[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






    PRIVATE SECTOR INITIATIVES TO EDUCATE SMALL BUSINESS OWNERS AND 
                             ENTREPRENEURS

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

                                HEARING

                               before the

        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 19, 2013

                               __________


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


            Small Business Committee Document Number 113-036
              Available via the GPO Website: www.fdsys.gov


                                _____

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                       BLAINE LUETKEMER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      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
Hon. Tom Rice....................................................     1
Hon. Judy Chu....................................................     2

                               WITNESSES

Dina Powell, Managing Director, Goldman Sachs, New York, NY......     4
Stephen Morgan, Ed.D., Chair, Board of Trustees, My Own Business, 
  Inc., City of Industry, CA.....................................     6
Damien Stevens, Founder & CEO, Servosity, Greenville, SC.........     8
Kim Pate, Chief External Relations Officer, Corporation for 
  Enterprise Development, Washington, DC.........................     9

                                APPENDIX

Prepared Statements:
    Dina Powell, Managing Director, Goldman Sachs, New York, NY..    27
    Stephen Morgan, Ed.D., Chair, Board of Trustees, My Own 
      Business, Inc., City of Industry, CA.......................    32
    Damien Stevens, Founder & CEO, Servosity, Greenville, SC.....    35
    Kim Pate, Chief External Relations Officer, Corporation for 
      Enterprise Development, Washington, DC.....................    37
Questions for the Reocrd:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.

 
    PRIVATE SECTOR INITIATIVES TO EDUCATE SMALL BUSINESS OWNERS AND 
                             ENTREPRENEURS

                              ----------                              


                      THURSDAY, SEPTEMBER 19, 2013

                  House of Representatives,
               Committee on Small Business,
                   Subcommittee on Economic Growth,
                                    Tax and Capital Access,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building. Hon. Tom Rice 
[chairman of the subcommittee] presiding.
    Present: Representatives Rice, Chabot, Schweikert, Chu, 
Payne, Meng, and Schneider.
    Chairman RICE. Good morning.
    I want to start out with an apology in advance, and that is 
I have two simultaneous Committee meetings right now, and we 
are doing a markup in the Transportation and Infrastructure 
Committee, and I have to be there. So I am going to start this 
meeting off and at some point I will introduce my co-panelist, 
David Schweikert, who will take over as chairman of the 
meeting. And so I just want to apologize to you that at some 
point during this meeting I am going to stand up and excuse 
myself, but we have a very important markup going on in the 
Transportation and Infrastructure Committee. Unfortunately, the 
Committees do not check with each other's schedules when they 
schedule these things.
    I thank every one of you very much for being here in 
advance. Thank you for taking your time to come and educate us. 
It is so very important. And I will go as far as I can and then 
I will excuse myself. So thank you for that.
    The hearing will now come to order.
    Today, we will explore the importance of education and 
training for small business owners and entrepreneurs, and 
highlight examples of the private sector imparting knowledge to 
growing small businesses around the nation.
    Half of all small businesses fail within five years after 
opening, and recent research has shown that newly formed small 
businesses are creating fewer jobs than in the past. Analysts 
cite a lack of general business acumen, and an inability to 
adapt to rapidly changing economic environments as a reason for 
the challenges they so often face. Since historically, small 
businesses have been responsible for over two-thirds of new job 
creation in this country, it is critical that we ensure our 
nation's entrepreneurs are receiving the educational and 
training opportunities that provide the knowledge, and in turn 
the confidence, they need to grow.
    Education for those looking to start or grow their 
businesses comes in many forms. Whether it is through a 
classroom environment, online course, mentorship provided in an 
incubator or accelerator, or networking through peer-to-peer 
programs, small businesses are using these avenues to gain the 
knowledge, expertise, and personal connections to help them 
grow their businesses and hire more employees.
    There are numerous examples of the private sector stepping 
up around the country to provide both established, and 
fledgling small businesses with the information they need not 
only to survive, but to also grow and create jobs. Today, we 
will hear about some of these initiatives and how they assist 
our nation's job creators.
    We are fortunate to have here with us some of the leaders 
that help to address the critical knowledge gap facing small 
business owners and entrepreneurs, as well as an entrepreneur 
that has participated in and benefitted from such efforts. I 
look forward to learning first-hand from our witnesses today 
about how their work has helped to stimulate economic growth 
and create jobs around the country. Thank you very, very much 
for being here.
    I now recognize the ranking member for her opening 
statement.
    Ms. CHU. Thank you, Mr. Chair.
    Today's hearing will provide insights into a variety of 
private sector initiatives to train and mentor entrepreneurs 
and small business owners across the country. We will also hear 
how these efforts are contributing to our nation's economic 
growth and job creation.
    In today's hearing, we have representatives from big and 
small companies, as well as the nonprofit sector. I look 
forward to hearing about your programs and how we as 
policymakers can learn from your successes and failures to 
continue supporting small businesses, the growth engines of our 
economy.
    Initiatives that support small business owners and 
entrepreneurial development are essential to promoting economic 
and development growth. Historically, the United States has 
experienced job growth primarily due to business startups. In 
the last 30 years, new firms have generated an estimated three 
million new jobs every year. In fact, small businesses that are 
less than five years old create two-thirds of all net new jobs.
    As the nation continues its recovery from the Great 
Recession and the labor market remains weak, it is vital to 
support policies in the public and private sectors that support 
entrepreneurs and small businesses. If entrepreneurs have the 
support tools and resources that they need, they will grow to 
the point where they can generate job opportunities for the 
millions of unemployed Americans.
    We all note that being an entrepreneur and starting a 
business is difficult because it entails having a good idea, 
finding capital, and taking a huge risk. Obstacles exist at 
every stage of business, but they are particularly acute at the 
earliest developmental stages. These challenges include 
financing, capital access, and uncertainty over regulation and 
taxes.
    Thankfully, those willing to take the risk can take 
advantage of a number of technical assistance and 
entrepreneurial development opportunities provided by the 
federal government and also by the private sector which we will 
be hearing about today. I am excited to have the Corporation 
for Enterprise Development here to discuss their efforts to 
help low and moderate income entrepreneurs formalize their 
businesses and gain access to tax credits, financial 
incentives, and credit products.
    Their Self-Employment Tax Initiative (SETI) has helped over 
12,000 entrepreneurs prepare their taxes at little or no cost. 
Considering the complexities of the tax code, this program 
offers much needed assistance to entrepreneurs who do not have 
the means to pay a professional to file their taxes.
    We also have Goldman Sachs today to talk about their 10,000 
Small Businesses Initiative, a program designed to help small 
businesses with practical business and management education, as 
well as access to capital and business support services. For 
the last three years, I have invited a representative from the 
10,000 Small Businesses Initiative to my annual small business 
workshops to talk about this very successful program and how 
entrepreneurs in my district can benefit from it. This is a 
great program that gives small businesses a unique opportunity 
to network, receive top-notch training, and direct access to 
top business executives.
    There are also programs that leverage federal dollars with 
the private sector to help entrepreneurs. One of my favorite 
programs is the Small Business Development Centers, which 
provide small businesses with training and counseling for free. 
SBDCs receive funding from the Small Business Administration, 
but do have to form partnerships with the private sector to 
receive matching funds. Last year alone, SBDCs in 900 locations 
across the country provided assistance to 210,000 small 
businesses. Continuing federal and private support for 
businesses like this and programs like this are vital to our 
economic recovery and future economic growth.
    With this in mind, I am looking forward to today's hearing 
which will provide insights into what CFED, Goldman Sachs, and 
other private sector companies are doing to help entrepreneurs 
and small businesses grow and succeed.
    Thank you, Chairman Rice, for convening this hearing, and I 
yield back.
    Chairman RICE. Thank you, Ms. Chu.
    If Committee members have an opening statement prepared, I 
ask they be submitted for the record.
    I would like to take a moment to explain the timing lights 
to you. You will each have five minutes to deliver your 
testimony. The light will start out as green. When you have one 
minute remaining, the light in front of you will turn yellow. 
Finally, at the end of your five minutes it will turn red. And 
we will have a little leeway in there.
    I ask that you try to adhere to the time limit, but again, 
there will be some flexibility.
    I want to thank you once again before I start introducing 
you for being here. This is such an exciting and critical time 
in Washington. A lot of things come together that affect small 
business, a lot of things that will affect our competitiveness 
worldwide. With the continuing resolution, the potential with 
ObamaCare getting ready to kick in, with the debt ceiling 
coming in, with all these things coming together all at one 
time, it is an exciting time to set up our country for 
competitiveness and to set up our country for the future. So 
thank you again for being here at this really critical time in 
our nation's history.
    Our first witness is Dina Powell, Global Head of Corporate 
Engagement at Goldman Sachs and President of the Goldman Sachs 
Foundation, where she leads its 10,000 Small Businesses 
Program. Prior to joining Goldman Sachs, Ms. Powell served as 
assistant secretary of state for Educational and Cultural 
Affairs and was deputy undersecretary of state for Public 
Diplomacy and Public Affairs, after serving as assistant to the 
President for Presidential Personnel at the White House. She 
also serves as a member of the J. William Fulbright Foreign 
Scholarship Board, the Board of Trustees at the University in 
Cairo and the Vital Voices Global Partnership, and is a member 
of the Council on Foreign Relations. Ms. Powell, you are a very 
busy lady, and we look forward to your testimony.

 STATEMENTS OF DINA POWELL, MANAGING DIRECTOR, GOLDMAN SACHS; 
  STEPHEN MORGAN, CHAIR, BOARD OF TRUSTEES, MY OWN BUSINESS, 
  INC.; DAMIEN STEVENS, FOUNDER AND CEO, SERVOSITY; KIM PATE, 
 CHIEF EXTERNAL RELATIONS OFFICER, CORPORATION FOR ENTERPRISE 
                          DEVELOPMENT.

                    STATEMENT OF DINA POWELL

    Ms. POWELL. Thank you, Mr. Chairman.
    It is really an honor to be here today and to join you and 
Ranking Member Chu and members of the Subcommittee, including 
Congressman Schweikert, Congresswoman Meng, and Congressman 
Schneider.
    We are really honored to have the opportunity to testify 
today about the 10,000 Small Business Initiative. Goldman Sachs 
proudly launched this effort alongside a coalition of 
individuals and institutions who are committed to economic 
growth and job creation in our country. These include our co-
chairs of the Advisory Council. Our CEO at Goldman Sachs, Lloyd 
Blankfein; Berkshire Hathaway CEO, Warren Buffett; and Harvard 
Business School professor, Dr. Michael Porter. They lead an 
advisory council that includes Dan Danner of the National 
Federation of Independent Businesses, Marc Morial, head of the 
National Urban League; Javier Palomarez is head of the Hispanic 
Chamber; and former education secretary, Margaret Spellings. 
Together this coalition built 10,000 Small Businesses, which is 
an integrated program that offers proven tools that small 
business owners need to grow their businesses.
    This $500 million commitment provides entrepreneurs with 
three key resources. The first is a practical, high-quality 
business education. The second is growth and working capital. 
And finally, the third, and often mentioned as the most 
critical, is business advising, networks, technical assistance, 
and mentors. We believe it is this integrated framework 
bringing all three pieces of the puzzle together that help 
small business owners in one program.
    We also know that we have tested this program in a global 
marketplace. This framework has been born out of a program we 
ran globally, called 10,000 Women, a $100 million investment 
that was seeking to reach female entrepreneurs in 43 countries 
with business education, mentoring, and links to capital. We 
are very proud that this month marks the graduation of the 
10,000th woman in the program. We were able to apply many of 
the lessons of this global program and the measurement and the 
results that we took away to building our domestic effort here 
in the United States. In just three years, we have invested in 
an infrastructure, we validated our model, and we have launched 
the program in 15 markets across the country. Now, 10,000 Small 
Businesses is active in these markets. It is designed for 
existing small businesses poised for growth. In each market, we 
built a separate and distinct entrepreneurial ecosystem to 
provide local services, and the partners include respected 
community institutions, like community colleges, community 
development, financial institutions, local chambers of 
commerce, local community groups, and mayors and local 
officials committed to supporting their small businesses.
    In the interest of time, I will respectfully refer you to 
my written testimony for the full program description, but I 
would love to use my remaining time with you to tell you three 
lessons we have learned along the way and some of our results 
to date.
    First, as my bosses always tell me at Goldman Sachs, 
measurement is crucial. We rigorously track the performance of 
our businesses at regular intervals when they complete the 
program. We are pleased to report that just six months after 
graduation, more than 60 percent of the participants are 
reporting increased revenues, and nearly half are creating net 
new jobs. Additionally, we were surprised by one metric. We 
assumed that we would have a high attrition rate initially 
because these are very busy small business owners and this is 
an intense time commitment and you cannot graduate without 
completing it all and having a growth business plan submitted. 
We were surprised and pleased to see that nationwide we have a 
99 percent completion and graduation rate.
    One example of success is in Ranking Member Chu's district, 
Ada Chan from Pasadena, California. Ada runs Fresh Events 
Company, an event planning firm. Ada's revenue has grown 22 
percent since joining the program, and while she was in the 
program she was named ``The Small Business Person of the Year'' 
by the SBA in Los Angeles, and she was referred by you inviting 
us to the session where she applied for the program. So thank 
you very much for that, Congresswoman Chu.
    Our second lesson is that public-private partnerships are 
critical, and I am so honored to join my fellow panelists 
because that is, I think, the message that you will hear from 
all of us. No one institution can do it all and our 
partnerships have included, as I mentioned, these local 
community organizations but many members of Congress and others 
who, as you have, have nominated small business owners. We even 
had Speaker Boehner a few months ago meet a roundtable of 
graduates from Ohio, and he gave them some tough lessons of 
being a businessperson himself.
    A couple of years ago, I was honored to have the 
opportunity to join Ranking Member Velazquez in her district in 
Brooklyn to tour one of our small business owner's sites, Mike 
Dimarino, who has a tool and die fabrication business in 
Brooklyn. Mike succeeded very well as our first cohort at La 
Guardia Community College, and then he nominated Andy Dimarino, 
his brother, who is in Congresswoman Meng's district. Andy got 
into the program and taught us one of the best lessons, and we 
have seen this example over and over again. He actually merged 
with a fellow classmate, another landscaper in New York, and 
now together they are competing for much larger bids throughout 
the city.
    This is that important example and the third lesson and 
final lesson learned, the impact of peer-to-peer learning. We 
see that businesses enter the program and they often say to us, 
``I feel like I am an island all by myself,'' but when they 
enter the program, they immediately build a network of support 
and create a tangible marketplace together. In fact, 70 percent 
of our graduates are either doing business together or 
referring business to each other.
    We are really looking forward to scaling this program 
across the country, and we are honored to use the occasion of 
this prestigious hearing, Mr. Chairman, to announce today that 
we are launching a national expansion of 10,000 Small 
Businesses. We are now beginning to accept applications for our 
first ever national cohort. Any qualified business across the 
country may apply. Accepted participants will take the full 
program at Babson College, and we could not be more excited to 
encourage you to nominate your constituents.
    So I just want to say in closing, on behalf of our partners 
and all of the people at Goldman Sachs, it has been a humbling 
and inspiring experience to work with Americans across the 
country, these small business owners dedicated to job creation 
and growth.
    Thank you so much, and I will be pleased to take your 
questions.
    Chairman RICE. Thank you, Ms. Powell. And thank you so much 
for what you are doing for American business. We appreciate it 
very much. It sounds like you are doing great things.
    Our next witness is Dr. Stephen Morgan, chairman of the 
Board of Trustees of My Own Business, Inc., an organization 
that provides online training courses to those looking to learn 
how to start or grow a business. In addition to his role at My 
Own Business, Dr. Morgan currently serves as the president of 
the University of the West in Rosemead, California, and was 
previously president of the University of La Verne for 26 
years.
    Dr. Morgan, we thank you for being here and look forward to 
hearing your testimony.

                  STATEMENT OF STEPHEN MORGAN

    Mr. MORGAN. Thank you, Chairman Rice and Ranking Member 
Chu. It is a pleasure for me to have my paying job in your 
district. Thank you very much. Other members of the Committee, 
it is a great opportunity for us to discuss small business 
creation, ownership, and most importantly, success.
    I am particularly appreciative of the opportunity to be 
here as I am the volunteer chair of the Board of Trustees of My 
Own Business, Inc., a Los Angeles-based nonprofit organization 
providing free educational tools and training via the World 
Wide Web to support successful businesses around the world. As 
you will know, much of the success of our country comes from 
the fortitude of new business creation, often started by those 
who seek to create new opportunity for their families, and that 
has been particularly true during these very difficult years 
since 2008.
    Please allow me to share with you a story about how our 
organization came to be. On April 29, 1992, verdicts were 
rendered in a controversial case involving the 1991 beating of 
Rodney King. The toll of the riots that followed was 
devastating. More than 50 people were killed, over 4,000 people 
were injured, 12,000 were arrested, and a billion dollars worth 
of property was damaged.
    Southern California entrepreneur, Phil Holland, founder of 
the Yum Yum chain of donut shops in California, watched in 
dismay during those riots. Having already successfully 
published The Entrepreneur's Guide and The Moonlight 
Entrepreneur, Phil decided that he wanted to go into the riot-
torn area to teach those who were in that community how to 
start their own business. And for the next three years, Phil 
drove weekly to Compton, California, to teach those courses. 
The final session of the class was taught in Spanish, and 
eager, small business owners came by the busload from across 
Los Angeles to hear Phil Holland's presentation.
    Then, in 1994, Phil Holland created My Own Business, Inc., 
(MOBI), a 501(c)(3) public charity, and he began to build a 
website so people everywhere could take advantage of a free 
curriculum designed to share with them the dos and don'ts of 
starting their own business. The free website courses include 
quizzes on all subjects contained in the curriculum, business 
plan templates, 75 video presentations by business experts, and 
a final examination and certificate of completion for those 
scoring over 80 percent on the quizzes. MOBI's Growing a 
Business course includes practical business training 
specifically focusing on 15 topics necessary for expanding a 
business.
    For the past 20 years, MOBI has offered this free business 
training to nearly 35 million people who have visited the MOBI 
website. Since the launch of the web-based MOBI curriculum, 
469,000 have completed the courses and nearly 31,000 have 
applied for the certificate of completion. The MOBI website is 
viewed monthly by an average of 235,000, resulting in 4,000 
students' completion the MOBI courses each month.
    In a 2010 study, involving 5,000 MOBI graduates conducted 
by the UCLA Anderson Graduate School of Business, 22 percent of 
the respondents indicated their businesses would have failed if 
they had not studied the topics offered in the MOBI curriculum. 
Of the 5,000 MOBI graduates responding to the survey, 56 
percent have actually started a business, and 77 percent of 
those who started a company were still in business. Nearly 60 
percent of the respondents reported that they had been in 
business for more than two years, and nearly one-third reported 
that they planned to hire at least one new employee within the 
next 12 months.
    Three important partnerships have strengthened MOBI's 
outreach since its founding in 1994. First, for more than 10 
years, MOBI has provided its courses to the World Bank. The 
second important partnership continues with Cisco Systems, 
Inc., which primarily has used the program in its 
internationally-focused Cisco Entrepreneur Institute. The third 
partnership that MOBI engaged in was with the Small Business 
Administration. For a number of years until 2006, a link to the 
MOBI Starting a Business course was provided on the SBA 
website.
    It has been a pleasure for me to have had this opportunity 
to share the extraordinary service and contributions of Phil 
Holland, an American entrepreneur who sought to significantly 
give back by helping others achieve similar success, and all 
free of charge.
    Thank you very much.
    Chairman RICE. Thank you very much, Dr. Morgan. It sounds 
like you are doing big things. Thank you for being here.
    Our next witness is Damien Stevens, founder and CEO of 
Servosity, a growing technology company located in the NEXT 
Innovation Center in Greenville, South Carolina.
    Prior to starting Servosity, Mr. Stevens founded Utopia 
Net, which was the number one ranked web development company in 
the upstate area. He also previously founded GSA Technology 
Council in South Carolina, a community of IT professionals. Mr. 
Stevens is both a high school and college dropout, but he has 
been asked to teach at the very same college he dropped out of 
and has served in advisory capacities for other colleges and 
universities.
    Mr. Stevens, we look forward to your testimony.

                  STATEMENT OF DAMIEN STEVENS

    Mr. STEVENS. Thank you, Mr. Chairman. I appreciate that.
    I want to thank you and the members of the Subcommittee for 
the opportunity to be here and testify at today's hearing. I am 
Damien Stevens, the founder and CEO of Servosity.
    Servosity provides backup and disaster recovery as a 
service to a national network of partners or technology 
companies that service small and medium-size businesses. I 
wanted to talk a little bit about the story that we have had in 
our growth.
    In 2008, I joined NEXT Upstate and began learning from 
other entrepreneurs at events such as their CEO Roundtable. 
Before joining NEXT Upstate, I made all the mistakes myself 
without the benefit of learning from others, specifically other 
entrepreneurs, and the challenge is unique to high growth 
companies.
    NEXT Upstate is an organization that attracts and grows 
high impact, technology companies by developing the 
entrepreneurial ecosystem needed by these companies and 
connecting companies to the ecosystem.
    In 2009, Servosity moved into a small office in the NEXT 
Innovation Center, a collaborative workspace formed by a group 
of entrepreneurs and the Greenville Chamber, which houses 
multiple high-growth companies. Upon moving into this office, I 
came into contact with Michelin Development and learned of 
their low interest loans they offer to small businesses. After 
being turned down the first time, I persevered and was 
fortunate enough to be approved for $100,000 loan for my small 
business after applying the second time. This capital gave us 
the bridge to grow from the company we were to the company we 
wanted to be, to that next level. That gave us the ability to 
grow to the point we were able to attract and secure private 
investment.
    In 2011, and again in 2012, Servosity attracted private 
investment capital. In 2012, Servosity announced its expansion 
into a 3,200 square foot new headquarters at the NEXT 
Innovation Center in Greenville, South Carolina, and our 
intention to add 30 jobs in the next 18 months. We started off 
this year with four employees and have 12 now, and we are 
currently growing and hiring. These jobs are just the 
beginning; we have the opportunity to employ hundreds of people 
over the next few years. These jobs we are adding are for 
software developers, system engineers, support engineers, 
sales, account management, and business development. The 
average earnings are $80,000, and some positions are 
significantly higher. Those earnings are more than double the 
average prevailing wage in South Carolina. Not only are we 
creating jobs in the knowledge economy, we are creating 
meaningful high-paying positions with nearly unlimited growth 
potential for employees.
    Without the next ecosystem, I would not have learned from 
other entrepreneurs. I would not have met with Michelin 
Development to have the opportunity to secure that growth 
capital. I would not have been able to grow to the next stage 
to secure private investment capital, been introduced to 
potential investors, nor would we have attracted the top tier 
talent to required to grow a fast paced technology company.
    Thank you for your valuable time today. I enjoyed being 
able to share a very small part of our entrepreneurial journey. 
I would not be here today without the help from so many others. 
I am so blessed. Thank you.
    Chairman RICE. Thank you, Mr. Stevens, for your 
contribution to small businesses in this country.
    I will now yield to Ms. Chu, who will introduce our final 
witness.
    Ms. CHU. I have the pleasure of introducing Kim Pate. She 
is the Corporation for Enterprise Development's chief external 
relations officer. She is responsible for the biannual Assets 
Learning Conference, which brings together over 1,000 leaders 
in the asset-building field to discuss ways that assets can 
help create prosperity and expand economic opportunity for low-
income people.
    Kim also coordinates strategic events, partnerships and 
communications across CFED's priority areas of work, including 
asset building, entrepreneurship, tribal state, and local 
economic development, and affordable home ownership.
    Prior to joining CFED, Kim was a deputy director of the 
national projects for Wider Opportunities for Women in 
Washington, D.C., which is a multiple strategy, women's 
employment organization that is recognized nationally for its 
skill training models, technical assistance, and advocacy for 
women workers. Kim holds a law degree from the University of 
California, Los Angeles School of Law, and a B.A. in Political 
Science from Stanford University.
    Thank you for being here, Kim Pate.

                     STATEMENT OF KIM PATE

    Ms. PATE. Chairman Rice, Ranking Member Chu, and Member Mr. 
Schweikert, thank you so much for this opportunity to testify 
on behalf of efforts to support entrepreneurs and specifically, 
small and micro businesses. We applaud this Subcommittee's 
focus on this sector.
    The Corporation for Enterprise Development was founded in 
1979 to support entrepreneurs, and ``enterprise,'' you may say, 
is our middle name.
    Microbusinesses--those with four or fewer employees--
account for nearly 90 percent of all U.S. businesses. So that 
means that roughly one in six South Carolinians and 
Californians own and operate a microbusiness. This figure is 
representative nationwide. Microbusinesses contribute to 
community revitalization, and Mary Gatch, of South Carolina, 
who started DwellSmart as a retail shop offering 
environmentally healthy products is a great example of this.
    After winning contracts with large green companies, 
DwellSmart needed a location with a warehouse space and a 
loading dock to be able to meet all of the demand. They found 
an unused building in an area of redeveloped downtown 
Charleston, and with a Charleston local development corporation 
loan, DwellSmart rehabilitated the property and led to more 
revitalization in the area.
    According to the U.S. Small Business Administration, 
business created by low-income entrepreneurs have high survival 
rates ranging from 57 to 90 percent. This is higher than the 
rate for all small businesses. Microbusinesses contribute to 
American economic growth and vitality. On average, 
microbusinesses create 2.9 full and part-time jobs per 
business. Small changes to enhance the capacity of such a large 
and productive sector could reap major dividends.
    Another microbusinesses example comes from CFED partner 
PACE in Los Angeles. Deborah Stern attended PACE's 
entrepreneurial training program while starting a business 
making tamales. She won a PACE award of $5,000, which she used 
to hire two employees and rent a kitchen. Her restaurant, La 
Guera Tamalera in the Silver Lake neighborhood of Los Angeles 
has become an area favorite.
    Recognizing the importance of microentrepreneurship as a 
critical strategy, CFED launched the Self-Employment Tax 
Initiative in 2005, and we had three goals. First, build assets 
for low-income households; second, create jobs, and third; 
increase tax revenue by bringing more self-employed into the 
formal tax system. Most of SETI's local partners are volunteer 
income tax assistance or VITA programs, and these VITA programs 
provide free tax support to low and moderate income taxpayers. 
There are nearly 6,000 VITA community-based sites throughout 
the country. For example, in Horry County, South Carolina, you 
can find VITA programs at several libraries. In California, 
VITA assistance is offered through the Monterey Park 
Bruggemeyer and at El Centro de Accion Social in Pasadena. VITA 
is a good example of successful public-private partnership. In 
South Carolina, California, and the rest of the country, the 
VITA sites represent local community efforts supported by 
federal grants, state and local funds, and philanthropy all 
coming together.
    According to a 2012 National Community Tax Coalition (NCTC) 
report, VITA helped more than three million taxpayers claim 
$2.2 billion in tax refunds, while saving the federal 
government 5.5 million in reduced processing costs. So while 
VITA assists some low-income entrepreneurs, IRS restrictions on 
allowable VITA activities have prevented many self-employed 
earners from receiving any assistance at all.
    Recognizing that VITA's narrow scope meant that sites were 
turning away microentrepreneurs with few other options, NCTC 
led an effort with CFED and the IRA to build on CFED's SETI 
program. In 2010, we launched the Schedule C VITA Initiative 
with 16 pilot sites that have served business with up to 
$25,000 in expenses. In its three years of operation, the 
Schedule C VITA initiative has not only brought thousands of 
low-income entrepreneurs into the VITA system, it has done so 
without reducing tax filing quality.
    Our current research is examining how other systems, three 
key federal policy systems--tax, but also workforce and post 
secondary education--are supporting or failing these 
entrepreneurs. And while this research will reveal new forms 
worth considering, this Subcommittee need not wait to act in 
support of microentrepreneurs. As you may know, in the previous 
Congress, Ranking Member Chu proposed one significant step 
forward, the Entrepreneur Startup Growth Act. And this 
legislation, which is based on CFED's SETI program, would have 
provided additional support for microentrepreneur tax-filing 
assistance. The $1.5 million authorized by this legislation 
could support hundreds of local VITA sites to serve thousands 
of entrepreneurs.
    So in conclusion, Chairman Rice, Ranking Member Chu, 
members of the Committee, I would like to thank you again for 
inviting me to testify today. We at CFED are eager to work with 
the Subcommittee to expand economic opportunity, create jobs, 
and support microenterprise. We would be happy to answer any 
questions. Thank you.
    Chairman RICE. Wow, what a very impressive panel. I sure 
appreciate what you all do. I do not think there is anything 
more important than job creation and economic development and 
you are right at the heart of it, and I so appreciate what you 
do.
    Ms. Pate, I have to correct you on one thing. You said 
Horry County, South Carolina, H-O-R-R-Y. I was the chairman of 
that county and my wife said, ``I am not the First Lady of 
Horry County. It is Horry County, thank you very much.''
    Ms. PATE. Duly corrected.
    Chairman RICE. She would be very upset if I did not correct 
you on it. You know, I was a tax lawyer and a CPA in my real 
life for 25 years, and I think one of the biggest problems that 
businesses face is uncertainty. I think if they do not know 
what the rules are--it is hard to play the game if you do not 
know what the rules are. And so I think Washington is one of 
the biggest creators of that uncertainty. Here we have been 
operating under a continuing resolution for years. We have not 
had a budget for years. We are considering the adoption of a 
continuing resolution for a few months to get past this, that, 
and the other. We have got this healthcare law getting ready to 
hit on January 1st. I do not think anybody really knows the 
effect of that. People say they do but I do not think anybody 
really knows the effect.
    What I am curious about is from your perspectives, I am 
getting a lot of calls in my congressional office about these 
things. How is the uncertainty around the Affordable Care Act 
affecting the small businesses that you represent or work with?
    Ms. Powell?
    Ms. POWELL. Thank you, Mr. Chairman.
    You know, for the past three years we have heard a lot of 
different challenges from small business owners, and I think 
that it affects certainty--and many of those challenges relate 
to workforce issues.
    Maybe I will just backup a second though because you 
mentioned something about yourself and your career prior to 
being a member of Congress serving for 25 years as a successful 
tax lawyer. I cannot tell you the amount of legal issues small 
business owners face, and that is probably an area, whether it 
affects regulation around healthcare or employee relations or 
access to capital, that they know the least about and there are 
the fewest programs out there for them. I am sure your law firm 
in South Carolina used to do pro bono work. We have been so 
pleased to see a number of law firms around the country come to 
us and say, ``Can we work with your small business owners?'' So 
we now, in every single region that we operate, have law firms 
like Weil Gotshal, Latham and Watkins, many, many, doing an 
entire legal clinic. And I do think one of the areas that our 
small business owners will certainly ask about are many of the 
regulations that affect their workforce. And so I think that is 
something we are hopefully preplanning for by giving them an 
outward connection to these lawyers.
    Chairman RICE. I had a fellow in my office yesterday who 
owned two franchise auto service and he had 40 employees and he 
did not want to open a third one because he would go over 50 
employees. Are you hearing things like that?
    Ms. POWELL. You know, we are hearing a number of challenges 
but I cannot say it is specifically that. I mean, I will tell 
you the truth, when you get into 10,000 Small Businesses, you 
are really focused on whether or not you are going to be able 
to grow your business. That is one element. But as Ms. Pate was 
talking about, the largest growth opportunity in terms of job 
creation are coming from small businesses--four, five, six 
employees--but they could get to 40, could get to 100. And I 
think that there are so many challenges that we hear. Do you 
know what the biggest one is? All I do is work in my business, 
not on my business. I do not know how to be a CEO. I do not 
know how to make contacts. I do not know how to address all 
these legal issues. So I would say we are hearing a whole 
bucket of different issues.
    Chairman RICE. Thank you.
    Dr. Morgan, another thing I am hearing from a lot of 
people, particularly in the service business, is that they are 
cutting their employees back to 29, 28 hours a week. Are you 
hearing a lot of that?
    Mr. MORGAN. What we see is that entrepreneurs have a 
passion. They are driven to start their own business, and that 
passion is a powerful fuel. And once they get into their 
business, there is a great deal of red tape that the small 
business owner faces. And the uncertainty of future 
legislation, whether it be ObamaCare or whether it be other 
legislation, is what really concerns them, because most of them 
do not have a staff. They may not have an attorney on retainer. 
They may not have an accountant on retainer. And it is the 
answers to those questions that puzzle them and trouble them, 
and certainly they think about that before they hire people or 
expand their business beyond a certain level.
    Chairman RICE. Mr. Stevens?
    Mr. STEVENS. I appreciate that, Mr. Chairman.
    I can at least speak for our company. We are not at the 
size that we have to worry about being 50 employees or 
something related to healthcare additional complexities, but 
that uncertainty has created issues for us. We want to focus on 
growth, delivering the best service to our customers and not be 
concerned with the uncertainty. So I know from our perspective, 
uncertainty has been a problem, and the way that we addressed 
it is we are working with a co-employment firm and essentially 
we get to give them the headaches of dealing with the 
healthcare issues. And whether we are at 12 or whether we are 
at 112 employees, we have a predictable path and cost structure 
to get there. So that was our way of trading uncertainty for 
certainty, and it certainly has its costs and expenses. I can 
tell you, obviously healthcare costs continue to rise and are a 
big issue for a small business. And for the first several years 
we were unable to offer healthcare. Financially, it just was 
not feasible. We would have had to hire less people or not 
grow. And I am thankful to say that we do offer, of course, 
healthcare today and that has been a big issue on our minds.
    Chairman RICE. And Ms. Pate?
    Ms. PATE. I think that Ms. Powell pointed out a really 
important need in the field, which is that entrepreneurs are 
finding themselves surrounded by questions of legality, red 
tape, taxes, et cetera, and this is another thing for them to 
be worried about. So what we----
    Chairman RICE. And do you agree that most of that comes 
from Washington, D.C.?
    Ms. PATE. Well, to the extent that this is the seat of 
government authority and power, a lot of it is coming from D.C. 
And so especially the entrepreneurs who are rural, who are 
disconnected from cities, who do not understand the government 
process or the legal processes are feeling very concerned about 
the viability of their businesses with all of this change. So 
what a lot of successful programs like PACE in Los Angeles are 
doing is looking at integrated service delivery so that they 
are providing access to taxes, which is a moment that you can 
grab people in and say, ``And by the way, are you familiar with 
the Affordable Care Act and the changes? Are you familiar with 
regulations related to your food business,'' et cetera. So it 
is like we are meeting the entrepreneurs where they are, with 
every need that they may have.
    Chairman RICE. It is hard to be familiar with regulations 
that have not been written yet. You have to have ESP.
    Ms. PATE. Yes. Or good lobbyists in Washington.
    Chairman RICE. I am a big fan of Michael Porter. You 
mentioned him earlier. An expert in national competitiveness. 
And he is a firm believer that our tax code makes us not 
competitive worldwide.
    What do you all think about that? Do you think we need tax 
reform? I do. I am curious.
    Start with you, Ms. Powell.
    Ms. POWELL. Well, can I say one thing about Dr. Porter? I 
think he sees a number of things that the United States could 
improve on to be way more effective.
    One of the reasons we were really honored he was a co-chair 
of the program is that over 15 years in running the Initiative 
on Inner City Competitiveness, he actually did an analysis that 
showed these inner cities, these urban communities are really 
not just the right thing to do in terms of an investment but 
they are the smart, economic, strategic thing to do because 
they are underserved populations that do not have access to 
capital, that do not have access to job growth. And he tracked 
businesses for 15 years and found that 70,000 jobs came 
directly from those communities when the business owners were 
served. And I think that was something that was new because it 
was really data that showed there is growth opportunity, not 
just a good thing to do in terms of investment.
    I could not speak directly to the tax reform issue, Mr. 
Chairman, but I do think that the most important thing we have 
learned is that we need to be bringing stories to you of your 
constituents and the small business owners that we see. And 
increasingly, our small business owners know now where to go as 
they come into our program or some of the programs here, that 
their voices matter to you and that they need to be talking. 
Certainly, in our legal clinics, taxes come up quite a bit.
    Chairman RICE. Thank you, Ms. Powell.
    Dr. Morgan?
    With all due respect to CPAs and attorneys, Mr. Chairman, I 
would like to say that the entrepreneurs who start small 
businesses would like to spend as little time and as few of 
their resources on those services as they possibly can and move 
forward with growing their business and being successful 
entrepreneurs.
    Chairman RICE. So you are thinking a simpler tax code would 
be a good thing?
    Mr. MORGAN. So my belief is that if we can simplify the tax 
code and other laws that are coming down or that are out there 
in uncertainty land, the easier it will be for entrepreneurs to 
be successful, particularly in challenging economic times.
    Chairman RICE. I completely agree with that. I think we can 
compete with anybody worldwide, but the government stands in 
the way.
    Mr. Stevens, what do you think about that?
    Mr. STEVENS. Mr. Chairman, I agree. I think Dr. Morgan put 
it well that all things being equal, simplicity is better. As a 
small business, and as one that speaks with a number of 
entrepreneurs, uncertainty and complexity are the enemies of 
growth. We need to focus on innovating and creating jobs and 
serving the customers and delivering what we do an spend less 
time on uncertainty and tax issues and other things.
    Chairman RICE. Comply with government red tape.
    What do you think, Ms. Pate?
    Ms. PATE. I think that entrepreneurs that do not understand 
the tax code have three choices. One is to just figure it out 
themselves. The second is to hire a commercial tax preparer. 
And the third is to not file. If they do it on their own, the 
chances are that they will make mistakes and they will incur 
liabilities that they are not prepared to pay. If they hire a 
commercial preparer, they may be paying exorbitant rates or----
    Chairman RICE. That is clearly--as a tax lawyer, let me say 
that is money well spent.
    Ms. PATE. Yes. Yes. Assuming they can afford it, right? It 
may be out of their ability, right, as brand new businesses. 
And third, not file. And if they do not file, we know what 
happens then. They are contributing to the tax gap and they are 
making themselves unqualified for any support through the tax 
code and also for earned income tax credits, child tax credits, 
and other benefits they may be eligible for.
    Chairman RICE. Well, I completely agree with you. I think 
our businesses can compete with anybody, but the government has 
got a noose of red tape around their neck and we have got to do 
everything we can to loosen that and make the road ahead as 
easy as we possibly can. We do not need to be an obstacle; we 
need to be somebody that encourages and makes it easier for 
business.
    Thank you very much. Next up will be the ranking member, 
Ms. Chu. And I am going to leave now. I cannot thank you enough 
for being here and what you do to encourage business and jobs 
in this country. Thank you.
    Ms. CHU. Thank you.
    I am going to yield to Congressmember Schneider, because he 
is under time pressure due to a competing committee. So 
Congressmember Schneider.
    Mr. SCHNEIDER. Thank you very much. And I thank you for 
letting me jump ahead of the line, so to speak.
    If any of you in your small business or small businesses 
you advise can try to find a way to be in two places at one 
time, we all would be so grateful.
    Speaking of grateful, let me say thank you for what you all 
are doing. I spent my career as a small businessman mostly 
advising other small businesses. I know the companies you are 
dealing with. In particular, I know startup companies are 
dealing with so many challenges. For a lot of them it is their 
dream. They are going to cobble together all the pennies and 
nickels and dimes that will get them to there, and every single 
penny they spend is crucial and it can be the difference 
between success and failure. And so much of what they are 
facing they are facing for the first time. So to have guidance 
is also crucial. But they cannot afford the guidance 
oftentimes, whether it is a CPA or an accountant, or in my 
case, a strategy consultant. These small companies do not have 
the resources to reach out to people who are providing those 
for a fee. And whether it is a volunteer organization or a 
group like 10,000 Small Businesses from Goldman Sachs or what 
you are doing, Ms. Pate, is critical because these companies 
grow. They start out. Maybe it is a barber shop or a 
delicatessen or even a food cart, and they start out with that 
but their aspirations are to be something great and you provide 
them the pathway. So let me just again say thank you for what 
you are doing.
    In that context, some questions I would love to explore.
    In today's environment--and Mr. Stevens, I left you out as 
a small businessman, so maybe I will start with you on the 
question--there are things I think the government does do to 
help, and yours is a technology business, things like 179, the 
accelerated depreciation, how important is something like that 
as you decide where to put your money to grow your business?
    Mr. STEVENS. Thank you. I appreciate that. That is a great 
question.
    That has been help for us, the section 179. I know other 
business owners say it has been the deciding factor whether or 
not to invest further. For us it has not been. We have been 
fortunate enough to grow dramatically either way, and really 
before growth, even if it was not ideal from a tax or other 
perspective, but I have spoken with many entrepreneurs where 
that influenced their ability to invest in their business, buy 
additional equipment, do the other things they wanted to do, 
which later led to additional job creation. And without that 
credit they would have either not done it or put it off another 
year or another two years.
    Mr. SCHNEIDER. Great. Thanks.
    From your experience, the rest of the panel, are you seeing 
things like that, other things the government does that helps 
the client companies you are working with?
    Ms. Powell?
    Ms. POWELL. Thank you for the question.
    Ranking Member Chu described one that we have been very 
proud to partner with, which are the SBDCs. These local small 
business development centers are working with hundreds and 
hundreds of small businesses and they are bringing them in and 
assessing their needs, and then being able to refer them to one 
of our organizations or many of the other programs out there. 
So we have a large nominating partnership with them across the 
country. And what I think they are also trying to do is one of 
the things we have learned is that 10,000 Small Businesses is 
not a lecture format. We put every cohort in growth business 
groups, and so they actually, as I mentioned earlier, have this 
peer-to-peer learning and they are teaching each other or they 
are relying on each other. They are like living case studies of 
challenges. The businesses may be extremely diverse, but the 
challenges are common. And one of the most interesting things 
we have seen is how they then recommend government contracting 
programs. They teach some of the minority-owned businesses--
women-owned businesses, and other minority-owned businesses to 
apply for that status, which would surprise you, Congressman, 
how few businesses out there know there is this referral 
network that is created. So I would highlight the SBDCs and 
just the opportunity in some of the government programs to 
build these networks in communities across the country.
    Mr. SCHNEIDER. Great.
    Dr. Morgan?
    Mr. MORGAN. Congressman Schneider, we refer our students to 
many of the federal government websites, and particularly to 
the SBA for assistance in starting their businesses and in 
funding their businesses. And moving ahead with the challenges 
of understanding the laws and the rules and regulations. So you 
are absolutely right. There are many resources available 
through the federal government for our small business 
entrepreneurs.
    Mr. SCHNEIDER. So I see I am down to my final 30 seconds, 
so let me just close with a comment. And again, a 
congratulations. The other Committee I am balancing is Foreign 
Affairs, so congratulations on 10,000 Women. That is an 
incredible program Goldman does and is a thing that I think 
everyone in the United States should be proud of.
    With small businesses, the idea of partnerships, the 
public-private partnerships where government works with 
nonprofit organizations like what you are doing, with private 
companies like what Goldman Sachs is doing to help drive the 
engine. Sixty-five percent of the jobs in this country are 
created by small businesses. Fifty-five percent of the jobs are 
in small businesses because some of those small businesses grow 
to be large and it moves the numbers. If we are going to have 
another American century, it is going to be on the innovation, 
creativity, and entrepreneurial spirit of the companies you are 
helping. So again, thank you for all that you do.
    Mr. SCHWEIKERT. [Presiding] Thank you to the gentleman from 
Illinois.
    Ms. Chu, can I extend you a courtesy, if you would like to?
    Ms. CHU. Thank you, Mr. Chair. I appreciate that.
    Well, Ms. Pate, your organization's SETI has awarded more 
than $500,000 to 40 organizations to offer tax preparation 
services. If these services were not available to small 
businesses, the microbusinesses, where would these individuals 
go for tax preparation services?
    Ms. PATE. There is not a lot out there for them, frankly. 
As I mentioned before, if they choose to do their taxes on 
their own they may have trouble with that. We only at this 
point have 16 pilot sites in this VITA initiative with the IRS 
and NCTC, and what we are finding is that over 50,000 of the 
people who go through these VITA Schedule C programs return to 
get their taxes done the following year, so we see a lot of 
interest and need through just these 16 pilot sites, so we can 
only imagine what would happen if this was available on a 
broader scale, and it is possible that that could happen 
through VITA. But we also need efforts like the Entrepreneur 
Startup Act that you introduced last congressional session 
because it would create much more ability for more than just 
VITA programs to provide free and low-cost tax preparation. It 
could be done at a state agency level. It could be done at a 
local agency level. It could be done in a public-private 
partnership. There are many, many opportunities to expand this 
model of free and low-cost tax preparation far beyond VITA and 
make it not as dependent, frankly, on the VITA pilot that we 
have been pursuing.
    There are a lot of microenterprise development 
organizations that get funding from the small business 
programs, including the program for investment in 
microentrepreneurs, women's business centers. You mentioned the 
SBDCs and also the microloan programs that are trying to serve 
entrepreneurs best as they can but their focus has necessarily 
been on lending and training and technical assistance and not 
so much in the tax field because you must have specialty and 
expertise as we know. So we need to focus on making 
opportunities much more plentiful for tax preparation than they 
currently are, and the way to do that would be to create some 
legislation that would enable that.
    Ms. CHU. Thank you for that.
    Also in your testimony you mentioned PACE, an organization, 
of course, with which I am very familiar because it is in Los 
Angeles, and you talked about a business that received a grant 
from PACE for $5,000 which it used to launch a restaurant. From 
a program-wide perspective, how successful is the PACE program 
in cultivating long-term successes like that of the restaurant 
owner and what could we learn from it?
    Ms. PATE. So PACE is a wonderful example of one of these 
integrated service delivery approaches that I mentioned 
earlier. So they provide workforce training. They provide 
business development training, financial education, individual 
development accounts which are matched to savings accounts. And 
in the fiscal year 2010 through 2011, and cumulative, they had 
a number of successful outcomes. First, they served 3,526 
entrepreneurs; they started 142 new businesses; 400 businesses 
were either stabilized or expanded; 542 total businesses were 
assisted; 981 jobs were created; $108 million in sales or gross 
revenue was obtained; and $9 million in tax revenue generated 
for local government by businesses assisted through PACE. So 
these are outcomes that are pretty stunning for a nonprofit but 
they are not unusual. There are a number of other 
microenterprise development organizations throughout the 
country as evaluated by the field program at the Aspen 
Institute through their Microtracker Program where the data 
suggests that since the Great Recession, microenterprise 
development organizations have increased their lending by 25 
percent and the number of individuals assisted by 15 percent. 
Outcomes data collected in 2011 from 1,200 microentrepreneurs 
served by 23 organizations demonstrate the power of these small 
businesses to produce jobs for their owners and for others, and 
many of these small business owners are disadvantaged otherwise 
in the labor market. So they were having a hard time getting a 
job, so creating their own job was their best option.
    Ms. CHU. Thank you.
    Ms. Powell, how do small businesses find out about the 
10,000 Small Business program, and what is the best way to 
reach out to these small businesses so they know about it?
    Ms. POWELL. Well, first, we appreciate champions like you 
who refer them to applying, and then that is where I think our 
community partners really come in, whether it is the NFIB, the 
local chambers, Hispanic chambers. One of the things that was 
really important to Goldman Sachs as a firm was that this is 
not just our effort, but rather it is this consortium of 
institutions who are committed across the country. It is also 
why when we go to a market we are not trying to have a generic 
imprint but rather a customized local imprint that is developed 
along with the local community because that is how we can 
ensure that it will really build a capacity that can last. So 
we have a lot of advertising for the program the SBDCs recruit. 
The community college in each district puts out calls for 
applications, and today, with the launch of the national 
program we hope people will go to our website, gs.com/
10000smallbusinesses, and learn how to apply from throughout 
the country for this program.
    Ms. CHU. And what businesses are the ideal fit for your 
program?
    Ms. POWELL. Well, we are really hoping that Damien, that 
Mr. Stevens will apply, because he is a perfect target. As you 
can tell, he has had a proven track record. He already has 12 
employees and when he said earlier that he was looking for 
access to networks, I think that is what we could really 
provide. I think he would be able to pitch Servosity very well 
to other small business owners in the program. But really, it 
is businesses that have been operating a couple of years, at 
least four employees, that are poised for growth, and that we 
believe this program can really make a difference in.
    Ms. CHU. And you have worked with community colleges to 
ensure that business owners get training. So far what has 
Goldman Sachs learned about the capacity of community colleges 
to educate entrepreneurs?
    Ms. POWELL. Well, thank you for that question. We have been 
really impressed with the community colleges that we have 
worked with throughout the country. Community colleges, as you 
know, are one of the most important platforms now in higher 
education in the United States, particularly when you have a 
program where adult learning is central to it. And so they are 
experts in adult learning, in short-term programming, 
continuing education, but importantly, they are often the 
bedrock of a community, and immigrants and a very diverse set 
of individuals feel very comfortable going to a community 
college. What we learned though was that while they had a lot 
of workforce training programs, and that is certainly an 
expertise of community colleges across the country, they did 
not necessarily have entrepreneurship centers or centers where 
you are not learning to train for a specific job that someone 
created but rather you want to learn how to create jobs through 
your business and grow your enterprise. And so I think that is 
what we believe is the lasting piece of the infrastructure we 
have invested in which are these entrepreneurship centers. More 
than 200 community college professors have been trained through 
10,000 Small Businesses. All of the community colleges have 
access to the curriculum. And then we are very pleased now that 
we are leaving a legacy of local case studies in each of these 
communities. So we have been impressed with their dedication.
    The final thing I will say is that community colleges are 
entrepreneurial themselves. No offense to the four-year 
institutions that we are also proud of. I will say we see them 
being incredibly entrepreneurial and this is a program where 
you have to start from scratch, you have to get the results 
back, and make adjustments to make it even better, and we have 
been really, really pleased to see it. And we are honored to 
have Walter Bumphus who is the head of the Association of 
Community Colleges, on our advisory council helping us kind of 
implement these lasting learnings across the country.
    Ms. CHU. That is very impressive, and I am sure you are 
going to see multiplier effects from training so many 
professors in the community colleges.
    Dr. Morgan, it is so impressive that MOBI was able to 
develop its program on its own. Does MOBI work in tandem with 
the SBA's entrepreneurial programs? And considering your 
extensive experience training small businesses, what are some 
of the things that similar SBA programs could do better?
    Mr. MORGAN. Well, as I mentioned, MOBI was on the website 
of the SBA until 2006, and then there was a disagreement about 
intellectual property rights for the MOBI curriculum. And the 
MOBI board did not want to give up the ownership of their 
intellectual property rights, so the SBA removed us from their 
site. But we would like very much to continue to work with the 
SBA. We have a curriculum. We update that curriculum. In fact, 
we will soon be relaunching our website before the end of the 
year with a more modern, up-to-date curriculum and with new 
video. And we are also looking at technology and how do we 
continue to expand MOBI's force around the world. So we would 
like to be in partnership with the SBA. We do refer our 
students to the SBA on a regular basis for the services that 
they provide so well.
    Mr. SCHWEIKERT. As you will learn, we have lots of bells 
and buzzers. I have been here three years and I still have not 
figured out which bell means what.
    [Recess]
    Ms. CHU. I will ask then a couple more questions and yield 
to the chairman.
    The other thing I was very impressed by, Dr. Morgan, was 
you talked about the fact that you had classes that were taught 
in Spanish and that prompted eager small business owners to 
come by the busload from all across Los Angeles. Can you share 
with the Committee what kind of difference language access has 
made for non-English speaking entrepreneurs and what training 
in other languages benefit the business community and job 
creation?
    Mr. MORGAN. Well, we have just launched our 
myownbusiness.org/espanol, and it is the website in Spanish for 
Spanish-speaking patrons of MOBI. And we have now 16,000 people 
per month looking at that website and beginning to utilize it. 
So we want to continue to expand our MOBI base and we want to 
continue to convert it into additional languages so that all 
people can access it and make use of our curriculum.
    Ms. CHU. Very good.
    Mr. Stevens, based on your testimony it sounds like the 
NEXT Upstate provides an ecosystem for high growth 
entrepreneurs to learn from each other and grow. What sort of 
information and education were you able to receive from your 
fellow entrepreneurs that you were not able to receive 
elsewhere?
    Mr. STEVENS. Yes, thank you, Ms. Chu.
    This particular ecosystem has really been fundamental in 
our growth, and I guess as Ms. Powell pointed out as example, 
the community colleges did not have an entrepreneurial program. 
A lot of those resources to learn how to go from point A to 
point B and then point B to point C were not there and the NEXT 
ecosystem emerged really with entrepreneurs and the Greenville 
Chamber to become its own economic development initiative but 
driven by and chaired by the entrepreneurs. And so the 
entrepreneurs decide what happens, what is needed. The 
committee decides what we need as entrepreneurs. And so it 
changes. Things change. When the Affordable Care Act came up, 
we brought in people to speak about that. When taxes become an 
issue, we have people speak about that. Legal issues, growth 
issues. So just about anything you could mention, we have 
brought in speakers to help educate. We have had CEO 
roundtables to help peer-to-peer facilitation. And we have even 
had special groups formed to address certain issues that only a 
subset of the group is interested in.
    Ms. CHU. Thank you. I yield back.
    Mr. SCHWEIKERT. Thank you, Ranking Member Chu.
    And for My Own Business we have actually handed out that 
website many times at many of the different forums. Can I 
actually solicit a couple questions and give me some education 
here?
    If you were--we will call it a microbusiness--and are we 
comfortable with the definition under 10 or do you prefer your 
definition of under four?
    Ms. PATE. Under 10 is fine.
    Mr. SCHWEIKERT. Okay. Under 10. In today's world, in the 
United States, what do you think your single, biggest 
difficulty is?
    Ms. Powell?
    Ms. POWELL. Difficulty if you are a microenterprise?
    Mr. SCHWEIKERT. Yeah. So you are the 10-person plumbing 
business or little retail business. Because where I am trying 
to lead to is my understanding from what we have picked up from 
national datasets is access to capital. I have amazing 
appreciation for education on how to do that but loop it back 
in. I mean, does anyone disagree with being able to find money?
    Ms. POWELL. Well, thank you for asking that, Mr. Chairman, 
because that is why our program believed that you cannot--in 
order to spur the most growth and to support these businesses 
most effectively, you have to have three legs of the stool--
education, capital, and mentoring and networking. And that is 
why we actually committed, of the $500 million, $300 million 
was committed to capital. And a very specific kind of capital 
if I may describe it. We are actually providing that capital to 
a nonprofit lending platform called Community Development 
Financial Institutions. Those are lenders who are trying to 
give access to capital to the business owners you are 
describing.
    Mr. SCHWEIKERT. Can I back up just a tiny bit on you? We 
have also had some of the folks from--is it Samuel Adams 
Brewery--come talk to us and the amounts of money they have 
been putting out in the street in microlending to small 
businesses.
    Ms. POWELL. This is not microlending.
    Mr. SCHWEIKERT. Well, I think they go up to 10,000.
    Ms. POWELL. Yeah, we go up to 750,000, the average loan for 
us. And so we are above the space. I think that is what is 
important, is there is a lifecycle of a small business owner. 
So you might start out as a four-person Mexican restaurant and 
you can grow into a catering business, et cetera.
    Mr. SCHWEIKERT. I am with you on the--where I am trying to 
get to is okay, we have had a conversation here of there is 
some platforms, though you believe it needs more growth and 
more government sponsorship, of tax preparation help, of 
mentoring and education. You are actually sort of covering all 
there with both the mentoring and access to capital, and trying 
to teach. I have done these classes where you teach folks how 
to write a basic business plan. One of my great passions and 
concerns is there are a lot of wonderful actors out there in 
the community. Goldman Sachs, what they are doing is at a 
completely different scale than much of what we see, but if I 
turn to Dr. Morgan and say your website for the Phoenix market 
or the LA market, can you have on there everything? Here is the 
website for the Department of Revenue. Here is how you file 
your form online. Here is your health license at the county. 
Here is how you get your tax ID number. Here is how you make an 
app for this. Are we seeing any unifying force out there that 
is bringing all those options together? So if I am that really 
busy entrepreneur and do not get to have time to go sit in 
class and sit with my mentor, at least I have access to 
information that also leads me to that capital and leads me to 
that information?
    Ms. POWELL. Well, I do think you are hitting on something 
that is a great need, Mr. Chairman, and I think one of the best 
things that this Committee hearing is doing is bringing all of 
us who are doing different pieces of the work together. And I 
do think that is an opportunity for this Subcommittee, frankly, 
to bring together more of the public-private partnerships, 
showcase them together, and have us frankly not only work more 
together but find ways to advertise our work in a more 
comprehensive method.
    On the capital piece, for example, the work that Ms. Pate 
is doing is helping microlenders. We hope that the work that we 
are doing, what we call small and medium-size borrowers who do 
not have access to capital, and then there are other forms at 
the end of that lifecycle when you have--when Damien breaks 100 
employees and can go access a large commercial bank loan, that 
capital is we hope increasingly available. What we are trying 
to do is target markets where capital does not now flow to 
those borrowers.
    Mr. SCHWEIKERT. Well, we are going to come back and talk to 
that because I still think we are hitting very close to sort of 
a revolution in access to capital with crowdfunding, if the SEC 
ever finishes its rule sets and some of these other things out 
there.
    Dr. Morgan, if I right now lived in wherever in the United 
States and wanted to go online and have a single porthole 
telling me my access to information, my regs, my filings, my 
access to money, does such a thing exist, and are you trying to 
get it there?
    Mr. MORGAN. Mr. Chairman, you ask a question that our board 
has spent time discussing because to our knowledge there is not 
that location, that website where you can get all of that 
information. And we have talked about a continuing education 
program for our entrepreneurs, for our graduates, so that we 
can continue to have a discussion where the entrepreneurs share 
that kind of information. As they seek it out, they would put 
it on a website. They would put it----
    Mr. SCHWEIKERT. So you would crowdsource the information?
    Mr. MORGAN. So we would crowdsource the information; 
exactly.
    Mr. SCHWEIKERT. Okay.
    Ms. Pate, in your watching the world, do you see such a 
porthole with that information coming together?
    Ms. PATE. Thank you for that question, Mr. Chairman.
    There are organizations at the national level, like the 
Association for Enterprise Opportunity (AEO), that are working 
to create these kinds of platforms in partnership with the 
private sector.
    Mr. SCHWEIKERT. Can I ask you just a one-off question?
    Ms. PATE. Sure.
    Mr. SCHWEIKERT. If you were to think about all the 
different groups that are out there trying to help small 
businesses, and those that we have created here in government, 
but also those I have created from my university, my community 
college, my NFIBs and all the other groups, I mean, just off 
the top of my head I bet you I can name two dozen.
    Ms. PATE. And that does not even count the local 
organizations that are providing that kind of one-stop shopping 
for their clients.
    Mr. SCHWEIKERT. I am trying to think of the 
microentrepreneurs that you and I have all met in our political 
lives. They are wonderful people. Their lives are so incredibly 
busy. Time is in many ways their most precious commodity. And 
my fear is our attempt to help, one of the most powerful things 
we could all do is sort of narrow that portal.
    Ms. PATE. So may I make a suggestion? Years ago, when I 
first came to D.C., I was part of a Clinton administration 
intra-governmental task force on microenterprise, and it 
brought together the Department of Treasury, the Department of 
Labor, the SBA, the Department of Education, all of the 
relevant agencies on a monthly basis, and we all came 
together--nonprofits were invited to the table, as well as the 
private sector--to talk about how to be more cohesive and 
aligned in the way we deliver services to the field.
    Mr. SCHWEIKERT. From just a personal standpoint, I believe 
actually Dr. Morgan may actually have the solution and that is 
the crowdsourcing of information. Whenever we build 
bureaucracies to try to help us do it they mean very well but 
they do not move fast enough, and then you get people who fuss 
over who owns this copyright, who does not do this, or you do 
not get to be on the website. There has got to be a better way 
to do it because if you have the 800 pound gorilla, like 
Goldman Sachs--excuse me, 800 pound helper--it is a very 
friendly, it is a cuddly gorilla. Those sorts of resources and 
talent for all these groups that--I used to be treasurer of a 
very, very large county and just the number of businesses that 
would come in every day trying to understand where they get 
their licenses, what are their tax liabilities and those 
things, and we found when we built really strong, powerful 
websites they stopped calling because they got the information 
easy and we stopped burning their precious time.
    And the last bit of my rambling here, I really believe with 
what we all did in bipartisan fashion now two years ago in the 
Jobs Act--there are things we are going to have to find a way 
to clean up and fix because there are problems in the design 
and we need still for the SEC to finish its rule sets, but the 
future crowdfunding where it may be the tiny little bakery, it 
may be up to the million dollars, there is a revolution coming 
for raising money. Will we have the backbone to educate our 
small entrepreneurs out there how to access it?
    With that, my friend from New Jersey, you are up.
    Mr. PAYNE. Thank you, Mr. Chairman and Ranking Member Chu. 
I appreciate this opportunity to ask my question.
    The panel's testimony is very encouraging and I applaud 
your effort to support entrepreneurs and small businesses.
    I notice that several testimonies reference the use of 
government program or resource supplement to supplement your 
efforts or attract additional private dollars. This is also 
encouraging as we work to support and strengthen these 
programs. So my question is, several of the testimonies also 
spoke to efforts of supporting low-income or disadvantaged 
business owners. Can anyone speak to the challenges that have 
been identified facing this particular population and your 
company's efforts to address them? And does anyone have 
suggestions on what we can do at the federal level to better 
support these businesses?
    Ms. Powell?
    Ms. POWELL. Thank you very much, Congressman Payne, and we 
are honored to have a number of your constituents who have 
graduated from 10,000 Small Businesses, and actually, a number 
of them who came through nominations from Marc Morial and the 
National Urban League in the area.
    I think that one of the learnings from 10,000 Small 
Businesses, particularly because we are implementing our 
program through community colleges, and I was referencing 
earlier the fact that these academic institutions draw from the 
community and often do have a higher percentage of 
disadvantaged communities. Our businesses, our 10,000 Small 
Business graduates are actually 50 percent women- or minority-
owned businesses, and this is something that we have been 
extremely proud of, although we are open for all businesses to 
apply. But I think what is happening is that this particular 
program and the suite of services it is providing is needed in 
communities where there are very hard-working, passionate small 
business owners who are saying, ``I just need a little bit of 
knowledge, some capital, and mentoring support and I will do 
the rest of the work. I will make the business grow.''
    I will give you one example, if I may, which is Saudia 
Davis. Saudia is a graduate from our first cohort in the New 
York/New Jersey area. Saudia has started a company called Eco-
Cleaning in honor of her grandmother, who sadly died of cancer 
as a result, she believed, of the carcinogens in the chemicals 
she used as a housekeeper for more than 25 years. So she wanted 
to start a commercial cleaning company that used eco-friendly 
products. She had started the business, had been operating for 
two years, got into 10,000 Small Businesses, learned how she 
needed to train her workforce better, write a growth business 
plan, pitch, become a minority-owned business so that she could 
compete for other contracts. I am so proud of her and the 
results she has had. She has created more than 15 new jobs. 
American Express named her as one of the Make Mine a Million 
business owners. She accessed capital from Seed Co. Financial, 
her first loan from a CDFI in New York that is one of our 
nonprofit lending partners, and she is just doing terrific. She 
has become a role model in the community. So we have so many 
examples where if you provide access just to the tools, these 
extraordinary small business men and women will do the rest of 
the work.
    Mr. PAYNE. Absolutely. I totally agree with you because in 
a lot of situations we find just a little technical knowledge, 
you can see the spirit. You can see that they are ready and 
willing and the effort is there but they do not have the 
technical knowledge. There are certain small aspects that they 
need to make them successful, so I really applaud a program 
such as that.
    Anyone else? Dr. Morgan?
    Mr. MORGAN. Congressman Payne, thank you for the question.
    Our program started in Compton, California by Phil Holland, 
and Phil knew that that was an area with a high profile of 
minority population and a lower socioeconomic community, and he 
has been absolutely committed from day one that our program 
will be offered free of charge so that there is no barrier to 
people accessing the education necessary to start your own 
business. And one of the major emphases of our website is how 
to develop a business plan that will help our entrepreneurs 
compete for capital in the capital market. So MOBI will 
continue. It is being funded by estate plans from Mr. Holland 
long into the future so that it continues to be accessed free 
of charge by any person who wants to start their own business.
    Mr. PAYNE. Thank you, sir.
    Ms. Pate?
    Ms. PATE. Thank you, Representative Payne.
    We, at CFED, have focused for the last 45 years on low-
income and minority communities, women, people with 
disabilities, and eradicating some of their barriers to 
starting their own businesses. So we fight very hard at the 
federal level to promote year after year funding for the Small 
Business Administration programs that are surveying this 
population. However, there is never enough funding through 
these programs and they are not, frankly, reaching some of the 
hardest to serve, most disadvantaged entrepreneurs. And what we 
are hopeful is that through the work of groups like MOBI and 
others, 10,000 Entrepreneurs, et cetera, that we can begin to 
raise the level of awareness that programs are out there and 
that they are having this kind of wonderful impact and maybe 
get more funding in the market for these groups. I do know that 
the work of the NAACP, in addition to the work of CFED and the 
Northwest Area Foundation will be producing next week in the 
Northwest a series of informational conversations about 
African-American asset building and entrepreneurship in 
particular, and I am helping to lead that effort. So we will be 
unearthing what we think will be some barriers to accessing 
those services and getting a better sense of, well, who are 
serving entrepreneurs of color and women? And what are some of 
those gaps, and how can we begin to close them?
    Mr. PAYNE. Well, I appreciate and commend all your efforts. 
It is my constituents that are looking for these opportunities, 
and it is a leveling of the playing field. I am not looking for 
people that are just going to show up, but we know that there 
are so many people that have the entrepreneurial spirit but 
just have not had the training and understanding of it. First 
generation entrepreneurs. They do not come from a history of 
that, their father and their grandfather. So this little push 
and this help in getting this population ready and prepared 
helps the nation because if they are able to build these 
businesses, then they do not have to look on the other side for 
the help that they need if they are not successful. So this 
helps the nation become stronger in serving its population, and 
I commend all your efforts. Thank you. I yield back.
    Mr. SCHWEIKERT. Thank you, Mr. Payne.
    With that, I think we are going to shut down. Although I 
will tell you I was all giddy when I heard MOBI was here. Now, 
for those my age it is a very popular musician. I am very fond 
of him.
    Mr. MORGAN. I am sorry to have disappointed you, Mr. 
Chairman.
    Mr. SCHWEIKERT. Yeah, it is okay. I think he would be 
creeped out to have a conservative republican as one of his 
fans anyway.
    But with that I want to thank you for your participation 
today. The testimony given to us and the examples of the 
private sector providing small business with the knowledge that 
they need to achieve and maintain success. Through your 
efforts, entrepreneurs are gaining the skills they need to 
adjust to the steep learning curve that comes with starting 
their own business in today's challenging environment. It has 
been an honor for the Committee to have you here. Be prepared. 
There may be some other questions and some other members here 
who are not here who may reach out to you and ask for your help 
for some input.
    I ask unanimous consent that members have five legislative 
days to submit statements and supporting materials for the 
record.
    Without objection, the hearing is now adjourned.
    [Whereupon, at 11:29 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X


                     Testimony from Dina H. Powell


    Director of Corporate Engagement, The Goldman Sachs Group, Inc.


                President, The Goldman Sachs Foundation


                   House Committee on Small Business


        Subcommittee on Economic Growth, Tax, and Capital Access


                           September 19, 2013


    Chairman Rice, Ranking Member Chu, Members of the 
Subcommittee, thank you for the opportunity to testify before 
the subcommittee regarding Goldman Sachs 10,000 Small 
Businesses and the critical issues of supporting small business 
growth and job creation in the United States.

    As you know, the success of small businesses is critical 
for a strong national economy. According to the U.S. Small 
Business Administration and Bureau of Labor Statistics, over 
the last two decades small businesses have been responsible for 
creating 2 out of every 3 net new jobs and currently employ 
roughly 60 million Americans, half of the private sector 
workforce.\1\ But despite general improvement in the nation's 
overall economic condition, challenges persist for many small 
businesses.
---------------------------------------------------------------------------
    \1\ http://www.sba.gov/sites/default/files/
FAQ--Sept--2012.pdf

    So, with this in mind, and based on the success of Goldman 
Sachs 10,000 Women--our global effort of supporting women 
entrepreneurs in developing and emerging economies which will 
serve its 10,000th women this year--we launched 10,000 Small 
---------------------------------------------------------------------------
Businesses in 2009.

    10,000 Small Businesses, or 10KSB, is a $500 million 
initiative to help small businesses in the United States by 
providing entrepreneurs through an integrated program a 
practical business and management education, as well as access 
to capital and business support services. The program is based 
on recommendations from leading experts that greater access to 
this combination of education, capital and support services 
best addresses barriers to growth. The large network of 
national and local implementing partners that we work with are 
what make this program a success.

    The program is currently operating in fifteen sites: the 
metro areas of Chicago, Cleveland, Houston, Long Beach, Los 
Angeles, New Orleans, Philadelphia, New York and Salt Lake 
City, and in a number of states with a capital-only offering, 
including Virginia, Kentucky, Montana, Oregon, Tennessee and 
Washington. In these capital-only states, the program's 
partners focus on making capital available in underserved rural 
areas which may lack the presence of commercial banks.

    10KSB is designed for small businesses poised for growth. 
Applicants must demonstrate a commitment to growing their 
businesses and crating jobs within their communities. Business 
owners targeted include, but are not limited to those with: 
revenues between $150,000 and $4 million; in operation for at 
least two years; at least four full-time employees; and a 
business model that could scale to create more jobs.

    10KSB provides comprehensive support for small businesses 
owners. Based on a high quality curriculum designed in 
consultation with industry experts--principally Babson College, 
the U.S. News and World Report number one ranked undergraduate 
business school for entrepreneurship for 17 years running--
10KSB enlists community colleges to deliver business training, 
local mission-driven capital providers to make small business 
loans, and local non-profit partners to provide technical 
assistance and business support services. In addition, Goldman 
Sachs employees and senior management are actively engaged in 
various aspects of program delivery.

    For the educational component, The Goldman Sachs Foundation 
is contributing $200 million to fund business owner training at 
partner community colleges, and faculty training and technical 
assistance to help build our partners' capacity. Business 
owners receive a practical education that focuses on skills 
they can apply immediately. The 360 degree approach--business 
training, access to capital, one-on-one businesses advising and 
exclusive networking opportunities--that help each participant 
develop a tailored business growth plan that they begin to 
implement even before completing the program. Because of this 
personalized training, the program is able to serve businesses 
within a highly diverse set of industries ranging from 
construction, food service and security to technology, 
marketing and health care.

    For the capital component, $300 million has been allocated 
nationally for a combination of lending and philanthropic 
support to non-profit Community Development Financial 
Institution (CDFI) Loan Funds and other community-based 
lenders. The investment will increase the amount of growth 
capital available to small businesses in underserved 
communities and expand the capacity of mission-driven lenders 
to deliver financing and technical assistance to small 
businesses. Goldman Sachs partners with CDFI loan funds and 
other nonprofit lenders due to their ability to flexibly 
underwrite capital to businesses which typically don't qualify 
for bank financing. The CDFI funds not only provide capital, 
but also provide extensive technical assistance to help these 
businesses become ``bank-able''. The loan funds provide loans 
in amounts less than what conventional banks like to offer--the 
average loan size is $200,000 and can often be made as an 
unsecured loan for working capital. In addition, to help our 
capital partners serve the many deserving businesses, Goldman 
Sachs provides a loan loss reserve. Separately, 10KSB provides 
grants to fund the capital partner's operational capacity to 
increase their lending generally.

    The program's strength is derived from a network of over 80 
partnerships designed to maximize its reach and results. This 
includes the leadership provided by the program's Advisory 
Council co-chaired by Goldman Sachs Chairman and CEO Lloyd 
Blankfein, Berkshire Hathaway Chairman and CEO Warren Buffett, 
and Dr. Michael Porter of the Initiative for a Competitive 
Inner City and Harvard Business School. Furthermore, local 
partners at each site, including both public and non-profit 
sector participants, are empowered to implement the program in 
serving the local small business population. This is the 
linchpin on which the program's effectiveness relies. Our 
partners help the program from the design to implementation to 
recruitment of businesses depending upon their particular 
expertise. The program aims to bring together local 
organizations with similar goals to work together in new ways 
and develop cooperative relationships that will last for years 
to come. In working with our partner across the United States, 
the program is building capacity and cooperation within local 
small businesses and entrepreneurship ecosystems. These 
national and local organizations, together with Mayors and 
other government leaders in the communities in which we 
operate, are working together to support this program, small 
business development in their communities, and are building 
relationships that will long outlast this program.

    Across the United States, 10KSB works. To date, over 1,600 
small business owners have participated in the program. The 
education component maintains a 99% graduation rate, and just 
six months after graduation, 63% have reported increasing their 
revenues and 47% have reported creating net new jobs. The 
program is creating a strong network of small businesses as 76% 
of graduates end up doing some form of business together, 
keeping more money within the local economy. In addition, 
approximately $56 million has been funded to over 265 
businesses for growth capital, of which 75% are located in low 
and moderate income levels, and 50% are Women/Minority Business 
Enterprises.

    The following examples illustrate participating businesses' 
success across the country:

          Rhys Powell is the founder and President of Red 
        Rabbit, a company that provides alternative and healthy 
        meals for school children. He founded the company in 
        2005 and operates the business from Harlem, New York. 
        Rhys joined 10KSB at LaGuardia Community College in 
        2011 to enhance his proficiency in managing the 
        business operations, hone his negotiations skills and 
        gain a framework to plan strategically for growth. 
        Since joining the program, he has reported an increase 
        in revenues by 300%, winning six new contracts totaling 
        almost $1 million from different schools across New 
        York City, and hiring 90 new employees since starting 
        the program.

          Payal Kamdar is the founder of VSolvit, which 
        provides geospatial and information technology 
        consulting services and solutions to government and 
        private sector clients. Founded in 2006, VSolvit LLC is 
        an award winning 8(a), HUBZone, Woman Owned company. 
        Payal joined 10KSB at Long Beach City College in 2011 
        and credits the program with enabling her to think 
        simultaneously across multiple dimensions to drive 
        VSolvit's growth. Since graduating from the program, 
        VSolvit has reported increasing revenues over 500% and 
        growing from 17 to 120 employees. VSolvit was recently 
        awarded a 5 year, $53 million software development 
        contract with the U.S. Navy. VSolvit was also selected 
        as the US Department of Agriculture (USDA) Woman Owned 
        Business of the Year in 2011 and Payal was selected as 
        the 2012 Small Business Administration (SBA) Region IX 
        Minority Small Business Person of the Year and 2013 Los 
        Angeles Minority Business Person of the Year. VSolvit 
        has also begun work on a breast cancer initiative by 
        mapping diagnosis rates, then identifying areas where 
        lag time of diagnosis is above the national average, 
        which then allows teams to send mobile health units 
        into those areas to bring diagnosis timing in line with 
        averages.

          Ryan Walsh is the Vice President of Walsh Electric, a 
        family-owned and operated electrical contracting 
        company based in Staten Island, New York. The company 
        provides electrical contracting services to the 
        residential, commercial, and industrial markets both in 
        the public and private sectors. Ryan joined 10KSB at 
        LaGuardia Community College in 2012. Since joining the 
        program, Walsh Electric has reported growing from a 44 
        person organization with $4 million in sales to an 
        organization that employs 127 people and is on track to 
        $25 million in sales. In addition, Ryan has reported 
        that Walsh business has secured a significant credit 
        line used to replace aging tools, equipment, and 
        vehicles. Lastly, Walsh is in the final stage of moving 
        from their original office to a new facility that is 
        450% larger--and which they will own.

          Angelica Rivera is the co-owner of Colmex 
        Construction, a family-owned contractor for residential 
        and commercial construction and renovation. Colmex 
        specializes in working with nonprofit organizations. 
        She formed Colmex Construction with her husband in 
        2008. In 2011 she joined 10KSB at Delgado Community 
        College in New Orleans to improve her company's cash 
        flow and learn more ways to pursue capital effectively. 
        Since then, Angelica reports that Colmex has added 16 
        new jobs and increased revenues over 400%.

    These four businesses are not alone in their success and we 
are pleased today to announce that small businesses owners from 
every state will now have the opportunity apply to be part of 
the 10,000 Small Businesses program.

    In the coming months 10KSB will launch our first ever 
national cohort of the 10KSB education program, designed to 
serve business owners from across the county who do not live in 
the metropolitan areas of one of our nine education sites. The 
program will be held at Babson College just outside Boston, 
Massachusetts and be a combination of an accelerated classroom 
experience coupled with online learning. Participants will 
travel to Babson for two intensive 4-day sessions separated by 
a few weeks of online coursework. The program will be at no 
cost to small business owners so that all of the most deserving 
small businesses can participate. 10KSB is accepting 
applications now at www.10ksbapply.com for the class that will 
begin in January. The application deadline is October 18th and 
we hope that members of the committee and their colleagues in 
Congress will help us get the word out to their constituents 
and maximize the number of entrepreneurs that can take 
advantage of this opportunity.

    Thank you once again for the opportunity to testify.
                     Tesimony of Dr. Stephen Morgan


                        Chair, Board of Trustees


                         My Own Business, Inc.


  Before the U.S. House of Representatives Committee on Small Business


        Subcommittee on Economic Growth, Tax and Capital Access


                           September 19, 2013


    Thank you, Mr. Chairman, and Members of the Committee, for 
providing this opportunity to discuss small business creation, 
ownership and, most important, success.

    I am particularly appreciative of the opportunity to be 
here as I am the volunteer Chair of the Board of Trustees of My 
Own Business, Inc., a Los Angeles-based nonprofit organization 
providing free educational tools and training via the World 
Wide Web to support successful businesses worldwide. Our web-
based program is licensed by CISCO for its training programs of 
small businesses around the globe, as well as by the World Bank 
in its Small and Medium Enterprise (SME) outreach worldwide. 
Given the years of experience we have in creating a strong 
educational toolkit, we would like the Small Business 
Administration to also appropriately apply our educational 
program to its support of America's entrepreneurs. We have 
previously supported their initiatives in this regard.

    As you well know, much of the success of our country comes 
from the fortitude of new business creation, often started by 
those who seek to create new opportunity for their families. 
And, it is particularly pursued as an option for those who have 
faced job loss in recessions such as the one we have 
experienced. For my organization, we believe it is important 
that those who strive to create a new business and contribute 
to the growth of our economy should be successful. We seek to 
provide a solid foundation and valuable tools to ensure their 
success, and to help them avoid the most common mistakes.

    Please allow me to share with you a story about how our 
organization came to be: On April 29, 1992, verdicts were 
rendered in a controversial case involving the 1991 beating of 
Rodney King. The toll of the riots that followed was 
devastating: More than 50 people were killed, over 4,000 people 
were injured, 12,000 were arrested, and $1 billion worth of 
property was damaged.

    Southern California entrepreneur, Phil Holland, founder of 
the Yum Yum chain of donut shops in California, watched in 
dismay at the fires burning and the businesses lost and 
wondered what he could do to give hope. Having already 
successfully published The Entrepreneur's Guide and The 
Moonlight Entrepreneur, Phil decided he might help by 
encouraging residents to start their own businesses as a way of 
rebuilding the neighborhoods and communities most affected by 
the crisis. He began by teaching a free class in one of the 
most riot torn areas, Compton, California. For the three years 
following the riots, Phil drove to Compton one evening each 
week to teach his class in how to start your own business. The 
final session of the class was taught in Spanish and eager 
small business owners came by the bus load from across Los 
Angeles to hear Phil Holland's presentation.

    Then in 1994, Phil Holland created My Own Business, Inc., 
(MOBI) a 501(c)(3) public charity and began to build a website 
so people everywhere could take advantage of a free curriculum 
designed to share with them the dos and dont's of starting 
their own business. Phil and his Board of Trustee members have 
recruited educators, entrepreneurs and business executives to 
develop the curriculum and share their strategies for 
successfully starting and growing one's own business. Today the 
website provides two free courses: Starting a Business and 
Growing a Business. Successful completion of the online 
curriculum results in valuable information for those wishing to 
start their own business or grow the business they have already 
successfully started and a Certificate of Completion issued by 
My Own Business, Inc.

    The free website courses include quizzes on all subjects 
contained in the curriculum, business plan templates, 75 video 
presentations by business experts, a final examination and the 
Certificate of Completion to those scoring 80% and above on the 
final examination. MOBI's Growing a Business course includes 
practical training specifically focusing on fifteen topics 
necessary for expanding a business, including how to prepare 
for growth and how to maximize skills in evaluation of growth 
opportunities. Students taking the Starting a Business course 
may purchase an accompanying textbook for $39.50 but it is not 
required for completion of either course offered on the 
website.

    For the past twenty years MOBI has offered this free 
business training to nearly 35 million people who have visited 
the MOBI website. Since the launch of the web based MOBI 
curriculum, 469,000 have completed the courses and nearly 
31,000 have applied for Certificates of Completion. The MOBI 
website is viewed monthly by an average of 235,000, resulting 
in 4,000 students completing the MOBI courses each month.

    In a 2010 study involving 5,000 MOBI graduates conducted by 
the U.C.L.A. Anderson Graduate School of Business, 22 percent 
of the respondents indicated their businesses would have failed 
if they had not studied the topics offered in the MOBI 
curriculum. Of the 5,000 MOBI graduates responding to the 
survey, 56 percent have actually started a business, and 77 
percent of those who started a company were still in business. 
Nearly 60 percent of the respondents reported that they had 
been in business for more than two years and nearly one-third 
reported that they planned to hire at least one new employee 
within the next twelve months.

    Three important partnerships have strengthened MOBI's 
outreach since its founding in 1994. First, for more than ten 
years MOBI has provided its courses to the World Bank. The 
second important partnership continues with Cisco Systems, 
Inc., which primarily has used the program in its 
internationally-focused Cisco Entrepreneur Institute. The third 
partnership that MOBI engaged in was with the Small Business 
Administration. For a number of years until 2006, a link to the 
MOBI Starting a Business course was provided on the SBA 
website.

    Behind the scenes, we are continually updating our site to 
ensure that the MOBI curriculum is up to date, that the 
technology used to deliver that curriculum is state of the art, 
and that the website will be easily accessible to as many as 
possible. The MOBI website will be re-launched before the end 
of this calendar year. A sample of the new website can be seen 
at MOBI's Spanish website, www.myownbusiness.org/espanol.

    It has been my pleasure to have had this opportunity to 
share the extraordinary service and contributions of Phil 
Holland, an American entrepreneur who sought to significantly 
give back by helping others achieve similar success...and all 
free of charge. We hope My Own Business, Inc. will continue to 
be a valuable tool in ensuring the success of America's small 
business and of those in economies interacting with the United 
States around the world.

    My Own Business Organizational Background:

    Today Phil Holland continues to serve as the Chief 
Executive Officer of MOBI, reporting directly to the Board of 
Trustees. The Board consists of 13 independent Board members 
including business executives, practicing professionals, small 
business owners and educators. MOBI, as a not for profit 
organization, is funded by gifts and licensing agreements. Mr. 
Holland and his wife Peggy give significant amounts each year 
to fund MOBI and they have included MOBI in their estate plans 
to provide an endowment to help fund My Own Business, Inc. in 
perpetuity. MOBI's current annual operating budget is $325,000, 
$260,000 of which comes from contributions, $50,000 from 
licensing agreements and $15,000 from the sale of the non-
required supplemental textbooks.
                    Testimony of Mr. Damien Stevens


                   Founder & Chief Executive Officer


                               Servosity


    Before the U.S. House of Representatives Committee on Small 
Business Subcommittee on Economic Growth, Tax and Capital 
Access

    Mr. Chairman and members of the Subcommittee, thank you for 
your time and the opportunity to testify at today's hearing. I 
am Damien Stevens, Founder & CEO of Servosity located in 
Greenville, SC.

    Servosity (http://www.servosity.com/) provides Backup and 
Disaster Recovery as a Service to a network of technology 
companies all over the United States. In a location better 
known for manufacturing and textiles, we are a fast growth 
technology company that is competing at a national level.

    In 2008, I joined NEXT Upstate (http://
www.nextupstatesc.org/) and began learning from other 
entrepreneurs at events such as the CEO roundtable. Before 
joining NEXT Upstate, I made all the mistakes myself, without 
the benefit of learning from other entrepreneurs and the 
challenges unique to high growth companies.

    NEXT Upstate is an organization that attracts and grows 
high impact, technology companies by developing the 
entrepreneurial ecosystem needed by these companies, and 
connecting companies to this ecosystem.

    In 2009, Servosity moved into a small office in the NEXT 
Innovation Center (http://www.greenvillenext.com/), a 
collaborative workspace formed by a group of entrepreneurs and 
the Greenville Chamber which houses multiple high growth 
companies. Upon moving into this office, I came in contact with 
Michelin Development and learned of their low interest loans 
they offer to small businesses. After being turned down the 
first time, I was approved for $100,000 after I applied for the 
second time.

    This capital gave us the bridge to grow the company to be 
able to secure private investment. In 2011 and again in 2012; 
Servosity attracted private investment capital.

    In 2012, Servosity announced its expansion into 3,200 
square fee at the NEXT Innovation Center in Greenville and 
intent to add 30 jobs in 18 months. We started off this year 
with 4 employees and have 12 people now and we are currently 
growing and hiring. These jobs are just the beginning; we have 
the opportunity to employ hundreds of people in the next few 
years.

    The jobs we are adding are for software developers, system 
engineers, support engineers, sales, account managers and 
business development. The average earnings are $80,000 and some 
positions are significantly higher. Those earnings are more 
than double the average prevailing wage in South Carolina. Not 
only are we creating jobs in the knowledge economy, we are 
creating meaningful, high paying positions with nearly 
unlimited growth potential for employees.

    Without the NEXT ecosystem, I wouldn't have learned from 
other entrepreneurs, met with Michelin Development to help with 
growth capital, been able to grow the next stage to secure 
private investment, been introduced to potential investors, nor 
would we have attracted the top tier talent required to grow a 
fast pace technology company.

    Thank you for your valuable time today, I enjoyed being 
able to share a small part of our entrepreneurial journey. I 
wouldn't be here today without help from so many others.

    I am so blessed.
                     Written Testimony of Kim Pate


                 Chief External Relations Officer, CFED


                             Submitted to:


       U.S. House of Representatives Committee on Small Business


        Subcommittee on Economic Growth, Tax and Capital Access


                         Subcommittee Hearing:


   ``Private Sector Initiatives to Educate Small Business Owners and 
                            Entrepreneurs''


                           September 19, 2013


                Rayburn House Office Building, Room 2360

    Chairman Rice, Ranking Member Chu, and Members of the 
Subcommittee on Economic Growth, Tax and Capital Access, thank 
you for the opportunity to testify on behalf of the Corporation 
for Enterprise Development (CFED) regarding efforts to engage, 
educate, and empower small business owners and entrepreneurs. 
As the impact of the Great Recession continues to ravage 
communities from South Carolina to Southern California, we 
applaud the Subcommittee's focus on supporting small businesses 
and enterpreneurs--the true engines of innovation and 
opportunity in our economy.

    About CFED

    CFED--the Corporation for Enterprise Development--was 
founded in 1979 on a bedrock belief in the power of America's 
entrepreneurial spirit. ``Enterprise,'' you might say, is our 
middle name.

    Enterprise development has been integral to our work over 
the last thirty-five years. CFED's first major publication was 
entitled ``Revitalizing the American Economy through New 
Enterprise Development.'' In the mide-1980s, CFED launched the 
Self-Employment Investment Demonstration to test strategies for 
empowering low-income workers to gain a foothold in the middle 
class through entrepreneurship and self-employment. In the 
1990s, CFED was an early advocate for Individual Development 
Accounts (IDAs), which empower low- to moderate-income families 
and individuals to save and invest in buying homes, paying for 
college, and starting their own businesses.

    Today, CFED's work takes place in three overlapping areas: 
programs, research, and policy. As a field builder we provide 
technical assistance and training to hundreds of nonprofits 
across the country and we invest in social enterprises to help 
these organizations create pathways to financial security for 
millions of Americans. As a leading expert on household 
financial security, CFED conducts cutting-edge research on 
strategies that build and protect assets for low-income 
families, expanding the evidence base in support of actionable 
strategies that empower financially vulnerable families. And as 
a leading national advocate, CFED coordinates a grassroots 
network of local asset-building organizations--the Assets and 
Opportunity Network--and promotes federal, state, and local 
policies to expand economic opportunity.

    Importance of Supporting Microbusiness

    In our nearly thirty-five years of work expanding economic 
opportunity through programs, research, and policy, we at CFED 
have been surprised again and again by the creative and 
economic power of America's micro-entrepreneurs. Far from a 
niche market, microbusinesses--those with four or fewer 
employees--account for nearly 90 percent of all businesses in 
the country. Roughly one in six South Carolinians and 
Californians own and operate a microbusiness. This figure is 
representative nationwide.

    Microbusinesses can contribute the revitalization of entire 
communities. Mary Gatch of South Carolina started DwellSmart as 
a retail shop offering products that promote healthy, 
sustainable living--from building products to baby clothes. 
While enjoying modest profitability in the store, DwellSmart's 
online sales were skyrocketing. After winning the distribution 
rights of two large green-oriented companies, DwellSmart needed 
to immediately move to a location with sufficient warehouse 
space and a loading dock. The company found the perfect spot in 
an unused building in an area of downtown Charleston that was 
experiencing revitalization and redevelopment. With the 
assistance of a Charleston Local Development Corporation (LDC) 
loan, DwellSmart made a significant investment in 
rehabilitating the property using eco-friendly and sustainable 
products.

    In a nation seeking economic recovery through job creation, 
supporting microbusinesses like DwellSmart is an important 
solution. According to the U.S. Small Business Administration, 
businesses created by low-income entrepreneurs have high 
survival rates, ranging from 57-90 percent--higher than the 
survival rate for all small businesses.

    Despite the small size of microbusinesses, the sector is a 
significant contributor to American economic growth and 
vitality. On average, microbusinesses create 2.9 full- and 
part-time jobs per business. Cumulatively, these 
microentrepreneurs and self-employed individuals amount to 
millions of firms and even more jobs. These microbusinesses and 
the self-employed represent new transfusions of ideas, talent, 
competition, and entrepreneurial energy into the overall 
economy. Small changes to enhance the capacity of such a large 
and productive group could reap major dividends.

    At the individual and community level, microbusiness and 
self-employment can serve as a ladder out of poverty and into 
economic stability for some of the most disadvantaged 
populations. Microbusinesses that survive, grow, and become 
profitable, enhance household income and reduce families' 
reliance on public assistance. These low-income entrepreneurs 
gain a sense of security, new skills and managerial capacity, 
build new support networks, and increase self-esteem.

    Another example of microbusiness success comes from CFED 
partner Pacific Asian Consortium in Employment (PACE), a Los 
Angeles-based workforce, community, and business development 
organization. Deborah Stern attended PACE's entrepreneurial 
training program in June 2008 while starting a business making 
tamales. She won a PACE award of $5,000, which she used to hire 
two employees and rent a kitchen. From there, Stern attracted 
media coverage and cultivated loyal fans. Today, her business 
is more successful than she ever dreamed: she opened a 
restaurant, La Guera Tamalera, in the Silver Lake neighborhood 
of LA, which has become an area favorite. Stern has had 
remarkable success, but she is not wholly unique among PACE's 
clients: in 2010, 65% of returning microbusiness tax clients 
had increased their household income.

    Self-Employment Tax Initiative

    Recognizing the importance of micro-entrepreneurship as a 
strategy for expanding economic opportunity, CFED launched the 
Self-Employment Tax Initiative (SETI) in 2005 with three goals:

          1) Build assets for low-income households

          2) Create jobs by growing and expanding 
        microbusinesses

          3) Increase tax revenue by bringing self-employed 
        into the formal tax system

    To accomplish these goals, SETI has awarded more than 
$500,000 to 40 community-based organizations that offer free or 
affordable tax preparation assistance to low-income, self-
employed taxpayers. These local partners have helped SETI 
identify, test, and refine promising practices for using the 
tax filing process as a means of fostering small business 
development.

    Most of SETI's local partners are Volunteer Income Tax 
Assistance (VITA) programs, which provide free tax support to 
low- and moderate-income taxpayers. There are nearly 6,000 
community-based VITA sites throughout the country. In Horry 
County, South Carolina, you can find VITA programs at the 
Chapin Library, the North Myrtle Beach Library, and the 
Surfside Beach Library. In Monterrey Park, California, VITA 
assistance is offered through the Monterey Park Bruggemeyer 
Library. Down the road in Pasadena, you can find VITA at El 
Centro De Accion Social.

    VITA is a brilliant example of a successful public-private 
partnership. In South Carolina, California, and the rest of the 
country, these VITA sites represent local community efforts--
supported by federal grants, state and local funds, and 
philanthropy--to engage low-income taxpayers and ensure that 
they get a fair shake from the tax system. According to a 2012 
National Community Tax Coalition (NCTC) report, VITA helped 
more than 3 million taxpayers claim $2.2 billion in tax refunds 
while saving the federal government $5.5 million in reduced 
processing costs.

    Expanding VITA to Support Micro-Entrepreneurs

    VITA represents an excellent opportunity to engage and 
empower micro-entrepreneurs. Frustrated by the complexity of 
the business tax code, many of these entrepreneurs are left 
with few options for learning about and accurately completing 
their tax filings. The inaccessibility of low-cost or free tax 
preparation assistance and the complexity of the tax code 
compel many self-employed people to seek tax assistance from 
costly commercial preparers. Those small business owners who do 
not seek--or cannot afford--help from commercial tax prepareers 
may choose not to file taxes at all.

    While the existing VITA program assists some low-income 
entrepreneurs, IRS restrictions on allowable VITA activities 
prevent many self-employed earners from receiving any 
assistance. For example, VITA sites are restricted to preparing 
Schedule C-EZ only, and self-employed taxpayers must have 
expenses below $5,000.

    Recognizing that VITA's narrow scope meant that sites were 
turning away micro-entrepreneurs who had with few other 
options, the National Community Tax Coalition (NCTC) led an 
effort with CFED and the IRS Stakeholder Partnerships, 
Education and Communication (IRS-SPEC) team to build on CFED's 
SETI program. In 2010, this partnership launched the Schedule C 
VITA Initiative. Through this initiative, sixteen pilot sites 
across the country are now able to serve a wider range of low-
income entrepreneurs, including businesses with up to $25,000 
in expenses, as long as they meet certain other qualifications 
such as no net operating losses, no inventory, and limits on 
business use of the home, among others.

    In its three years of operation, the Schedule C VITA 
Initiative has not only brought thousands of low-income 
entrepreneurs into the VITA program, it has done so without 
reducing tax-filing quality. According to SPEC's own reviews of 
the sixteen VITA sites, nearly 95 percent of Schedule C returns 
reviewed by SPEC staff at participating sites were found to be 
accurate. As the initiative continues next year, it will 
continue exploring methods for expanding VITA assistance for 
micro-entrepreneurs.

    Next Steps to Expand Support for Micro-Entrepreneurs

    What does this mean for federal efforts to support micro-
entrepreneurs?

    CFED is currently exploring additional federal policy 
reforms that would effectively support micro-entrepreneurs. Our 
research is examining how three key federal policy systems--
workforce, postsecondary education, and tax--support or fail to 
support these low- and moderate-income entrepreneurs. Later 
this year we will release our report detailing recommendations 
for reforms that would significantly expand the ways in which 
federal policy supports the growth and success of these 
entrepreneurs.

    While this research will reveal new reforms worth 
considering, this Subcommittee need not wait to act in support 
of micro-entrepreneurs. In the previous Congress, Ranking 
Member Chu proposed one significant step forward: the 
Entrepreneur Startup Growth Act. This legislation, based on 
CFED's SETI program, would have provided additional support for 
micro-entrepreneur tax filing assistance. The $1.5 million 
authorized by this legislation could support hundreds of local 
VITA sites to serve thousands of micro-entrepreneurs.

    Conclusion

    Chairman Rice and Ranking Member Chu, I would like to thank 
you again for inviting me to testify on behalf of CFED. We at 
CFED are eager to work with the Subcommittee to expand economic 
opportunity, create jobs, and support micro-entrepreneurs. I 
would be pleased to answer any questions you and the other 
members of the Subcommittee may have.

                                 
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