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







   A JOB CREATION ROADMAP: HOW AMERICA'S ENTREPRENEURS CAN LEAD OUR 
                           ECONOMIC RECOVERY

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


                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             MARCH 21, 2012

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


            Small Business Committee Document Number 112-059
              Available via the GPO Website: www.fdsys.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

76-466                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001











                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York

               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVEITE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director














                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Graves, Hon. Sam.................................................     1
Velazquez, Hon. Nydia............................................     2

                               WITNESSES

Andrew J. Razeghi, Adjunct Professor, Kellogg School of 
  Management, Northwestern University, Evanston, IL..............     3
Seth Goldman, President and TeaEO, Honest Tea, Bethesda, MD......     5
Heath Hall, President, Pork Barrel BBQ, Washington, DC...........     7
Clinton Tymes, State Director, Delaware Small Business Technology 
  Development Center, Newark, DE.................................     9

                                APPENDIX

Prepared Statements:
    Andrew J. Razeghi, Adjunct Assistant Professor, Kellogg 
      School of Management, Northwestern University, Evanston, IL    22
    Seth Goldman, President and TeaEO, Honest Tea, Bethesda, MD..    41
    Heath Hall, President, Pork Barrel BBQ, Washington, DC.......    45
    Clinton Tymes, State Director, Delaware Small Business 
      Technology Development Center, Newark, DE..................    52
Questions for the Record:
    Rep. Owens Questions for the Record for Mr. Goldman..........    61
    Rep. Owens Questions for the Record for Mr. Razeghi..........    62
Answers for the Record:
    Mr. Goldman Answers for Rep. Owens...........................    63
    Mr. Razeghi Answers for Rep. Owens...........................    64
Additional Materials for the Record:
    The Story of OpenTable by Chuck Templeton....................    69

 
   A JOB CREATION ROADMAP: HOW AMERICA'S ENTREPRENEURS CAN LEAD OUR 
                           ECONOMIC RECOVERY

                              ----------                              


                       WEDNESDAY, MARCH 21, 2012

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Chabot, Tipton, West, 
Hanna, Velazquez, Schrader, Chu, Hahn.
    Chairman Graves. Good afternoon. We call this hearing to 
order. I apologize for being tardy. I was having a hard time 
getting across town, and sometimes in D.C., that is the way it 
works. But I want to thank our witnesses for coming. Some of 
you came a long ways and I appreciate you taking the time away 
from your families and your businesses to be here and be a part 
of this testimony.
    Today, we turn our attention to entrepreneurs, one of the 
most critical links to our economy. Entrepreneurs who are the 
thinkers who can take an idea from concept to fruition. They 
are the risk-takers, they are the boot-strappers and innovators 
we depend on to create jobs and spur economic growth. 
Entrepreneurs represent what is great about America, it is 
about opportunity, innovation, and hard work. It is never easy 
to start a company, and in today's economy, it is an even 
greater challenge. The trend in entrepreneurship is up, but an 
entrepreneur's ability to hire is down. The recession's high 
unemployment rates may have encouraged people to start sole 
proprietorships, but there are many obstacles in the way of 
growing a company to create jobs.
    One of our witnesses today, Heath Hall, and his business 
partner started their company in the middle of a recession. 
Friends and family members thought they were crazy, but they 
wanted to prove that a small business could succeed if it was 
founded by entrepreneurs with a good work ethic, a great 
product, and people that believed in them. They wanted to prove 
that the free market is still the best path for success for 
entrepreneurs.
    This afternoon, we are going to hear from witnesses who 
will discuss the current state of the entrepreneurship and 
risks and rewards and challenges of building a company and we 
look forward to hearing your testimony. Again, keeping mine 
short since I am tardy, but I will now yield to Ranking Member 
Velazquez for her opening statement.
    Ms. Velazquez. Thank you, Chairman Graves.
    Our Nation's 29 million small firms are the cornerstone of 
our economy. They employ half of all private sector employees. 
Over the past 15 years, they generated two-thirds of new jobs. 
Clearly, given this fact, entrepreneurs will be essential to 
our economic recovery. All small businesses help the economy 
grow, but it is the opportunity entrepreneurs that hold the 
most potential for job creation. These new, fast-growing firms 
develop cutting-edge products, often revolutionizing entire 
industries. Encouraging these innovators to turn their dreams 
into reality benefits the entire economy. By creating brand-new 
markets and sparking competition, these firms often have a 
multiplier effect on job creation. As other businesses seek to 
compete in newly created markets, they, too, add workers to the 
payroll.
    This spirit of entrepreneurship has always been part of our 
national identity and remains so today. In fact, close to 
565,000 new businesses per month were created in 2010, the 
highest level over the last decade. During today's hearing, we 
will examine how these innovators are contributing to our 
recovery and the hurdles they face in creating new jobs. Before 
the recession, starting a business simply required a good idea, 
hard work, and Internet access, but in today's turbulent times, 
forming a business is more challenging. The financial crisis 
presented a unique set of challenges for small firms seeking 
capital. As lending standards tightened, entrepreneurs found it 
more difficult to secure loans and lines of credit.
    While this situation has improved, there is still a long 
way to go. SBA loan programs have played a critical role in 
bridging these gaps, providing startup with access to capital 
they need to launch and expand.
    Another critical area to businesses' success is technical 
assistance. SBA's program assists entrepreneurs by providing 
tailored education on topics ranging from marketing to 
procuring to international trade. For the startup, this 
expertise can often make the difference between failure and 
long-term growth. Initiatives like the Small Business 
Development Centers have proven effective in channeling, 
counseling, and assisting to millions of entrepreneurs around 
the country.
    While the SBDC network is the SBA's largest such program, 
it faces challenges in the form of reduced budgets and pricing 
demand for its services. Today, we will hear how the SBDC 
network is adjusting to these fiscal realities and what can be 
done to help it carry out this mission of assisting small 
firms.
    Startups and small businesses are critical to our Nation's 
long-term prosperity. Currently, this sector's growth is 
largely fueled by immigrants, entrepreneurs, and other 
professionals launching new ventures. As the face of 
entrepreneurship is changing, strategies for supporting these 
ventures must also evolve. Today's hearing will provide the 
committee's insights into how to tackle this challenge, 
identify areas where entrepreneurs face the greatest obstacle 
and the help the committee craft practical solutions to these 
problems.
    In advance of their testimony, I also want to thank all the 
witnesses for participating. Your testimony provides valuable 
insight into critical topics and we appreciate your being here.
    With that, I thank the chairman and yield back.

 STATEMENTS OF ANDREW J. RAZEGHI, ADJUNCT ASSISTANT PROFESSOR, 
    KELLOGG SCHOOL OF MANAGEMENT, NORTHWESTERN UNIVERSITY, 
 EVANSTON, IL; SETH GOLDMAN, PRESIDENT AND TEAEO, HONEST TEA, 
     BETHESDA, MD; HEATH HALL, PRESIDENT, PORK BARREL BBQ, 
 WASHINGTON, DC; CLINTON TYMES, STATE DIRECTOR, DELAWARE SMALL 
       BUSINESS TECHNOLOGY DEVELOPMENT CENTER, NEWARK, DE

    Chairman Graves. Our first witness is going to be Andrew, 
you are going to have to pronounce it. Razeghi? Huh?
    Mr. Razeghi. Razeghi.
    Chairman Graves. Razeghi. Okay, well, I appreciate you 
pronouncing it for me. I am terrible with names. Razeghi. He is 
an adjunct professor at the Kellogg School of Management at 
Northwestern University. Professor Razeghi teaches courses on 
innovation and is founder of the Andrew Razeghi Companies. He 
works with organizations seeking growth through the creation 
and introduction of new ideas. He is a best-selling author and 
an expert on creativity and innovation and he earned his MBA 
from Loyola University in Chicago, has an undergraduate degree 
in international business affairs from Bradley University. 
Welcome. And to kind of explain, too, you all have five minutes 
and try to keep it within that, if possible.
    Mr. Razeghi. Great.
    Chairman Graves. Mr. Razeghi.

                  STATEMENT OF ANDREW RAZEGHI

    Mr. Razeghi. Thank you. Chairman Graves, Ranking Member 
Velazquez, members of the committee, good afternoon. My name is 
Andrew Razeghi and I am a lecturer of the Kellogg School of 
Management, Northwestern University. I am also an advisor to 
organizations on innovation and growth and an active angel 
investor in startups, and I am pleased to be here today to 
provide testimony for today's hearing.
    As you know, small businesses are instrumental to our 
economy. As we heard, they employ 50 percent of private sector 
workers and responsible for 60 percent of new jobs. I have 
outlined several factors in my written testimony, however, for 
now, I would like to focus really on two principles. The first 
is that not all entrepreneurs become entrepreneurs for the same 
reasons. For some, entrepreneurship is a choice, they want to 
work for themselves or they have got a problem that they are 
looking to solve. For others, entrepreneurship is necessity. 
They are typically the victims of job loss and start businesses 
to create income for themselves. And for others still, 
entrepreneurship is their destiny. These are members of multi-
generation family businesses, and as their paths differ, so too 
do their motivations and their motivations are instrumental to 
keep in mind as we create good policy.
    Second, beyond their origins, it is important also to 
distinguish between small business owners and high-potential 
entrepreneurs. These two groups differ significantly in their 
skills, their funding needs, their challenges, and the social 
networks that they need to succeed.
    So, what are the differences and what are the implications? 
Well, let me just share a quick story with you. Ray Kroc, who 
we all know as the legendary founder of McDonald's or the one 
that grew that business, was a high-potential entrepreneur; 
creates today 1.5 million employees and several million 
employees that work for that company for many, many decades. 
The McDonald brothers, on the other hand, who invented the 
concept in San Bernardino, California, in 1940, were small 
business owners. Their goal was to sell hamburgers and shakes 
and to do it really, really fast. While the McDonald brothers 
saw the potential of their idea, they wanted it to remain a 
small business. Ray, on the other hand, also saw the potential, 
but he had aspired to grow the business. Ultimately, Ray became 
frustrated with that, and so he acquired the brothers and built 
what we know today as McDonald's. The difference between the 
McDonald brothers and Ray Kroc go well beyond their 
aspirations, however. Small business owners and high-potential 
entrepreneurs also differ in their skills, their challenges, 
their funding needs, and their social networks.
    First, in terms of skills, typically, the small business is 
concerned with creating income for themselves, as I mentioned 
earlier, and, therefore, leveraging their own skills. High-
potential entrepreneurs are really in the business of creating 
businesses.
    So, in the United States, 10 percent of entrepreneurs, for 
example, create 30 percent of our new businesses; 20 percent of 
our entrepreneurs create over half of our new businesses. These 
are a different group and these are what I call our high-
potential entrepreneurs.
    Second, they have very different challenges. Small 
businesses primarily are concerned generally with cash flow 
and, therefore, are typically interested in lowering their tax 
burdens. High-potential entrepreneurs, on the other hand, are 
interested in really scaling their businesses. So, their 
biggest challenges are, A, attracting capital, and, B, 
attracting and hanging onto talent. So, high-potential 
entrepreneurs can only hope someday to pay taxes.
    Third, they really differ in the sources of capital. Small 
businesses typically seek, as we know, capital from banks and 
micro loans, majority of their funding from there, while high-
potential entrepreneurs rarely set foot in banks, primarily 
because they have no collateral other than their dream and 
their vision that we know. So, while small businesses really 
trade on their collateral and interest, high-potential 
entrepreneurs trade on capital gains and equity with their 
investors.
    And finally, they really maintain different social 
networks, whereas small businesses typically network locally as 
members of the chambers of commerce and other organizations, 
high-potential entrepreneurs typically are networking globally 
through venture accelerators and incubators and the like.
    So, while both are vital to our recovery, certainly small 
business owners and high-potential entrepreneurs, because of 
these differences, my recommendation is that we really think 
about these entities and manage them differently.
    Why is that the case? As you look at high-potential 
entrepreneurs, for example, they are generally backed by 
venture capital and venture-backed businesses are more 
resilient in economic downturns and more prosperous typically 
over the long-term. Moreover, they have exponential economic 
impact.
    For example, if you look at the investments made in high-
potential businesses, although it is only .2 percent of GDP, 
the revenue they generate is equivalent to 21 percent of U.S. 
GDP. So, very, very high-performing companies.
    So, generally, for these reasons--the differences in their 
skills, their needs, their funding requirements, their social 
networks that make them succeed--my recommendation is that we 
need to focus just as much on these high-potential 
entrepreneurs as we do on the typical small business 
challenges. Thank you.
    Chairman Graves. Thank you, Professor Razeghi.
    Our next witness is Seth Goldman, who is the president of 
Honest Tea in Bethesda, Maryland. As a youngster, Mr. Goldman 
had newspaper routes and lemonade stands. He nearly pursued a 
prize-winning biotechnology idea before he co-founded the 
Honest Tea brand in his kitchen in 1998. Is that correct?
    Mr. Goldman. That is correct.
    Chairman Graves. He is a graduate of Harvard College and 
the Yale School of Management, and he is testifying on behalf 
of the American Beverage Association.
    Welcome, Mr. Goldman.

                   STATEMENT OF SETH GOLDMAN

    Mr. Goldman. Thank you. Good afternoon. Usually when there 
is a discussion about high-growth businesses, the focus is on 
the Internet or biotech, so I am happy to be here to represent 
a part of the economy everyone understands. We make low-sugar, 
organic beverages, and over the 14 years, our continuous 
double-digit growth has created 122 jobs in 22 states. These 
are jobs that create and support manufacturing across the 
United States and jobs that cannot be shipped overseas.
    In 1998, I launched Honest Tea out of my kitchen. My co-
founder and I brewed five thermoses of tea and got an empty 
Snapple bottle and stuck on a label and brought it to the local 
Whole Foods buying office. And to our great delight, surprise, 
and horror, the buyer said he was going to buy 15,000 bottles, 
so we had to go home and figure out how to make that much tea.
    We launched in the 17 Whole Food stores in the Mid-Atlantic 
and gave away more samples than we sold, but by the end of that 
summer, we were the best-selling tea in those stores. And then 
we expanded from there to the rest of the Whole Foods chain and 
then became the best-selling tea in the natural foods industry. 
And just last year, Coca-Cola purchased our company, which is 
still run out of Bethesda, Maryland.
    When we started, my co-founder and I raised money from 
basically the people who could not say no: ourselves, our 
parents, my sister, his roommates from college. And over the 
next 10 years, we raised $10 million in angel capital from 
equity.
    And so how did we manage to stay in business over that time 
while a lot of other beverage companies started and went under? 
Well, first, we offered something that was clearly different. 
While everyone else was selling a tea with a lot of sugar, we 
were offering something with just one to two teaspoons. And 
then, in 1999, we became the first company to create organic 
bottled tea. So, once again, we had a point of difference in 
the marketplace.
    The other way we stayed in business is we were careful with 
our cash. Instead of paying for radio and TV ads, we developed 
alternative ways to generate attention. We did an experiment 
called Honest Cities. We set up in 12 cities a freestanding 
booth with bottles and it said it is an honor system, $1 a 
bottle, and we will see how honest people are. And to our great 
delight, most of the country was in the high 90 percent honest, 
but it was also a great way to get media coverage and we were 
on the Today Show and certainly raised a lot of awareness.
    The other benefit of operating on a tight budget is you 
make less expensive mistakes. We certainly made some doozies 
over our 14 years, but if we had had more money, we just would 
have spent more money trying to correct those mistakes rather 
than to just recognizing when something was not working.
    Unlike most acquisitions which involve relocations and 
layoffs, when Coca-Cola invested in Honest Tea, we created a 
structure where we continued to base it in Bethesda, and our 
headcount has actually doubled since Coke invested three years 
ago.
    And we have been expanding jobs around the country. Last 
October, I cut the ribbon on a Coca-Cola-owned bottling 
facility that created 100 manufacturing jobs in Massachusetts. 
Next month, we are launching a new bottling line in California.
    When we took in Coke's initial investment, we were in 
15,000 stores. Today, Honest Tea can be found in over 80,000 
stores and we just signed on a new chain this morning. So, we 
are still growing.
    Unlike so many industries, the beverage business is one 
where outsourcing is not an issue. There is no way to ship 
bottles through those Internet cables and the math does not 
favor manufacturing the product overseas and then shipping into 
this market, and there is still no substitute for the role that 
skilled professionals, maybe a little aggressive, can play in 
protecting a beverage shelf.
    So, how did the Federal Government help Honest Tea? The 
best thing I can say is that the government did not get in the 
way of us launching our business. Of course, we had to make 
sure all of our bottling plants and suppliers were licensed 
with the FDA and USDA and we filed our stock offerings to 
accredited investors through the relevant entities and paid our 
taxes through ADP, but other than that, we were left to build 
our business.
    One way the government did support our growth is through 
the creation of the USDA Organic Standards. Having a 
differentiated product was key to Honest Tea's survival and the 
USDA Organic Seal, which appears on all of our products, helps 
consumers seek out products grown without chemicals, 
pesticides, or fertilizers. It is a great example of a 
government program that helps establish a quality standard 
without any mandates or large bureaucracy.
    My experience building Honest Tea represents all that is 
great about the American economic system. A group of passionate 
entrepreneurs and patient investors combining their dreams, 
their investment capital, and their energy to create something 
out of nothing, delivering jobs, strong investment returns, and 
healthier beverages along the way. In terms of supporting the 
development of more companies like ours, I would say the best 
policy is to let entrepreneurs and investors continue to take 
well-informed risks.
    By definition, the work we do is challenging. If it were 
easy or obvious, the big companies would have already done it. 
But in Honest Tea, we take two proverbs to heart. They are 
Chinese proverbs. The first is if we do not change the 
direction we are headed, we will end up where we are going. And 
I believe entrepreneurs are our Nation's best chance to change 
and make an impact on the issues that confront our society, and 
that is not easy work. And that is why we pay attention to the 
second proverb, which is on the wall of our office in Bethesda: 
Those who say it cannot be done should not interrupt the people 
doing it.
    Thank you very much.
    Chairman Graves. Thank you, Mr. Goldman.
    Our next witness is Heath Hall, who is the president of 
Pork Barrel BBQ here in Washington. Mr. Hall co-founded the 
company in 2009. His barbeque sauce is available in over 3,000 
stores in 40 states. In November, the company opened a 
restaurant in Alexandria, Virginia. Widely recognized as a 
winning entrepreneur on the television show Shark Tank, Mr. 
Hall is known for his innovative approach into starting and 
growing successful businesses. He received his bachelor's 
degree from Truman State University and his JD from the 
University of Missouri, Kansas City.
    So, welcome.

                    STATEMENT OF HEATH HALL

    Mr. Hall. Thank you, Chairman, Ranking Member, and members 
of the committee. It is great to be here. Small businesses and 
the entrepreneurs who create them fuel the engine that drives 
the American economy and determines the overall health of our 
Nation.
    It is an honor to return to Capitol Hill, where I once 
served as senior legislative assistant to a guy who I see is 
looking at me as I am testifying, Senator Jim Tallon, former 
chairman of this distinguished committee. But more importantly, 
it is an honor to be back because this is really where the 
genesis of Pork Barrel BBQ was formed.
    In 2006, during a Senate budget debate, my business 
partner, Brett Thompson, and I were debating what we would be 
having for dinner. And as I am sure many of you have struggled 
to find some good options late at night here on Capitol Hill, 
we were wishing and hoping and thinking about the great 
barbeque joints back in Missouri that we often frequented when 
back home and there just were not any here. So, at the moment, 
the Senate was debating pork barrel spending projects on the 
floor, a vigorous debate, and as we were vigorously debating 
dinner, the two ideas merged and Pork Barrel BBQ was formed. 
So, we like to say that at least one thing came out of Congress 
that night that was good. No offense. [Laughter.]
    In the few minutes I have today, I would like to talk about 
three key issues that every entrepreneur faces on their journey 
to creating a successful and small business. Those include risk 
assessment, access to capital, and increasing their visibility 
and identity.
    The first, risk assessment, there is a critical point where 
every small businessman and entrepreneur founding those 
businesses have to make the decision to move forward and invest 
their own time and money with zero guarantee of getting 
anything back. For most, like us, those include questions of 
where are we going to get the funding? How are we going to be 
known? Where are we going to secure retail outlets and 
customers?
    The second is access to capital. For many, if not most, 
getting through this challenge means spending a lot of precious 
capital on understanding the system and it did not take us too 
long to realize that we needed every ounce of capital that we 
had, and most of that coming from own our pockets, in order to 
do this process and do it right. And because we had such 
limited funds in addition to limited access to additional 
capital, we decided that we would take nothing out of our 
company from the beginning until a point when we could and we 
are still at that point today where we have realized no profits 
ourselves. Everything we have made, we have reinvested into the 
company. And I think it is important right here to note that 
every extra regulation, requirement, and delay that the 
government imposes is a burden that new small businesses have 
to overcome. These burdens cost time and money and often lead 
to many small businesses prematurely calling it quits, opting 
to create fewer jobs, or slowing down their innovations. I am 
not saying that none of the regulations are necessary or 
justified. They often are, but I do want the committee to 
understand that they come at a cost and time and money, which 
small businesses must pay and which could not be used for them 
generating jobs and growing their company.
    The third is the need to increase that brand identity. The 
challenges for most entrepreneurs in doing this is it is on a 
shoestring budget. For us, we accomplished it through social 
media, and in a stroke of luck, we were contacted by the 
producers of the hit reality show Shark Tank on ABC and that 
really changed the future of our company. We were given the 
opportunity to present our product in front of sharks and we 
got a deal from Barbara Corcoran, the New York real estate 
giant, and she is currently still a valued member of our 
company and business partner. And so it gave us some capital 
and also gave us instant national exposure that we could have 
never afforded. I sit before you today 100 percent certain that 
we would not be in the position we are were it not for Shark 
Tank, which kind of sounds strange that a TV show could do that 
for you, but it really has.
    Our second break came when we met a guy called Hunt Burke 
of Burke & Herbert Bank over in Alexandria, Virginia, a bank 
that believes in entrepreneurs and believed in us. He gave us 
the initial seed money after the show to really address all of 
the new retail accounts we were quickly gaining. It is also 
important to note, I think, right here that large businesses 
play an important role in the success of small businesses. 
Harris Teeter, a local grocery store on the East Coast, picked 
us up before we were known. Costco, a real contributor to 
cultivating small businesses in this country, picked us up. 
Safeway has been a huge supporter with unsubsidized promotions 
and ads that we could have never afforded.
    Although I do not have any specific recommendations to the 
committee, I would say that in my opinion, the average 
entrepreneur does not expect or want to be unregulated. We take 
quality and safety very seriously, we take pride in offering an 
affordable, gourmet product that is high-quality, good-tasting, 
and safe for people to consume and that is produced by 
manufacturers that are current and have scored high on all 
required inspections.
    The problem, in my view, is that there is no effective 
safeguard in the system to make sure the regulations are 
written and enforced in a way that minimizes the burden of 
honest, well-intentioned entrepreneurs. One approach I would 
encourage the committee to look into would be for the 
government to adopt a partnership approach to regulation 
whenever possible. In these cases, it seems far more productive 
and less costly to all parties to partner with these businesses 
rather than adopting an adversarial attitude that leads to 
costly fines and mistakes that were made in good faith and that 
had no impact on public health or safety.
    I would like to reiterate that America is still the land of 
opportunity and, when given the chance, an entrepreneur's idea 
combined with the power of the free market can lead to amazing 
things. If America is to emerge from its economic woes, it will 
be on the back of entrepreneurs. Elected officials like 
yourselves should keep in mind the sacrifices and risks 
entrepreneurs take when considering ways to increase the number 
of successful small businesses in America. It is the 
entrepreneur who has taken all the risk and invest his or her 
time and money into that endeavor with no guarantee of return, 
yet, if small businesses are not allowed to enjoy the benefit 
of success when it happens, they will never take the risk of 
failure.
    Thank you and I look forward to your questions.
    Ms. Velazquez. It is my pleasure to introduce Mr. Clinton 
Tymes, the state director of the Delaware Small Business 
Development Center Network, headquartered at the University of 
Delaware. In this role, Mr. Tymes is responsible for long-range 
planning and program development for the statewide network. 
Prior to joining the Small Business Development Center, he 
owned and operated his own office equipment business. He 
received his bachelor's and MBA degrees from Wilmington 
College. Welcome.

                   STATEMENT OF CLINTON TYMES

    Mr. Tymes. Thank you. I was instructed early and got all 
ready. Chairman Graves, Ranking Member Velazquez, and members 
of the committee, thank you for inviting me to testify here 
today.
    For over 30 years, the SBDC Network has been providing 
frontline services to entrepreneurs and small business owners 
while developing an infrastructure dedicated to assisting all 
business owners across this country.
    How can we help small business growth and innovation and 
help those entrepreneurs lead the economic recovery? At SBDCs, 
we focus on that every day. It is a basic tenant of our 
accreditation process, where we are focused, where we have to 
develop a strategic plan focused on constantly improving 
services that we provide to the small business community that 
is of high value and provide contemporary business solutions.
    Technology has changed the way most businesses do business, 
so, the SBDCs, we partner with firms like Google, Intuit, 
Microsoft, and others to bring innovation to small businesses. 
Guiding innovation and new technologies is an important part of 
our work. It may be high-tech, like Facebook or some of the 
other technologies I will talk about a little bit later, or 
just a different way of looking at things.
    Maui Jim was a simple idea--sunglasses that cut glare, but 
did not distort colors--but making that concept a worldwide 
success took years of working with the Illinois SBDC Program. 
Likewise, at the Delaware SBDC, we are proud of our work with 
Sam Calagione of Dogfish Head Breweries. Sam came to us with 
little more than an idea. He is now one of the leading 
microbrewers in the country and it is not high-tech, but we 
just made sure that Sam got the basics right and got the 
financing and funding that he needed to launch his business.
    SBDCs do not necessarily know about optical coatings or 
jalapeno ales, but we do know marketing, we do know finance, 
product development, government contracting, and business 
planning. Our clients come to us with ideas, a lot of energies, 
and a lot of issues and problems, and they need knowledge to 
succeed. It is all about basics.
    All small businesses, high-tech gazelles, local mom-and-pop 
organizations or companies or third-generation manufacturers 
are all focused on one thing, and that is the bottom line. 
Growth in sales, investment, and hiring are just key 
indicators. We see several significant areas where 
entrepreneurs need help: finance, technology development, and 
education, and let me give you a few examples of those.
    Many SBDCs work specifically to assist the firms in the 
high-tech arena. The Delaware SBIR Program is a program that we 
developed, is designed to help knowledge-based firms and 
entrepreneurs compete and win Federal SBIR and STTR funding. 
For almost a quarter century in Delaware, we led the Nation in 
patents and PhDs per capita, but one of the things that we were 
lacking in Delaware, and we lagged behind, was the number of 
startups and technology-based businesses, as well as lagging 
behind in the number of SBIR application and awards, and, 
hence, we responded and developed this program. It was designed 
to be a one-stop shop to assist entrepreneurs and every aspect 
of the SBIR Program. We helped them with the application 
strategies; we provided proposal-writing workshops; we 
critiqued, reviewed the proposal editorially as well as 
technically before it is submitted; we provided a mentoring 
program for applicants, as well. All of these are designed to 
help businesses achieve their goals.
    The Delaware SBTDC, like many SBDCs, are hosted by research 
institutions that work closely with their technology transfer 
offices, science, and engineering departments. At the 
University of Delaware, we formed a special group called the 
Office of Economic Innovation and Partnerships where we merge 
the Technology Transfer Office as well as the SBTDC Program 
together, so that we have the technical side in terms of 
research and commercial application. Our business expertise 
helps to expedite those technologies from lab to the 
marketplace. So, it is a unique model.
    I have also attached a letter from Mr. Jianrong Lin of 
Spectrum Magnetics, and in his letter, he outlines the 
knowledge gaps that he and his companies had and many 
entrepreneurs and how our team helped them. This is just one 
example of how SBDCs help businesses develop and 
conventionalize technologies. Similar programs are being 
conducted in North Carolina, Texas, Missouri, Michigan, just to 
name a few.
    The second aspect is financing. We often work with 
entrepreneurs who have little idea about financing. Many high-
tech clients do not know how to approach an angel investor. We 
have heard that here, and do not even know what an angel 
investor is, and there is a huge gap there and we help those 
business owners to speak finance, if you will.
    At SBDCs, we bring relationships from all walks of life in 
terms of financing, whether be a microloan, a 504 loan, or 
angel investors in trying to match them.
    In San Antonio, the SBDC helped a third-generation company, 
Kiolbassa, with a 504 loan that expand their firm and triple 
the number of employees.
    SBDC identifies an entrepreneur's strength and their 
weaknesses and we teach them how to relate to the financial 
community and find the right tools and the right financing 
program that best meets their needs.
    Education is the third component and it is a common theme 
that we have and entrepreneurs need. We have heard just a few 
moments ago about skills and enhancing those skills and 
building those skills. Well, that is what SBDCs do through our 
one-on-one counseling programs and through our training 
programs. We teach them techniques to show them the tools they 
need. Ideas, dreams, and innovations can all fail without 
knowledge.
    How can we work to overcome these knowledge gaps? You 
maximize the tools at hand. Currently, our association and 
network work with HUD's Office of Community Development, SBA's 
Office of Surety Bond Guarantees and Surety Bond Association. 
Our goal, to educate small contractors on obtaining surety 
bonds and getting contracts on HUD-funded contracts. Not a new 
program, just teaching financial skills.
    In conclusion, the ASBDC believes the most common concern 
of small businesses are the lack of capital, lack of sales, and 
difficulties in dealing with day-to-day complexities of their 
business. Some surveys say that the capital is bound for the 
qualified. We help get them qualified, the small business 
owners. As a result, nearly $4 billion in financing was 
assisted in terms of SBDC assistance nationwide. Small 
businesses say that sales are weak. We help them develop 
markets and new products. In 2009, 2010, our clients in our 
network, their sales are four times that of the national 
average. If you do not know how to do it, we will, get 
resources to do it. We understand the resources are available 
and we understand how to leverage those resources that help 
business owners become successful.
    Thank you for letting me share my views about our network 
and look forward to your questions.
    Chairman Graves. Thank you, Mr. Tymes. I am very familiar 
with the role of the SBDCs. In Missouri, and, in fact, Max 
Summers is here, who is the state director of the Missouri 
SBDCs, which I worked with for a long time.
    Mr. Tymes. Okay.
    Chairman Graves. And I appreciate the work you all do.
    Mr. Tymes. Thank you.
    Chairman Graves. Mr. West, we will open with you.
    Mr. West. Thank you, Mr. Chairman, and thanks to the 
distinguished panel for being here. And, Mr. Goldman, thanks 
for not giving us any of your Honest Tea, because I am sure it 
will be an ethics violation. [Laughter.]
    Mr. Goldman. Well, I have some bottles here.
    Mr. West. No.
    Mr. Goldman. I am happy to----
    Mr. West. We will have to get rid of the cameras if you do.
    Chairman Graves. Just $1.50 per bottle. [Laughter.]
    Mr. West. Okay, I think I got it.
    You know, when I travel the district down in South Florida, 
up U.S. Highway 1, you see many closed storefronts, and, of 
course, that represents 8, 10, however many Americans that once 
worked there. There is a budget resolution proposal up here 
about taking those 6 tax brackets and combine them down in 2 
and that top tax bracket being at 25 percent.
    What I would like to know is if we adopted that budget 
resolution proposal, having that top tax bracket at 25 percent, 
as we know, small businesses, entrepreneurs start off at 
Subchapter S LLCs, what would that do for the growth of small 
businesses in the United States of America? And I understand we 
close some of those tax breaks, loopholes, but what would that 
25 percent top bracket do?
    Mr. Razeghi. So, a couple thoughts. I think, first off, as 
you know, 75 percent of the small businesses have no payroll, 
so, I think, as I mentioned earlier, and then the 25 percent 
are really generated in sales receipts and even a smaller 
percentage of that. So, I think it gets back to who that would 
appeal to, right? Back to this notion of at least my opinion on 
high-potential entrepreneurs, tax policies nowhere near the top 
of their list in terms of their concerns. It is back to 
capital, it is about getting the right talent, and hopefully, 
someday, as I mentioned, they want to pay their taxes and if 
the taxes go up, they will work harder, which is typically what 
you will hear from most entrepreneurs, at least what I hear.
    So, I think it will help those, again, back that are 
traditionally let us say small business centers that are 
focused on cash flow, and in a way, they want to stay small, 
but could use relief in that area. The high-potential folks, on 
the other hand, again, it will not speak to their needs.
    Mr. Goldman. And just to follow up on that, I think that is 
right. The year-to-year income is not as much of a concern as 
the long-term. If you were to change the capital gains rate in 
a significant way, that would probably make some investors less 
interested, but as long there is----
    Mr. West. You mean if you were to increase?
    Mr. Goldman. That is right, especially on the long-term 
side.
    Mr. Hall. One thing that I might say to that is that as an 
entrepreneur, any dollars that remain in my pocket are dollars 
that I have to invest in my company, and I think although what 
the two gentlemen before me have said I agree with, I think 
that all entrepreneurs would be happy to have the opportunity 
to have a lower burden on themselves personally because in many 
instances, we would turn that money right back into investing 
in our business.
    Mr. Tymes. The clients that we see, they usually come to us 
other than tax issues to be honest with you there, and I think 
that any lower tax would be beneficial, but the concerns that 
most of our clients are expanding, again, expanding markets, 
issues with getting a loan at this particular point in time, 
but I can just say that any lower tax I am sure would be 
beneficial.
    Mr. West. Well, and I guess then that is the next question 
is: I mean, when you come in and you are at level A, what keeps 
you from getting to level B and C, what are the primary factors 
or obstacles that keep you from taking it to that next level 
that you see out here in this current economic environment?
    Mr. Goldman. Well, often it is capital, being able to hire 
more people, it takes capital or being able to invest in new 
initiatives, new equipment. So, that is capital-intensive, and 
then it is where there are sales. So, for our brand, which is a 
consumer product, consumers having money in their pocket to 
spend, having consumer confidence is important, too.
    Mr. West. Do you feel there is a lack of predictability or 
certainty out there?
    Mr. Goldman. It certainly seems to have gotten better. We 
have seen it in our business pretty significantly, but, sir, 
two years ago, it was a lot of people were keeping their cash 
in their pockets.
    Mr. Hall. I think one of the interesting things that we 
have found is that the more successful we have gotten, the more 
challenges we face. When you have one grocery store chain 
picking up your sauces, you are producing a few thousand 
dollars' worth of product at a time. When you are at $3,000, 
$4,000, or $5,000, you are producing potentially several 
hundred thousand dollars' worth of product at a time. So, the 
need for capital really grows when you grow and I think that 
has been one of our challenges, although, we have had more 
capital access as we have become more successful. It is kind of 
a beast that needs to continue to be fed and it gets more and 
more difficult.
    Mr. Tymes. I would just like to echo that access to capital 
is one of the major ones, but there are a couple of other ones 
that we see. One is skills. Skills of not only the 
entrepreneur, but a skilled workforce and trying to attract 
those types of talent that they need to grow and I think this 
is increasingly important with technology-based firms in terms 
of attracting those individuals that have a technical 
background. I think that especially at the university, we see 
in terms of some of the companies that we are working where the 
immigration issue is also a problem in terms of trying to 
retail those skills that are needed to help those companies 
grow.
    Mr. West. Thank you, and I yield to Ranking Member 
Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman. For the record, 
this is less than $75, right? [Laughter.] Yes, okay.
    So, Mr. Tymes, Mr. Razeghi in his written testimony 
explained why we must learn to better identify and support the 
companies that have the greatest potential to succeed. So, Mr. 
Tymes, as an SBDC director, when an innovator comes to you with 
an idea, how do you assess their needs and determine how you 
can help them become successful?
    Mr. Tymes. Well, it is a couple of ways. One is when 
someone comes in with an idea, just by purely the conversation, 
we have a number of assessment tools, and some things that we 
are trying to identify. First and foremost, we are trying to 
identify commitment, is that entrepreneur, is that individual 
committed to being an entrepreneur? One of our core values at 
our program and make sure it is the same with other SBDCs 
across the country, we will never squash the dream of an 
entrepreneur. Anybody who walks through that door, we have 
tools to assess what stage of development their idea is, we 
will help them self-select out of the process by helping them 
with some research, if you will. But our process and most 
SBDCs, we have training programs once we have identified in the 
assessment what those skill gaps are, we have training programs 
to fill those gaps, if you will. So, it is a process and most 
SBDCs have a process that where a committed entrepreneur with a 
good idea has a customer, will percolate to the top.
    Ms. Velazquez. And you will look at a business plan?
    Mr. Tymes. Oh, absolutely. We help them with the business 
plan, as well, because that is critically important. We always 
say that the plan itself is not the most important document, 
although it is important, but it is the process that you go 
through, it is the questions that you have to be able to answer 
as an entrepreneur, whether it be with financing, whether it be 
with your competition, whether it be with your industry, these 
are some important things that need to be done, and as I talked 
before, it is about knowledge, it is about more information 
that you have.
    And I will just add one other thing because I just wrote it 
down because I think it was Mr. Goldman that said that taking 
in a ``well-informed'' risk, and I think that that is what we 
try to do is provide information to minimize those risks.
    Ms. Velazquez. Thank you, Mr. Tymes.
    Mr. Goldman, your company undoubtedly competes against 
large firms in your industry. What are some of the challenges 
you face in competing against your larger companies or 
counterparts?
    Mr. Goldman. Yes. Well, for us, distribution was critical. 
In the beginning, I was trying to distribute the product 
myself, and it did not get us very far, and we went to the 
large distributors and they were not interested in our product 
because it was not sweet enough and probably they did not think 
organic tasted good. So, we had to go to other distributors, 
cheese distributors, corned beef distributors, anybody who was 
putting something on a truck. And so, for us, distribution was 
a key barrier and we did not have a way to get around it. The 
way we were able to succeed is we had a product that was 
different so that a store would take us on a shelf, even if we 
sort of had to go through a different door, and when there are 
such big barriers, entrepreneurs have to have a unique selling 
proposition that gets them someone's audience.
    Ms. Velazquez. Are there any benefits that you offer your 
employees that----
    Mr. Goldman. Oh, yes.
    Ms. Velazquez [continuing]. Your large counterparts will 
not?
    Mr. Goldman. Yes. Yes, we certainly have a very different 
approach to how we interact with our employees. Because we are 
a health and wellness-focused company, we gave all of our 
employees bikes to ride a few years ago, they get healthy snack 
pack benefits, and then, of course, the most, I think, 
important one to them is that they all got equity stock options 
as we grew. So, as our company succeeded, they succeeded, as 
well.
    Ms. Velazquez. Thank you.
    Mr. Razeghi, in your written testimony, you talk about 
crowd source funding offered as an alternative to credit card 
debt for entrepreneurs. You do not see any risk for fraud 
abuse?
    Mr. Razeghi. Oh, no, there are certainly risks there, yes, 
and I think capital is one avenue. What is in the Jobs Act and 
the issues around crowdsourcing, certainly risks that people 
have to be mindful of that. I think the bigger risk for the 
entrepreneur is most traditional venture capitalists frown upon 
having too many early stage angel investors. They do not want 
to deal with that many small investors early. So, when you are 
talking about 300, 400, 500 possible, that is not going to bode 
well when you go to, Mr. West, your question about A to B, when 
you move to that next level of capital, that is really the 
bigger risk, I think. So, no, certainly, we have to be mindful 
about it.
    Ms. Velazquez. How do we ensure that investors are 
protected?
    Mr. Razeghi. So, to some degree, the market works pretty 
well, so, if you look at some of the crowdsourcing, businesses, 
Angie's List, for example, it sort of keeps itself honest, it 
runs a little like Wikipedia. People review those investors, 
they are rated, people can comment on what is it like to work 
with this investor. So, the market really, if you let it work, 
it kind of works itself out. So, that is my opinion on it.
    Ms. Velazquez. Okay, thank you, Razeghi.
    Mr. Razeghi. Sure.
    Ms. Velazquez. Mr. Hall, you started your company out of 
your home's basement and now your product is carried in over 
3,000 stores, you mentioned, in 40 states. At what stage were 
capital infusions critical to your success?
    Mr. Hall. Really from the beginning, maybe the very first 
run in 2008, if you knew any of our friends or our families, 
you probably received a bottle of our spice rub and it cost us 
about $3,000 or $4,000 to do that initial run of about 2,000 
units. Once we decided we really wanted to make a go of it, it 
became critical to have capital for everything from production 
to trademark, getting the trademarks and licensing, getting all 
of the legal documents in place. Shipping, it is something that 
you do not think about when you are in your home kitchen, but 
when you are going bigger scale, it costs a lot to send across 
country a glass bottle with 12 ounces of barbeque sauce in it.
    Once we were on Shark Tank really was when we went from a 
regional D.C., Maryland, Virginia company to more of a national 
company, and that is really when our first big infusion needed 
to occur. We went from 100 stores in the area to what seemed 
like 250 and then 500 and then 1,000 within a few months. And 
that is really when the big capital infusion needed to occur 
because, like I mentioned earlier, the smaller you are, it 
seems like there is more pressure, but I am of the opinion now 
the bigger you are, when you have not really made it to that 
top level yet, you are getting bigger and bigger and more 
people want your product. So, there is the pressure to produce 
more product, there is the pressure to increase the number of 
products that you offer in your product line. So, if you have 
one product, you only have one product sitting in the 
warehouse. If you have six products, you have six products 
sitting in the warehouse that are not making money for you 
until you actually get them sold. So, I think really that big 
step for us when we went from more of a D.C. area company and 
into that larger regional and eventually national.
    Ms. Velazquez. Sure.
    I yield back, Mr. Chairman.
    Mr. West. Thank you, Ranking Member of Alaska.
    Mr. Hanna.
    Mr. Hanna. I am curious, anyone can answer this or maybe 
all of us, it is widely accepted or at least touted that one of 
the mistakes we make in our educational system is we take in 
people from abroad, we educate them well and we do not stamp 
their graduation diploma with a green card, something I 
personally think we should do, especially in STEM.
    Would anybody like to speak to that? I know it is a little 
off the subject, but----
    Mr. Razeghi. Yes. So, this is my backyard, of course, as an 
educator and I can tell you at least anecdotally that it is 
certainly a trend. More folks are returning home versus staying 
here. Part of it is they want to go home, so, I think we cannot 
necessarily affect that. They have opportunity now in places 
like China and India where they can build their own dreams and 
stay by their families. That said, certainly if you look at 
engineering, for example, 75 percent of PhDs are foreign-born, 
as you know. We need them here and we could use them here. But 
I think beyond that, we could also perhaps take a page from 
what Israel has done. In Israel, of course, they train their 
military to code and, as a result, Israel now is one of the 
technology powerhouses of the world and----
    Mr. Hanna. Dan Seymour's book.
    Mr. Razeghi. Precisely. Precisely, yes. So, I think it is a 
combination both of immigration reform on the one hand and then 
developing our own talent here, as well, but it is certainly 
something I am in favor of is developing the talent.
    Mr. Hanna. Mr. Goldman, you mentioned the market kind of 
has a way of resolving its own issues. Do you think that the 
popular term moral of consequences is thrown a lot? I am not 
exactly tight on what--everybody means something different by 
it, but I think you know what I am talking about in terms of 
business.
    What are the dangers of government getting involved and how 
do you balance that?
    Mr. Goldman. Well, I do think inevitably, when the 
government gets involved, it is somehow going to be picking 
winners and losers and winners and losers that the market will 
not necessarily agree with. And so what happens is you may see 
the government propping up something that is not sustainable, I 
mean, from a business perspective. And so, one of the things 
that has been nice about our business, 14 years, although 
sometimes it feels like I have been counting in dog years, it 
is a relatively long time to build something. So, we have been 
growing, but each year, we have been able to digest the growth, 
and, as a result, we have had a lot of things that have failed, 
but the market has sort of proven it out.
    And whether you look at our housing markets, I mean, there 
are a lot of markets where the government was supporting them 
or directing them in a way that was not long-term sustainable. 
So, from my perspective, the markets in general are the best 
judge of what is going to work.
    Mr. Hanna. There must be some benefits to people having to 
fight through that, slog through that process.
    Mr. Goldman. Yes.
    Mr. Hanna. I mean, it is a filter in and of itself.
    Mr. Goldman. It is. It is a proving ground. There is no 
entrepreneur who--all of us, you get lucky breaks, but for 
every luck break, there are a lot of ones that--someone told me 
I was in the right place at the right time. I said, well, it 
took 14 years to get here. So, there are not enough lucky 
breaks to keep a budding entrepreneur in business over 14 
years.
    Mr. Hanna. Thank you, I yield back.
    Mr. West. Thank you, Mr. Hanna.
    Ms. Chu.
    Ms. Chu. Thank you, Mr. Chair.
    Mr. Tymes, I was so glad to see that you are such an 
enthusiastic supporter of SBDCs. I am, too. And, in fact, even 
though we had one in the general area, I am working to get one 
in my area, the San Gabriel Valley in California, and I am 
aware that these programs have to have a certain amount of 
matching funds from the private sector, also, that overall 
SBDCs are facing about a 10 percent cut in the budget. This has 
resulted in numerous centers receiving fewer funds, even though 
there is more client demand now for assistance in starting 
businesses, and client demand, I would have to think, is 
especially high as more unemployed people try to start their 
own businesses.
    So, what are you doing in response to this? What can be 
done in our staff being trained to respond more effectively in 
this current economic downturn?
    Mr. Tymes. Thank you for the question. I first would like 
to say that over the past few years, it has been difficult in 
terms of our program nationally. You mentioned we did Federal 
funding, but the matching component of that.
    Ms. Chu. Yes.
    Mr. Tymes. And that matching portion not only comes from 
the private sector, but from states, and we all know the 
difficulty states have had over the past couple of years with 
their budgets. So, it is compounded, if you will, as it moves 
down.
    But to answer your question, the way that we have been 
doing it, again, just like other SBDCs across the country, as 
collaborations. I mean, that is leveraging. That is what we 
have to do and let me just give you a good example of that. We 
assist technology-based businesses. We do not have in Delaware 
the resources to hire someone that is technical, if you will, 
to assist these types of businesses. So, again, what we have 
done is with the new unit at the university, we have leveraged 
resources with the individuals that have the technical 
background with our expertise, again, on the business side of 
it.
    But this is the important thing here in this unique model 
is that not only do we assist those individuals in terms of 
internal to the university faculty and researchers, but we also 
have an arrangement that the university licensing associates 
and those technical individuals also assist us with 
entrepreneurs outside of the university, as well. So, you have 
to be really creative, but at times, you can only be so 
creative. At some point in time, it catches up with you and you 
are not able to meet the demand that is out there. 
Collaborations, collaborations, and leveraging resources as 
best you can, but, again, it gets to a point where you work 
with organizations that have the same problems that you have, 
and it becomes really, really difficult at times to keep up 
with the demand with the economy the way that it has been. We 
are just flooded with business owners that come in.
    And I will just add this, that what happens is when you 
have a situation where there is an economic downturn and things 
get pretty tough, the time that you spend with a business 
increases because what you are doing is you are going through 
every aspect of that business to try to determine, number one, 
how can you wring out as much excess as you can there because 
of cash flow. At the end of the day, that is what it is going 
to be all about in there. So, it has been difficult, but 
collaborations and leveraging resources as best you can is the 
only way you can do it.
    Ms. Velazquez. Would the gentle lady yield for a second?
    Mr. Tymes, how do you feel about the fact that when your 
program, the SBDC, is getting a cut of reduced budget of $13 
million, yet, the administration is creating a pilot project, a 
pilot program like regional clusters, for $13 million at a time 
when we are facing budgetary constraints and the network SBDC 
has a proven record throughout the Nation. It does not make 
sense that we are going to fund a program that is a pilot, is 
untested, and unauthorized. We are on record, both the chairman 
and myself, telling the administration that it is not the right 
way to go. So, we understand the incredible resource that you 
represent in our Nation by providing tools and information to 
small businesses and I want you to know that I support 
reinstating the $13 million.
    Mr. Tymes. Thank you. Thank you very much.
    Ms. Velazquez. Thank you for yielding.
    Ms. Chu. Thank you. I yield back.
    Mr. West. Thank you, Ms. Chu.
    Ms. Hahn.
    Ms. Hahn. Thank you, Mr. Chairman. I enjoyed this hearing 
today and the two entrepreneurs, glad you are here and you 
really sort of confirmed what I found when I have been touring 
small businesses and meeting with them, they really talk about 
their biggest issue is access to capital and the other thing, I 
was like well, what can I do for you, and then say customers, 
we need more customers. So, get the economy back on track, get 
the people back to work, that is what we need is more 
customers.
    My question, I kind of feel like one of our colleagues 
recently in another committee who said where are the women? 
And, Mr. Razeghi, in the 2010 Kellogg Foundation Report, it 
found that overall men are substantially more likely to start 
businesses each month than are women, and in your research, I 
am wondering if you found a similar phenomenon. And if so, are 
there resources that women entrepreneurs need that are not 
available or to what do you attribute the lack of women 
entrepreneurs that we are seeing?
    Mr. Razeghi. Yes. So, it is a great question. So, I do not 
research the specific, but I can tell you that other research 
that I have seen, but typically, it is more so the types of 
businesses. So, they are typically called lifestyle businesses, 
but work from home types of businesses and so on. They are 
because of family reasons and so on, there is a tendency to 
move there.
    In our experience that we are seeing, for example, I am 
involved with an accelerator in Chicago, where we have actually 
a predominant number of women, majority of women that are 
starting technology businesses.
    So, what are the hurdles there? Frankly, I do not study 
that subject closely enough, but I think there is certainly a 
trend, at least I have seen a trend moving more in that 
direction, but the big issue really are these categories of 
these lifestyle businesses versus these high potential types of 
businesses.
    Mr. Tymes. But the thing is, though, at the end of the day, 
whether you are a woman, whether you are a male, marketing is 
marketing, finance is finance, and product development is 
product development. At the end of the day. It is these are the 
basics of the business basics, if you will. There are some 
things there in terms of what you just mentioned, but, again, 
at the end of the day, to be successful, it is going to take 
some of the same skills that anyone will need to be successful.
    Mr. Razeghi. An idea I would add to that, sort of to follow 
on it, but what I see is an educator, and I guess I am 
concerned with the pipeline of entrepreneurs, is that our best 
and brightest, I am fortunate to teach at a high-ranking 
school, if I can be so humble, in Chicago. What I see typically 
is that there are opportunity costs of walking away from their 
student loans is why typically either one or the other in a 
relationship, somebody has to have the full-time job while the 
other goes, whether it is male or female, to go keep the lights 
on while they pursue their dream. So, a thought I had is why do 
we not offer credits towards people against their student loans 
for every new job they create to really change the metric? Some 
have been extreme and say do not even go to school, just drop 
out and start a business. There are only so many Bill Gates 
that we can to that have done that and succeeded, so, stay in 
school, but let us put incentives in place. So, I think it is 
probably if we look deeper, more of an economic issue than a 
gender issue.
    Ms. Hahn. Of course, I always love hearing men comment on 
what the issues are with women, but, anyway.
    Hey, I was going to talk to the two entrepreneurs here. One 
of the other things I was reading in the Kellogg Report is that 
interestingly enough, of the 15 largest cities in the country, 
Los Angeles actually created the most entrepreneurial 
businesses in 2011, which is interesting because Los Angeles 
usually gets pegged as not business-friendly and it is very 
difficult to do business.
    I am wondering from the two of you what geography or 
location actually played in where you chose to start up your 
businesses.
    Mr. Hall. Well, I will start with that. Geography has a lot 
to do with barbeque. [Laughter.] I am from Texas, I love Texas 
barbeque; I am from Kansas City, that is not barbeque in North 
Carolina; oh, Memphis is the only place to get barbeque. Pork 
is barbeque, beef is not; beef is barbeque, pork is not.
    So, I think that definitely there are some strategy with us 
in the type of product we have and the type of product people 
in certain geographies are used to. So, we kind of started out 
with what I would kind of consider a basic barbeque sauce that 
we thought would appeal to the vast majority of Americans and 
then since then, we have started to create more of the regional 
variances. We will probably in the next four to six weeks be 
launching our newest sauce, which is a Carolina vinegar sauce. 
We have launched a mustard sauce, which is very regional. 
However, one of the interesting things, and you mentioned Los 
Angeles, is we introduced the mustard sauce last year and we 
found that it is selling the best in California. And the 
reason, I think, is because it is an unusual product for 
California. There is no competition really. You do not go to 
the grocery store and see seven or eight mustard sauces on the 
shelf, you see ours.
    Ms. Hahn. We put it on our tofu. [Laughter.]
    Mr. Hall. Hey, that is fine, as long as you are buying it, 
you can put it on whatever you want. [Laughter.] Whereas in 
South Carolina, where you go to the grocery store and there may 
be a dozen mustard sauces on the shelf, we are now competing 
with 11 other products. So, I think that maybe for our product 
geography is definitely a kind of really important factor to 
figure in.
    And one of the things also that has helped us, we have been 
able to partner with certain companies and groups like Reser's 
Fine Foods out of Portland, Oregon, a major potato salad, 
coleslaw, side dish company that is very predominant at 
barbeques, and being able to have our product mentioned with 
theirs has helped integrate us into their customer base because 
they trust Reser's, they know it is a good product. They see we 
are associated with it and they are willing to take a chance.
    But it is really tough in the food industry. I am sure it 
is the same way with teas. When you have companies like Sweet 
Baby Ray's and Tennessee Masterpiece and Kraft that are 
spending billions it seems like--it is probably not that, but 
that is what it seems like--and running 10 for $10, for 76 
cents you really have to find ways to distinguish yourself, and 
we do that through what we think is a higher-quality product. 
We like to call ourselves affordable gourmet.
    Mr. Goldman. For me, I was working at a company called 
Calvert Group, which does environmentally responsible mutual 
funds and I started out out of my house, so I just stayed at 
the same place. And it is very often you will see one business 
sort of be the nucleus where others sort of come off maybe not 
directly related, and, obviously, that is what Silicon Valley 
is.
    I will say just as a parenthetical that a lot of startup 
entrepreneurs in the beverage industry are very afraid of 
California because of the consumer, the friendly laws, and we 
have seen that that is a state that is very intimidating to 
startup businesses, at least in the food space.
    Ms. Hahn. Okay. Thank you.
    Mr. West. If there are any other members who have any other 
questions, we are about to have a vote call.
    Mr. Hanna. Just a quick one.
    Mr. West. Mr. Hanna.
    Mr. Hanna. Mr. Tymes, what is your failure rate?
    Mr. Tymes. Failure rate?
    Mr. Hanna. Go broke rate, whatever you want to--does not 
work out?
    Mr. Tymes. That do not work out, to be honest with you, in 
Delaware, we have not tracked that, to be honest with you. I 
can say this, that anecdotally, that is all I can say, those 
that have worked with our programs have done fairly well, I 
would say.
    That is a difficult one to measure. And let me give you a 
good example. Over the past couple of years, we will get a 
referral from a bank where an entrepreneur business is in 
trouble and we have got to work to try to turn that business 
around as best we can and sometimes it works and sometimes it 
does not, and so, is it a failure? No.
    Another thing that is hard to measure is especially in the 
startup situation, a person comes through, we go through a 
training program, starting out in business, we work with them, 
and through our process, they self-select out and find out that 
maybe I better not start this business. Maybe I better not do 
it. Maybe I better save some more money and maybe I better get 
some experience, and they do not start it up. So, you ask 
yourself the question: Is that a success or is that a failure? 
In my eyes, I think it is a success, but that individual never 
started a company, they will never hire any employees at this 
particular point in time, all right. So, a lot of times, that 
is kind of hard for us to measure to be honest with you.
    Mr. Hanna. Thank you.
    Mr. Tymes. Yes.
    Mr. West. Thank you, and on behalf of Chairman Graves and 
Ranking Member of Alaska, I just want to thank you all for 
being here and participating today. And the committee will 
continue to follow closely and research the Nation and the 
needs of our entrepreneurs who are definitely our country's 
best job creators.
    I ask unanimous consent that members have legislative days 
to submit statements and supporting materials for the record. 
Without objection, that is so ordered and this hearing is now 
adjourned.
    [Whereupon, at 2:18 p.m., the Subcommittee was adjourned.]



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


