documents, including our financials. We provide 
bios on ourselves and have meetings with them. Some are over 
the internet by Skype or something like that.
    I think we can create some guardrails that are very 
helpful. Whether it is done on the internet, which it should 
be, I think we can securitize that, but disclosure I think is 
really the key.
    Dr. Goldenberg. I agree with my colleague. I would like to 
add that I do see a role for the SEC. The SEC will simplify the 
language, for example, and make it more readable by the average 
person. I don't think the issue of sophistication will play a 
role.
    To give you an example, in the past, I have seen many 
sophisticated investors, the VC or the Angel, and they made 
mistakes and the ratio of success has now changed. Being 
sophisticated or being experienced will not necessarily give 
you a chance to a higher success.
    I see the combination between simple rules from the SEC 
which will be properly displayed on the Web site of the company 
and the company sharing information and this is all about 
sharing. I think the bigger issue is to force the company to 
share information to make sure they are not holding back 
because we have that issue even when you are private or public. 
You have to share information. If you share all the 
information, bad and good, I think that will eliminate some of 
the risk.
    Mr. Quigley. Very briefly, the bad actors out there that 
can discourage investment by all, any thoughts on who should 
play a role in helping investors deal with them?
    Mr. Koester. I do think the market will solve that. I 
ultimately think because of the reputation of these bad actor 
investors, bad actor companies will be kind of disclosed. I do 
think that solves a lot of it. I think even today for example, 
when we were choosing which venture capitalist to go with, 
there is actually now tracking that will basically give the 
reputation of the venture capital fund and the venture capital 
partner himself.
    When we were making decisions on who to take as an 
investor, we were able to look at that information on their 
reputation and decide which of them would be a bad addition to 
our team and the same when we are adding team members to our 
company, we can look at background information as well as 
reputation on tools like Linked In to find out who those bad 
actors are. That information really does help empower the 
individuals.
    Mr. Quigley. Thank you for your accommodation, Mr. 
Chairman.
    Mr. McHenry. I thank the ranking member and I certainly 
appreciate the work he has done in Congress for disclosure 
which is to the panel's point.
    I recognize myself for 5 minutes.
    Panelists, you all are basically serial entrepreneurs, 
that's fair to assess you that way. In raising capital, my 
legislation, which is the crowd funding idea, we originally 
designed it to allow folks to raise up to $5 million in capital 
from a large number of people. Individuals are capped at 10 
percent of their annual income or $10,000 to make sure this is 
low dollar, that folks aren't risking their 401(k). In fact, 
they can't even access their 401(k) for this type of 
investment.
    Having said that, what is the marker for raising capital 
that would be helpful in your experience, your past experiences 
and what you are going through right now? What is that dollar 
amount of capital you need to raise for crowd funding to be 
effective or helpful?
    Mr. Koester. I think it is a great question. Some of it 
depends on industry. I do think we being an Internet mobile 
company, we started raising $1 million to get our product 
launched which was sufficient, but I do think to scale that 
business requires more capital.
    I do think my colleagues will discuss in the biotech and 
medical sector that $1 million is enough to basically get you 
started maybe but it is not enough to really do enough damage 
to understand even if you have a product on your hands. I think 
the $5 million is really a place where venture capitalists 
actually will start to invest more. I think up to that $5 
million is right now a lacking area.
    Mr. McHenry. Pick a dollar amount, tell me a dollar amount, 
$2 million, $3 million, or $4 million?
    Mr. Koester. I think at least $3 million.
    Mr. McHenry. At least $3 million. Ms. Williams.
    Ms. Williams. Obviously the sector I am in, we do require a 
little more capital than that. However, we have raised at Ridge 
about $4.5 million over the last couple of years through Angel 
money and the grants which got us to the point with our 
particular technology to be able to commercialize at least on a 
limited basis. We are receiving reimbursement.
    We have had to work really hard for that $4.5 million 
because we are getting it in $50,000 to $100,000 increments. I 
think the $5 million number is a very good number because until 
we get to a point where we can demonstrate some kind of 
financeable milestone which takes out a lot of the risk factor, 
we need to continue to raise money, so $5 million to me is a 
really good starting point.
    Dr. Goldenberg. I would agree with my colleague on the 
right. We need at least $5 million in the medical device 
biotech companies. Biotech is even more than medical devices, 
so $5 million would be the minimum. If we do health IT, we 
probably can do it with $3 million but I would go with $5 
million.
    Mr. McHenry. The higher amount. The concept of crowd 
funding, would that replace Angel investors in your minds or 
would that basically take you to a capacity to get venture 
capital money or other types of financing?
    Ms. Williams. In my opinion, I think it could be one or the 
other frankly and it depends on the type of company even 
whether it is in the healthcare sector. For example, Angel 
money is available, so are the grants and loans to get you to a 
certain point. Venture money today is not available, so I can 
use $5 million that will significantly take me into the 
marketplace where I can actually start generating my own 
capital and bootstrapping from there.
    In this situation, I think it would replace venture 
capital. If the markets continue to be a volatile as they are, 
and we are seeing this now, Angels are dropping off and holding 
on to their cash. Individuals are doing the same thing. If that 
is the case, crowd funding could certainly replace some of 
those typical accredited investors that may not want to 
participate at a higher level of investment but the folks who 
might be a part of the crowd funding initiative not buying 
stock on the open market because they don't want to be in the 
stock market.
    Mr. McHenry. Do you think that crowd funding could be 
competition to bring down the cost of capital from Angel 
investors?
    Ms. Williams. I think it certainly could be. In all cases 
today, there is limited competition whether it is in the VC 
side or the Angel side, that those of us raising money are 
giving up a significant amount of the company for very small 
amounts of money.
    Mr. McHenry. Mr. Koester.
    Mr. Koester. Absolutely. The reality of what this does is 
it allows another avenue which essentially creates more 
competition for these companies. I think what has been 
noticeable by this company AngelList that I think has started 
to mass market the Angel investment space is by literally 
creating competition in disclosing information across these 
companies you create better value for the companies that are 
going to succeed, you windup increasing the amount these 
companies are able to own and you give companies a new angle to 
raise money they might not otherwise have had.
    Mr. McHenry. Thank you. My time has expired.
    Mr. Koester, I was on Zaarly yesterday looking at what is 
available in the Washington, DC, market, who is seeking to buy 
and who is seeking to sell and I know somebody in Adams Morgan 
is looking for a gently used iPad 2. Thanks so much and I 
appreciate your testimony.
    We will now go back to the normal process. Mr. Meehan is 
recognized for 5 minutes. Then we will go to Mr. Yarmuth and 
back and forth.
    Mr. Meehan. Thank you, Mr. Chairman. Thanks to the panel 
not only for the work that you are doing and allowing us to 
explore this issue but what you are doing out there to try to 
create jobs.
    I am stuck on a couple of things which I would like you to 
tell me how we get out of. One, I am struck by the fact that 
you are entrepreneurs particularly in the life sciences. I have 
a lot of that in my area. I hear frequently about the legacy of 
significant investment by big pharma or otherwise. The truth of 
the matter is there is a library of work that has been done but 
it sits. There is a lot of opportunity in there and yet we 
cannot acquire it and get it down to where entrepreneurs can 
actually take advantage of some ideas they would be willing to 
move forward on. How do we unleash more of that? The second 
question would be how do we prevent that? Maybe you're 
answering by virtue of your testimony today.
    I am struck by the fact that you keep saying because of the 
VC market drying up and because of banks not doing loaning, you 
are being pulled right back into the same circumstance in which 
it is the big corporations you have to go back to, the very 
ones that are too big and too slow to respond to a global 
marketplace.
    How do we unleash that $1.4 trillion that is sitting on 
corporate balance sheets and do it in a way that can allow you 
to put that money to work and reverse this tendency to keep 
going back because that is where the money is but it slows down 
the entrepreneurial spirit?
    I will take it in order. Mr. Koester, as a recovering 
attorney, I will let you jump into that first.
    Mr. Koester. I appreciate that. Thank you.
    The point you are raising about unlocking potential 
sciences locked in various places really does come down to 
capital. When I was an attorney, one of the things I did see 
was that you have to pay to license that technology from big 
pharma. I do think it all comes back to money.
    Mr. Meehan. What can we do to require them to do more? I 
guess these are proprietary things but sometimes they have had 
government money invested in that. I am a told an awful lot of 
good ideas that are sitting on the shelf. Do you agree with 
that?
    Mr. Koester. I think that actually part of it would come 
down more to education, matching entrepreneurs with these 
businesses. A lot of times these assets that are locked up are 
unknown to the potential entrepreneurs and they are looking for 
ways to disclose it. A smart, savvy entrepreneur who can figure 
out where these ideas and this technology is might be able to 
acquire it very cheaply.
    I have seen that happen with a client named Clineta that 
formed a business simply to go out and extract unutilized 
resources from biotech companies and used those in turn to 
commercialize those and sell them back.
    Mr. Meehan. Ms. Williams, do you have some thoughts?
    Ms. Williams. There are a lot of technologies that come out 
of big pharma that don't meet their revenue hurdles, that get 
acquired by smaller companies, biopharma companies and are 
developed to a point where they see proof of principle and then 
they sell them back to pharmaceutical companies. That is where 
venture capital has facilitated that loop.
    They have pulled the capital to allow the entrepreneurs to 
further develop that technology and then sell it back.
    Mr. Meehan. Why has venture capital money dried up? You 
would suspect that people see opportunity in this environment?
    Ms. Williams. You would suspect that. I have talked to over 
100 venture capitalists in the last 18 months and what I hear 
from them is that their resources, their sources of capital 
have waned, so they now have to reduce what they consider their 
risk profiles.
    Instead of investing in Series A capitalization for 
companies like mine, they are investing in later stage and what 
they perceive to be less risk type companies. In fact, they 
have gone so far as to buy stock in the open market because it 
has been undervalued.
    They have to protect their own investors, they have to 
protect their portfolio companies. There is very little 
liquidity in their portfolios now because of the lagging IPO 
market, so they are stuck. They can't make new investments for 
the most part or they are not willing to. That is why it has 
dried up for early stage companies.
    Your comment is a good one. There is a lot of pent-up 
technology sitting there that could be very useful but not 
useful enough that it is addressing the masses. Without access 
to capital, available moneys, it is not going to come out of 
big pharma or any other corporation.
    Mr. Meehan. Dr. Goldenberg, do you have any thoughts?
    Dr. Goldenberg. First of all, I would like to clarify that 
one way to start companies is not normally our ideas. We 
basically would go to a university in San Diego, the University 
of California San Diego, and that is where we get our idea, our 
discoveries. We basically package it and put in a business 
plan, do the planning and then go out and talk to the VC.
    We ask the same thing talking to the VC that they basically 
prefer to be later stage for a simple reason, because they are 
afraid of the market. If they invest in a small startup right 
now, they have to come multiple times until they take it IPO. 
The IPO market doesn't exist right now. For them to invest, 
they get stuck with an investment, and go to their limited 
partners and say, I have no exit scenario for you.
    Mr. Meehan. Because there is nobody coming behind that is 
making an investment?
    Dr. Goldenberg. No, because there is no public market for 
new companies. Private companies do not go public right now. 
The stock market is structured in a way right now that there is 
no issues of new companies.
    Mr. Koester. The one point to that is the hearing in May 
talked about second market which can be secondary markets, the 
semi-public market where you have certain disclosure 
opportunities. I think that is what is being addressed by the 
500 shareholder limit increased.
    Fundamentally, we hope that does allow more companies such 
as Zaarly when it does advance to a further stage that we can 
do a non-fully public sale but we can sell to sophisticated 
investors in an open market that is constrained, so it is not 
public entirely but it is constrained in a way.
    I think that addresses that and I do think that is an 
important step in this process and why I am still supportive of 
the 200 limit because it does address that ill liquid market 
right now.
    Dr. Goldenberg. If you open the public market, the VC will 
come back. The VC are not bad people, it is a risk versus gain. 
That's one point.
    The second point, you mentioned the $1.3 trillion, one way 
of unlocking that money is some tax break. If you go to big 
pharma and tell them for every dollar they invest in a biotech 
with an idea or without an idea, they get a tax break off their 
taxable income or revenue, that may be looked as a good 
investment because what big pharma wants to do is increase the 
pipeline of drugs. Right now they don't invest that much in 
biotech because they like to keep the cash for themselves for 
rainy days. If you give them a tax break, you meaning Congress, 
they may unlock their money.
    Mr. McHenry. The gentleman's time has expired.
    Mr. Yarmuth is recognized for 5 minutes.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    I thank the panel for the testimony. It is a very 
interesting discussion.
    I have the background of having been involved in the 
startup of a number of ventures, some successful, some not so 
successful because that is the way the world works. I am 
familiar with many of the issues and challenges that you face.
    I am intrigued by the whole notion of crowd funding. I 
think it has enormous potential. I also think there are 
enormous opportunities for mischief in this area. We know that 
any time we create some kind of new business technique, there 
are those out there who want to take advantage of it for 
purposes other than which it was intended. I am concerned about 
the regulation.
    The chairman asked what kind of monetary limit you would 
think would be appropriate. If we were to lift the 499 limit on 
number of investors, do you have any sense of what a manageable 
amount would be and something that would still retain some kind 
of element of security?
    Mr. Koester. I think the current proposal that has a broad 
base of 2,000 and includes certain individuals as credit 
investors and employees does allow you to solicit from a broad 
enough pool. I think fundamentally as executives of companies, 
2,000 shareholders is something I cannot fathom to manage.
    However, I do think if the decision is to close the company 
or to have 2,000 shareholders and I believe in the idea, I 
would absolutely take 2,000 shareholders and not sleep because 
I do think it is one of those things that ultimately 
entrepreneurs like us believe in our vision so much that we are 
willing to do what it takes. If that means manage 2,000 
shareholders, then that is what we do.
    Mr. Yarmuth. I think Ms. Williams mentioned the issue of 
how much equity is given up in some of these deals particularly 
with venture capital and that is always going to be in the 
equation. If you had your absolute ideal situation for getting 
money any way you could get it, what way would be preferable? 
Would it be selling equity, just having access to affordable 
loans? What would be your preference?
    Ms. Williams. I think I would probably look to a variety of 
different sources. I think selling equity would be one. You 
look for that, not just for money, but you look for it for 
expertise, for assistance with other areas of business. To me, 
that is not necessarily a bad thing.
    I would like to see that happen in a way where you are not 
giving up the majority share of your company to be able to gain 
expertise. I think loans would be fantastic. Those are pretty 
much unavailable to us today.
    Mr. Yarmuth. The cost of borrowing money, if you could get 
it, the interest rates now are far lower than the cost of the 
equity you would have to give up?
    Ms. Williams. Yes.
    Mr. Yarmuth. Which leads me to the next point, I have a 
piece of legislation that I have introduced that would actually 
direct the SBA to lend money to small businesses on the same 
basis that we are lending it to large banks--in other words, 
free. The idea if you have a certain track record, why not use 
government funds to make those kind of loans. SBA doesn't want 
to do that, I must confess, but that is why the legislation 
actually directs them to.
    Is this the kind of program you think might be helpful in 
your situations, probably not in the $2 million to $5 million 
range but $500,000 or so? You could get very low income 
financing.
    Dr. Goldenberg. I actually went to the SBA. We got so 
desperate about 6 months ago and went to the SBA. We said we 
started a company right here in San Diego and talked with the 
head of SBA in San Diego and explained the situation. He said, 
you need to go to a bank. We went to the bank and the bank said 
something very simple. What is the collateral you are going to 
bring me, how about your house? That is not the business we are 
in.
    As a startup company, medical device or health IT, I cannot 
put up my house. In other words, the availability of free 
money, when I say free money, I mean inexpensive money in the 
form of a loan will not help me that much.
    Mr. Yarmuth. Would not help you?
    Dr. Goldenberg. Would not help me, not the type of company 
we are.
    Mr. Yarmuth. Because you cannot afford to pay it back.
    Dr. Goldenberg. Because we have no collateral, we cannot 
pay it back. We are not going to have revenue for 3 to 5 years 
or we will have but it will not be where we can pay back our 
loans, so we will go into default.
    Mr. Yarmuth. One quick question because you talked about 
research and a lot of other things for which funding is 
threatened right now because of our current financial situation 
as a nation. Do you think it is advisable at this point in our 
future to cut funding for things like scientific, medical 
research, education and many of the other things that would 
help support either directly or indirectly the activities you 
are in?
    Mr. Koester. There is a shortage of engineers and 
scientists for the technology industries we are in.
    Mr. Yarmuth. Thank you very much. My time is up.
    Thank you, Mr. Chairman.
    Mr. McHenry. The Vice Chair, Mr. Guinta from New Hampshire, 
is recognized.
    Mr. Guinta. Thank you, Mr. Chairman. I just want to follow 
up briefly on the SBA.
    I think the SBA has a certain role to play in very, very 
small businesses. I am not sure the SBA is properly 
incentivized to assist the kind of companies you are looking to 
build, grow and expand. I think the clearer way to do this is 
to give you greater flexibility and greater opportunities to 
identify your own private capital.
    There are a couple of things I want to talk to you about, 
Ms. Williams. You mentioned in your testimony a bit about 
autonomy issues when getting dollars from larger companies. 
First, can you expand on that a little bit?
    Ms. Williams. Depending on what the transaction looks like, 
it could be something as limited as a licensing agreement or a 
strategic partnership. Today, to facilitate that, the larger 
companies are taking equity in the company. They are not just 
paying a licensing fee like they had in the past where you are 
left autonomous. They are actually taking equity in the company 
so they have some control over what it is you are doing.
    It has gone so far for the most part and they are so heavy 
handed because they can be that they are basically acquiring 
the company. When that happens, they absorb the company into 
their own infrastructure. That then reduces the opportunity for 
job creation that would otherwise be realized by the small 
company hiring and growing. It takes away the autonomy as it 
relates to innovation because, for the most part, they are not 
willing to take risks and invest money in new ideas. It affects 
that whole job creation aspect as well. That is what I was 
referring to.
    Mr. Guinta. In my home State of New Hampshire, about 75 to 
80 percent of our economy is generated by a small business 
owner. That is defined as 500 employees or less. In New 
Hampshire, it is even smaller. It is the lifeline and the life 
blood of our local economy.
    We are trying to attract more companies like yours into the 
southern tier of New Hampshire and to the sea coast of New 
Hampshire. One of the things I continue to hear again is the 
lack of access to capital, the lack of choices.
    I think someone on the panel mentioned we have a decline in 
the number of IPOs in this country and on the New York Stock 
Exchange. We have a decline in VC investment. We have a decline 
also in Angel investment. There is a lot here that is shrinking 
in terms of access. Some of that is actually going overseas and 
those companies are being created overseas and those jobs are 
being created overseas. Probably all three of your companies, 
you are talking a minimum of a $60,000 job plus. These are high 
paying, high quality jobs that we could be creating right here 
in America if the access to capital issue is addressed.
    There are three components. One, I think the chairman's 
bill makes a lot of sense at $5 million instead of $1 million, 
which is what the President is looking for. I think we have to 
have the proper level of company disclosure, so individuals can 
do their own research. I tend to believe in the individual 
American, that they can make the right decision so long as the 
bad actors are minimized by access to information. That makes 
sense to me. Allowing an individual to invest in your company 
provides you greater access.
    The second component I want to ask about you touched on a 
little bit is raising funds by issuing equity and how that 
gives you the ability to defer payments. If you get a loan from 
the SBA and your business plan suggests you are not going to be 
making money until 3 to 5 years out, you have already 
eliminated that option but selling equity provides you that 
greater opportunity, does it not?
    Dr. Goldenberg. That is correct. One way to look at equity 
the way you describe it is that it is our way of printing 
money. We basically give a piece of the company for getting 
money in but that is some form of IOU for the future that we 
will develop it and have the revenue and then they will make 
much more.
    Mr. Guinta. This is exactly what spurs the 
entrepreneurship, the innovation and the ability to create an 
idea and bring it to market. That is what we want to see 
happening in our country with a 9.1 percent unemployment rate. 
This is a critical component.
    The other component that I am very concerned about is the 
ban on general solicitation. Mr. Koester, could you talk a bit 
about that, how that has affected your company and what that 
would do if we lifted it. How could you get that capital 
quicker and how you could get job creation quicker as a result?
    Mr. Koester. I think the real challenge is that an 
entrepreneur cannot use all the tools they can to generate 
business to generate investment. For example, if you have a 
presence on social media or write a book and say in that book 
that you are seeking funding, you could actually be sanctioned 
by the SEC. There are ways around those limits so it is more 
form over substance.
    I think it allows people to just have open disclosure of 
information and we don't wind up having back channel 
discussions in cloaked secrecy. I think it puts an open tarp on 
things and for us, maybe our financing process could have been 
shortened from a 9-month process down to a couple month process 
if we could have opened it up and made it with open dialog.
    Mr. Guinta. Thank you all very much. I yield back.
    Mr. McHenry. We will begin a second round.
    There are a few other things on which I wanted your 
thoughts. We have a 500 shareholder cap. This was raised 
earlier but I want to get your feedback on this.
    It appears right now that allowing an unlimited number of 
accredited investors to invest in your company is no longer 
legislatively attainable at this moment, at least in the short 
run. The cap will likely remain at 500 for the remainder of 
this Congress unless the SEC acts. How do you feel about this 
turn of events? How do you feel about that limitation? What 
impact do you think that would have if we raised that cap on 
your ability to raise capital and what that would mean for 
jobs, growth and innovation?
    Mr. Koester, we will begin with you and go across the 
panel.
    Mr. Koester. I think the challenge to the crowd funding 
legislation you have introduced is there essentially becomes a 
waterfall effect. By opening up crowd funding which may allow 
me as a company to add 100 shareholders, suddenly now I only 
have 400 left and I think we start opening it up to a broader 
audience but then we also basically keep the cap on that 
audience tight. I think those two need to be thought of as 
orchestrated together because I do think when you open up the 
shareholder base early in the company's life cycle, it winds up 
limiting what you can do later on down the road.
    Essentially for me as a business, were I to add 200 crowd 
source investors to my company, down the road it would make it 
challenging or me to use a tool like second market or to use a 
tool that would allow me to not go over that cap and raise 
funds in that way. I do think it is a challenge to have those 
two not move in tandem.
    Mr. McHenry. To be clear on this, my crowd funding 
legislation has no cap, so that is the beauty of it. It is a 
relatively small amount of capital you can raise, but it is 
from an infinite number of people. These individuals are capped 
by what they can invest annually. That was due to a lot of 
concern about fraud, to make sure someone doesn't put up $1 
million on a $1.5 million crowd funding raising venture without 
having a clue. There is this concern for fraud and investor 
protection. You wouldn't be subject to that. That I think is 
one of the positives of it.
    To this larger question, we basically have a 500 
shareholder cap which includes credit investors, includes 
connected people, employees, and those that are close 
relationship individuals. It is a pretty limited group. To 
remove employees from that calculation is helpful. To remove 
accredited investors, would that be helpful? Would that be a 
positive so you could have even pushing up to 1,000?
    Mr. Koester. Yes.
    Mr. McHenry. You mentioned you would much rather not have 
to deal with 1,000 individuals. I get that. I am the youngest 
of five kids. It would be easier to have a brother and sister 
and not two brothers and two sisters, especially when they are 
bigger than you. It is sort of difficult to deal with and 
contend with. Do you think it would be helpful to remove that 
accredited investor number from that 500 shareholder cap? Would 
that help?
    Ms. Williams. I think it would. They have kind of separated 
themselves out anyway, so they are manageable as it is. If you 
think about 1,000 investors, to me I think there might be a way 
to create the mutual fund concept with those people so it 
doesn't mean that me or my CFO are managing 1,000 people. It 
means that I am managing an institutional vehicle or an 
investment vehicle of one, three or five that might have 100 or 
150 people in it. That way they can kind of form their own 
opinions and that would come to me in the form of five opinions 
instead of 500 opinions. I think there are ways of making that 
manageable for the entrepreneur.
    Mr. McHenry. Dr. Goldenberg.
    Dr. Goldenberg. If I understand you correctly, you want to 
move the accredited investors out of the one available to 
invest?
    Mr. McHenry. Rather limit it to 500 shareholders, to remove 
that accredited investor from that count or raise the count.
    Dr. Goldenberg. Will they be allowed to invest in this 
crowd funding?
    Mr. McHenry. Two separate issues. Crowd funding is 
available to every individual just capping the percentage they 
can invest of their income. The question with accredited 
investors and the 500 shareholder cap is a separate question. 
Do you think it would be helpful to raise that number? 
Additionally, would it be helpful to remove the accredited 
investors from that count of individuals?
    Dr. Goldenberg. The way I look at this crowd funding is it 
is another form of IPO because you are going to have a large 
number of investors. I have taken a private company public and 
once you get used to it, it is manageable. The crowd funding to 
me is another form of a public offering without really calling 
it a public offering. Whether they give us the money now or 
later, we will manage the same with the risk and the reporting 
and everything, the disclosure. I would agree with your point, 
the more you have the better.
    Mr. McHenry. Limiting the choices for raising capital, 
whether that is equity or giving away equity or getting a loan 
or bootstrapping, there is a cost to that. Widening the array 
of capital choices for you as an innovator and entrepreneur 
lowers the cost potentially. It gives you more opportunities.
    I have too many questions and I know your time is limited. 
Ms. Williams, you said something very interesting which was 
right now, you are going to the big corporations, Fortune 500 
companies or Fortune 1000 and getting capital from them. 
Describe for me the cost limitations, what that means beyond 
your company, what does it mean to your ability to grow jobs, 
to the ability of the economy to start moving? What is the 
macro view of what this means?
    Ms. Williams. It can mean good and bad. To me as it relates 
to job creation to start, I think it is not going to help to 
create more jobs for the most part. As I said earlier, small 
companies really have the ability to create jobs where larger 
companies don't prove to do that. With a company like mine, 
they will absorb my company into theirs, so I will not be out 
hiring and growing. Therefore, job creation will be flat as it 
relates to me specifically.
    I know I can create 300 jobs with under $10 million of 
funding in just a few years at Ridge alone based on our 
forecasting. To me, it is not the alternative I wanted to take 
but it is the only choice I have right now.
    They will take a percentage of the company--frankly, we are 
negotiating that right now and what that is going to be--and 
they will control the single largest market because they will 
have licensing rights in the single largest area of use for 
this particular blood test. I am not going to have access to 
that. My shareholders will have a royalty revenue that will 
contribute to their value but not the full value of product 
sales. That is the balance we have to choose.
    Typically the larger companies are very risk adverse. They 
have their own array of things they have to manage and I 
appreciate that. Therefore, they will be less likely to 
accelerate innovation. They don't want to have their earnings 
per share reduced for any reason, especially right now, and 
want to make sure management is retaining their physicians, so 
they are not going to make any mistakes. They will toe the 
line.
    I think it is going to create a flat environment and a job 
reduction as relates to potential new jobs.
    Mr. McHenry. When we talk about capital markets, 
regulations coming from Washington, whether SEC or the laws we 
have actively passed in this Congress, can you touch on what is 
limiting your ability to grow and create jobs? Tell me the 
limitations, the barriers and the problems. State the problem, 
a regulatory problem or law, that impedes your ability to grow 
and create jobs.
    Mr. Koester. I think a lot of it has to come down to 
Sarbanes-Oxley. I think that has slowed the ability of private 
companies to go public. I think it has created a backlog within 
the entire cycle. I think we have locked up innovation capital 
exchange by having no clear exit valve for companies once they 
hit a certain size.
    A company such as Facebook or Twitter in other days should 
have gone public by now. However, due to the fact there is an 
increased burden on being a public company, you are seeing 
those companies hold back longer than they would have before. 
The backward effect of that is the shareholders of Facebook, 
the venture capitalists who basically invested in them early, 
are unable to get back that capital so they can reinvest in the 
next wave of companies.
    I think that creates a backlog of problems where you wind 
up not having the flow of that innovation capital exchanged 
back. What we need to find is more ways to spur companies to be 
able to go public. I think there are multiple ways of doing 
that. One is the public market and the second one is companies 
like second market and similar that do allow liquidity. I think 
the rules that limit liquidity of companies is where I think we 
really see some backlog.
    Mr. McHenry. Ms. Williams.
    Ms. Williams. I would agree. I cannot put my finger on any 
other specific things other than perhaps taxation which 
obviously is not something that affects us today. I live in the 
State of California but our laboratory and our research is all 
done in North Carolina. We are trying to create jobs there. 
There is a significantly different cost in doing business in 
California than there is in North Carolina as it relates to 
taxes and other things. That will be a driving factor and 
probably is for a number of companies where they decide they 
are going to incorporate and where they will develop their 
companies.
    Mr. McHenry. Dr. Goldenberg.
    Dr. Goldenberg. We talked about raising funds but the other 
obstacle is, for instance, in our case dealing with the Health 
and Human Services. There is their Office of National 
Coordinator. We tried to talk to them both about incorporating 
our system in their program, the HIE, the Health Information 
Exchange, and they kind of ignored us. They like to deal with 
large hospitals, community projects but they shy away and are 
not that interested in talking to small companies.
    It would be nice to have them onboard and also recognize 
the role we are playing in commercializing all this.
    Mr. McHenry. If you had just one thing you wanted to say 
about job creation, here is your moment. Go for it. Mr. 
Koester.
    Mr. Koester. Give us a chance and we will create a lot of 
jobs.
    Ms. Williams. I agree and I think we should go back to 
talking about the loan opportunity because the State of North 
Carolina and the North Carolina Biotechnology Association has 
funded Ridge to the tune of over $500,000 over several years to 
be able to do our research and have our laboratory in that 
area.
    Loans, whether they are securitized with some kind of 
collateral or not, which is what has happened in the State of 
North Carolina in that particular area because they are 
offering entrepreneurs the opportunity is really a terrific way 
to get jobs started. I think we need to go back and think about 
how to construct loans, whether it be through SBA or others 
where we are not giving up equity to be able to create jobs.
    Mr. McHenry. Dr. Goldenberg.
    Dr. Goldenberg. I think creating jobs is a great effort but 
we are also creating high paying jobs. I think that is very 
important and people forget about that. I think that should be 
recognized.
    Mr. McHenry. Thank you.
    Mrs. Maloney from New York is back. Before I recognize Mrs. 
Maloney, I want to thank my colleague for working diligently on 
improving the legislation I filed and working with me to amend 
it and working in a very collaborative way to bring a bill that 
has bipartisan support and allays a lot of the concerns about 
fraud and the structure you worked with us on creating. I think 
it will be very beneficial and I thank my colleague.
    Mrs. Maloney. Thank you and it will be on the floor 
tomorrow and I will be there supporting it with you. I want to 
credit the chairman's leadership for being open to suggestions 
and working with us in a very creative way to make a good bill 
a better bill. People say this Congress can't work together, 
well this is one example where we are working together to help 
get access to the markets and to help smaller companies move 
forward, and to remove the barriers, in this case, to his 
legislation on what is called crowd funding, which is the aim 
of the chairman's legislation.
    It is also, I might add, a component of President Obama's 
Americans Job Act. The President is likewise supporting the 
legislation. In fact, the President's legislation includes 
several provisions to increase the amount of capital, small or 
startup businesses can access, retain and put to good use.
    While crowd funding would likely be helpful for some 
startups, I would like to ask the panelists, wouldn't you agree 
that crowd funding and related or similar changes to securities 
law are not the only tools that we can have at our disposal to 
encourage the startup of businesses and small businesses moving 
forward.
    I would like to give to you for your comment some of the 
ideas that are put forward in the American Jobs Act which we 
would like to get to the floor also for a vote. I hope the 
chairman can help us move that legislation to the floor for the 
vote. For example, the American Jobs Act plan we have proposed 
cutting in half small business employer and employee payroll 
taxes. This would put money right back into workers' and 
employers' hands.
    Another provision is temporarily eliminating employer 
payroll taxes for small businesses that create jobs or give 
raises for existing workers above the prior year's wages and 
eliminating the payroll tax if that is accomplished.
    Extending an immediate 100 percent expensing writeoff into 
2012 to encourage businesses to invest in machinery and other 
new equipment; extending tax credits for businesses that hire 
workers who have been unemployed for at least 6 months; raising 
the cap on many public offerings of small firms from $5 million 
to $50 million this is actually on the floor tomorrow and is a 
bill that likewise we have worked together on in a very 
positive way. That will be moving forward. Another provision is 
increasing skills-based training for youth and adults.
    I would like to ask all the witnesses if you would comment 
on these policies and whether or not you think they would be 
helpful to new or small businesses and if you have another idea 
you think could help get our economy moving, help businesses 
grow and expand and hire more people. I would like to start 
with Mr. Koester and go down the line to Ms. Williams and Dr. 
Goldenberg.
    Mr. Koester. It is great to see the support of small 
businesses and early stage companies because I do think that 
our goal is to grow into those large, mature businesses that 
can create thousands and thousands of jobs. I think across the 
board, any provisions that allow increased access to capital, 
increased ability to attract and retain employees and an 
ability to basically grow our business free of restrictions and 
limitations are helpful across the board.
    I also think one of the points all of us will face in the 
technology sector is improvements to immigration will be an 
important thing for us to be able to attract talent from around 
the world. I think that is one of the things that the United 
States has an incredible advantage at doing. I do think that is 
another piece of long term sustainability.
    Mrs. Maloney. May I comment on that and I would like to 
bring it to the chairman's attention, I do have a piece of 
legislation called the Startup Business Visa Application. This 
would speed up visas for people coming to America sponsored by 
other American businessmen who are willing to invest in their 
startup idea. The money can come from either the immigrant or 
from an American businessman and help move that forward.
    As the chairman and the panelists know, we have a program 
for investment where if an entrepreneur wants to come to this 
country and invest $1 million, then there is a speed up process 
to help them come and invest in a business that has been 
acknowledged and supported by American business. They are not 
using all those visas, so it wouldn't be new visas. It would be 
taking the visas that already exist and allowing them to come 
with capital.
    I would like to request additional time to put forward 
another idea that I think is critically important. Thank you, 
Mr. Chairman. This is great. This is bipartisan cooperation.
    Many businesses have been started by really very few 
people, one or two people with incredibly little capital. If 
you look at the story of Steve Jobs, he started in his garage 
with one friend and $100. A lot of businesses in America, in 
fact, most of them, have started with an idea and an 
entrepreneur trying to move forward.
    I would like this committee to look at micro loans, the 
small loans that are given out to one or two individuals in 
small amounts. This country has supported micro loans in 
foreign countries in many ways to help their economy. I think 
it would be an excellent way to partner with the private sector 
to create a micro loan area that could respond to some of these 
young people who have a fine education but the jobs are not 
there for them. Let us give them a helping hand to move 
forward.
    Mr. McHenry. Would you yield on the note of micro loans?
    Mrs. Maloney. Yes.
    Mr. McHenry. In doing all the research we did for crowd 
funding, there are two interesting Web sites that are 
available--prosper.com and kickstarter.com. Mr. Koester 
mentioned that. Both Web sites do peer-to-peer micro lending 
and it is absolutely fascinating the success they have.
    Earlier when my colleague had to step to the other hearing, 
Mr. Koester mentioned in essence you establish a reputation as 
an entrepreneur and that reputation will enable your investors 
to create a risk profile. Prosper is doing that. It is 
fascinating to watch.
    Amazon allowed individuals to write negative reviews about 
a book. People said that was crazy, you are trying to sell 
books, why would you do that. He said, I want people to come 
back and buy another book, that is why. Likewise eBay, you have 
individuals who exchange goods on eBay every day and they are 
wonderful products. If you send the person a bad product, you 
are done. You are not going to be able to sell your stuff on 
eBay anymore.
    Likewise, you can do one-on-one individual fraud but on the 
internet, it makes it very difficult because you establish a 
reputation which prevents you from getting away with it more 
than once or a limited number of times.
    I would yield back.
    Mrs. Maloney. I thank the gentleman for his insight. I 
would like to request a hearing on Kickstarter and prosper.com 
to take a look at these smaller startups and the new 
technologies. I commend you for moving forward with the crowd 
funding. I think it is an exciting idea and excepting 
democratic amendments to really protect investors more and put 
more transparency out there, I think there is a lot of new 
ideas out there with this new economy and with the high tech 
economy. We should be looking at them.
    I think the micro loans have been particularly successful, 
particularly with women starting small cottage businesses. I 
also think the young men and women who are out of work and 
highly educated would be very good prospects to have an idea 
and try to start working on it and give them a little support 
to do it.
    I would like to ask Dr. Goldenberg if he could respond to 
micro loans and specifically the idea of a public/private 
match. We are all in this economy together, we are all in this 
country together. I would like an opportunity for successful 
businesses to really give back to the young men and women who 
want to follow in their footsteps of going forward with new 
products, innovation, new ideas.
    Dr. Goldenberg. I think micro loaning is a great idea and I 
would encourage you to pursue it for a simple reason. It 
provides new money. American ingenuity is everywhere in every 
field, not just in our fields of medical technology or health 
IT. It can see it everywhere you go. There is a small business 
or small operator. I don't know the exact number for micro 
loans but $10,000 to $25,000, I think would be a big step for 
them to start working and producing something.
    Mrs. Maloney. What about a public/private match, what about 
involving the public sector? What is your feeling on that, 
voluntarily?
    Dr. Goldenberg. Again, I am looking at it from the point of 
generating new funding. If you can do that matching and provide 
more services or more consulting that will help start a new 
business, I think that would be great.
    Mrs. Maloney. Ms. Williams.
    Ms. Williams. Yes, I agree. I think micro lending is a 
valuable way to generate additional new businesses. I actually 
participated in it outside the United States in a very small 
way.
    Mrs. Maloney. Excuse me. I have to run to another hearing 
and give back my time. I look forward to working with you.
    Mr. McHenry. You may finish your answer.
    Ms. Williams. I am for micro lending.
    Mr. McHenry. This is for the record and we are being 
streamed online, so it is helpful to establish this record 
because you are creating jobs. We in Congress may previously 
have created jobs in our previous work but we are trying to 
create the regulatory framework that frees you up and enables 
you to be creative.
    The final question I have for the whole panel. The online 
guy, the woman who does biotech and the gentleman who does a 
different form of biotech, it is great to have this cross 
section, but do you think the lack of capital in the current 
market, affects certain industries more than others and what 
does that mean?
    Dr. Goldenberg. As I am looking at the panel, one of the 
things that struck me was that we are operating at different 
time scales. In my world, before now, we talk about 3 to 5 
years. My colleague, he operates on 6 months?
    Mr. Koester. Twenty-four hours.
    Dr. Goldenberg. Twenty-four hours. We are much slower and 
we need to invest now in order to see the fruit in 3 to 5 
years. We are here asking the Congress to keep that in mind. A 
very large part of the American economy--I think actually the 
largest part of the American economy--is drugs, devices. I 
think it is approaching $100 billion or even more in sales per 
year. Whatever you decide to do will have a major impact. Keep 
in mind that the time to get there is not 6 months. That is 
very important.
    Mr. McHenry. Over the horizon.
    Dr. Goldenberg. Over the horizon. We are operating either 
with little revenue or have revenue but not necessarily 
profitable. That is something to keep in mind.
    Mr. McHenry. Ms. Williams.
    Ms. Williams. I think we can bifurcate that to a certain 
degree by saying what we do from a development and research 
standpoint in creating these new medical products takes more 
time. The dissemination of information about those products 
once they have been proven can go quickly with the tools being 
developed in the tech sector, so we can reduce the time that we 
make these products available and we can educate physicians 
online through Medscape and other ways of continuing medical 
education where it doesn't require some costly sales rep 
knocking on their door.
    I think it is going to take us more time because we have to 
do that credible research and make sure we are creating a safe 
and efficacious product. We can disseminate that information 
much more quickly and essentially catch up from that standpoint 
with the technology sector.
    Mr. McHenry. Mr. Koester, in terms of the lack of capital, 
does it affect one industry more so than others? For instance, 
in tech there is perhaps this emphasis on apps, the sexy, cool 
apps, the newest, greatest thing, is capital flowing whether it 
is Ashton Kutcher or whatever, putting a lot of money in those. 
You are actually in a more over the horizon perspective rather 
than an app where you have a very short turn time. You are 
actually building something that takes a little more time even 
though it is still very brief traditionally?
    Mr. Koester. Yes, that is a very good point. Our ultimate 
goal at Zaarly is to create local commerce, local jobs. We have 
seen almost 8 million truly local American, community-based 
jobs and requests being generated from our tool. While it is 
relatively fast, I think we also see a long time horizon and 
hopefully spurring American jobs and hopefully keeping that $8 
million that may never have otherwise existed in these 
communities.
    Fundamentally, I think it is incumbent on government, 
corporations and the populace to support innovation. I do think 
that the biotech and health sector does have a longer horizon 
and I do think that access to capital may sometimes slow those 
innovations that may not have mass market adoption. There are 
technologies that may meet a need of a healthcare need that is 
out there whereas they may not receive the funding because the 
venture capital space isn't quite as willing to bet on a $500 
million company versus a $5 billion company. I think that is 
one of the challenges, helping those companies.
    The other interesting thing about my industry is I think we 
benefit from the investment the U.S. Government made in 
telecom, the internet and those types of things. I think those 
investments that were made in infrastructure wind up allowing 
us to launch a business in a weekend. Were it not for the 
ability to get the internet on your phone that comes from 
investments made by the government and others, I don't think 
our ability to launch this company would exist.
    I do think those kinds of investments do have a huge impact 
on our ability to launch technology businesses. I think those 
types of investments in things like genomics, research, super 
computers and those types of things that can speed up the 
healthcare and biotech sectors are crucial.
    Mr. McHenry. Thank you for your testimony.
    Today is largely focused on capital formation and 
regulatory impediments on capital formation but there are so 
many other issues we have to face. Through the testimony today, 
it is fascinating to hear no matter what we do to spur more 
capital formation, businesses still have the challenge and they 
can still fail. With a great idea, you can still fail.
    The challenging environment today of getting consumers to 
actually use your product still remains or getting your product 
to the market, still remains, but we also need to make sure 
that we are in a fruitful space for that innovation to occur 
and the regulatory impediments that we can remove and relieve 
from small businesses, that we actually take that on.
    We clearly have to have infrastructure, educational 
resources and the right investments and those constructs so 
that can take place. We still are the largest economy on earth, 
we still have wonderful opportunities and wonderful resources, 
even though we are going through very challenging times right 
now.
    The fact remains that we can still get back to those good 
days of real and strong economic growth and job creation and 
get this unemployment rate down and give people choices and 
opportunities.
    Thank you so much for testifying today in particular about 
capital formation and thank you for providing this committee 
and this Congress your insight and experience. We certainly 
appreciate that.
    With that, the committee is adjourned.
    [Whereupon, at 12:12 p.m., the subcommittee was adjourned.]

                                 
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