[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
NATIONAL ENTREPRENEURS' DAY
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
NOVEMBER 17, 2015
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-029
Available via the GPO Website: www.fdsys.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
MIKE BOST, Illinois
CRESENT HARDY, Nevada
NYDIA VELAZQUEZ, New York, Ranking Member
YVETTE CLARK, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
MARK TAKAI, Hawaii
Kevin Fitzpatrick, Staff Director
Stephen Denis, Deputy Staff Director for Policy
Jan Oliver, Deputy Staff Director for Operation
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 2
WITNESSES
Mr. Chris Ostoich, Co-Founder & VP Marketing, LISNR, Inc.,
Cincinnati, OH................................................. 4
Mr. Sam Zietz, CEO and Founder, Touchsuite, Boca Raton, FL....... 6
Mr. Drew Bartkiewicz, CEO and Founder, lettrs LLC, Collinsville,
CT............................................................. 8
Ms. Jen Pepper, Owner, Peppersprouts and The Chatty Press, West
Newbury, MA.................................................... 9
APPENDIX
Prepared Statements:
Mr. Chris Ostoich, Co-Founder & VP Marketing, LISNR, Inc.,
Cincinnati, OH............................................. 26
Mr. Sam Zietz, CEO and Founder, Touchsuite, Boca Raton, FL... 29
Mr. Drew Bartkiewicz, CEO and Founder, lettrs LLC,
Collinsville, CT........................................... 33
Ms. Jen Pepper, Owner, Peppersprouts and The Chatty Press,
West Newbury, MA........................................... 37
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
NATIONAL ENTREPRENEURS' DAY
----------
TUESDAY, NOVEMBER 17, 2015
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[Chairman of the Committee] presiding.
Present: Representatives Chabot, King, Luetkemeyer,
Huelskamp, Brat, Knight, Curbelo, Hardy, Kelly, Velazquez,
Hahn, Meng, Lawrence, Adams, Moulton, and Peters.
Chairman CHABOT. Good morning. The Committee will come to
order. Earlier this month, I, along with Ranking Member
Velazquez and several members of Congress, including many on
this Committee, introduced a resolution to establish the third
Tuesday in November as National Entrepreneurs' Day. As today,
November 17th, is the third Tuesday of this month, it seems
only fitting that we hold a hearing to highlight the vital role
that entrepreneurs play in the American economy and how being
an entrepreneur is, for many, a large part of the American
dream.
We are a country that was founded by inventors and
entrepreneurs, such as Benjamin Franklin and Thomas Jefferson,
and even George Washington. Our nation's rich heritage of
entrepreneurship should compel us to continue to create
opportunities for individuals who dream big and strike out on
their own. In America, entrepreneurship is a viable career
path, one that a majority of Americans consider a measure of
success. We lead the world in ingenuity and innovation, and we
should be proud of that.
As the Committee on Small Business, we recognize that our
entrepreneurs are in every community, whether it is running a
100-year-old family restaurant or creating the next big product
at a local accelerator. Each and every day, entrepreneurs are
seeking to provide for their families, and build their
communities, and live the American dream.
However, sadly, we do know that the rate of new business
creation is less than it was a few decades back. And while
everyday people still dream of starting their own small
business, it has become harder given the increase in
regulations, challenges accessing capital, and general
uncertainty in our economic climate.
Today, though, we are fortunate to be joined by a great
group of witnesses who have been successful striking out as
entrepreneurs and who continue to promote entrepreneurship in
their communities. I want to thank our panel for taking time
away from their jobs and making the trip to Washington for this
important hearing, and we look very forward to your testimony
here this morning.
And I will now yield to the ranking member, Ms. Velazquez,
for her opening remarks.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Entrepreneurs are one of the leading forces in our economy.
They develop new products, stimulate other industries, and
create new markets. As a result, startups have a
disproportionately positive impact on job creation. By starting
new endeavors and developing cutting-edge products, entire
industries, as well as the overall economy, are renewed and
energized.
Forming a new business and bringing innovative products and
services to unproven markets is inherently risky. As a result,
startups face unique challenges. From accessing capital and
maneuvering an uncertain tax code, to managing operations and
human resources, there are numerous hurdles to launching a new
venture. Yet, despite the risks and challenges, new companies
continue springing up, reinvigorating our economy. It is this
committee's responsibility to ensure these firms have the
resources they need to navigate these many complexities and
take advantage of the wide ranging support available to them.
Fostering innovators who are determined to turn their dreams
into reality benefits the entire economy since these businesses
create new markets and increase competition. Their actions have
a multiplier effect on job creation as new enterprises and
innovators are drawn into the new market.
During today's hearing, we will have an opportunity to
examine the unique role entrepreneurs and startups have played
in strengthening our economy. Currently, entrepreneurship is
experiencing growth as more immigrants, entrepreneurs, and all
the professionals start businesses, and these job creators are
becoming increasingly diverse with more than 40 percent of new
entrepreneurs being minorities. While these numbers are
promising, we have seen some groups steadily lose ground. In
fact, the rate of women entrepreneurs has fallen to 36.8
percent, which is close to a 2-decade low. And despite more
college graduates starting businesses, the rate of younger
entrepreneurs has been declining due to greater student debt
burdens.
Today's hearing will allow us to find solutions to these
issues so we can learn how best to increase their participation
as entrepreneurs. In order to facilitate their success, it is
critical that as dynamics change, the strategy for supporting
them also evolves.
In advance to your testimony, I just want to take an
opportunity to thank all of you for being here today. And I
yield back.
Chairman CHABOT. I thank the gentlelady for her opening
remarks, and I would also like to ask unanimous consent that
the gentleman from California, Mr. Peters, is recognized for
the purpose of this hearing to ask questions and participate
like any other member. He was, I believe, the lead sponsor in
the last Congress of this legislation and was a cosponsor this
time as well. So we thank him.
Without objection, so ordered.
I would now like to introduce our distinguished panel here
this morning. I am very pleased to introduce our first witness,
one of my constituents, Chris Ostoich, who is the cofounder and
vice president of Marketing, LISNR, in Cincinnati. LISNR is new
audio technology, and it recently raised $10 million in
financing, which will lead to new jobs and opportunities in the
Cincinnati area. But more importantly, Mr. Ostoich himself is a
successful entrepreneur, and he has done a lot to reignite the
spirit of entrepreneurship back in my hometown, and I thank you
for that even though the Bengals lost last night for the first
time this year. Very depressing today, so if I am a little
less--well, never mind. It was just a sad, sad evening.
So anyway, thank you very much for being here. And I would
like to now turn to my colleague, Mr. Curbelo, to introduce our
second witness.
Mr. CURBELO. Thank you very much, Mr. Chairman, and I thank
you and the ranking member for giving us this wonderful
opportunity.
I am pleased to introduce our next witness who hails from
my home state of Florida. Mr. Sam Zietz is the CEO and founder
of Touchsuite, located in Boca Raton, Florida. Mr. Zietz
started his company, which specializes in point-of-sale
technology, in 2003 and today employs about 60 people. He was
recently recognized by Ernst and Young as the Southeast
Region's 2015 Entrepreneur of the Year. In addition to his
everyday job, Mr. Zietz is passionate about creating
opportunities for America's youth to engage in entrepreneurship
as a viable career path, and he is active in his local chapter
of the Young Presidents Organization. He is joined here today
by his wife, Sheila, and they are the parents of Rachel,
Jordan, and Morgan. Rachel, an entrepreneur in her own right,
Mr. Zietz has called his clone, and Jordan has also started a
successful business. We will see what the future holds for
Morgan, but I think we all have a pretty good idea as to what
is going to happen. So thank you very much, Mr. Zietz, for
joining us today.
And Mr. Chairman, I yield back. Thank you.
Chairman CHABOT. Thank you very much. And I would like to
next introduce our next witness. Our third witness will be Drew
Bartkiewicz, who is the CEO and founder of lettrs, which is
incorporated in Connecticut but has much of its team located in
Brooklyn, New York. As a resourceful entrepreneur, Mr.
Bartkiewicz previously founded CloudInsure and CyberFactors. He
is also a West Point graduate and proudly served in the United
States Army. We thank you for your service, and also for making
the trip to be with us here today.
And finally, I would like to yield to another gentleman who
we also thank for his service Mr. Moulton, to introduce our
next witness.
Mr. MOULTON. Thank you, Mr. Chairman.
It is my pleasure to introduce my constituent from Newbury
Port, Massachusetts, Ms. Jennifer Pepper. Jen is the owner of
two Etsy-based stores. PepperSprouts opened in 2008, which
sells woodland-inspired home decor, and ChattyPress, launched
in 2011, which sells custom stationery. In 2012, Ms. Pepper
left her job as a designer of the catalogue FetchDog to be a
full-time entrepreneur operating her creative businesses. She
owns and operates her online stores and works with other small
businesses throughout the country to bring her nature-inspired
home goods to life. Welcome, Ms. Pepper.
Chairman CHABOT. Thank you very much. And I also would note
that the gentleman from Massachusetts did an excellent job this
morning on I think it was Morning Joe or one of those talk
shows. So a nice job.
Mr. MOULTON. Thank you, Mr. Chairman. Glad to hear you are
watching MSNBC.
Chairman CHABOT. Absolutely. It is a rare thing. I had a
feeling I might get something like that but I have a very open
mind. Once in a while--I will leave it there.
Okay. Without further ado, we will go to our witnesses for
their testimony. And I also want to just make sure you know
what our rules are. We have basically a 5-minute rule, which
means that you get 5 minutes to tell us everything you would
like to tell us and then we get 5 minutes to ask questions. And
we go back and forth to make it fair. And there is a lighting
system. The green light will be on for 4 minutes. The yellow
light will come on to let you know you have got 1 minute to
wrap up, and then the red light will come on and we would ask
you to try to keep within that as much as possible. We will
give you a little leeway but not a whole lot.
So Mr. Ostoich, you are recognized for 5 minutes.
STATEMENTS OF CHRIS OSTOICH, CO-FOUNDER & VP MARKETING LISNR,
INC.; SAM ZIETZ, CEO AND FOUNDER TOUCHSUITE; DREW BARTKIEWICZ,
CEO AND FOUNDER LETTRS LLC; JEN PEPPER, OWNER PEPPERSPROUTS
STATEMENT OF CHRIS OSTOICH
Mr. OSTOICH. That would help. Does my time start over?
Chairman CHABOT. Yes, we will restart the clock there.
Mr. OSTOICH. Okay. Thank you for restarting my clock. I am
about 5 minutes, 8 seconds.
So, as I said, I am Chris Ostoich. I am an entrepreneur.
This is my third entrepreneurial tour of duty, if you will, as
cofounder and marketing leader at LISNR, which is a connected
devices company based in Cincinnati, Ohio. I would like to
thank Chairman Chabot and the rest of the Small Business
Committee for having me here today. This is a real honor to be
here in D.C.
So I started my first company in 2006, and I started that
company because of a pain that I felt personally. The pain was
being new to a job in a city that I did not know. So I was new.
I was disconnected. I did not have professional or social
networks that mattered, and I do not mean the digital kind. I
wanted to have a life that was full of meaningful
relationships, both at home and at work. So I did what most
rational people would do--I took all of the money that I had to
my name, moved into my parents' basement. At 28-years-old, I
took a job waiting tables at night and I went to work building
this company.
What I found very, very quickly was this. Your money goes
quickly. Second, in any successful startup or entrepreneurial
ecosystem, you always have three things--entrepreneurs with
scalable ideas, investors will to back those ideas, and
customers willing to engage and buy those products. Cincinnati,
at this time in 2006, was a little short on all three.
It was clearly not the first place on earth that one would
think to build a tech company. We did not have accelerators. We
did not have incubators. We had very little venture capital
available to companies like mine. What I did not know, however,
was that there was something very special in the works that was
set in motion years before. There were things already happening
that would very quickly make Cincinnati and the rest of Ohio
what we call ``flyover country'' no more.
In 2002, the Ohio Third Frontier was established to change
the trajectory of Ohio's economy. The $2.1 billion initiative
provides funding to Ohio technology-based companies,
universities, research institutions, and other organizations to
create new stuff--new technology-based products, companies, and
jobs. It also set up regional investment arms in cities all
over Ohio, including Cincinnati, Columbus, and Cleveland. By
2006, the Ohio Third Frontier was starting to actually reach
into these communities, and our regional investment arm in
Cincinnati of the Third Frontier itself was called CincyTech,
and they were just about to start making their first
investments. So definitely right time, right place for me.
My first company, BlackbookHR, was funded in 2008 by
CincyTech and a syndicate of angel investors. By 2013,
BlackbookHR was one of the industry's leading software
solutions for employee engagement. In 2013, I started my next
business with friend and P&G marketing veteran, Rodney
Williams, called LISNR. So LISNR is a new communication
protocol, not, you know, unlike Bluetooth. However, we are
simply using sound around us to connect devices. In 3 short
years, we have grown LISNR to more than 40 employees. We will
reach 80 by the end of 2016. Just last week, as Chairman
mentioned, we announced our $10 million Series B financing that
was led by one of the most successful corporate venture
capitalists in the world, Intel Capital, the chipmakers, as you
probably know.
CincyTech, however, has participated in each company that I
have led, and almost every round of capital that we have
raised. Collectively, companies that I have started have raised
more than $20 million of venture capital money, and in total,
we employ more than 60 people in all of those companies at an
average salary of approximately $70,000, something I am very
proud of.
And I am just one representative from this great community.
There are hundreds more like me in Cincinnati and in other
cities in Ohio right now. In fact, many people are saying the
Midwest offers the best opportunity for growing companies
outside of Silicon Valley, and the math behind their logic is
fairly straightforward. The Midwest makes up 19 percent of the
country's GDP. We generate almost 20 percent of its patents. We
have some of the best engineering schools in the world, and we
house and hold more than any other region in the country in
terms of the concentration of Fortune 500 companies. Yet, the
region only attracts 5 percent of the nation's venture capital.
So that is where state and federal government come in.
As I mentioned previously, there are three things that are
a part of any successful startup ecosystem--entrepreneurs with
scalable ideas, investors willing to invest in them, and
companies willing to do business with those companies. We still
do not have enough access to capital in southwest Ohio, and we
would not survive without programs like the Third Frontier.
Today, the world has changed in Cincinnati and in Ohio, and
here are three examples of the Third Frontier's influence.
First, CincyTech has invested more than $25 million in 59
companies in Cincinnati. Those companies have generated more
than $500 million of follow-on capital and more than 760 jobs
have been created. The Brandery has graduated 56 companies that
have generated $120 million in follow-on funding, and lastly,
Cintrifuse is a network connecting the region's high potential
startups with talent, funding, and customers.
Chairman CHABOT. Mr. Ostoich, if you would not mind
concluding.
Mr. OSTOICH. Certainly.
Chairman CHABOT. Thank you.
Mr. OSTOICH. This is the end. We would not be here if I did
not have access to initiatives like the Third Frontier. We have
come a long way in less than a decade, and there is still
plenty of work to do. But I will tell you today, that Ohio is
``flyover country'' no more.
Thanks again for having me here today. It has been an
honor.
Chairman CHABOT. Thank you very much.
Mr. Zietz, you are recognized for 5 minutes.
STATEMENT OF SAM ZIETZ
Mr. ZIETZ. I am happy to be speaking before you today on
National Entrepreneur Day. Entrepreneurship is what built this
country through the likes of Rockefeller, Carnegie, Edison,
Ford, and many others, and entrepreneurship remains the only
competitive advantage we have over the rest of the world.
I am extremely passionate about entrepreneurism, and
actually just came back two days ago from the EY Strategic
Growth Forum where I was fortunate enough to be recognized as
one of the Entrepreneurs of the Year. I have also had my
companies appear on the Inc. 500 List of Fastest Growing
Companies seven times. My company, Touchsuite, is a financial
technology company focused on the payment processing space. We
provide businesses throughout North American with the
technology necessary to accept payment. I believe that every
great company needs to have a purpose greater than themselves
and profit.
At Touchsuite, our purpose is to help rebuild America one
small business at a time. Through the products we create, we
help other small business owners to compete with larger
companies by giving them the same access to data, marketing,
and capital that Fortune 500 and big box retailers have long
enjoyed. As a result, they are able to increase their
businesses, expand, provide for additional jobs, and stimulate
the economy.
However, I am most proud of the amazing entrepreneurs that
my wife Sheila and I are raising. My oldest daughter Rachel is
a passionate lacrosse player and saw a need for improved
practice equipment and started her own company, Gladiator
Lacrosse, when she was just 13 years old. She participated in
the local chapter of YEA, Young Entrepreneur Academy, which is
a 33-week program for students after school where they learn
how to start a business, write a business plan, receive
mentorship, and ultimately pitch investors for funding. She is
now 15 and generating over 1 million in revenue. She is the
top-seller on Amazon, has created multiple jobs, and was
recently recognized by Governor Scott with Florida's Young
Entrepreneur Award. My son Jordan also participated in the YEA
program last year and won the local competition, the regional
competition, and finished third in the nation out of
approximately 4,000 students.
I grew up in a blue-collar neighborhood outside Detroit,
and even though I did not have much, I recognized there was
opportunity for everyone regardless of the position you started
in life, unlike so many other countries. I always wanted to be
an entrepreneur, but I figured you needed one of two things--
money or know-how. I did not have any money, so I figured I
better go get some know-how and went to law school. In 2001,
with two young children, I took a leap of faith and followed my
dream of starting my own business. I made it against the odds
because of my legal background and the people I met along the
way. If you want to make a decision at the governmental level
that will increase the odds for others, then I would suggest
you take the following four actions. First, make the capital
markets available to everyone, not just large corporations. If
small business had access to capital, there are a million ways
they could effectively deploy it to obtain amazing returns for
their business. Empower banks, particularly community banks to
make loans. Banks by their very nature are not entrepreneurial
and they want to avoid as much risk as possible. However, if
the government were to insure part of the loan by charging a
premium, they could go a long way towards offsetting the
increased losses that would have to be paid out. Not only would
this drive additional revenue through the premiums, but
deploying capital into small businesses will create additional
jobs, taxes, and capital expenditures.
Second, reduce regulation. The cost of compliance is too
high. There are many valid instances where regulation is
necessary; however, we need to be able to remove as many
obstacles as we can for businesses to be successful. Across the
board, private enterprise has always been more efficient than
government in execution. Less involvement in government in
small business affairs equals stronger small businesses which
equal more jobs.
Third, create a favorable tax environment so people will
want to invest. Like any good business person, they will run a
risk-reward analysis. Any potential investor takes into account
their after-tax return, which needs to be high enough or they
will sit on the sidelines and not deploy their capital.
Finally, promote entrepreneurship in the next generation.
Entrepreneurship is as important as any core curriculum and
needs to be taught to our children. We need to empower the
future generation with the tools to succeed. Technology is
rapidly changing at unprecedented levels, and that will only
continue to speed up. We cannot train them for the jobs of the
future since we do not know what they will be or the skills
that will be required. However, we can prepare them for the
mindset necessary to be successful.
Our government needs to continue to support what built this
country and foster an environment that is pro-entrepreneurship.
It is my belief that through the planting of the seeds
necessary to foster entrepreneurship in this country, we can
harvest everything we need to regain our greatness. A strong
culture of entrepreneurship in this country will solve most of
our problems, will create jobs, will help the GDP rise, and
shrink the deficit. Much in the same way that we rely on the
brave men and women of the armed forces to fight for us and
protect us, we need to remove the restraints we have placed on
our small business community and allow them to win the global
economic war we are fighting.
Chairman CHABOT. Thank you very much.
Mr. Bartkiewicz, you are recognized for 5 minutes.
STATEMENT OF DREW BARTKIEWICZ
Mr. BARTKIEWICZ. Thank you, Chairman, and members, for
inviting me today.
I am a former 82nd Airborne paratrooper, so when I see a
red light, if there is a compulsion to jump off the desk, you
will know why.
It comes as really a fascinating story for me to even be in
front of you today. About 2-1/2 years ago, with three teenage
children and my wife from Madrid, Spain, I began to lament
that, in fact, there were no lasting words coming out of their
device of choice. Their device of choice, whether we like it or
not, is not the writing desk, it is not parchment paper, it is
not quill pens. Their writing desk is right in their hand. I
spent 20 years in the software industry since I left the
military in the mid-'90s and graduated from the Yale School of
Management. And, in fact, in the summer of 1994, I had a life
event that put me on the path to start my company, and that
path was I met a beautiful Spanish woman from Madrid, Spain,
and for the next 6 months of our lives, we conducted long-form
letter writing which became the foundation of our marriage of
the last 19 years. (Speaking in Spanish)
Lettrs is a bilingual application. In fact, it is 80
languages at once, to invite people into a more deliberate,
more passionate, and a more lasting communication. That
business and that idea has, in fact, been, in the beginning, an
extremely lonely journey. Every entrepreneur here knows that
when you build something new, you are, in fact, going to be
alone for a while because people are going to think you are
either nuts or you have lost it or you are having a middle-age
crisis. That was my case, by the way. But, in fact, when I
unearthed these letters from 1994 and I started to circulate
them on my fridge at home with my three children starting to
observe, we realized that letter writing was not dead; letter
writing simply had not yet been brought to the millennial
generation.
I, frankly, am sickened by the number of apps out there
that are really, to me, frat apps. They invite anonymous
messaging. They invite messaging that disappears. And where
would this institution be if we had treated words with such
dismissive ideology and such disdain. Words are, in fact, the
most profound invention of human beings in terms of how we
communicate and how we connect with other people.
So my company, I am proud to say, has raised $2.3 million
to create a technology network and a platform which does three
very simple things. First, it takes you into the device of
choice where people are, and I put a West Point-type rule when
we launched the company, and that was you could not write a
fast letter. The app would stop you. You cannot publish a
letter quickly. You cannot deliver a private letter quickly.
You were asked and invited into a more deliberate mobile
communication. What happened from that point on shocked me. We
were downloaded in 170 different countries. Five MBA players
joined our network. The author, Paulo Coelho, The Alchemist,
joined our network. Actress Izabella Miko. And the irony is, as
a technologist, I did all of my study and research for timeless
communication right across this green at the Smithsonian
Museum, at the U.S. Postal Museum, and I spent time asking
curators in the museum, what was the ingredient of the personal
letter that was timeless? Not one of them said that because it
was on paper. Not one of them. Paper and postal delivery was
simply the medium of choice. It is what we relied on for
personal correspondence. It is much the way picture-taking is
no longer defined by the darkroom and 35 mm cameras. Picture-
taking is defined for the mass part of the world right here.
And so thanks to the U.S. Postal Museum, we really studied
what are the three elements of this technology that can be
resurrected for a mobile world where all of the House members
here, for example, could not only publish letters, sign those
letters. By the gift of us today, you have a stamp for each one
of you that is on the network today, and the aspiration of a
letter is that it is something people want to read. The
affirmation of a letter, it is something you are willing to
sign. And every letter on our network is signed with a stylus
or write with someone's finger. And I am proud to say over half
of our investment has come through other Academy graduates and
veterans who saw this as a meaningful company. I am delighted
to say that our creative and coding staff is located in
Brooklyn, New York. It is a hub of creative people who care
about reviving a national pastime for words that last. And
joining me today as well is an Air Force Academy graduate,
Andrew Commendo, who was also funded by many Academy graduates
and started an augmented reality company. So thank you for
recognizing entrepreneurship, and on behalf of Mr. Ostoich, Mr.
Zietz, and Ms. Pepper, it is great to be here. Thank you.
Chairman CHABOT. Thank you very much.
Ms. Pepper, you are recognized for 5 minutes.
STATEMENT OF JEN PEPPER
Ms. PEPPER. Good morning. My name is Jen Pepper, and I am a
creative entrepreneur from the North Shore of Massachusetts.
Thank you, Chairman Chabot, and Ranking Member Velazquez, and
all the members of the Committee for the opportunity to share
my story with you today.
I opened my first Etsy shop, PepperSprouts in 2008, where I
make nature-inspired home decor. Etsy is an online marketplace
where you can buy handmade and vintage goods from artists,
designers, and collectors all around the world. When I opened
my first shop, I was working full-time as a graphic designer in
New York City, and PepperSprouts was just a creative for me. I
sold some illustrations and a few greeting cards, but I never
considered it a business. A few months in, I received an offer
to try laser cutting for the first time, so I illustrated a
design for a set of coasters and had them laser cut. I posted a
photo of the coasters online and I started getting encouraging
responses from friends and strangers and a few blogs. So with
that encouragement, I started trying to sell them on Etsy.
PepperSprouts kind of took off. My coasters have been featured
in national magazines, sold in museum gift shops, and most
importantly, treasured by people all across the world.
In 2010, I opened another Etsy shop called the Chatty
Press, where I sell stationery and address stamps for paper
letters. I ran the shop in addition to working as a full-time
graphic designer and running my original shop as well, and it
grew slowly and steadily. And after another successful holiday
season, in 2012, my fiance at the time and I agreed that I
would quit my day job. This spring will mark my fourth year as
a full-time creative business owner, a milestone I am
incredibly proud of.
But my experience is not unique. There are over 1.5 million
sellers on Etsy. Together, we sold $1.93 billion in goods in
2014. Most of the sellers there are underrepresented
populations. Eighty-six percent of all Etsy sellers are women.
We are twice as likely than other small business owners to be
under the age of 35, and many sellers are parents with children
at home. For many, Etsy acts as a starting point to creative
entrepreneurship because it eliminates the barriers and risks
to starting a business. It costs 20 cents to list one item on
Etsy, and the platform takes just 3.5 percent of the
transaction, so it is not surprising that nearly half of all
Etsy sellers sold their first product on Etsy just like me.
Some people may think that Etsy sellers are hobbyists, but
we are small business owners in our own right. In fact, 76
percent of all sellers on Etsy label their shops as businesses,
and for 30 percent of those sellers, it is our sole occupation.
For the rest, it provides an important source of supplemental
income. Every part of my business stems from my heart and my
own hands, and like the majority of Etsy sellers, I run all
aspects of my shop by myself from my home. I write my own copy,
I photograph my own products, I draw my designs, I stain and
sand every set of coasters that goes through my house, and I
typeset every address stamp that is sold in my shop.
While operating as a business of one has been really
liberating, it does come with challenges that policymakers
could help address. First, I am concerned with the Remote
Transactions Parody Act, H.R. 2775, which would require sellers
like me who sell online to collect and remit sales tax in every
state regardless of how big we are. There are over 9,000 tax
jurisdictions in the United States, and it would be impossible
for me to manage these new requirements without hiring
additional help. H.R. 2775 would increase barriers to
entrepreneurship and stifle creative microbusinesses, owners
like me, who do not have the time or the resources to comply
with this act.
Second, policymakers could help by reducing the barriers we
face when shipping goods across borders. Around 15 percent of
my sales are to people in the U.K., Australia, and Canada, and
while I love seeing my work in homes across the world, it can
be a frustrating process to ship them there. Customs duty
requirements vary by country, and tracking often stops at the
border on packages. I do have to work harder than other large
businesses, which have the means to navigate these complex
shipping challenges and trade rules, and policymakers can help
creative micro entrepreneurs like me by prioritizing higher de
minimis custom exemptions in trade negotiations around the
world. I am thank for the provisions in the Customs Bill
increasing the U.S. de minimis to $800 and encouraging the USTR
to prioritize this issue in future trade negotiations. I
encourage lawmakers to quickly pass this important piece of
legislation.
Finally, policymakers can help build new systems to ensure
economic security for self-employed people like me. As a
business of one, it can be incredibly difficult to manage
periods of slow sales, safe for retirement, or even take a sick
day. When you are a business of one, there are no coworkers
filling in when you are sick. Time away from my studio means
money lost and increased stress upon my return.
More people are earning income outside the employer-
employee relationship and working in the broader gig economy,
and I encourage policymakers to consider new portable benefit
models that ensure everyone has access to economic security
regardless of the way they earn a living.
I am deeply appreciative of the opportunity to share my
story with you, and I hope that I have shed some light on the
challenges creative entrepreneurs face today. I hope this
coming year brings more success and more customers, so that I
can hire an employee and perhaps even move into my own studio
space. My dream is not only to sell my own work, but also
create a lasting business that is bigger than just myself, and
I would welcome the opportunity to work with all of you to make
that dream a reality.
Chairman CHABOT. Thank you very much. We thank the entire
panel. It was very good testimony. Really.
And I will recognize myself for 5 minutes now to ask
questions. And I will start with you, Mr. Ostoich. It is my
responsibility to be kind of the timekeeper here, so I
apologize for cutting you off, so I will start with my first--
let me give you a minute or so. Is there anything that you
would like to have said that you kind of ran out of time there
at the end? So I will not ask you a specific question.
Mr. OSTOICH. No, I think I got everything in that I have
written, so I am happy to field questions.
Chairman CHABOT. Okay. All right. Thank you.
Well, let me ask you, you mentioned the Ohio Third Frontier
Program. Could you maybe elaborate a little bit on that and how
that happens, how it works in our state for small businesses
and entrepreneurs?
Mr. OSTOICH. Sure. Certainly. So I can tell you how I have
seen it impact me personally. I was introduced to the Third
Frontier through the CincyTech Initiative. So they deployed
capital through regions in the state by focusing on regional
networks. So Cincinnati has an entity, CincyTech. Tech Columbus
is the entity in Columbus that invests in companies. Cleveland
has Jump Start. So every major city that applied for this kind
of capital, it was sort of an ask. And then the Third Frontier
said, hey, in your region, if you can assemble a team of people
to build this and then go raise funds to match what we are
willing to give you--so it was a matching program, dollar for
dollar--we would start pushing venture money into the region.
It started as a nonprofit, and they quickly realized for
investors to participate, as I mentioned, was important in that
equation, that it needed to have a for-profit entity as well.
So my experience with the Third Frontier has been working
directly in CincyTech. They have invested between $500,000 and
$800,000 in every company that I have started.
Chairman CHABOT. Thank you very much.
Mr. Zietz, I will go to you next. What were some of the
challenges, things that made things tougher to be successful
from the federal government? I know there are things with the
local folks, but we tend to make it a lot tougher, whether it
is regulations or whatever. What do we do that makes your life
more difficult trying to be an entrepreneur and hire folks and
be successful?
Mr. ZIETZ. Yeah, there is a lot of regulation. I mean, one
that recently impacted us and our clients was the Operation
Choke Point that was implemented. It has since been supposedly
curtailed and reversed, but the effect of it was to force us to
stop payment processing service for Small Business, hundreds,
and across the country, thousands, tens of thousands of small
businesses because----
Chairman CHABOT. Would you just briefly tell us again what
Operation Choke Point was?
Mr. ZIETZ. So Operation Choke Point was implemented to
basically curtail the banking and payment processing for access
to banking and payment processing for the business community.
So if the government did not like a particular industry, even
though it was completely legal, they would influence or
prohibit the banks from allowing them to have bank accounts or
payment processing to accept credit cards for payment.
Effectively, the reason they call it Choke Point is you
basically choke them off. If you cannot accept credit cards for
payment, it is going to be a big deterrent to your business.
Chairman CHABOT. Was not the firearms industry one of
those, for example?
Mr. ZIETZ. Absolutely.
Chairman CHABOT. One that was kind of frowned upon by an
administration at that time is my recollection. Yeah. All
right.
Mr. ZIETZ. That is exactly it. I mean, basically, the
administration tried to implement social policy through
Operation Choke Point.
Chairman CHABOT. Thank you. I have only got a minute and 13
seconds yet I have got two more I would like to get to.
Mr. Bartkiewicz, let me go to you next. What is it about
veterans? Why do they make such strong entrepreneurs oftentimes
like yourself?
Mr. BARTKIEWICZ. Ambiguity and uncertain outcomes is what
you kind of adapt to in the military. So when you start any
business, there is no shortage of ambiguity and there is
certainly no shortage of uncertain outcomes. So I think your
ability to adapt to a changing environment, your ability to
have stamina and perseverance in terms of what you are doing
are just two ingredients. I think the federal government could
recognize that. Do exactly what you are doing today; just
recognize it and it will happen.
Chairman CHABOT. Thank you. Thank you for being brief on
that, too, so I can get to Ms. Pepper. And I will be real brief
on the question.
Does intellectual property rights and making sure that they
are enforced, et cetera, is that important to your business?
Does that come into play at all?
Ms. PEPPER. Absolutely. It would be great to have more of
that infrastructure for outside countries as well. For me
personally, I have had my work infringed upon by outside
countries offering my designs using my own photos that I
personally took and selling them for pennies on the dollar. And
again, I am just a business of one, so tracking those people
down and sending DMCAs to the sites is a lot to manage for one
person.
Chairman CHABOT. Thank you very much. My time is expired. I
will now yield to the gentlelady from New York.
Ms. VELAZQUEZ. Thank you. I was very happy to hear, Mr.
Ostoich, that you mentioned the important role that government
could play in providing access to capital or establishing
contracting goals so that businesses could access the federal
marketplace or the state government procurement processes,
because that is a good way for a startup to get contracts. Do
you think that it might be different to have that type of role
played by government?
Mr. OSTOICH. I do. In fact----
Chairman CHABOT. The mike?
Mr. OSTOICH. I do. Clearly, I have not figured this out.
Both from the viewpoint of doing business with these
entities.
Ms. VELAZQUEZ. Sure.
Mr. OSTOICH. In every one of my companies I could argue
that the state or local government or the federal government
could be a customer, but at the same time I would love to see
more opportunities for in many cases big businesses to actually
be incentivized by government to do business with small
businesses. And that is one of the ways we get started. As a
company that is less than a year old, it is all about whose
logos you put up on your site in the first 12 months of your
existence. And for us to have some incentive for big businesses
to do business with us would be hugely helpful.
Ms. VELAZQUEZ. Sure. We have contracting goals throughout
the federal government, so if there is a prime contractor that
has the opportunity to do business with the federal government,
we require them to also subcontract with small businesses. So
that is a way we incentivize the big, large businesses. They
come in; they do business with the federal government and then
provide an opportunity to contract with smaller businesses.
Mr. Zietz, you mentioned it is important that we provide
opportunities for everyone, and you also mentor young
entrepreneurs, right, and startups? What would you say is the
biggest challenge they are facing today, in terms of going
ahead and opening their business but also in growing their
business?
Mr. ZIETZ. At a high level it is twofold. It is, one,
access to capital. Two, it is experience. In experience scale,
you always hear about entrepreneurs failing multiple times
before they hit it big. Well, the reason for that is they are
gaining experience. They are learning from their failures. But
through mentorship, through programs that are out there,
whether it is YPO, EO, incubators, et cetera, and even the
universities have started to jump onboard, this education will
provide them the experience necessary so they do not
necessarily make those pitfalls.
Ms. VELAZQUEZ. And what would you say is the biggest hurdle
for young graduates to venture out and establish their
business?
Mr. ZIETZ. Well, they need access to the capital, but it is
knowing that they can take that chance. When you are growing
up, kids think they can do anything. In school and society, we
kind of box them in. We need to stop boxing people in and
letting them believe that they can do anything. And when they
go out there, they will take those chances, they will take
those risks, and many times they will create just unbelievable
things that will propel our society.
Ms. VELAZQUEZ. Do you think student debt is in a way a
challenge for those graduates?
Mr. ZIETZ. Well, my wife and I both graduated law school.
We met in law school. And when we graduated, we joked that it
would have been a huge head start if we had nothing because we
had nearly $300,000 of debt. But we worked hard and paid it
back and I was thankful for the access to it that allowed me to
have an education.
Ms. VELAZQUEZ. You mentioned that access to capital is very
important, and we need to incentivize banks to lend more. And
you say that community banks are the ones lending to small
businesses in our communities.
Mr. ZIETZ. I did not say that they are. I think they need
to. I think----
Ms. VELAZQUEZ. Well, when compared to the big banks,
community banks are the ones that are lending to small
businesses.
Mr. ZIETZ. Yes, they are.
Ms. VELAZQUEZ. And in the federal government, we
incentivize community banks and other lenders to lend to small
businesses by guaranteeing 85 percent of their loan. So I do
not know if you are aware of this or whether any of you have
benefitted in any way from the programs that are in place at
the Small Business Administration.
Chairman CHABOT. The gentlelady's time is expired, but if
you would like to answer the question, go ahead.
Mr. ZIETZ. I think the programs in place are very helpful,
but I think we could go a lot farther with those programs by
incenting, especially community banks who are on the
frontlines. They know what that community needs and they know
the character of that entrepreneur, and they are in the best
position to make that--call it a bet on whether they are going
to be successful. If the government backstops it with some sort
of program where they can charge a premium to offset those
losses, I think you will see a lot more entrepreneurism in this
country.
Chairman CHABOT. Thank you.
Ms. VELAZQUEZ. We guarantee 85 percent. That is a big
chunk.
Chairman CHABOT. Thank you.
The gentleman from Nevada, Mr. Hardy, who is the Chairman
of the Subcommittee on Investigations, Oversight, and
Regulations is recognized for 5 minutes.
Mr. HARDY. Thank you, Mr. Chairman. Thank you for being
here.
You know, as an entrepreneurial small business owner myself
in the past, I appreciate the risk that you take. It is a risk,
and you know, every business that starts up takes that risk.
That is truly what it means to be an entrepreneur. Putting
everything aside, you move forward and you kind of try to
figure out whether you can create a better mousetrap. So when
you jump in, you either sink or you swim. Those that create
that better mousetrap have success, as you folks have had.
Those that do not kind of have to go back to the drawing board.
Being that small business owner myself and stepping out and
taking that chance, I want to give about 20 seconds to each of
you if you would, to just tell me what you think caused you to
take a step forward and take that challenge? Because it is not
easy, at least in my opinion. But for some reason you push
yourself to do it. What caused each of you to do that? If you
do not mind, I will start with you, Mr. Ostoich.
Mr. OSTOICH. I would say that for me it was a relentless
commitment to my own pain. I think entrepreneurs are born out
of either education or of pain, and for me it was a personal
pain point that I was just relentlessly focused on making sure
I solved for this, and I think that gave me the confidence to
just take the lead.
Mr. ZIETZ. I have a friend that says he is socially and
economically unemployable, so I would say that probably applies
to me as well. But it is really passion and purpose. I feel I
had a purpose to go out there and be an entrepreneur and help
other small businesses. We feel at our company that we champion
the small business community and what we do is we solve their
problems, and along the way we profit from that.
Mr. BARTKIEWICZ. In my case, certainly, trust your
instincts, and part of the challenge young people have in
starting a new business and starting a company is they have not
really fully developed confidence in those instincts. By the
time that you have either previously failed or you felt the
pain of working perhaps in another organization that did not
fit for you, either the pain or the trust in your instincts
just pushes you to do it. And the more philosophical answer is
that I always believe what is most personal can also be the
most universal, and therefore, if there is something that is so
personal to you that you cannot see a world without it, you are
just going to go do it.
Ms. PEPPER. For me, it was part I did not have a choice. I
had laid plans in the middle of 2012 after I was married to go
full-time and quit my day job, and before we could get to that
point in June, the catalog that I was working for actually shut
its doors in March. So I was pushed into--I did not have a job
anymore, so why not just keep working for myself because I
already had these companies set up, so I just kept running with
it, and here I am. I celebrate 4 years of it this spring.
Mr. HARDY. Thank you.
Mr. Bartkiewicz, I want to start with you first. First of
all, you talk about you moved forward and did this as a middle-
age crisis. I must tell you, you are wrong. This is a middle-
age crisis. With that being said, back to your military
background. I had the opportunity to go overseas and visit
Israel, and they think some of their best entrepreneurs and the
reason they are such an innovative country is because everybody
has to be in the military. They have to grow up quick in Israel
because they enter at 18 and they come out of there at 20, 21
years old, and they have done some of the greatest innovations
across the country over the past years. Did you see military
life or service to your nation as an opportunity when you took
that opportunity? And thank you for it.
Mr. BARTKIEWICZ. For sure. You know, when I was in Iraq in
1991, the vision of starting my own business was not in my
mind. It was establishing the safe have for the Kurds. And when
I play back the word nourishment that came through a letter, it
is what I, 20-plus years later, revived. I think there is a lot
of support for this nation for veterans, probably better than
there ever has been. I think there is a recent decision on Reg
A that allows noninvestors to get behind a new company and fund
that company. So I certainly relied on the network of military
people who knew me first as a place to start. I am sure every
entrepreneur here went to people who knew them and trusted
them. And you just build that incremental trust as you grow
your company, and you discover that there are a lot of people
in the world who want your services beyond just the military,
which was wonderful in itself.
Chairman CHABOT. The gentleman's time is expired.
The gentlelady from California, Ms. Hahn, is recognized for
5 minutes.
Ms. HAHN. Thank you, Mr. Chairman and Ranking Member
Velazquez for honoring our entrepreneurs in this country. I am
happy to be a cosponsor of the resolution to declaring it
National Entrepreneurs' Day, the third--is it the third
Thursday? Or Tuesday. It should be every day.
Thank you for your testimony, Ms. Pepper. I really
appreciate that. I actually looked up your site while sitting
here. You have some really creative, interesting items for
sale. I love your woodland ornament advent calendar.
Ms. PEPPER. Thank you.
Ms. HAHN. Super cute. Anyway, you know----
Chairman CHABOT. We may be violating some sort of
advertising rules here, but you go right ahead. We want our
small businesses to be successful.
Ms. HAHN. I know. Right? It was super cute.
Chairman CHABOT. I will give you some time at the end to
make up for me breaking in.
Ms. HAHN. I am certainly a strong supporter of women and
minority-owned businesses. I have brought to my district in Los
Angeles the former SBA administrator and other SBA officials to
provide information. We have got seminars just for women-owned
and minority-owned businesses. In fact, one in two new small
businesses are Latinos in this country, so it really is
interesting. And 86 percent of the businesses on Etsy are
women-owned. So it certainly is a growing opportunity for women
in this country.
One of the things that you said in your testimony was that
many small business owners lack access to retirement plans. In
fact, over 68 million people lack access through their jobs,
and I think this is an area where we really need to make sure
people have the financial support and freedom and security to
feel the confidence to start their own businesses. The Treasury
Department started the pilot myRA program, and under this
program, individuals can sign up for retirement accounts that
have no fees or costs and no minimum balances. But more
importantly, they are backed by our Treasury, and the account
stays with you even if you change jobs or decide to open your
own business. Have you personally heard of myRA? And do you
think this program helps business owners like yourself? And do
you think we should be doing a better job of promoting it?
Ms. PEPPER. I have not heard of myRA, but it sounds like a
great program that could definitely help small businesses,
especially small individual businesses. I think a lot of what
is missing in retirement plans for single business owners is
knowing what plans work best for me personally because I am
married. I had an individual IRA that no longer worked for me
due to the amount of money that my husband was making. I got
absolutely no tax credit and no incentivization to have that
retirement plan. So I had to go to my account to find out what
worked for me now. And that is information that is not readily
available online, which is where most people turn for this kind
of information.
Ms. HAHN. So we probably should be doing a better job of
promoting those programs to our small businesses.
So I like to do a lot of my holiday shopping on Small
Business Saturday, the day after Black Friday. And it usually
seems like a lot of our emphasis is on the brick-and-mortar
stores on Small Business Saturday. Do you think we should do a
better job of promoting online small businesses like yours in
these kinds of shop small business campaigns in this country?
Ms. PEPPER. It would be silly to say no. Yes, absolutely. I
think a lot of it is about going out and shopping local, which
I absolutely do, and I am a big fan of, like, my local
boutiques that sometimes carry my work and works of my
colleagues as well. But I think anything that, you know, the
government can do or even other small businesses can do to help
support not just brick-and-mortar physical locations but all of
the Etsy shops and even small businesses that are not on Etsy.
Ms. HAHN. Have you ever reached out to our Small Business
Administration with suggestions on how they might be more
supportive of businesses like yours?
Ms. PEPPER. I have not, but I absolutely will in the
future.
Ms. HAHN. Great. Well, thank you for being here.
Ms. PEPPER. Thank you.
Chairman CHABOT. Thank you very much. The gentlelady's time
is expired.
The gentleman from Virginia, Mr. Brat, is recognized for 5
minutes.
Mr. BRAT. Welcome to everybody this morning. Thanks for
being with us.
I just have a question. Once in a while, politics seeps
into the city up here. Have you all ever heard of that? I will
try to bypass that. I am kind of interested, a lot of your
stories were very individual and the product you developed
seemed very individual and particular to you. And so that is
amazing. I applaud that; following your passion and developing
a product in that way. But in the back of your mind, I mean, to
duck the politics, as a small business person, did you choose
that path for a reason? Were there other avenues you probably
knew you could not pursue? I am just interested in the mind of
entrepreneurs out there. Are there some paths that you can
pursue in business and other sectors you just know ``I cannot
go down that route.'' If you can all just four--or friends you
have in other sectors, other industries where there are also
entrepreneurs. I just am curious, a quick response from each of
you on that one.
Mr. OSTOICH. No. It was a very clear path for me. I spent
most of my early professional career in finance, and felt like
I was dying a slow death. And now being three startups in, and
I blew the first one up. I did not share that with everyone,
but the first one got shut down. This will be the same thing I
do over and over and over again, and that is what I love about
it.
Mr. BRAT. That is great. And just to be clear, I am trying
to get at policy up here. Is there anything we are doing wrong
that is crimping some sectors and keeping you from pursuing
some lines where you chose to go into others lines? That kind
of a thing.
Mr. ZIETZ. As for me, as I made my opening remarks, I
always wanted to be an entrepreneur, and that led me ultimately
to law school and I practiced law. I worked at a very large
firm, Skadden Arps in New York, and I was doing structured
finance. So I was securitizing income streams for others and I
thought to myself, how do I go get one of these for myself? And
that is how I discovered the payment processing space. And like
any entrepreneur, when you start a business, you start to
pivot, and that is how we ended up becoming a financial
technology company. And we kind of evolved that way. I would
say, sure, there are certain industries where there are huge
barriers of entry. I would never have dreamed of starting a
defense company. I just would not have those resources. Or a
pharmaceutical company. But, you know, I think what you do as
an entrepreneur is you rely on what you know and what your
niche is, and most great entrepreneurs came from that
background. You know, my daughter started a lacrosse business.
Why? Because she was a very good lacrosse player and saw a
need. So that is where I think most people go.
Mr. BARTKIEWICZ. You know, the nature of the question asks
kind of why do something insane? Because it feels like an
insane process. But you will come across an observation of your
society that is not necessary in the interest or long-term
benefit of the next generation. And so as you become a parent,
you start to think not about problem-solving for what you are
doing, but how do you anticipate the problems that are right in
front of your kids? And I read a book called The Shallows,
which was a bestseller by Nicholas Carr a few years ago, and
Nicholas Carr cautioned us as a society about the narrowing
band of attention, literacy, and even emotional care that young
people have as they move into a more and more shallow band to
multiplication of inputs on a mobile device. So when I read the
book, 20 years in technology, I said, if we use technology to
invite people to move to the shallows, let us turn it upside
down and use the same technology but now invite them into a
more reflective, pensive, and with a sense of permanence by
design. And it was that book that pushed me down a path to just
go do it and not really worry about the consequences
afterwards.
Mr. BRAT. I was going to ask another round two, but Ms.
Pepper, maybe I can ask you and push the second one on you. I
did not want to get to this ahead of times but sometimes there
is a tension between small business and big business. So I kind
of ask the first round just to see, are certain avenues closed
off to you? Put a little bit more bluntly, are there areas
where you just see small businesses are being discriminated
against, there are huge roadblocks? Not just scale. I get the
scale industry kind of thing you cannot go down, but are there
ways which you just feel small business is getting the short
shrift?
Ms. PEPPER. I would say in some aspects yes, with getting
financing, all of the hoops that you have to jump through as a
small business. You do not necessarily have people working for
you who can manage all these things. You really have to do all
of the research on your own, which is the one downfall for
small business versus a larger corporation.
Mr. BRAT. Anyone else in 7 seconds?
Mr. BARTKIEWICZ. Going back to a large business right now
would be the death of me.
Mr. BRAT. I will close on that one. Thank you.
Chairman CHABOT. Okay. Thank you very much. The gentleman's
time is expired.
The gentlelady from North Carolina, Ms. Adams, who is the
Ranking member of the Investigations, Oversight, and
Regulations Subcommittee is recognized for 5 minutes.
Ms. ADAMS. Thank you, Mr. Chair. Thank you, Ranking Member
Velazquez, for hosting this hearing.
I have said many times that small firms are the engines
that help drive our economy and our nation's small business
entrepreneurs are in the driving seat. We must continue to
support these business owners as they start and expand their
companies. It is critical to target areas where small firms
have the most potential to create jobs and thrive. Some point
to government contracting while others focus on exporting.
Ms. Pepper, in your opinion, what area has the highest
likelihood to make this possible?
Ms. PEPPER. I think one thing that needs to be mentioned
about some small businesses and women-owned businesses,
especially mine in particular and the 1.5 million sellers also
on Etsy, is that we do not necessary want to grow to get
government contracts or to grow and have 100 people working
under us. We have our own measurements of success, and for some
of us that might be making enough money to take our kids on a
vacation. Some of us might be to quit our day job. Some of it
might be to gain more wholesale accounts and have our goods
sold in shops across country or across the world, but it does
not necessarily stack up with what other businesses may
consider successful outcomes.
Ms. ADAMS. Thank you.
Mr. Zietz, when compared with federal efforts, do you see
any limitations in the types of business assistance services
that the private sector, such as incubators and other mentor
programs, can provide to small firms, particularly minority-
owned firms?
Mr. ZIETZ. I think it breaks down to access to information
and experience. So businesses that have access to experienced
people, to mentors, to people to guide them, have a far greater
likelihood for success. Programs, even at the youth level, when
I mentioned the young entrepreneur academy, what they have done
is they have partnered these children up with mentors from the
business community who have already been there and done that.
And they provided that access through their experience so that
those kids are successful, and a lot of them have created real
companies that are employing people and are generating real
revenue.
Ms. ADAMS. Beyond SBA's business assistance services, there
are a number of training opportunities and resources available
to small businesses such as community college classes.
Mr. Bartkiewicz, in your opinion, how effective are
educational classes at the college level for young
entrepreneurs, and is this enough to encourage more young
prospective business owners?
Mr. BARTKIEWICZ. I think it is a great question because
college and community are two incredible ecosystems to nurture
risk-takers and problem-solving. I think for the college
environment, you have certainly universities that distinguish
themselves by attracting entrepreneurs, both success stories of
students that come out of those schools and, you know, it
certainly began out more on the West Coast part of the country.
There was a bit of a tech snobbery when I first went out there
for capital raising on my company. I can tell you though, in
the New York City area, Austin, Chicago, there now is a lot of
energy around community events called meetups. And these
meetups are going on in these cities probably every other day
on subjects form writing code to gaining capital to web design.
And I will say, they are largely organized around a lot of new
technologies, so I think your influence certainly could be to
create your own meetups in your own jurisdictions, invite in
entrepreneurs and let a community college know that these
entrepreneurs are going to be coming to your office, to your
forum, to talk about entrepreneurship and how they might pursue
this themselves.
Ms. ADAMS. Great. Thank you. And thank you all for your
testimony. I yield back, Mr. Chair.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
The gentleman from California, Mr. Peters, is recognized
for 5 minutes.
Mr. PETERS. Thank you, Mr. Chairman, and thanks to Ranking
Member Velazquez for holding this hearing on National
Entrepreneurs' Day and for including me. I am not typically a
member of the Committee but as you heard, I am allowed to sit
in today, and I am happy to do so. And it was an honor to work
with the members of the Committee to help introduce bipartisan
legislation that would support designating the third Tuesday of
November as National Entrepreneurs' Day. And I want to thank
the witnesses for being here to highlight the culture of
entrepreneurs in the spirit of America's growth and for sharing
your experiences.
I am proud to represent San Diego, California, which was
recognized by Forbes last year as the number one place to
start--to launch a startup. And it is clear to see how much our
region has embraced the entrepreneurial spirit that continues
to grow in San Diego. And I just want to mention that the
reason I was involved last term was I was inspired by a leader
in San Diego's Research Committee whose name was Duane Roth,
who passed away from injuries sustained in a bicycling
accident, so this particular effort has become of some
importance to the entire city. His commitment to promoting
entrepreneurial spirit helped turn San Diego into a top city
for innovation.
I wanted to ask a question of Ms. Pepper about one thing
that she mentioned, which was--I think it is now called the
Remote Transactions Parody Act. It is my understanding that the
various discussions of that kind of approach, which is to
require online businesses to collect sales tax so that you are
not undercutting brick-and-mortar stores who are selling the
same things. There is typically a discussion about an exemption
for smaller businesses, and I have heard the range of that to
be $5 or $10 million of annual revenue. Is that the kind of
exemption that would help you in terms of implementing this?
Ms. PEPPER. I think a $10 million exemption would be
absolutely the right thing to do.
Mr. PETERS. Okay. So you would favor that level?
Ms. PEPPER. Yes.
Mr. PETERS. Okay. Well, that is very helpful for us. I hope
that we will be taking that up. I think you can see at the very
large level that there is a disparity between folks who are
selling these big ticket items and then being undercut by
online purchases.
Ms. PEPPER. Absolutely.
Mr. PETERS. Also, I just wanted to mention, for the benefit
of the chairman, we have introduced a bill to cut red tape to
allow startups or businesses with less than a million dollars
in revenue to file their federal taxes annually instead of
every quarter. This is typically a Ways and Means thing, but it
is something that I think this Committee might be interested
in.
Chairman CHABOT. It sounds like an excellent idea to me,
and I would be happy to work with the gentleman on that.
Mr. PETERS. Great. Thank you.
And then finally, although you mentioned you were not
interested in federal contracting, I am a member of the Arms
Services Committee. We introduced rules there to allow small
businesses to be eligible to compete for some of that business,
and we think that that is a successful model for throughout the
federal government, and again, Mr. Chairman, I would love to
show you what our ideas were on the defense side and maybe make
that something that is available throughout the federal
government.
Chairman CHABOT. We would be happy to work with the
gentleman on that, too. Thank you.
Mr. PETERS. Thanks very much. I want to just say again,
thanks very much. I wish you the best of luck. And we have
another NYU law graduate I saw there, too. There are three of
us in Congress, and we know it is expensive, so I am glad you
were able to pay back those loans.
Mr. ZIETZ. Thank you.
Mr. PETERS. Good luck. Thank you.
Chairman CHABOT. Thank you. The gentleman yields back.
The gentlelady from Michigan, Ms. Lawrence, is recognized
for 5 minutes.
Mrs. LAWRENCE. Thank you, Mr. Chairman.
It is great to be with you today as we recognize the
National Entrepreneurs' Day here in the United States.
Ms. Pepper, congratulations on your success. I want you to
know, between 1997 and 2015, the number of women-owned small
businesses grew over 70 percent, and that rate is 1.5 times the
national average. So congratulations on contributing to that.
In my hometown of Detroit, a very small but effective
nonprofit called the Build Institute, is helping promote
entrepreneurship, and since it was founded and have graduated
over 600 students, 70 percent of those students are women, and
60 percent of them identify with a minority group. So we know
that the growth of our economy in the United States is really
right now resting on the shoulders of women, and we are very
excited about that.
So with that, based on your experience of starting and
running a successful small business, what advice would you give
to women across American who want to start and run their own
business? And how can we, Congress, help you?
Ms. PEPPER. I think the advice is not to be scared, and
there is so much support out there. Even in the local level
there is SCORE that you can go to in so many cities that will
help not only women but any small business, navigate the tax
law and all of the paperwork that a person would need in their
individual location to start a business. And it ranges so much.
I personally just moved to a small town from another small town
in Massachusetts, and just to get my little business license
for the town, it was about a 10-page book, where the last town
that I looked in was just a piece of paper that I filed and
signed. But I think anything the government can do to just make
it easier, and being self-employed is an opportunity. It is
work, but it is so rewarding just knowing that everything that
you make and do and all of the money you bring in is because of
you and your mind and everything that you created.
Mrs. LAWRENCE. Thank you so much.
I just want to say this. As we talk about understanding and
this Committee, under the leadership of our ranking member and
our chair, focus on the challenges of small business, it is
extremely important that the feedback and your experience, that
we understand it, we incorporate that into our policies so that
we can do exactly what you mentioned, and that is to make the
road to entrepreneurship and the road of small businesses to be
one that is productive, one that we, you know, sometimes people
say government gets in the way. I am a firm believer we should
not be in the way. We should be empowering you and giving you
the resources so that you can do what you do. Thank you all so
much.
I yield back.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
And I would now like to----
Mr. BARTKIEWICZ. Chairman?
Chairman CHABOT. Oh, I am sorry.
Mr. BARTKIEWICZ. I was just going to add one comment to the
nature of the question. I apologize for the interruption.
Chairman CHABOT. No, go ahead.
Mr. BARTKIEWICZ. There is definitely something to be said,
too, about the cofounders of companies who bring a balance, and
there is no doubt in our case the cofounder of our company,
Araceli Bosco, my wife, has brought a certain grace, composure,
and style to how we have grown our company, that myself as an
aerospace engineer would not have brought. And so when people
see the visual beauty of letters, the fact that no letters ever
look the same, whether you view them on the web or the mobile
device, the currency of our company is to certainly bring
letters to the world. We will sell mobile stamps, and back to
the other question, we would love to not have stamps be taxed.
You cannot buy a mobile stamp at any retailer, so it would be
nonsensical. But even though the currency of the company is to
grow and make money, it was decided by my wife early on that 2
percent of our company would be owned and allocated to 501(3)c,
called the Ltters Foundation, which is allocated to purely let
any cause, educational or nonprofit organization use this
technology in perpetuity for free. So it was through kind of
the grace of a cofounder to think that way, and I am delighted
that my wife is really the soul of our company.
Chairman CHABOT. Thank you.
Mrs. LAWRENCE. I always like to remind people that women
are 51 percent of the population, so it is great that you have
targeted that other half of the population.
Mr. BARTKIEWICZ. Thank you.
Chairman CHABOT. Thank you. The gentlelady's time has
expired.
The gentlelady from New York, Ms. Meng, who is the ranking
member of the Agriculture, Energy, and Trade Subcommittee is
recognized for 5 minutes.
Ms. MENG. Thank you, Mr. Chairman. And thank you to our
ranking member for holding this Committee. And I just really
want to thank you and congratulate all of our entrepreneurs for
being here and all that you have achieved.
I just wanted to further get a sense of what your
experiences have been like with federal agencies' initiatives
in terms of what do you think we can do more effectively to get
out the message? I know that, for example, in my home district
of Queens, New York, a lot of our businesses are sort of the
brick-and-mortar shops, and online resources do not necessarily
help. But then when we have talked to a lot of MWBs, for
example, and in New York, they complain of lack of
consolidation amongst the city, state, and federal levels in
terms of paper handouts. So I just wanted to get your take on
what do you think can be done more effectively to get the
resources and information out? Anyone?
Mr. ZIETZ. Well, you know, at the start it is less
regulation, so making a business do what they do best. But
promoting an environment for people to want to be
entrepreneurs, and I think it starts at the lowest levels. I
mentioned educating our children that this is a possibility,
when they are young, that they can be an entrepreneur. They
talk about wanting to be a doctor, wanting to be a lawyer,
wanting to be an engineer. You know, we need to instill with
them the belief that they would want to be an entrepreneur.
Back years ago it was a dirty word. It was like, oh, you could
not get a job. You became an entrepreneur. Well, that is not
the case, and we have got people who have been very successful
that you look out as role models and we want to let them all
know. And it is not just we talked about why there is less
women. You need to educate them at that same young age and let
them be aware that this is a valid option for them. And when
you do that--my daughter is a perfect example--then they do not
see any limits and they can go on to be quite successful.
Mr. OSTOICH. If I can jump in. I can give you some
experience from the first company that I started. I did the SBA
thing. I went to the SBA Office. I sat down with somebody and
talked to them about what I was trying to build and where we
were and current state of things, and that was not an option
for us. And I think what the SBA is looking for in terms of
grant making or loans, does not fit the mold or the model of a
high-growth, high-tech company. However, where there is a huge
opportunity I feel is that the SBA should be where small
businesses go for information. I should not go to CincyTech or
an investor who points me to the SBA. I should go to the SBA
first and they should push me out to everybody. Even if they
cannot make me a loan, or they cannot help my business
financially, maybe they can connect me with someone who does.
Mr. BARTKIEWICZ. My very mechanical view of the SBA was the
SBA loan process. That application is really geared towards a
very classic, physical asset company, inventory warehouse
factory, cash flow, goods and services. So it is out-of-date in
my view. There are a lot of companies who have created a lot of
wealth and opportunity that do not fit that loan application
box, which I think is a little outdated if I might make a
suggestion.
Ms. MENG. I know that Mr. Zietz, you mentioned children's
entrepreneurship success. Are there certain programs or
initiatives that you think local or federal government can do
better to encourage entrepreneurship or foster necessary
business skills among youth? And is there a demand for this
even?
Mr. ZIETZ. Well, you know, my children participated in a
program called the Young Entrepreneur Academy. It was started
in Rochester, New York, and it is about 140 locations right now
and growing. I know they are trying to get the word out, so if
anybody is listening, hopefully that is helpful to them.
There are other programs out there that are similar to what
they are doing, and there are other universities that are
starting to not only develop programs and concentrations in
entrepreneurship, but they are giving back to the community in
bringing in students. And the earlier we can make them aware of
these programs and provide this education, I know at my
children's school I spoke recently with the principal about--
she asked me. You know, your kids are doing these wonderful
things. How can we do that for all our children? And they are
looking heavily into how to create a program for
entrepreneurship there. And it is really access. When they know
it is an option, then it is something that can be, you know,
they can strive for.
Ms. MENG. Thank you. I yield back.
Chairman CHABOT. Thank you. The gentlelady yields back.
We want to thank our panel here. I think you have really
been excellent here today. Mr. Zietz, you mentioned about when
people could not get a job and they became entrepreneurs it was
maybe looked down upon back in the past. The kid I really feel
sorry for is the poor kid in the GE commercials whose dad
thinks he cannot pick up the hammer and whose friends ask him
if he works on a train and all that kind of stuff. He is the
one I feel very sorry for. GE Aviation happens to be
headquartered in my district. But in any event, it is very
obvious to me why each of you has been successful in a tough
world out there. You are all very creative and quick on your
feet, even though you are sitting down answering all our
questions. I think you really did a commendable job here. And I
would encourage folks to maybe consider these meetings are--if
you go to the House Small Business website, these are all
available, and if there are potential entrepreneurs out there
all across the country who I think could really learn a lot on
what took place here this morning and a little bit into this
afternoon because you all had a lot of very wise things to say,
and I think it would be great for the economy if they listened
because a lot of people probably would be successful. Obviously
not everybody, but some might be and hire a lot of folks and
get the economy moving, and that is what both Republicans and
Democrats on this Committee are all about. Right, Ranking
Member?
Ms. VELAZQUEZ. Let me just thank you for the important
experiences you shared with us, and I hope that we could
continue doing this at the local level so that other people--
because information is so important--are able to listen to you
and do not make maybe the same mistakes people before them made
or perhaps they gain the type of information that empowers them
to go to the right places. One thing is certain--there is a
network of support out there and we need to do a better job of
communicating that information.
Chairman CHABOT. Thank you very much. And again, we thank
the very distinguished members of the panel for their testimony
today.
And I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered. And if there is no further
business to come before the Committee, we are adjourned. Thank
you very much.
[Whereupon, at 12:25 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC] [TIFF OMITTED] T7594.001
Good morning. My name is Chris Ostoich - and I'm an
entrepreneur. I'm on my third entrepreneurial tour of duty - as
co-founder and marketing leader at LISNR, an internet of things
and connected device company headquartered in Cincinnati, Ohio.
I would like to thank Chairman Chabot personally and the
members of the Small Business Committee for inviting me here
today.
I started my first company in Cincinnati in 2006. I started
that company because of a pain I felt personally--the pain of
being new in a city and in a job.
I was new. I was disconnected. I was missing professional
and social networks that mattered, and I'm not talking about
the digital kind. I wanted to have a life that was full of
meaningful relationships at home and at work--so I did what
most rational people would do in this situation. AT 28 years
old, I took every dollar to my name, moved into my parents'
basement, got a job at night waiting tables for extra cash--and
went to work building this company.
What I found very quickly was this: in any successful
entrepreneurial ecosystem, you will always have these three
things:
Entrepreneurs with scalable ideas
Investors willing to back those ideas
Customers willing to engage and buy products
Cincinnati at this time was a little short on all three. It
was clearly not the first place on earth one would think to
build a tech company. We had no accelerators. We had no
incubators. We had very little venture capital available to
startups like mine.
What I didn't know was that there was something very
special in the works that was set in motion years before. There
were things already happening that would soon make Cincinnati
and the rest of Ohio flyover country no more.
In 2002, the Ohio Third Frontier was established to change
the trajectory of Ohio's economy. The $2.1 billion initiative
provides funding to Ohio technology-based companies,
universities, nonprofit research institutions, and other
organizations to create new technology-based products,
companies, industries, and jobs. It also set up regional
investment entities in cities all over Ohio including
Cincinnati, Columbus and Cleveland.
By 2006 the Ohio Third Frontier was starting to reach local
communities. Our regional investment arm of the Third Frontier
was established in CincyTech--and they were about to begin
making their first investments.
My first company, BlackbookHR, was funded in 2008 by
CincyTech and a syndicate of angel investors. By 2013,
BlackbookHR had become one of the human resource industry's
leading software solutions for employee engagement.
In 2013, I started LISNR with my friend and P&G marketing
veteran Rodney Williams. LISNR is a new communication protocol
similar to Bluetooth; however, we are simply using sound to
connect devices. In three short years, LISNR has grown to 40
employees and will reach 80 by the end of 2016. Just last week,
we announced our $10 million dollar Series B financing led by
the one of the most successful corporate venture capitalists in
the world, Intel Capital.
CincyTech has participated in each company I've led and in
almost every round of capital we have raised. Collectively,
companies that I have started have raised more than $20MM of
venture capital and, in total, companies that I have started in
Cincinnati now employ 60 people at an average salary of
approximately $70,000.
And I am just one representative from this great community.
There are hundreds more like me in Cincinnati and other cities
in Ohio right now. In fact, many people are saying the MidWest
offers the best opportunity for growing companies outside of
Silicon Valley. The math behind their logic is fairly
straightforward: the MidWest makes up 19% of the country's GDP,
we generate almost 20% of its patents, we have some of the best
engineering schools in the world and we have the largest
concentration of Fortune 500 companies in the country, yet the
region ONLY draws 5% of the country's venture capital.
That's where State and Federal government comes in. As I
mentioned previously, there are 3 things any successful startup
ecosystem needs to be successful...entrepreneurs with scalable
ideas, people willing to invest in them and companies willing
to do business with them. We still do not have access to enough
capital and would not survive without programs like the Ohio
Third Frontier.
Today the world has changed in Ohio and in Cincinnati
specifically. Here are examples of the Third Frontier's
influence.
Since 2007, CincyTech has invested more than $25.5MM into
59 companies in Cincinnati. Those companies have generated more
than $509MM in follow-on investment capital. More than 760 jobs
have been created and these companies have created almost
$160MM in revenue.
The Brandery, Cincinnati's top 10-ranked brand-focused
startup accelerator, has accepted companies from 40 countries
and 40 states into their accelerator program and has launched
56 companies that have generated $120MM in follow-on funds.
Cintrifuse is a network connecting the region's high-
potential, venture-backable startups to advice, talent,
funding, and customers. With over 35 ecosystem partners, 50+
participating local corporations, 75+ mentors and advisors, and
a $57MM Fund of Funds, Cintrifuse leverages the power of its
networks to serve over 160 startup members and improve their
chances of success.
We've come a long way in less than a decade--and one
thing's for sure, Ohio is flyover country no more.
Thank you again for having me here today--it's been an
honor.
11-17-015 Zietz Testimony
I am happy to be speaking before you today on National
Entrepreneur Day. Entrepreneurship is what built this country
through the likes of Rockefeller, Carnegie, Edison, Ford and
many others, and entrepreneurship remains the only competitive
advantage we have over the rest of the world. I am extremely
passionate about Entrepreneurism and actually just came back
two days ago from the EY Strategic Growth Forum where I was
fortunate enough to be recognized as one of their Entrepreneurs
of the Year. I have also had companies of mine appear on the
INC 500 list of fastest growing privately held companies seven
times and I am the incoming Chair of the Palm Beach Chapter of
the Young Presidents Organization.
My company, Touchsuite, is a financial technology company
focused on the payment processing space. We provide businesses
though out North America with the technology necessary to
accept payment. I believe every great company needs to have a
purpose greater than themselves and profit. At Touchsuite our
purpose is to ``Help rebuild America, One Small Business at a
time.'' Through the products we create we help other small
business owners to compete with larger companies by giving them
the same access to data, marketing and capital that Fortune 500
and big box retailers have long enjoyed. As a result, they are
able to increase their business, expand and provide for
additional jobs and stimulate the economy.
However, I am most proud of the amazing Entrepreneurs that
my wife, Sheila, and I raising. My oldest daughter Rachel is a
passionate lacrosse player and saw a need for improved practice
equipment and started her own company, Gladiator Lacrosse, when
she was just thirteen years old. She participated in the local
chapter of YEA, Young Entrepreneur Academy, which is a thirty
three week program for students after school where they learn
how to start a business, write a business plan, receive
mentorship and ultimately pitch investors for funding. She is
now fifteen, and is generating over one million in revenue, is
the top seller on Amazon, has created multiple jobs and was
recently recognized by Governor Scott with Florida's Young
Entrepreneur Award. My son Jordan also participated in the YEA
program last year and won the local competition, the regional
competition and finished third in the nation out of
approximately 4,000 students. With the help of programs like
YEA, there is not only an amazing future for my children, but
this can be the future for our next generation which can
continue the rich history of entrepreneurism we have had in our
Country.
Entrepreneurs make something out of nothing. We take a
chance, work hard and follow our dreams. Sometimes we are
successful and when we are we are typically handsomely
rewarded, other times we fail, but even in failure we have
benefited with an education, albeit an expensive one, that can
be applied to our next venture, thus increasing the likelihood
of success.
I grew up in a blue color neighborhood outside Detroit and
even though I did not have much, I recognized there was
opportunity for everyone regardless of the position you started
in life, unlike so many other countries. I always wanted to be
an Entrepreneur but figured you needed one of two things, money
or know how. I did not have any money so I figured I better go
get some know-how and went to law school. After law school I
was fortunate to work at Skadden, Arps, one of the largest law
firms in the world. The great thing about working at Skadden
was every year you were there they gave you three years of
experience! However, this helped foster my work ethic.
My wife had it far worse than I did. She was born in Cuba
and came to this country when she was thirteen not speaking the
language but managed to work hard and I was fortunate enough to
meet her in law school. My wife and I joke that if we had
started with nothing it would have been a huge head start
because we were both saddled with six figure loans from law
school.
In 2001, with two young children and a high paying job, I
took a leap of faith and followed my dream of starting my own
business. I could have continued being an attorney and cashing
a very nice pay check. But, I took a chance and bet on myself
and what I thought I could build. As a result, today there are
approximately one hundred people with high paying jobs that
they love. I made it against the odds because of my legal
background and the people I met along the way. If you want to
make a decision at the governmental level that will increase
the odds for others and make their journey easier, than I would
suggest you take the following four actions.
ACCESS TO CAPITAL
First, make the capital markets available to everyone not
just large corporations. If small business had access to
capital there are a million ways they could effectively deploy
it to obtain amazing returns for their business. Empower banks,
particularly Community Banks, to make loans, their acquisition
costs would be significantly lower since they already have the
primary relationship with these customers. Banks by their very
nature are not entrepreneurial as they want to avoid as much
risk as possible, however, if the government were to insure
part of the loan by charging a premium on every loan (similar
to a PMI insurance in the real estate industry), the premium
could go a long way towards offsetting the increased losses
that would have to be paid out. Not only would this drive
additional revenue through the premiums (i.e. increased
interest rate, 2% or so), but by deploying capital into small
business will create additional jobs, taxes, capital
expenditures, etc. I believe that the Community Banks would be
in the best position to make these types of loans as they know
the local business owners in their community and with a more
entrepreneurial underwriting process can allow them to think
outside the box and make loans that make sense in their
community.
LESS REGULATION
The cost of compliance is very high. There are many valid
instances where regulation is necessary; however, we need to be
able to remove as many obstacles as we can for businesses to be
successful. A perfect example, of anti-business regulation was
Operation Choke Point. Additionally, the different levels and
requirements of regulations by each state make it impractical
for small business to compete with larger companies that can
absorb those unnecessary costs. Across the board private
enterprise has always been more efficient that government in
execution. Less involvement of government in small business
affairs equals stronger small businesses, which equals more
jobs.
FAVORABLE TAX ENVIRONMENT
With the upcoming election we are hearing about different
tax plans and I am not here to give you another, however, we
need to create a favorable tax environment so people will want
to invest. We need to encourage those with money to invest and
like any good business person they will run a risk reward
analysis on any potential investment that takes into account
their after tax return. That return needs to be high enough or
they will sit on the sidelines and not deploy their capital.
The recent perception in this country is ``tax the rich'',
``CEOs are making too much money'' but that is not the correct
question. Instead ask ``how many jobs were created?'', how much
total tax revenue was generated''. Instead of vilifying these
individuals and corporations we should be riding their coat
tails. Who cares that they got more, look at what they created
and at the end of the day they are the ones who took the chance
and risked everything in hopes of the reward they received for
executing.
PROMOTE ENTREPRENEURSHIP IN THE NEXT GENERATION
As I discussed earlier, Entrepreneurship is our only
competitive advantage and we need to continue to foster that in
the next generations. Entrepreneurship is as important as any
core curriculum and needs to be taught to our children. We need
to empower the future generation with the tools to succeed.
Technology is rapidly changing at unprecedented levels and that
will only continue to speed up. We cannot train them for the
jobs of the future since we don't know what they will be or the
skills that will be required. However, we can prepare them with
the mindset necessary to be successful. The basics of
Entrepreneurism are the same today as they were one hundred
years ago; all that has changed is the products, technology and
platforms utilized.
CLOSING
Our government needs to continue to support what built this
country and foster an environment that is pro entrepreneurism.
It is my belief, that through the planting of the seeds
necessary to foster Entrepreneurship in this country we can
harvest everything we need to regain our greatness. A strong
culture of Entrepreneurship in this country will solve most of
our problems, will create jobs, will help the GDP rise and
shrink the deficit. Much in the same way that we rely on the
brave men and women of the armed forces to fight for us and
protect us, we need to remove the restraints we have placed on
our small business community and allow them to win the global
economic war we are fighting.
Testimony of Drew Bartkiewicz, CEO of lettrs TM
Before the U.S. House of Representatives
Small Business Committee
November 17, 2015
Chairman Chabot, Ranking Member Velazquez and Members of
the Committee:
I am delighted to be here today to tell you the story of a
brand new method of communicating meaningful messages--of
reimagining, reinventing and reviving the national pastime of
letter writing... all in a new mobile medium to capture the
imagination and insights of the next generation.
It is the story of using cutting-edge, up-to-date mobile
platforms for people who care about more substantive and
lasting communication. It is a story being written today by a
group of entrepreneurial veterans who think we need a way to
preserve the thoughts that we share with our friends, family,
customers, elected representatives and, in some cases, total
strangers who may become tomorrow's pen pals.
This is the story of ``lettrsTM''
(www.lettrs.com) the company I founded because I believe that
expressing our sentiments in 140 characters, or through a
temporal e-mail does not value the preservation of our
thoughts, is insufficient. As a father of three, I realized
that we needed to harness technology to power deeper, broader
and more nuanced language than those short-form snippet-
services allow. In essence we needed to reimagine the personal
letter for a new world.
There are times when it is important to step out of the
flow of our functional, minute-to-minute communications to
compose ``messages that matter.'' I am a student of letters, a
product of their power and fervently believe that deep
personalization of messaging--of mobile letter writing--is a
new frontier, distributed across mobile, social, email and
native messaging. In today's world of fast social media, the
art of communicating in a personal, expressive, and impactful
way is being lost...until now.
By way of background, I graduated from West Point in 1989
and served as an Army Lieutenant in the 82nd Airborne during
the first Gulf War. What I learned during my military
experience directly shapes my entrepreneurial approach today.
Like every small business, especially a technology start-
up, leadership is essential. The Army taught me how to build
and lead a team of diversely talented people without the
benefit of perfect market intelligence and under very
constrained budgets. I know how to lead in a climate where our
adversaries--competitors, if you will--are determined, adaptive
and patient.
My Army unit in Northern Italy and then in Iraq was a hub
of necessary innovation, rapidly reacting to a changing threat
and demanding adaptive actions to persevere and succeed. The
skills I learned then I apply to many of the decisions our
company makes today.
I am convinced that military education and service can be a
magnificent way to learn how to be an entrepreneur. It
certainly helped me graduate with an MBA from the Yale
Management School in 1994 and served as the foundation upon
which I have built my private sector business experience--a
pathway that has taken me all across the globe. It is where I
learned that no matter what language people speak, they have a
common desire to communicate with others, especially with the
hope of having communications that leave a lasting impression.
Letters were in fact the very foundation of my relationship
with my wife, Araceli, whom I met in Madrid, Spain in 1994.
When I shared those letters with our three teenagers a few
years ago, I was stuck by a force that was as compelling as it
was contrarian: to save social messaging from itself. I quit my
day job and started on the mission to design and deploy mobile
technology to bring letter writing to the writing tolls my kids
were using...their smart phones.
So we have been on this journey for 2.5 years, powering
more deliberate and expressive communications. We have filed 4
non-provisional patents as a proud LLC, won a Google Play Best
App Award in 2014 and recently won the trademark for our name
``lettrsTM'' from the USPTO. And we are just
beginning. We are becoming an expression network for all of the
world's letters that may have otherwise never been written.
Freedom of expression is a very powerful motivator for
human beings--it is timeless in fact--and making it easier for
people to convey personalized and lasting thoughts is at the
core of what is driving the adoption of the lettrsTM
app.
Today our mobile social messaging and media platform allows
personalized expression using letter-writing elements, such as
calligraphy, stationery, stamps and even mobile signatures more
than any other mobile messaging application. We are an award
winning, original content management network for branded
messages, fan mail and social media messaging.
We provide the ability for every person attending this
hearing to write a stamped, signed, and original letter which
can then be delivered immediately to a cell phone number, an
email address, and even through other social networks. We are a
small business doing something different, as all small
businesses must do, to craft their way to growth.
Our unique network literally powers hand-signed mobile fan
mail (what you might call constituent communications) that
fuses people, pictures, prose and personality. It allows for
communication that is automatically translated into 80
different languages with a pen pal network spanning 170
countries. LettrsTM allows for personalized, mobile
social stamps to promote an idea, a brand, a social cause or a
commercial product.
Our vision is catching on across the world. As of last
week, our social stamps have received over 950 million views
since we introduced them this year. Vint Cerf, the ``father of
the internet,'' recently conducted what he called the
``Internet letters initiative'' and using the
lettrsTM application the network powered over 1,000
letters from 32 countries, helping to drive a new writing desk
version on the web.
Our fastest growth market is Indian where
lettrsTM is giving over a quarter million people a
voice in letter writing that they would not otherwise have. And
while we are still compiling metrics, in the aftermath of the
Paris terrorist attacks this past Friday, we are already seeing
hundreds of passionate letters expressing sympathy and a global
desire for resilience and resolve for sanity.
Our story is one few would have ever seen coming. Just when
the world thought letters were dead, a relic of the physical
past, we have made them come to life again with passion,
purpose, and personality. From our small offices in Brooklyn,
New York, we touch people around the world. Through popular NBA
celebrities, accomplished writer Paulo Coelho of The Alchemist,
and eager millennials in a developing economy, the
lettrsTM platform invited people to communicate with
each other in a meaningful way. Not in the tradition of paper-
based writing but with the ease and expressive capabilities
that a modern mobile device now offers.
As a veteran-founded small business, we have created the
world's largest database and cloud platform of signed digital
letters from across the world--that now has led to a new book
publishing concept with National Geographic, an emerging
vintage stamps partnership with the Smithsonian and a long term
partnership with the National Society of Collegiate Scholars to
power the next generation of letters--from high school and
college students who know they can and should ask more of their
mobile communications. To my amazement, there are already more
than 77,000 love letters on our network that inspires and
invites a truly positive movement in the use of social
technologies.
We are not naive, but we honestly believe we have the right
social platform to change the world for the better and I am
proud to say that 2% of our company is already allocated to the
lettrsTM Foundation (www.lettrsfoundation.org),
having created charitable stamps and campaigns for the United
Way, Wounded Warrior Project and the Sundara Fund. This is our
effort to unlock mobile letter writing for free for any school
or non-profit organization wanting to elevate their message
that matters.
During National Entrepreneur Week our panel today
represents but a nano-fraction of the small business owners who
are trying to pursue their dreams by creating business
opportunities. It is not enough to have a good idea.
Entrepreneurs need access to capital--human and financial--and
I spend a lot of time ensuring that we have what we need. It is
not an easy task.
We did not even attempt to approach the Small Business
Administration. Their application and approval process is quite
tedious and is really designed for companies with physical
collateral that can be pledged as a loan guarantee. Our
collateral at lettrsTM--in contrast--is not physical
but digital. We have been growing social and mobile assets, and
we collect those powerful emotional expressions from
individuals who have invested over 116,000 hours in writing
deliberate words just in the last month alone.
I funded lettrsTM the old fashioned way, through
diligent personal efforts, persistence, sacrifice, managing
early stage business risk and building incremental trust with
our investors through large leaps in innovation. Individual
investment in lettrsTM has come from many who are
veterans themselves. Service Academy graduates, and also from
individuals formerly of Amazon, Apple, Google, and
salesforce.com, all who have faith in a veteran-founded
technology company.
Through some of my West Point classmates, I was introduced
to a group of angel investors who focus on companies started by
graduates of the military service academies. In addition to
investing seed money in lettrsTM to help us get
started, they have invested in other small businesses,
including one started by my friend, Andrew Kemendo, an Air
Force Academy graduate, who is sitting behind me this morning.
Andrew's company, called Pair, has developed an augmented
reality technology that is just remarkable and I hope you will
have a chance to look at it after this hearing concludes. I
would also like to show you how to download the
lettrsTM app and personalize your own account to
compose and sign your more deliberate and passionate
communications, thereby inviting and inspiring your
constituents to do the same. And I would like to show you how
we personalize lettrsTM stamps, including some
unique images that might even look familiar.
In closing, I want to say thank you to my country to which
I proudly served, the United States. I am grateful for the
opportunity to testify this morning. It is an honor to be here.
I look forward to your questions about my experience in
building my company www.lettrs.com and how we plan to power the
world's next generation of lasting communications.
Drew Bartkiewicz, CEO lettrsTM
[email protected]
http://about.lettrs.com/
Messages That Matter, Messaging 2.0.
Featured in TIME, BBC, WSJ, BusinessWeek, and NPR
##########
U.S. House of Representatives Committee on Small Business
Testimony on ``National Entrepreneurs' Day''
Presented by:
Jennifer Pepper, Owner, Peppersprouts & The Chatty Press
November 17, 2015
------------------------------------------------------
Good morning, my name is Jen Pepper and I'm a creative
entrepreneur from the North Shore of Massachusetts. Thank you,
Chairman Chabot, Ranking Member Velazquez, and members of the
Committee for the opportunity to share my story with you.
I opened my first Etsy shop, Peppersprouts, in 2008, where
I make nature inspired home decor. For those of you not
familiar with Etsy, it's an online marketplace where you can
buy handmade and vintage goods from artists, designers and
collectors around the world. When I started selling on Etsy, I
was working as a full-time design director in a marketing and
branding firm in New York City. Peppersprouts was a creative
outlet for me. I sold some paper cut illustrations and a few
greeting cards, but I wouldn't have considered it a business.
A few months in, I received a discount code through an Etsy
contest to try laser cutting for the first time. I illustrated
a design for a set of coasters, as interior decorating has
always been a passion of mine, and I had them laser cut. After
posting a photo of the finished product online, I began getting
encouraging responses from friends, strangers, and even a blog.
With that positive encouragement, I started selling the
coasters on Etsy.
That's when PepperSprouts took off. All of the sudden, my
coasters were featured in national magazines, sold in museum
gift shops, and most importantly, treasured by people all
across the world.
In 2010, I decided to open another Etsy shop called The
Chatty Press, selling stationery and address stamps. I ran this
shop in addition to working as a full-time graphic designer and
continuing to manage my first shop. The Chatty Press grew
slowly and steadily. After another successful holiday season in
2012, my fiance and I agreed that I would quit my day job after
our wedding that summer, and try to make my Etsy shops a full
time gig.
Unfortunately, the catalog I was working for went under in
March of that year, which expedited our plans. Although my move
to full time entrepreneur happened a bit sooner than we
expected, it is the best thing that could have happened. This
spring will mark my fourth year as a full-time creative
business owner, a milestone I am incredibly proud of.
Creativity runs through my blood and so does the
entrepreneurial spirit. My businesses give me the opportunity
to pursue both of these passions.
And my experience is not unique. There are over 1.5 million
sellers on Etsy, and together we sold $1.93 billion in goods in
2014. Most of those sellers are from traditionally
underrepresented populations. For example, 86% of Etsy sellers
are women, and they are twice as likely than traditional small
business owners to be under the age of 35. Many sellers are
parents with children at home and 17% of sellers have an annual
household income under $25,000.
For many, Etsy acts as a starting point to creative
entrepreneurship by eliminating the barriers and risks to
starting a business. It costs just twenty cents to list an item
on Etsy, and the platform takes just 3.5% of every transaction.
It's not surprising that nearly half of all Etsy sellers sold
their goods for the very first time on Etsy, just like me.
Some might be inclined to write off the Etsy sellers as
amateurs or hobbyists, but we are small business owners in our
own right. 76% of all Etsy sellers label their shops to be
businesses, and for 30% of sellers, their creative business is
their sole occupation. For the rest, their creative businesses
provide an important source of supplemental income.
Every part of my business stems from my heart and my own
hands. Like the vast majority of Etsy sellers, I run all
aspects of my shop on my own, working out of my home. I write
my own copy, design my own ads, photograph my own products,
draw my own designs, stain and sand every set of coasters, and
typeset every address stamp that is sold through my shops. It
is through my personal connection to each handmade good, that I
am giving back to the world.
While operating as a business of one has been truly
liberating, it has comes with challenges that policymakers
could help address.
First, I have serious concerns with proposed legislation
that would require sellers like me to collect and remit sales
tax in every state. In particular, I am concerned about the
Remote Transactions Parity Act (HR 2775), which would require
sellers who use online platforms to collect and remit sales tax
in every state, regardless of how big they are. I sell my items
at craft shows in multiple states, and work hard to make sure I
comply with the local rules wherever I go. But there are over
9,000 tax jurisdiction in the United States--it would be nearly
impossible for me to manage these new requirements without
hiring additional help. The Remote Transparency Parity Act
would increase barriers to entrepreneurship and stifle creative
micro-business owners like me, who would simply not have the
time or resources to comply.
Second, policy makers could help businesses like mine by
reducing the barriers we face when shipping goods across
borders. Right now, around 15% of my sales are to people in the
UK, Australia, and Canada. While it's rewarding to imagine my
products in homes across the world, it can be a frustrating
process to ship them there. Customs and duties requirements
vary by country, and tracking often stops at the border. To
successfully export my goods, I have to work much harder than
larger businesses, which have the means to navigate complex
shipping challenges and trade rules. Policymakers can help
creative micro-entrepreneurs like me by prioritizing a higher
de minimis customs exemption in trade negotiations around the
world. I'm thankful for the provisions in the customs bill
increasing the US de minimis to $800 and encouraging USTR to
prioritize this issue in future trade negotiations. I encourage
lawmakers to quickly pass this important piece of legislation.
Finally, creative policymakers can help build new systems
to ensure economic security for self-employed people like me.
As a business of one, it can incredibly difficult to manage
periods of slow sales, save for retirement, or even take a sick
day. My IRA has barely seen a few new dollars since I began
working for myself full-time. And, I have a weekly doctors
appointment that takes me away from my studio for half a day.
When you are a business of one, there are no co-workers filling
in when you are sick. Time away from the studio means money
lost, and increased stress upon return. More people are earning
income outside of the employer-employee relationship and
working in the broader gig economy. I encourage policymakers to
consider new portable benefits models that ensure everyone has
access to economic security, regardless of the way they earn a
living.
I am deeply appreciative of the opportunity to share my
story with you, and hope that I have shed some light on the
challenges creative entrepreneurs face today. Like 90% of Etsy
sellers, I wish to continue to grow my creative business. I
hope this coming year brings more success, and more customers
so that I can hire an employee, and perhaps even move into a
studio space, rather than continuing to work out of my
wonderfully decorated spare bedroom. My dream is not only sell
my work, but also create a lasting business that is bigger than
myself. I welcome the opportunity to work with you to help make
that dream a reality.
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