[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EMPOWERING SMALL BUSINESSES: THE ACCELERATOR MODEL
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MAY 3, 2017
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 115-018
Available via the GPO Website: www.fdsys.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
25-240 WASHINGTON : 2017
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Washington, DC 20402-0001
HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
TRENT KELLY, Mississippi
ROD BLUM, Iowa
JAMES COMER, Kentucky
JENNIFFER GONZALEZ-COLON, Puerto Rico
DON BACON, Nebraska
BRIAN FITZPATRICK, Pennsylvania
ROGER MARSHALL, Kansas
RON ESTES, Kansas
NYDIA VELAZQUEZ, New York, Ranking Member
DWIGHT EVANS, Pennsylvania
STEPHANIE MURPHY, Florida
AL LAWSON, JR., Florida
YVETTE CLARK, New York
JUDY CHU, California
ALMA ADAMS, North Carolina
ADRIANO ESPAILLAT, New York
BRAD SCHNEIDER, Illinois
VACANT
Kevin Fitzpatrick, Majority Staff Director
Jan Oliver, Majority Deputy Staff Director and Chief Counsel
Adam Minehardt, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 1
WITNESSES
Ms. Starr Marcello, Executive Director, Edward L. Kaplan New
Venture Challenge (NVC), Polsky Center for Entrepreneurship and
Innovation, University of Chicago, Chicago, IL................. 5
Mr. Darrin M. Redus, Sr., Vice President, Minority Business
Accelerator, Cincinnati USA Regional Chamber, Cincinnati, OH... 7
Ms. Carolyn Rodz, Founder and CEO, Circular Board, Houston, TX... 8
Stephen S. Tang, Ph.D., MBA, President and CEO, University City
Science Center, Philadelphia, PA............................... 10
APPENDIX
Prepared Statements:
Ms. Starr Marcello, Executive Director, Edward L. Kaplan New
Venture Challenge (NVC), Polsky Center for Entrepreneurship
and Innovation, University of Chicago, Chicago, IL......... 29
Mr. Darrin M. Redus, Sr., Vice President, Minority Business
Accelerator, Cincinnati USA Regional Chamber, Cincinnati,
OH......................................................... 33
Ms. Carolyn Rodz, Founder and CEO, Circular Board, Houston,
TX......................................................... 37
Stephen S. Tang, Ph.D., MBA, President and CEO, University
City Science Center, Philadelphia, PA...................... 40
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
EMPOWERING SMALL BUSINESSES: THE ACCELERATOR MODEL
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WEDNESDAY, MAY 3, 2017
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,
Radewagen, Knight, Kelly, Gonzalez-Colon, Fitzpatrick, Estes,
Velazquez, Evans, Murphy, Brat, Lawson, Clarke, Chu, Adams,
Blum, Espaillat, Comer Schneider, Bacon, and Marshall.
Chairman CHABOT. The Committee will come to order. We
welcome everybody here to the Small Business Committee today.
Before we begin this morning, I would like to welcome Ron
Estes, who is our newest member of this Committee. He is fresh
off a special election win, and with his background as being
the former Kansas State treasurer, the Small Business Committee
is lucky to have him on the team, and we welcome him here
today. We are expecting great things from him. So thank you
very much. Look forward to working with you.
We also have another guest here today. Dr. Marshall, would
you like to introduce somebody?
Mr. MARSHALL. Sure. So my wife Laina is here for the First
Ladies Luncheon tomorrow. Glad to have her and quite a bit of
our extended family with us as well from Kansas. Welcome.
Chairman CHABOT. Excellent. Very good.
And I want to personally welcome some of the folks from
Cincinnati here. We have the Chamber of Commerce, a bunch of
folks that are here from the regional chamber, so they want to
see Congress in action. So let us not disappoint them.
Ms. VELAZQUEZ. What they want to see is a committee that
works in a bipartisan way.
Chairman CHABOT. That is right. And they have got one here,
right?
Ms. VELAZQUEZ. That is right.
Chairman CHABOT. That is right.
Over in Statuary Hall there is a statue of Thomas Edison.
Now, the people of Ohio placed it in the Capitol because while
he may have done his most famous work in New Jersey, he is,
like the greatest Americans, an Ohio native. Sorry about that.
We love everybody on this Committee, whether you are from Ohio
or not. The statute depicts Edison holding his invention that
changed the world, the lightbulb. Speaking about his career as
an inventor and the varying degrees of success he had along the
way, Edison famously said, ``I have not failed. I have just
found 10,000 ways that will not work.'' Edison knew that the
power of American innovation was not always found in the
resulting product; it is found in the process. That process is
what we are really here to talk about today.
As American businesses and entrepreneurs have worked to
bring about economic recovery over the last decade, business
accelerators have emerged as an inspiring and effective force.
With an end goal of pitching their ideas to a field of
investors during a demo day, accelerators put company teams
through a fixed-term, cohort-based program that focuses on
mentorships. In effect, these are entrepreneurs helping
entrepreneurs, small businesses helping small businesses,
seeing what works, what has not worked, and what can be learned
from it.
While the accelerator model is not entirely new, it has
really materialized over the last few years and can be seen
throughout the Nation. Many of us have heard about the
successful high-tech accelerators out in Silicon Valley, but
there is so much more to this story. While they are operating
all over the country with an overall goal of accelerating
growth, they oftentimes have different focuses. Some are
concentrating on economic development within a geographic area,
like my hometown of Cincinnati. Some are dedicated to female
entrepreneurs. The process accelerators use to take
entrepreneurs through their programs is making a difference. It
is the power of experience coming alongside the newly inspired
and helping them turn their idea into action, helping to make
that crucial business connection, helping to advance a funding
opportunity, helping to achieve success.
At this Committee, we like to say that every small business
started with an idea, and with success, that idea turns into
jobs. Business accelerators give us a close-up look at that
process. As we celebrate National Small Business Week in our
Committee, on Capitol Hill, and across the country, it is great
to have such an impressive group of American innovators before
us here today, and we will hear, of course, from them very
shortly. Each one is directly involved with the running and the
operation of an accelerator.
I am looking forward to hearing from them directly, hearing
about their ideas and their stories. It is our hope that we all
come away today encouraged and reminded that we have much to
learn from our entrepreneurs and the processes that they
pioneer.
I appreciate all of you being here today and look forward
to your testimony.
And I would now like to yield to the ranking member, Ms.
Velazquez, for her opening statement.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Business accelerators help high-growth startup enterprises
develop their products, identify promising customer segments,
and secure resources, including vital capital and potential
employees. It is clear that they serve an important role in
innovation, and I am very interested to learn more about their
impact on small firms.
Growth accelerators have long been a powerful tool for
helping innovative entrepreneurs grow. Each year since their
formation in 2005, accelerators have gained in popularity. In
fact, a number of accelerators nearly doubled each year between
2008 and 2014, proving that this model has real potential to
assist entrepreneurs.
Accelerators are unique in that they provide the best of
both worlds for both startups and investors. They serve as an
all-inclusive, creative hub that provides technical assistance
for growing businesses and a central location for investors to
find vetted businesses. This arrangement reduces investor risk,
while maximizing the capital network for high-growth companies.
In 2015, more than $90 million was invested in the U.S. and
Canada by 111 accelerators into nearly 3,000 startups. Silicon
Valley firms accounted for more than one-third of that
investment, while New York totaled about $9 million in close to
400 startups. By opening the funding network for companies that
might not otherwise have gained such exposure, accelerators
contribute to stabilizing innovative businesses and the growth
of the economy.
Beyond promoting business expansion, growth accelerators
also bring benefits to the communities in which they are
located in the form of economic development and job
opportunities. We must consider ways to see a greater presence
of accelerators in underserved and rural areas outside of the
popular innovation hubs.
Another area of improvement is reaching entrepreneurs who
have traditionally been disadvantaged. Evidence shows women and
minorities are not participating at the same rate as their
white male counterparts. One promising trend has been the
emergence of accelerators focusing on these entrepreneurs.
While this is a step in the right direction, more must be done
because these businesses contribute greatly to our economy.
After all, that is what today's hearing is all about, growing
our economy and creating jobs. We already know the job creation
power small firms hold. Now the question becomes how to
maximize that power for startups.
During today's hearing we will hear from some of the most
successful, innovative accelerators from around the nation. I
look forward to hearing their suggestions as to how can we
replicate that success in communities across the nation.
I thank the witnesses for being here today, and I yield
back the balance of my time.
Chairman CHABOT. The gentlelady yields back. Thank you very
much.
And if Committee members have opening statements prepared,
we would ask that they be submitted for the record.
And I would like to take just a moment to explain our
lighting system here and the rules that we operate under. We
basically operate under the 5-minute rule. Each of you gets 5
minutes to testify and then we will all have 5 minutes to ask
questions. And there is even a lighting system to assist you.
The green light will be on for 4 minutes and then the yellow
light will come on to let you know you have a minute to wrap
up. And then the red light will come on, and if you can wrap up
by that time we would appreciate it.
And I would now like to introduce our very distinguished
panel. Our first witness will be Starr Marcello. Ms. Marcello
is the executive director of the Polsky Center for
Entrepreneurship and Innovation at the University of Chicago,
where she runs the Edward L. Kaplan New Venture Challenge. The
New Venture Challenge, which aims to launch the next generation
of companies, has an alumni list of some of the top technology
companies in the country, such as Grubhub and Braintree. Ms.
Marcello serves on a number of boards, including the Executive
Advisory Board of Tech Week and the United States Association
for Small Business and Entrepreneurship. We welcome you here
this morning.
Our next witness will be Darrin Redus. Mr. Redus is the
vice president of the Cincinnati USA--that is Cincinnati USA
Regional Chamber's Minority Business Accelerator, which has the
mission of scaling minority-owned businesses and expanding the
minority entrepreneurial community of the Cincinnati area. In
partnership with larger corporations, the Minority Business
Accelerator has been successfully piloting economic progress in
our area for many years. As a former commercial banker from
Cleveland, Mr. Redus--excuse me, Mr. Redus is the founder of a
number of companies, such as the Main Street Inclusion
Advisors, LLC, and the Redus Small Business Advisers. We thank
you for being here as well.
Our next witness will be Carolyn Rodz--is that Rodz?
Ms. RODZ. Rodz.
Chairman CHABOT. Rodz. I apologize.
Ms. Rodz is the founder and the chief executive officer of
Circular Board, which is a female entrepreneur-focused
accelerator. Utilizing a virtual model, Circular Board
concentrates on purpose, partnerships, and access to capital to
accelerate growth. With a resume that consists of creating a
retail line, founding of a global marketing firm, serving as a
TD--excuse me, TEDx speaker, serving as a member of the Dell
Women's Entrepreneur Network, and a 2016 Entrepreneur Magazine
Woman to Watch, Ms. Rodz is a driving force in the startup
world, and we appreciate your testimony here this morning as
well.
And I would now like to yield to the gentleman from
Pennsylvania, Mr. Evans, to introduce our fourth and final
witness.
Mr. EVANS. Thank you, Mr. Chairman.
It is my sincere pleasure to introduce Dr. Stephen S. Tang,
president and CEO of University Science Center in Philadelphia.
He is the first president in the Science Center history to have
led the company to venture funding and initial public offering.
University Science Center is a winner of the SBA Growth
Accelerator Fund competition for the class of 2015 and 2016. I
had the opportunity to work with Dr. Tang, and just yesterday,
we both received an award from the Opportunity Industrial
Center, OIC, of Philadelphia, founded by someone that I hold in
high esteem, the late Reverend Leon Sullivan. Last September,
Dr. Tang was appointed to the National Advisory Council on
Innovativeness and Entrepreneurship, and now serves as the co-
chair where he offers recommendations to the U.S. Secretary of
Commerce for policies and programs designed to make U.S.
communities, businesses, and the workforce more globally
competitive. Welcome to Dr. Tang. And thank you for your
testimony today.
And I yield back to the chairman.
Chairman CHABOT. Thank you very much. The gentleman yields
back.
Ms. Marcello, you are recognized for 5 minutes.
STATEMENTS OF STARR MARCELLO, EXECUTIVE DIRECTOR, EDWARD L.
KAPLAN NEW VENTURE CHALLENGE (NVC), POLSKY CENTER FOR
ENTREPRENEURSHIP AND INNOVATION, UNIVERSITY OF CHICAGO; DARRIN
M. REDUS, SR., VICE PRESIDENT, MINORITY BUSINESS ACCELERATOR,
CINCINNATI USA REGIONAL CHAMBER; CAROLYN RODZ; FOUNDER AND CEO,
CIRCULAR BOARD; STEPHEN S. TANG, PH.D., MBA, PRESIDENT AND CEO,
UNIVERSITY CITY SCIENCE CENTER
STATEMENT OF STARR MARCELLO
Ms. MARCELLO. Thank you, Chairman Chabot, Ranking Member
Velazquez, and members of the Committee for having me this
morning.
My name is Starr Marcello. I am the executive director of
the Polsky Center for Entrepreneurship and Innovation at the
University of Chicago. The Polsky Center drives the creation of
new businesses at the University of Chicago and on Chicago's
South Side. We teach entrepreneurship courses, we commercialize
faculty technology, we run a 34,000 square foot incubator, and
offer numerous programs to support and mentor those on their
entrepreneurial journey.
I am speaking to you today about our capstone program and
accelerator, the Edward L. Kaplan New Venture Challenge. The
NVC has been recognized as a top-ranked university accelerator
in the country for the past 2 years by the Seed Accelerator
Rankings Project.
Now in its 21st year, the NVC has helped launch more than
160 startups still in business today. NVC companies have raised
over $600 million in venture capital funding, and have created
more than $4 billion in value for investors through mergers and
exits. We have two national brands in our portfolio, Grubhub
and Braintree/Venmo, as well as emerging national brand Simple
Mills. Grubhub, an online food delivery service, completed the
New Venture Challenge in 2006, merged with its biggest
competitor Seamless in 2013, and went public with its IPO in
2014. The company in now valued about $3 billion.
The NVC also helped launch Braintree, a payment processing
company, which was acquired by PayPal in 2013 for $800 million.
Those under 30 may know Braintree for one of its acquisitions,
Venmo, which enables friends to send money to one another. By
most recent count, Grubhub and Braintree alone have created
1,000 new jobs in Chicago and 2,000 new jobs nationally.
The NVC's success can be attributed to its unique structure
and the environment in which it operates. As a leading research
university in the third-largest city in the U.S., the
University of Chicago is an intellectual destination for the
most innovative minds in the world. The reputation of the
university, its Booth School of Business and, increasingly, the
New Venture Challenge, draws creative entrepreneurial talent to
us. Getting top people into the accelerator is the first step
in getting successful businesses to emerge from the program.
The New Venture Challenge is structured as a year-long,
tiered selection process which coincides with the academic
year. Phase 1 focuses on team formation, Phase 2 on business
model development, and Phase 3 on communicating the vision to
potential investors. The program is competitive, with the
number of teams reduced at each phase to enable those most
viable to participate in the final ``Demo Day.''
Phase 1 of the program begins when students arrive on
campus in autumn. We spend several months working with
potential applicants on team formation and opportunity
identification. We create connections among many constituents
of our university and community, from scientists to MBA
students. Eligibility requires just one current UChicago
student. The others can be friends, family members, colleagues,
acquaintances.
We use our National Science Foundation-funded I-Corps
program to encourage these teams to better understand their
potential customers and to understand how their business idea
solves a real problem. The staff and faculty at Polsky Center
spend time mentoring aspiring teams one on one, and in
February, the hard work of this exploration phase results in 80
to 100 applications to the New Venture Challenge.
Of these, 30 teams are selected into Phase 2. In this
phase, the entrepreneurs enroll in our New Venture Creation
course, and spend 10 weeks testing and articulating their
business model in front of faculty and members of the business
community. The feedback they get is highly critical, but also
constructive. More than 100 mentors and three full-time coaches
participate in this phase, providing robust expertise, industry
knowledge, and support to the teams. Our founders are working
as hard and as fast as possible to show progress. They are
building minimal viable products, launching pilots, and
refining their value proposition. The deadlines create urgency,
and the urgency creates focus.
Based on their success in Phase 2, 10 of the 30 teams are
selected to compete in Phase 3, the NVC Finals, our Shark Tank-
style pitch competition. The incentives to reach this last
stage are substantial. The finalists pitch to top-level
investors and entrepreneurs who fly in from around the Nation.
We award a $500,000 prize package, which includes direct seed
funding from the university and from local VCs, as well as pro
bono legal support, design services, office space, and more.
Our portfolio of 160 companies includes many small
businesses of 50 or fewer employees. However, these businesses
are designed with growth in mind. When the NVC ends, the hard
work of scaling these companies continues. The Polsky Center
continues to provide mentorship, connections to capital, and
workshops for these growth-stage entrepreneurs. We help them
understand how to increase sales and how to hire and fire while
maintaining an entrepreneurial culture.
During the last decade, we have also grown the NVC platform
to support our global MBA students in Hong Kong, London, and
the Americas; our undergraduates; and those who are focusing on
social impact ventures. We also enable many of our local
community entrepreneurs to leverage the resources that have
been created as a result of the New Venture Challenge.
Every entrepreneur I have worked with, hundreds over my 12
years at the Polsky Center, has been driven to create value in
the world, to solve a problem people are faced with, and to
find ways of making people's lives better. Whether someone is a
founder of a small business or a founder of a high-growth
venture, these entrepreneurs are dedicating everything they
have in pursuit of their dreams. It is an honor to do the work
I do every day to support these founders' ambitions, and to see
the effects not only on Chicago, but throughout the world.
Thank you.
Chairman CHABOT. Thank you very much.
Mr. Redus, you are recognized for 5 minutes.
STATEMENT OF DARRIN M. REDUS
Mr. REDUS. Good morning. Chairman Chabot, Ranking Member
Velazquez, and distinguished members of the Committee, thank
you for the opportunity to speak to you today. My name is
Darrin Redus, and I serve as the vice president of the
Cincinnati USA Regional Chamber, and executive director of the
Chamber's Minority Business Accelerator.
On behalf of the Chamber and its 4,000 member businesses
and constituents, I would like to first thank the Committee for
holding this hearing, and thank you, Chairman Chabot, for this
opportunity to highlight some of the good work happening in
your hometown.
This is also a very personal topic for me individually as I
have now served for the Small Business Network for more than 29
years in a variety of senior-level capacities and
entrepreneurial capacities as well.
I have had the good fortune of working directly in the
center of one of the country's first tech startups in 2006, and
then witnessing the explosion of accelerators over the past 10
years. Evidence of this explosion can be found in the SBA's own
Growth Accelerator Competition, which received 832 applications
from accelerators nationwide in 2014, up from less than 10
organizations in 2005.
At their very core, the very nature of accelerators, as the
name implies, is to accelerate the growth and development of
promising business enterprises by engaging in an intensive and
comprehensive set of business development and mentoring
activities designed to dramatically expedite the growth
process. This has certainly been the case in Ohio that just
less than 10 years ago was considered a ``flyover State'' by
the venture capital community, denoting the historical tendency
of the venture capital firms to primarily focus on the East or
West Coasts for qualified deal flow and investment activity and
literally fly over States like Ohio. Whereby today, our State
is experiencing a robust relationship with the VC community,
evidenced by 330 early-stage companies receiving over $1.6
billion in venture capital since 2006.
Whether it is helping entrepreneurs with product
development, gaining traction with early client sales,
facilitating key business and investor relationships, or any of
a number of critical milestones designed to expedite capital
and market readiness, the early returns of accelerators over
the past 10 years have certainly been an absolute catalyst for
this country.
And while the economic benefits and significant
contributions of accelerators have certainly been impressive,
there remain segments of our population, particularly ethnic
minority groups, that remain largely disconnected from many of
these critical resources.
For over a decade now, our nationally recognized
accelerator has specifically targeted African American and
Hispanic populations that, unfortunately, continue to lag
behind from an economic standpoint. In fact, research by the
Pew Research Center released just in the past 2 years indicates
that economic disparities have actually widened for these two
populations in terms of wealth gap and other economic
indicators over the past 25 years. This is especially troubling
for our Nation as a whole as ethnic minority groups are
expected to be more than half of our national population over
the next 20 years, and continuing such disparities threatens
the economic vibrancy and competitiveness of the country.
Since its inception in 2003, the Cincinnati's Minority
Business Accelerator, in partnership with our corporate
community that we call goal setters, has specifically sought to
address these negative trends. Today our accelerator consists
of 35 larger-scale African American and Hispanic firms that
collectively do just over $1 billion in aggregate annual
business and have created over 3,500 jobs since inception. And
while we are certainly proud of our record to date, much work
still remains. Our new strategic plan just launched in
September of 2016 calls for the creation of an additional 3,500
jobs and an addition $1 billion over the next 5 years. The
specific strategy to be deployed to accomplish this objective
consist of leveraging more mainstream business growth
strategies, including mergers and acquisitions, joint ventures,
strategic partnering, exporting and partnering with private
equity investors, to name a few.
In closing, a rising body of evidence as further detailed
in studies by the Harvard Business Review, the Kauffman
Foundation, and various others, reveals a significant
contribution to our Nation's economy spurred by the accelerator
model. Much more work remains, however, to ensure that this
good work is not lost on various segments of our population. As
ethnic minority groups become an even greater percentage of the
total U.S. population, reversing these negative trends tied to
widening economic disparities must be a critical component of
the Nation's economic agenda going forward to ensure that all
of America's citizens are contributing to economic output.
Again, I thank you for this opportunity and look forward to
your questions.
Chairman CHABOT. Thank you very much.
Ms. Rodz, you are recognized for 5 minutes.
STATEMENT OF CAROLYN RODZ
Ms. RODZ. Thank you. Good morning. My name is Carolyn Rodz,
founder of Circular Board, a virtual accelerator for high-
growth female founders. I am here today to advocate on behalf
of our Nation's leading innovators, entrepreneurs, and
influencers, and specifically, for one of the largest untapped
economic and social opportunities in our country: women
entrepreneurs. If women and men participated equally in the
entrepreneurial ecosystem, in the United States alone GDP could
rise by $30 billion. Yet, in spite of this, less than 5 percent
of venture capital goes to female founders, and when we start
to look at minorities, the numbers are significantly lower.
The current startup ecosystem is built upon a process that
funnels information from a small group of people, predominantly
white males in Silicon Valley and other dense startup cities,
to their personal social networks and trusted colleagues. When
you consider that venture capitalists invested $58.2 billion in
companies with all-male founders in 2016 and just $1.46 billion
in female teams, in spite of the fact that women and diverse
leadership teams provide stronger financial returns, it becomes
apparent that our system for funneling capital into companies
solely based on financial opportunity is flawed. In 2016, 5,839
male-founded companies got venture capital funding compared to
just 359 female-founded companies.
In other words, companies run by men got more than 16 times
more funding than companies run by women. And to think, 2016
was a good year, with women-led companies making up 4.95
percent of all venture capital deals in 2016, the highest
percentage in over a decade, and representing just 2.19 percent
of dollars invested.
Which brings me to the rationale for the startup
accelerator, which is, at its core, an advocacy group for
founders with the intention of connecting them with the
experts, investors, media, and processes surrounding the art of
the startup. Think of the accelerator as a liaison between the
founder, who likely knows much about how to operate their
business and succeed within their industry, but often little
about how to raise capital, get covered by the media, build
support within their local community, and get the endorsement
of the most influential minds in the startup ecosystem.
At Circular Board, our most important job is to understand
the innovation landscape so that we can share this expertise
with our founders, who are heads-down building businesses that
are impacting the world around us, creating jobs, and driving
our economy forward. It is our responsibility to ensure that
their time is spent wisely, that their business models will
resonate with potential funders, and that, most importantly,
they gain a voice within the relatively small and very
homogenous startup world.
At Circular Board, we have worked with over 13,000 female
founders from places like Lake Oswego, Oregon, or El Paso,
Texas, connecting them with the intellectual capital that
resides nationwide. When these founders are armed with a
network of experts, introduced to early-stage investors, and
supported by a community of unique perspectives and varied
experiences, they are better prepared to overcome the dismal
statistics that currently define female founders.
Take Succhi Ramesh, for example, an Indian immigrant in New
Jersey, who has created nearly 50 jobs for women in her first
year. Women on welfare, no less. Or Adrianne Weir of Medolac,
who has reduced pre-term infant mortality rates by over 50
percent through fortified human breast milk, and is currently
raising her Series C at a $45 million valuation. Circular
Board's accelerator founders have raised over $26 million in
funding in the last 18 months and have created over 162 jobs.
Overwhelmingly, our founders cite the relationships they build
as turning points within their respective businesses.
It is true that accelerators are popping up all over the
country, but what is important to recognize is that each of
these accelerators tackles a unique segment of founders, from
industry verticals to marginalized audiences, attracting
expertise that can support problems facing these specific
groups of founders. Organizations like Circular Board bring
more than mentorship. They bring energy to the startup
landscape, forging connections, and bridging the gap between
enterprise, government, foundations, and more. We are a loud,
organized, and consistent voice for founders, and a pipeline
for opportunities presented by organizations like the Small
Business Administration, Kauffman Foundation, Case Foundation,
and more.
At Circular Board, we have learned that resource
connectivity is the greatest value we can provide to a founder,
which is why we are building a global artificial intelligence
platform that will support women at all stages of growth and
connect them to the tools, experts, content, and events
relevant to their real-time needs. There is an incredible
demand for startup accelerators, and it is our mission at
Circular Board to avail every entrepreneur, regardless of
gender, ethnicity, geography, capital resources, or cultural
constraints, the opportunity to engage the right support to
scale their business, all with the end goal of solving our
world's most pressing problems and creating sustainable,
meaningful impact.
As policymakers, there are significant opportunities to
support these accelerators, not only through government-funded
programs like the SBA's Small Business Accelerator Fund, which
we are grateful to be recipients of, but also by supporting
trade agreements that open new markets for businesses of all
sizes, streamlining the process of registering businesses and
applying for government resources, particularly when working
with strategic offices, such as the Patent and Trademark
Office, Department of Commerce, Small Business Administration,
and FDA.
Engaging with accelerators allows you to better understand
how founders are supporting our country through innovation and
economic development, and to see for yourself how the
accelerator is a model, not only promoting business success,
but also national leadership and economic prosperity.
I thank you for taking the time today to put a spotlight on
what I believe to be one of the greatest economic opportunities
of our time.
Chairman CHABOT. Thank you very much.
Dr. Tang, you are recognized for 5 minutes.
STATEMENT OF STEPHEN S. TANG
Mr. TANG. Thank you, Chairman Chabot, Ranking Member
Velazquez, and members of the Committee. Thank you for this
opportunity to testify regarding small businesses and the
accelerator model, and to help you recognize and celebrate our
Nation's legacy of entrepreneurial success. And special thanks
to my representative, Congressman Evans, for your kind
introduction.
I am Steve Tang. I am the President and the CEO of the
University City Science Center in Philadelphia. It is an honor
to join my distinguished colleagues in today's panel.
I would like to begin by expressing my strong support for
Federal programs such as SBA's Growth Accelerator Fund, which
encourage and facilitate entrepreneurship.
I have an extensive background in science, business, and
entrepreneurship, and a firsthand understanding of the power
and potential of technology commercialization. I have led a
company through venture funding and an initial public offering,
and I served as a senior executive of a large life science
company as it acquired and integrated smaller companies.
Last September, I was reappointed to the Department of
Commerce's National Advisory Council on Innovation and
Entrepreneurship, NACIE, and I have the privilege of serving as
NACIE's co-chair through 2018. NACIE reports to Commerce
Secretary Ross and is charged with identifying and recommending
solutions to issues critical to driving the innovation economy,
including establishing entrepreneurship and firms to
successfully access and develop skilled, globally competitive
workforces.
My organization, the University City Science Center, has
been a key driver of growth and a source of stability for the
Greater Philadelphia region's life sciences and technology
sectors since its founding in 1963 as the Nation's first and
largest urban research park. Today, we are a dynamic hub for
innovation, entrepreneurship, and technology development,
offering business incubation, acceleration, and other programs
that provide support for firms at all stages of the business
life cycle.
At the Science Center, we cultivate and expand the
possibilities that open up when research moves out of the lab
and into the marketplace. Over the past 52 years, 442 companies
have received incubation and acceleration services from the
Science Center. Today, 155 of those 442 firms are located in
Greater Philadelphia and account for 40,000 direct and indirect
jobs, or 1 out of every 100 jobs in the Philadelphia region.
And these 40,000 jobs drive $13 billion in economic activity
each year, more than 2 percent of the region's total economic
output.
To date, our biggest success story is Centocor, now known
as Janssen Biotech, a division of Johnson & Johnson. Centocor
was founded in 1979, with a vision of developing monoclonal
antibodies as a new paradigm to treat diseases such as
rheumatoid arthritis. Today, Remicade is the biggest product in
J&J's portfolio, with annual U.S. sales of $5 billion. Another
Science Center resident company, Spark Therapeutics, is
developing gene therapies that are showing early, promising
results for treating childhood blindness and potentially other
conditions such as hematologic disorders and neurodegenerative
disorders. These are just two examples of how the Science
Center has paved the way for transformational business growth
and job creation.
We are strong believers in the accelerator model as a
business vehicle for empowering small businesses. We define an
accelerator as a program that offers startups access to a suite
of business tools, including mentorship and professional
expertise, funding, and other support services over a defined,
limited time period, in an intensive, high-touch setting.
For example, our Phase 1 Ventures, or P1V, program works
with ``long-horizon'' technologies in pharmaceuticals, biotech,
healthcare, and other fields. P1V helps early-stage companies
apply for and obtain SBIR and STTR grants, and then provides
the companies with funding, management support, and access to
outside expertise, as well as connections to private sector
funding, in order to keep them growing.
And our Digital Health Accelerator, or DHA, helps health IT
companies with products in the prototype stage to reach their
first sales and investment milestones. The program selects
promising companies from around the world and provides them
with funding, collaborative workspace, professional mentorship,
and introductions to key stakeholders and investors in the
Greater Philadelphia region.
As you know, in the 3 years since the Growth Accelerator
Fund was launched, awards of $50,000 each have been made to 189
accelerators in 45 States, Washington, D.C., and Puerto Rico.
The Science Center has been fortunate to win two of those
awards, one for P1V and the other for DHA.
I am here to say that those awards, along with other
strategic and critical Federal grants, have made a real
difference. Since P1V was launched in 2015, a total of 18
startups have participated in the program, advancing
technologies developed in 12 different academic and healthcare
institutions. Together these companies have secured
approximately $3 million in public and private funding, and the
13 companies that have gone through DHA, since its inception in
2014, have created more than 160 new jobs, generating more than
$20 million in new revenues, and raising nearly $22 million in
follow-up funding.
Thanks to the Federal support that we received, we have
been able to accelerate the growth startups of companies like
UE LifeSciences, which is developing a low-cost, portable,
handheld scanner that can detect breast cancer in its earliest
stages, anywhere in the world. Or Talee Bio, which is
developing a gene therapy for cystic fibrosis, the first
curative disease treatment for this condition. Or SimUCare,
which is enhancing the training process for doctors and nurses
by enabling them to learn how to handle medically complex
situations using live actors rather than mannequins to maintain
realism.
At the Science Center, we support technology
commercialization in the broadest sense by acting as an
innovation intermediary or linchpin that brings together
academia, industry, and capital. We create specific processes
and frameworks, like P1V and DHA, that lower the barriers,
facilitate collaboration, and enhance the likelihood of
success. But we also create more generalized incubators,
accelerators, and other resource-rich environments that combine
multiple ingredients, including funding, expertise, and support
services, to help generate the unpredictable and serendipitous
outputs that have always fueled our Nation's scientific
advancement and economic growth.
Accelerators work because they promote and award
efficiency. We have a saying in the industry: startups need to
succeed or fail quickly and cheaply. The only way to drive
business creation and growth is for companies to move
technologies from across the value chain and get it into the
market.
Accelerators force technologies to move quickly, and by
offering multiple layers of expertise, services, and support,
accelerators often enable startups to pivot in different
directions in response to market demand. If Congress is
interested in stimulating entrepreneurship and pulling even
more high-potential technologies out of academia and elsewhere
into the marketplace, then accelerators and other key early-
stage support programs are a wonderful way to achieve a robust
return on investment.
Accordingly, we strongly support those targeted Federal
initiatives, such as the Growth Accelerator Fund, SBIR and
STTR, and the EDA's Regional Innovation Strategies program,
among others, that encourage innovation, entrepreneurship, and
tech-based economic development across the country. And equally
important, we strongly support those programs, like the Growth
Accelerator Fund, that promote greater diversity and inclusion
in our Nation's small business sector.
More than two-thirds of our P1V and DHA companies are owned
or led by women or members of underserved groups, such as
racial minorities, veterans, and disabled individuals. We
firmly believe that the knowledge-based economy must not only
be a place of innovation and growth for the science and
technology community, but also a hub for innovation and growth
in a wider community with meaningful opportunities for all of
our citizens to pursue STEM-related careers at all levels.
Mr. Chairman, this concludes my testimony. On behalf of the
University City Science Center and NACIE, I want to thank you
for this opportunity to highlight the benefits of Federal
programs for our Nation's small businesses and, more broadly,
our entrepreneurial ecosystem. I welcome your comments and
questions.
Chairman CHABOT. Thank you very much.
I will recognize myself for 5 minutes to start the
questioning. I will start with you, Mr. Redus, if I can.
It is my understanding that about 40 or so large Cincinnati
companies, corporations play a pretty significant role in your
minority business accelerator. Could you share with us kind of
the details of that partnership, how it works and what the
results have been?
Mr. REDUS. Absolutely. Thank you, Mr. Chairman.
It is also important to note that as important as the
startup sector is, our particular accelerator works with
existing companies that have significant upside potential,
which dovetails directly into the question on our partnership
with our corporate community. By design, our work is really
trying to create more viable vendors and suppliers to our
corporate partners, so we have to begin with some element of
scale already. And so our corporate partners really help us to
identify where their money goes locally and nationally, how we
can perhaps then align the region's minority companies with
their natural kind of spending on a go-forward basis.
So we start with kind of who in our landscape of minority
businesses already has some size and scale that we can begin to
accelerate in partnership with our corporate partners. But it
is a direct, kind of one-on-one relationship and making sure
that we are growing sizeable businesses that already have some
foundation of infrastructure.
Chairman CHABOT. Okay. Thank you very much.
Ms. Marcello, I will go to you next. In your written
testimony, you stated that deadlines create urgency and urgency
creates focus. Could you expand upon that a little bit?
Ms. MARCELLO. Thank you for the question. Certainly. In the
phase that that comment referred to of our New Venture
Challenge, our teams are forced to make very fast progress, and
the deadlines that they have do not allow them to spend as much
time as they might like going out and considering the
competitive landscape and talking to every potential customer,
and really considering every risk factor. They have to show
that they can make progress given the uncertainties that face
them as entrepreneurs do. All entrepreneurs face those
uncertainties. And by giving them a compressed time schedule in
which to make progress, they narrowly focus their attention and
go out and work harder than you can imagine. And so I believe
that entrepreneurship, with all of the time that you could
allow, could enable someone to consider every factor, every
reason why they might not succeed. By making the timeline
shorter, you can drive real progress.
Chairman CHABOT. Great. Thank you very much.
Ms. Rodz, I will go to you next. Could you talk to us about
how and why you selected a virtual or online model for your
accelerator?
Ms. RODZ. Certainly. We started Circular Board by looking
at the existing model and why it was not working for women, and
learned several things through that. Some around the learning
science that relates to women; women tend to learn in a very
collaborative environment. The other was looking at the unique
constraints of women. Many of the women that we work with, and
many women entrepreneurs in general, start their companies
later in life, which means they have children. They have family
constraints. Many are bootstrapping. Women start with half the
capital as men, which means relocating can be very costly. And
we wanted to target women that were in rural areas, that were
in cities that did not have dense startup ecosystems, and found
the virtual model to be the most beneficial structure for the
women that we were serving.
Chairman CHABOT. Okay. Thank you very much.
Dr. Tang, you stated that there is a saying in the industry
that, and I will quote it, ``Startups need to succeed or fail
quickly and cheaply.'' Could you talk about that?
Mr. TANG. Well, the success part is easy to explain. The
faster you are successful, the faster you get to market, the
more successful you will be. The failure part of it is a little
less easy to understand, and that is if you are going to make
mistakes, make them quickly and learn how to pivot and move on.
And that is, I think, the core of what we see a lot of the
activity in accelerators, it is putting that intense deadline-
based pressure to help them think creatively about their
businesses. So failure and success are equally important.
Chairman CHABOT. Thank you very much.
And before my time expires I will go back to you, Dr.
Redus, for my final question. Is the successful minority
accelerator model that we have seen in Cincinnati, could that
be replicated in other areas around the country?
Mr. REDUS. Thank you, Mr. Chairman. Yes, it can. In fact,
we are incurring discussions with a variety of communities to
do just that. It really starts with a very thorough assessment
of what are the existing companies in a given region. Every
community is different, but when you start with your base,
working with organizations like the Minority Business
Development Agency here at the Department of Commerce, to
understand your base and foundation, and then working with an
all-hands-on-deck sort of approach with your corporate
community and other business leaders, we are already seeing a
number of communities asking us how to replicate this going
forward.
Chairman CHABOT. Thank you very much. My time is expired.
The gentlelady from New York is recognized for 5 minutes.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you all.
It has been quite enlightening. You know, sometimes we have
programs that are created by federal agencies as pilot
projects, not that we authorized them, so there is no
congressional record as to the reasons for creating a program
and the metrics to measure their success. So this hearing is
very important to me because I have been critical of pilot
programs without the authorization from congressional
committees.
So Dr. Tang, one criticism of accelerators is that we do
not have proven metrics of this model and that job creation is
not an accurate measure of success. What are your thoughts on
this, and how can we best measure the performance of
accelerators?
Mr. TANG. Thank you, Congresswoman.
I believe that job creation is a key metric, but not the
only key metric. Many businesses that begin today do not
require a large number of employees, and also, the rise of the
1099 economy I think skews that information, also. So that is
why we, in addition to job creation, look at the revenue growth
as well as the amount of invested capital beyond the
accelerator. So the accelerator does not exist in a vacuum, and
its performance should not exist in a vacuum either. It should
be a bridge to something bigger and better. And that is on the
success side.
On the failure side, I think that even when companies fail,
the conservation of funds to help them fail so they fail
cheaply is vitally important; also, as well as whether that
entrepreneur repositions him or herself in the community with
another venture.
Ms. VELAZQUEZ. Thank you.
Mr. Redus, what is the impact on minority business owners
who participate in accelerators? And are they more likely to
succeed than when receiving angel investing alone?
Mr. REDUS. Thank you, Ranking Member Velazquez. Yes. So the
economic impact can be measured in a variety of ways, and I
will be brief. So certainly, as was mentioned, we measure the
growth of the companies in terms of their revenues, the capital
that they have raised, the jobs that they have created, the
average payrolls that they have created, the leadership
positions that these business owners often then go on to take
in the community. And so from the standpoint of overall impact,
it is far-reaching, and we also look to make sure that as our
companies grow to scale, they in turn do business with emerging
minority firms which furthers that impact. So to the point
mentioned, it is a broader, far-reaching interconnected nature
of how we measure the overall impact.
Ms. VELAZQUEZ. Thank you.
Ms. Marcello and Ms. Rodz, maybe the two of you or one of
you mentioned the fact that there is a tendency for venture
capitalists to invest significantly more in male-owned
businesses. Women have received only 7 percent of venture
capital raised in the U.S. and only 10 percent worldwide
between 2010 and 2015. Because of this, and you also stated
that, women are turning to unconventional sources, like
accelerators. What has your experience been in the investment
turnout for your women-owned businesses?
Ms. RODZ. Yeah, we see, you know, there is an incredible
interest in the venture capital community to invest in women
entrepreneurs, and we hear repeatedly that they are having a
hard time finding these women-owned companies. And
interestingly, we have had them flock to us, and a lot of it is
because of the model that is created and the way that money
flows. Investors will overwhelmingly say that it is partly
looking at the analytics behind our company, but then partly
also gut feel, and that relies a lot on who they know. And so
one of the goals that we focus on at Circular Board is making
those personal connections to investors so that they can get to
know the female founders that are running these high-growth
companies.
We are also really focused on these unconventional methods
of raising capital. I am proud to say that 100 percent of the
companies through Circular Board that have funded have
succeeded, and that is in large part because we are able to
leverage the community. And we are also looking a lot at
private family offices and individuals as well, and getting
more women involved in investing.
Ms. VELAZQUEZ. Would you allow----
Chairman CHABOT. Yeah. The gentlelady would like to----
Ms. VELAZQUEZ. Ms. Marcello, would you like to comment?
Thank you, Mr. Chairman.
Chairman CHABOT. Sure.
Ms. MARCELLO. Certainly. The Polsky Center at the
University of Chicago, in addition to supporting our
entrepreneurs, also supports our students who are looking to
enter the investment side of entrepreneurship and become part
of the venture capital community and invest actually in
startups. And what we have seen as well is an interest from the
finance side, from the venture community, in hiring more women
in as investors who build that diversity into their outlook of
entrepreneurs who should receive the funding. So I think there
is evidence going on that more women might be also investing
and joining the finance side of entrepreneurship and having
more diversity in terms of looking at entrepreneurs.
Ms. VELAZQUEZ. Thank you.
Chairman CHABOT. Thank you.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Chairman CHABOT. Thank you. The gentlelady's time is
expired.
The gentleman from Mississippi, Mr. Kelly, who is the
chairman of the Subcommittee on Investigations, Oversight, and
Regulations, is recognized for 5 minutes.
Mr. KELLY. Thank you, Mr. Chairman.
I am constantly amazed at the quality of the panels that we
have here in the Small Business hearings, and that is a great
thanks to our chairman and our ranking member. You are all very
accomplished professionals, and I just thank you for taking the
time out of your busy schedules to be here.
Ms. Rodz, can you describe the application process startups
go through to gain admittance into your accelerator program?
And how many startups do you accept at one time?
Ms. RODZ. We run a 12-week virtual program. We accept
between--we have had anywhere between 20 founders and 80
founders per class. The founders apply online. They submit a
video application, as well as a write-up on their concept, on
why it matters, and how they plan to scale. We then review
those applications among our team, our mentor community and
investors that we work with, and then follow up with phone
interviews and make the selections from there.
Mr. KELLY. Thank you. And Ms. Marcello, say I am an
applicant for the New Venture Challenge. As a small business,
what do I experience? Who do I first talk to? Who do I interact
with? How does that interaction work? And can you just kind of
walk me through the process like that, please?
Ms. MARCELLO. Certainly. So as an applicant to the New
Venture Challenge, you may very well walk into my office.
However, Polsky Center has a staff of 45 individuals who are
committed to entrepreneurship on the university campus. And so
there is a tremendous amount of support right at the initial
phase for people who are curious about whether the New Venture
Challenge is the right accelerator program for their business
and for them. And that web of support at the university level
helps guide the entrepreneur at that point through the
application process. We have the luxury at the University of
Chicago, and with the New Venture Challenge, of having a lot of
time on the front end before applications are actually do to
make sure everyone understand what the New Venture Challenge
can provide to them and how it will help their business go from
point A to point B.
Mr. KELLY. Thank you very much.
And Mr. Redus, what is the employee structure of the
Minority Business Accelerator? And if you will tell me how many
employees you have, please.
Mr. REDUS. Thank you. Yes, our direct FTE is five dedicated
individuals. We work also with a number of 1099 kind of coaches
and business advisors, as well as an extended network of
corporate partners that contribute expertise as well.
Mr. KELLY. And just down the line, I guess Dr. Tang, I do
not hear a lot about the accelerator. So if I am a small
business or someone who is starting to get into the small
business, what can we do better to make sure that people know
about the accelerator programs and know who to reach out to and
how to do that?
Mr. TANG. We have a saying at the Science Center, which is
celebrate what you want to see more of. And so I think the way
to get the word out is to have those that have been
successfully through the program, which have maintained their
success and sustainability, really do the talking for us. We
will certainly do our best, and I think agencies within the
government, like SBA, will do theirs as well. But nothing
speaks like success like those that have succeeded.
Mr. KELLY. Thank you. And then just, you know, I have spent
a lot of time in the last 2 weeks, they like to on the news say
vacation. I guess working 8:00 to 8:00 is a vacation for those
guys because I was in the district, meeting with people. And I
felt the entrepreneurial spirit. It felt like a lot of people
right now want to start up and create businesses. And if we
could start and each of you just go down and tell me what you
are hearing in your area, and do you think that people are like
looking forward to investing in small businesses right now?
Ms. MARCELLO. The answer is yes. Absolutely. In the Chicago
area, people are very interested in starting new businesses.
Entrepreneurship is of great interest to most people. There are
more and more early-stage investors coming out of the woodwork
and more angel networks forming to enable capital for those
entrepreneurs to succeed. I think the entrepreneurs that are
looking to get started, they need three primary things: access
to talent, access to capital, and access to space. And so what
we have tried to do at the Polsky Center is provide that
foundation and meet the needs of this growing energy around
entrepreneurship that exists.
Mr. REDUS. Yes, in the Cincinnati region, the
entrepreneurial spirit has never been greater. We have just a
robust ecosystem. Investors nationally and regionally are
coming to the region on a regular basis.
I would also add that as it specifically relates to
minority entrepreneurs, there is a greater emphasis, as there
should be, on equity versus debt. There is a longstanding
mindset in the minority community on overdependence on debt.
The equity capital market by its very definition looks for
growth and scale, and the equity capital markets have not
necessarily been that diverse. And so there is a big push to
drive more of the minority community towards the equity capital
environment.
Mr. KELLY. Mr. Chairman, if you will indulge, I would
really like to hear the other two answers, but if you all will
keep them short I would appreciate that.
Chairman CHABOT. Absolutely. I want to hear it, too.
Ms. RODZ. We are seeing at Circular Board a real national
convergence in terms of the expertise and access, which is
really exciting, and partly why I am very excited about our
virtual model. We are able to bring together mentors that
founders are demanding who may reside in California or New York
when that founder is in Cincinnati. And it is, I think, a real
testament to the democratization of intellectual and financial
capital, and I think is going to be the real next wave for
founders everywhere, being able to converge that access.
Mr. TANG. Mr. Congressman, I think there was definitely a
pickup in the Greater Philadelphia area in urban centers. I
think that should be expected. I think the unexpected and
delightfully positive result is in the less populated areas of
the State of Pennsylvania, Delaware, and New Jersey, where we
serve, we are also seeing a pickup. And I think the unique
challenge there is the access to resources. So would it not be
great if a country, like the United States, could have an on-
demand model of servicing entrepreneurs where the resources in
high-density regions, urban centers, could be used anywhere in
the country, rural or other places, where they do not have the
resources? So I think that is the next challenge.
Chairman CHABOT. The gentleman's time is expired.
The gentleman from Pennsylvania, Mr. Evans.
Have I been given the wrong thing? Our bad.
Ms. Chu is next? Okay, the gentlelady from California. We
apologize. Ms. Chu is recognized for 5 minutes.
Ms. CHU. Dr. Tang, my district of Pasadena, California, is
brimming with entrepreneurial innovation and creativity. The
combination of technical education institutions, like Caltech,
innovative companies, and entrepreneurs has created a startup
innovation Eco Lab in the district. A cornerstone of that is
Idea Lab, which is one of the longest-running technology
incubators in the country. Since 1996, Idea Lab has created
over 150 companies with more than 45 IPOs and acquisitions,
including successful companies like codeSpark and eSolar.
So Mr. Tang, could you tell me what makes a startup a
better candidate for an accelerator or a better candidate for
an incubator like Idea Lab or, for that matter, for an angel
investor?
Mr. TANG. Yes. Congresswoman, I first of all recognize the
success of the companies and the resources in your district. I
think each one of those situations, incubator, accelerator, and
just other general support programs, really depends on the
availability of capital for those programs. So entrepreneurs
are very adept in adapting their business plan for the funding
source.
I think that accelerators help when you want to accomplish
a set of goals in a shorter period of time. Incubation is a
longer horizon. There is probably less goal orientation. That
is why typically companies last a year or two within
incubators.
So I think particularly in the high-tech areas, which
obviously institutions like Caltech in your district, benefit
well from accelerators because they have a beginning, a middle,
and end to them.
Ms. CHU. Are there ways in which the Federal or State and
local governments can successfully partner with the tech
community, like the one in my district, to encourage economic
development? Now, I know you talked about the SBA Growth
Accelerator Fund competition. Would you consider that a
success? And I say that because that last time that was in
operation was 2014. But are there other ways in which we could
have partnerships with government?
Mr. TANG. Yes. I think that the partnership with government
is essential. I think what you have heard from this panel is
that there is a market failure. The market failure is not
enough folks in underserved communities who want to become
entrepreneurs can become entrepreneurs, whether they are
minorities or veterans or women entrepreneurs. So government
has a role here.
The other factor I think is that innovation has to be
scalable within the community. In other words, it does not do
any good for a local community to invest in innovation and have
that company go elsewhere. So the place really does have to
matter. There has to be a rich ecosystem that supports those
entrepreneurs with the kind of connections they need. And I
think the biggest connection has to be with customers, first
customers. So entrepreneurs need to be able to sell in the
local environment and have somebody buy it so they can have
referenceable clients and customers that are close by. So there
is a role for local, State, and Federal Government, clearly.
Ms. CHU. And how would that partnership be made?
Mr. TANG. A great example is the Department of Commerce's
EDA, regional innovation strategies, which look at the greater
set of resources in and around a company; the local, the State,
and Federal level, and integrate those together. So I think
there has to be a partnership between not only the public
sector--State, local, Federal--and the private industry as well
to help these startups.
Ms. CHU. Okay. Mr. Redus, we know that women and minorities
are not participating in high-tech incubators and accelerators
at the same rate as their white male counterparts and, in fact,
in 2012, women and minority-owned businesses represented
respectively only 14 percent and 19 percent of all businesses
in the high-tech sector. That is why the work of your
accelerator is so significant. And just last year you were able
to work with minority businesses to generate $30 million in
average annual revenue performed and create over 250 new jobs.
And you have an ambitious goal to create 3,500 new jobs in the
next 5 years.
Can you tell me what strategies do you use for attracting
minority firms that are different from other accelerators?
Mr. REDUS. Thank you. One important distinction again is
that our accelerator by design does focus on existing companies
that already have some base of size or scale. Typically, that
means at least a million dollars in annual revenue, and we
scale them from there, which in part speaks to our ability to
put such a lofty job creation number out there which we have
done once already, because these companies are now the size and
scale to be more attractive to such strategies as acquisitions,
being more relevant to private equity funds, et cetera. So that
is one piece.
The second piece of that as relates to just pure tech
startup environments, I would also just mention that part of
the way we can be more inclusive in that environment is looking
at all the various roles that are played in the typical
ecosystem. So as important as entrepreneurs are, there are
angel investors, there are subject matter expertise. There are
people that serve on boards of these emerging companies, the
management of these emerging companies. Every one of those
roles is an opportunity for diverse engagement. That will then
start to create more organic inclusion in every ecosystem.
Chairman CHABOT. Thank you. The gentlelady's time is
expired.
The gentlelady from Puerto Rico, Ms. Gonzalez-Colon, is
recognized for 5 minutes.
Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And thank you
for having this panel here.
Mr. Tang, you speak about having opportunities for this
Growth Accelerator Fund as it was launched, awards in so many
States, including Puerto Rico. And I would like to know what
kind of award was given in any specific case in the island and
in the rest of the States so we can have a specific kind of
startups or accelerator process you have got on the island.
Mr. TANG. Congresswoman, I am embarrassed to say I do not
know the specifics of the awards in Puerto Rico or really any
of the other awards.
Ms. GONZALEZ-COLON. Can you give us a specific case, even
in the States, that we can use as an example?
Mr. TANG. Yes. Well, I provided two that I am very well
aware of from the awards that we receive from the SBA
accelerator fund. One was Phase 1 Ventures, which looks at
long-horizon technologies. That is technology that takes a long
time to develop, mainly in the high-tech areas. And the other
one is the digital health accelerator, which takes more mature
companies that are looking for their first sale and to ramp up
sales.
So I guess the point is that it does not matter the domain
or the vertical industry that the company resides in. What
matters is that they are facing a particular challenge, either
scaling technology or tying technological risk, or scaling up
sales. So those are the fundamentals.
Ms. GONZALEZ-COLON. You said in your statement that you
were like an intermediary in the Science Center. Why do you say
that?
Mr. TANG. Yes. So this has to do with, I think, the market
inefficiency between ideas in the marketplace. And that is, in
our world it is typical that academic researchers create the
ideas, but academic researchers culturally are not business
people. And so to try to match and bridge that gap between the
idea people and the business people is why innovation
intermediaries like the University City Science Center exist.
So you are always going to have that sort of cultural
dissidence, and the lack of skills to convert the technology
into the marketplace, and that is why organizations like us
exist.
Ms. GONZALEZ-COLON. And my question then will be is there
always any kind of relationship between the State, at the
agencies, the Department of Commerce, SBA, the universities,
each State organization, and the accelerators?
Mr. TANG. Well, I think it is very common for there to be
an economic development role, and that can be local, State, or
Federal. And different organizations exist on different funding
streams. The Science Center has been around so long, 54 years,
that we do not rely primarily on government funding, and it
makes very efficient use of the funds. But I do think that
because there is so much at stake in developing jobs locally,
that is why you see the involvement at the State and the local
level.
Ms. GONZALEZ-COLON. Thank you.
Mr. Redus, you said that there is small business
accelerator. What is the number of complaints that you hear for
these small businesses?
Mr. REDUS. Number of complaints?
Ms. GONZALEZ-COLON. If you heard?
Mr. REDUS. We do not really get complaints, if you will.
Ms. GONZALEZ-COLON. There are no complaints? But the thing
is----
Mr. REDUS. There is more around what are the opportunities
as relates to how do we, one, get more access to capital, of
course, capacity building? So they are really just looking at
where are the barriers that we need to address? So we really
focus on those two issues in particular, capital readiness and
capacity readiness.
Ms. GONZALEZ-COLON. So there is no complaining about
regulation?
Mr. REDUS. Certainly, as it relates to doing business with
the Federal Government. There is certainly an opportunity for
growth at both the State and Federal level. There is always
more of that that could be done. So that is a terrific
opportunity for partnering to be sure.
Ms. GONZALEZ-COLON. Yeah, I am asking because I would like
to know about the differences between the jurisdictions in each
State regarding this kind of opportunity between the
accelerator version and small businesses, if each State is
managing this differently to improve their economy, to improve
those startups, to see if that kind of relationship between
those universities and accelerators may improve that to happen
as they did in California, of course, and to use that as an
example.
And as this Committee is trying to improve that kind of
environment, to try to use this and use that success story,
what kind of a specific recommendation you may bring to us
today to amend or recommend specific legislation today. Do you
have any?
Mr. REDUS. I would recommend, there are opportunities,
certainly, to incentivize greater engagement as it relates to
what has now been a proliferation of accelerators across the
country. Many organizations' accelerators now go to their State
and Federal partners to fund these operations. And so when you
look at what the ecosystem has become as relates to the various
roles that I played, angel investors, subject matter expertise,
and C-level management, if every one of the roles was more
inclusive, you would start to have more organic inclusion in
these ecosystems. Angel investors is a great example because
typically angel investors will bring a network with them. If we
had more women and minority angel investors, and they certainly
meet the requisite criteria of an accredited investor from an
income standpoint, well standpoint, but they are not being
engaged as much as they should be. So that in and of itself is
an opportunity to incentivize that sort of activity as folks
approach for grants, start having more of the kind of metrics
around the broader roles of engagement.
Ms. GONZALEZ-COLON. Thank you, sir.
Chairman CHABOT. Thank you. The gentlelady's time is
expired.
The gentleman from Pennsylvania, Mr. Evans, who is the
ranking member of the Subcommittee on Economic Growth, Tax, and
Capital Access, is recognized for 5 minutes.
Mr. EVANS. Thank you, Mr. Chairman.
The question I would like to start off to all of you is
what could the accelerator model do better? That is a question
I want to ask each one. What could the accelerator model do
better? And go down the line and give me some feedback on that,
whoever wants to start first.
Mr. TANG. Congressman, I think first and foremost, it has
to be we have to target companies that are successful where
they are funded. In other words, we have to make sure that they
have not only a good idea and a good business plan and a good
team, but they have something to contribute and connect them to
the community. I think that will help in many ways. Job
creation and keeping jobs where they are funded are helpful as
well.
Ms. RODZ. Accelerators certainly can utilize the very tools
that we are encouraging the businesses that we work with to
use. We are very focused on integrating technology into our
platform in order to gain a more robust view of the individual
founders that we are working with to better connect them to the
broader resources available in the startup ecosystem, to reach
far beyond what we know and the resources that we are aware of,
and to start to partner with other accelerators and resources
in the community, with government institutions and
corporations, to understand all the initiatives and outreach
that they have and the resources they have access to, to start
to tie all those together, something that we are very focused
on at Circular Board.
Mr. REDUS. One of the opportunities to get better, as much
as this is already a focus, it can still be more so, and that
is continuing to build bridges. When I think about the general
nature of accelerators who connect the disconnected from
resources, particularly as it relates to investors, key
customers, et cetera, there is always more work to be done to
really help entrepreneurs who are disconnected from those
environments to, one, go deep with respect to readiness for
those environments. And then after that readiness has been
addressed, then further the connectivity to the actual
resources that so many entrepreneurs are still disconnected
from.
Ms. MARCELLO. I would just add that the outputs of an
accelerator are only going to be as good as the inputs. And as
all of us running accelerators can tell you, it is our
responsibility to make sure that our entrepreneurs are
considering which accelerator program might be right for them.
The growth of accelerator programs means that entrepreneurs do
have some options in terms of going to an accelerator that
focuses on their industry or their geography, or a different
system that they want to be a part of. And their success can be
contingent on making that selection. So I think we have a role
to play in guiding them along those lines so that they can
leverage the ecosystem that is best for them.
Mr. EVANS. I want to follow up on the questions the ranking
member asked. Ms. Rodz, you said, how can we best market the
availability of accelerators to women?
Ms. RODZ. One of the big problems is that women are not
currently integrated into the startup ecosystem, and a lot of
the marketing initiatives and outreach programs are looking at
current programs. What we have really focused on and why we
have been able to engage so many women from so many different
areas is looking at places outside of the entrepreneurial
resources that exist, looking at women's chambers of commerce,
looking at social organizations, looking at moms' groups and
people that are innovating across the country in very different
ways, but really are not aware of all of the entrepreneurial
resources that exist. And so I think it is important to get
beyond what we know to start to really utilize the media. We
have had incredible partnerships with the media and have been
able to be recognized in, you know, major outlets in order to
get exposure. Something that we are very focused on is how do
we start to integrate more women and pull them into the
ecosystem.
Mr. EVANS. Dr. Tang, obviously, I am a little biased since
that is where I am from, Philadelphia, but what has made
accelerators in Philadelphia so successful?
Mr. TANG. Congressman, you know, we have great assets in
higher education and the medical arts in Philadelphia. And so
what we do is try to make good companies out of good science.
And so I think, as Starr mentioned, the inputs are very
important. So I think the secret sauce in Philadelphia is we
are at a good starting place in terms of intellectual capital,
intellectual property, and talent, to begin with. It is then
about converting that into something that is commercially
viable, something that people want to buy. And I think that is,
right now, what we are working on is that conversion from very
good inputs to very good outputs.
Mr. EVANS. I yield back the balance of my time. Thank you,
Mr. Chairman.
Chairman CHABOT. Thank you very much. The gentleman yields
back.
The gentlelady from North Carolina, Ms. Adams, who is the
ranking member of the Subcommittee on Investigations,
Oversight, and Regulations, is recognized for 5 minutes.
Ms. ADAMS. Thank you, Mr. Chair and Ranking Member
Velazquez, for hosting the meeting today. And I want to thank
all the witnesses for your testimony.
Charlotte, North Carolina, is honored to be home to a few
accelerators, and these accelerators are critical to innovation
and job creation.
Dr. Tang, I have spoken to a number of folks in my district
who are concerned about the lack of a skilled workforce,
especially in the STEM fields. So how is your center involved
in working to fill this gap and how does it build on your work
with entrepreneurs?
Mr. TANG. Yes. Thank you for the question, Congresswoman.
The University City Science Center is located literally at
the fault line between the haves and have-nots in Philadelphia.
We have great anchor institutions, like University of
Pennsylvania, Children's Hospital of Philadelphia, Drexel
University, and yet to our northern border of the Science
Center, we have Mantua and Powelton Village, which are part of
a Federal Promise Zone. So what we are trying to do is create
more access and inclusion in the programs that we have,
beginning with middle school and high school students.
And the real magic to what we are doing in a program called
First-Hand is to create opportunities for these school children
to be mentored by not only scientists, but by entrepreneurs.
That is scientists, entrepreneurs who are founding companies,
who are creating their own dreams with the benefit of
accelerators and incubators and the like. So it is infusing
young people with the possibilities of innovation and
entrepreneurship at an early age. From there, what we try to do
is create opportunities for developing adults into skilled
workers that can be working for these high-growth companies.
So our job, if you will, in Philadelphia, is to create
good-paying, high-growth jobs in high-growth companies in high-
growth industries. I think if we can do that we will create a
lot more inclusion of the surrounding community.
Ms. ADAMS. Thank you.
Charlotte-Mecklenburg faces a number of barriers to
economic opportunity and economic mobility. Ms. Marcello, can
you elaborate on in what ways do accelerators, either directly
or indirectly, promote this type of high-quality job creation?
Ms. MARCELLO. Yes. Accelerators, you know, do provide this
new path for high-quality job creation in that a program like
the New Venture Challenge is going through a tiered process by
which we are looking at how these companies can be most viable
and create a high number of jobs.
So I mentioned the New Venture Challenge, a lot of the
companies that come out are small, but they have growth
potential. And part of what we are evaluating as we go through
and look at these companies is whether they are scalable and
how big of an impact can they have not only on Chicago and our
region, but throughout the country, and maybe throughout the
world. And so as we look at the business ideas and the
entrepreneurs and the skill sets and the resources that they
need, we look at that with the growth strategy in mind hoping
that a real impact will result from that.
Ms. ADAMS. Thank you. Thank you very much.
Mr. Redus, thank you, first of all, for your important work
with Minority Business Accelerator. Many incubators and
accelerators are located in high-income, less diverse
communities. So do you think encouraging these centers to form
in urban areas might increase diversity? And how can we support
more minority entrepreneurs?
Mr. REDUS. Thank you, Congresswoman. Yes. In fact, I would
wholeheartedly support that. There are some examples across the
country where there are incubators and accelerators directly in
the urban core, and it absolutely makes a difference. One of
the barriers, of course, is connectivity; often transportation
and various other barriers. So the short answer is, yes, it
absolutely can make a difference. And I think working with our
various business leaders, government leaders, higher education,
et cetera, to specifically craft strategies around that, and
looking at the economic lift of doing so. So often we have to
first kind of create, based on that particular geography and
the level of folks that are disconnected, if connected, if now
part of an equity equation, what is the economic upside of
that? And that certainly drives investment in the urban core.
Ms. ADAMS. Thank you very much. Mr. Chair, I yield back. My
time is up.
Chairman CHABOT. The gentlelady yields back. Thank you.
The gentleman from Florida, Mr. Lawson, the ranking member
of the Subcommittee on Health and Technology, is recognized for
5 minutes.
Mr. LAWSON. Thank you very much, Mr. Chairman.
Dr. Tang, can you discuss how innovation and technology
have impacted the growth of accelerators?
Mr. TANG. I think technology has really enabled many
accelerators. Carolyn spoke of her accelerator being virtual. I
think that is something that could not happen without the role
of technology. So technology both enables these accelerators to
do their work in an efficient manner, information technology,
the technology itself that these companies are basing their
ideas on. So having good starting points with sound science is
actually very key to what we are doing with accelerators.
Mr. LAWSON. Okay, thank you. And can you also describe what
accelerators will evolve into over the next 10 years?
Mr. TANG. I am not an expert at predicting the future, but
I would say that more and more, as success of the accelerators
is better known, they will become more successful, and I think
evolve in their own right to the point where you can connect
people, regardless of where they reside, to valuable resources
and expertise that they could not get if they walked down the
street. So to me, it is an on-demand model where the best
advice gets to the best idea and the best entrepreneur at
exactly the right time.
Mr. LAWSON. And one other question is how has the global
market been affected by the growth of accelerators?
Mr. TANG. Well, the global market, I think, is both enabled
and caused by the technology. So it is very possible to have
teams that exist around the world. And, in fact, in the world
of information technology, have software development that
happens around the clock. So that consecutiveness across the
globe enables better invention and ideas and enables better
commercial success.
Mr. LAWSON. And anyone can respond to this. I think about 2
weeks ago when a panel was here they stated that the fastest-
growing small business was minority women-owned businesses. You
know, from the standpoint, how does accelerators enhance that
opportunity for them to bring about more job growth?
Ms. RODZ. I think ultimately it boils down to
accessibility. The more accelerators we have and the more focus
each of those accelerators has, it opens up opportunities for
all of these groups. I think across the board, I am going to
guess that everyone on this panel is in favor of inclusive
entrepreneurship. I think it is something that we all want and
believe in, and I think the more we can create these
opportunities, the more inclusive it is going to result.
Mr. REDUS. I would just like to add to that just briefly
that certainly, the number of women and minority entrepreneurs
has increased the number of new businesses. It is also a
question of what type of businesses are they? Higher potential,
scalable businesses, et cetera. And so part of the additional
challenge is making sure that as the numbers improve in terms
of just pure number of entrepreneurs, what are the industries?
What are the growth models?
We still have a ton of work to do to drive more larger-
scale, high-potential women and minority firms, so that the
actual numbers of new business starts is absolutely improving,
but the types of businesses need to be further examined.
Mr. LAWSON. You know, every time I have the opportunity to
ask this $10 million question, you all have given extraordinary
testimony. What can this Committee do to help enhance the
opportunity for more accelerators, more people having access to
capital, and so forth as they work on issues here in the Small
Business Committee?
Mr. REDUS. I will start. One of the things that I think is
critical, and I mentioned this to some degree, but every
Federal initiative by and large in the past around access to
capital, particularly for minority entrepreneurs, has been
around access to debt capital. And so you drive a certain
mindset. There is a very different way of thinking around debt
versus equity. And so a specific and intentional focus on
driving more discussion and issues and activities around equity
capital, because it drives a growth mindset, whether you are a
tech company or not, just the ability to think bigger about
your opportunity will attract equity capital. But that is a
very different way of thinking that still has to go a lot
further as relates to minority entrepreneurs.
Mr. LAWSON. Anyone else care to comment?
Mr. TANG. Congressman, that is a very big question. I think
that we need more of an entrepreneurial mindset in our economy,
beginning with young people and the people that are making
their way through college and into the work environment.
Obviously, they need incentives. I think there can be better
incentives, tax incentives to start businesses and for
communities to support businesses. But I also look at the
overhang of student loan debt as preventing young people from
going into entrepreneurial pathways. There is such a focus on
getting a job and paying down the debt that they are unlikely,
I think, to be entrepreneurs. And so I am concerned about the
pipeline of entrepreneurs from the young to the old.
Mr. LAWSON. Mr. Chairman, I know just before I yield back--
I have to yield back--that is a big issue with me. I have a lot
of university students in my area back in Florida, and one of
the things that they talk about all the time is they hope that
we can do something from the standpoint to encourage them. So I
really wish I had more time with Dr. Tang. But anyway, I yield
back. I certainly hope it comes back up again in the Committee.
Chairman CHABOT. We appreciate the gentleman raising that
very important issue. Thank you. And it is something that let
us carry on further discussions about it.
I want to thank our very distinguished panel. I think you
all did a great job here today, and thank you for celebrating
National Small Business Week with us. This Committee likes to
find out what is working, what is maybe not working, and
emphasize what is working, and business accelerators are a part
of the small business world which we think merits a lot more
activity and encouragement by the Federal Government, which
oftentimes means do not mess it up for you. And we will try not
to. And we will work together in a bipartisan manner not to do
that and to try to encourage what does succeed.
So thank you all for shedding a lot more information on the
Committee members that were here 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 12:30 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Good morning. Chairman Chabot, Ranking Member Velazquez,
and distinguished Members of the Committee, thank you for the
opportunity to speak with you today. My name is Darrin Redus,
and I serve as Vice President of the Cincinnati USA Regional
Chamber, and Executive Director of the Minority Business
Accelerator, an initiative of the Cincinnati Chamber.
The Cincinnati USA Regional Chamber is one of the nation's
largest Chambers, representing the interests of nearly 4,000
member businesses in a 15 county region across three states--
southwestern Ohio, northern Kentucky, and southwestern Indiana.
It is the purpose of the Chamber to grow the vibrancy and
economic prosperity of our region. The Chamber works to
accomplish this goal by being inclusive and regional in all
that we do, and by leading with a bold voice for business,
expanding the talent base and harnessing the power of the
region's unique offerings.
On behalf of the Chamber and its member businesses and
constituents I'd like to first thank the committee for holding
this hearing as small businesses are certainly the beating
heart of our community as they are for communities across the
country.
This is also a very personal topic for me individually as I
have now served for the better part of 29 years in any of a
number of capacities in support of small businesses--be that as
a commercial banker and financial services executive for 16
years, an entrepreneur myself and founder of 3 different
startups, as well as an investor, consultant and economic
development professional over the most recent 12 years in
supporting small business and entrepreneurial ecosystems
nationwide.
I've had the good fortune of being directly in the center
of today's topic having been on the leadership team of one of
the country's first wave of tech accelerators in 2006, and then
serving as a consultant in various capacities as incubators and
accelerators have literally exploded over the past 10 years
with now hundreds of such organizations around the world.
Evidence of the explosion can be found in the SBA's Growth
Accelerator Competition which took in 832 applications from
accelerators nationwide in 2014, up from less than 10 such
organizations on record in 2005.\1\
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\1\ 2014 Growth Accelerator Competition Quarterly Metrics and
Results as of 1/31/15, prepared by SBA Office of Investment &
Innovation in February, 2015
At their core, the very nature of accelerators--as the name
implies--is to accelerate the growth and development of
promising business enterprises by engaging in an intensive and
comprehensive set of business development and mentoring
activities that, without the intervention and guidance of such
resources, would significantly lengthen the growth process, if
it would happen at all. This has certainly been the case for
states such as Ohio that just less the 10 years ago were
considered ``fly over states'' by the venture capital
community--denoting the historical tendency of venture capital
firms to primarily focus on the east or west coasts for
qualified deal flow and investment activity and ``fly over''
states such as Ohio. Whereby today our state is experiencing a
vibrant and robust investment climate with national VCs
directly tied to the great work of our statewide network of
incubators and accelerators that comprise our entrepreneurial
ecosystem. In fact, since 2006 over 330 early-stage companies
across Ohio have received over $1.6 billion in follow-on equity
capital from regional and national VCs.\2\
---------------------------------------------------------------------------
\2\ Ohio Third Frontier Commission Meeting published on 3/29/17.
Whether it's helping entrepreneurs with product
development, gaining traction with early client sales,
facilitating key relationships with industry experts and
subject matter expertise, or any of a number of critical
milestones designed to expedite the investor and market
readiness of a promising business, the early returns of
accelerators over the past 10 years certainly speak to their
overall importance as a significant catalyst to our nation's
---------------------------------------------------------------------------
economy.
And while the economic benefits and significant
contributions of accelerators have certainly been impressive,
there remain segments of our population, particularly many
ethnic minority groups, that remain largely disconnected from
many of these critical resources.
The Cincinnati USA Regional Chamber's Minority Business
Accelerator (the ``Accelerator'') has been its premier minority
business and inclusion program for over a decade--specifically
targeting African American and Hispanic populations that
unfortunately continue to lag behind from an economic
standpoint. In fact research by the Pew Research Center
released in the past two years indicates that economic
disparities have actually widened for these two populations,
now representing the largest gap in wealth and other key
economic indicators in the past 25 years. This is especially
troubling for our nation as a whole as ethnic minority
populations are expected to represent over half of the nation's
population over the next 20 years, and such continuing economic
disparities threatens the entire economic vibrancy and overall
competitiveness of the nation.
Since its inception in 2003, Cincinnati's Minority Business
Accelerator has specifically sought to address these negative
trends. Today our Minority Business Accelerator is recognized
as a national best practice by such organizations as The Surdna
Foundation and the Association of Chamber of Commerce
Executives, and consists of 35 larger scale African American
and Hispanic firms that collectively generate just over $1
billion in aggregate annual revenues, and have created over
3,500 jobs in the region since the program's inception. The
Accelerator's approach focuses on preparing high potential
minority firms for larger scale business opportunities with
corporate and institutional buyers through an intensive process
of capacity building, capital readiness, and strategic growth
initiatives. The Accelerator further collaborates with over 40
major corporations (referred to as our Goal Setters) that work
intentionally and strategically to conduct greater levels of
business with minority firms that demonstrate the capacity and
capability to scale. Over the most recent year, clients of the
Accelerator have continued to demonstrate strong results as
evidenced by:
$30 million Average Annual Revenue per firm
24% Average Year over Year Revenue Growth
Over 250 new jobs created
Moreover, the Accelerator also manages a $2 million loan
fund called the L. Ross Love GrowthBridge Fund, which was
created in 2013 to further address the shortfall of financial
capital for growth-oriented minority firms.
And while we are certainly proud of our efforts to date,
much more work remains. Our new strategic plan, just launched
in September of 2016, calls for the creation of an additional
3,500 new jobs in the region over the next 5 years, and an
additional $1 billion in aggregate annual revenue growth across
the portfolio of minority firms assisted by the Accelerator.
The specific strategy to be deployed to accomplish this
objective consists of leveraging more ``mainstream'' business
growth strategies such as mergers and acquisitions, joint
ventures, strategic partnering, exporting, and partnering with
private equity investors, to name a few. An even greater
commitment from our corporate Goal Setter partners to further
diversify their respective and collective supply chains will
also be a cornerstone of our anticipate results going forward.
As large corporations and other institutional buyers
increasingly operate in a global marketplace, minority-owned
enterprises and small businesses as a whole, must continue to
expand their capacity and scale to remain viable strategic
partners for these larger institutional clients. This will in
part be accomplished through a greater focus on risked-based
equity capital, and the encouragement of higher growth
enterprises that this form of capital supports. A continuing
over-dependence on debt capital with minimal equity (as has
been well-documented for minority firms), and failing to adopt
more mainstream business growth strategies such as the
aforementioned approaches of joint ventures and acquisitions,
will continue to threaten the longer term competitiveness of
minority firms and ultimately the nation as a whole.
In closing, a rising body of evidence as further detailed
in studies by the Harvard Business Review, the Kauffman
Foundation and various others, reveals a significant
contribution to our nation's economy spurred on by the
accelerator model. Much more work remains however to further
insure that this good work is not lost on various segments of
our population. As ethnic minority groups become an even
greater percentage of the total U.S. population, reversing the
negative trends tied to widening economic disparities must
become a critical component of the nation's economic agenda to
ensure that all of America's citizens are contributing to
economic output.
Again, thank you for this opportunity and I'm happy to take
any questions that you have.
*** END ***
Good afternoon. My name is Carolyn Rodz, Founder of
Circular Board, a virtual accelerator for high-growth female
founders. I am here today to advocate on behalf of our nation's
leading innovators, entrepreneurs and influencers, and
specifically for one of the largest untapped economic and
social opportunities in our country: women entrepreneurs. If
women and men participated equally in the entrepreneurial
ecosystem, the United States' GDP could rise by $30 billion.
Yet in spite of this, less than 5% of venture capital goes to
female founders, and when we start to look at minorities, the
numbers are significantly lower.
The current startup ecosystem is built upon a process that
funnels information from a small group of people, predominantly
white males in Silicon Valley and other dense startup cities,
to their personnel social networks and trusted colleagues. When
you consider that venture capitalists invested $58.2 billion in
companies with all-male founders in 2016, and just $1.46
billion in all female teams, in spite of the fact that all-
women and diverse leadership teams provide stronger financial
returns, it becomes apparent that our system for funneling
capital into companies solely based on financial opportunity is
flawed. In 2016, 5,839 male-founded companies got venture
capital funding, compared to just 359 female-founded
companies--in other words, companies run by men got more than
16 times more funding than companies run by women.
And to think: 2016 was a good year, with women-led
companies making up 4.95% of all venture capital deals in 2016,
the highest percentage over the past decade, and representing
just 2.19% of dollars invested.
Which brings me to the rationale for the startup
accelerator, which is, at its core, an advocacy group for
founders with the intention of connecting them with the
experts, investors, media and processes surrounding the art of
the startup. Think of the accelerator as a liaison between a
founder, who likely knows much about how to operate their
business and succeed within their industry, but often little
about how to raise capital, get covered by the media, build
support within their local community and get the endorsement of
the most influential minds in the startup ecosystem.
At Circular Board, our most important job is to understand
the innovation landscape, so that we can share this expertise
with our founders, who are heads down building businesses that
are impacting the world around us, creating jobs, and driving
our economy forward. It is our responsibility, as their guides,
to ensure that their time is spent wisely, that their business
models will resonate with potential funders, and that, most
importantly, they gain a voice within the relatively small, and
relatively homongenous, startup world.
At Circular Board, we lead companies through a 12-week,
100% virtual accelerator that attracts founders from places
like Lake Oswego, Oregon, or El Paso, Texas, and connects them
with the intellectual capital that resides nationwide. When
these founders are armed with a network of experts, introduced
to early stage investors, and supported by a community of
unique perspectives and varied experiences, they are better
prepared to overcome the dismal statistics that currently
define female founders. Take Suuchi Ramesh, for example, an
Indian immigrant in New Jersey who has created nearly 50 jobs
for women on welfare and generated over $1 mm in revenues in
her first 18 months of business. Or Adrianne Weir of Medolac,
who has reduced pre-term infant mortality rates by over 50%
through fortified human breast milk, and is currently raising
her Series C with an estimated valuation of $45 million.
Overall, Circular Board founders have raised over $26 million
in funding, and have created over 162 jobs. Overwhelmingly, our
founders cite the relationships they built as the turning
points within their respective businesses.
It is true, that accelerators are popping up all over the
country, but what is important to recognize is that each of
those accelerators tackles a unique segment of founders, from
industry verticals to marginalized audiences to impact centered
hubs, attracting expertise that can support the specific
problems facing these groups of founders. Accelerators like
Circular Board bring more than mentorship, they bring energy to
the startup landscape, forging connections and bridging the gap
between enterprise, government, foundations and more. They are
a loud, organized and consistent voice for founders, and a
pipeline for opportunities presented by organizations like the
Small Business Administration, Kauffman Foundation, Case
Foundation and more.
Through our five cohorts, we've learned that resource
connectivity is the greatest value we can provide to a founder,
which is why we are pouring all of our resources into building
a global artificial intelligence platform that will support
women at all stages of growth, and connect them to the tools,
experts, content and events relevant to their real-time needs
and unique company profile. There is an incredible demand for
startup accelerators, and it is our mission at Circular Board
to avail every entrepreneur, regardless of gender, ethnicity,
geography, capital resources or cultural constraint, the
opportunity to engage the right support to scale their
business, all with the end goal of solving our world's most
pressing problems and creating sustainable, meaningful impact.
I urge each of you today to actively engage with
accelerators in need of your expertise. As policymakers, there
are significant opportunities to support these accelerators,
not only through government funded programs like the SBA's
Small Business Growth Accelerator Fund, which we are grateful
to be recipients of, but also by supporting trade agreements
that open new markets for businesses of all sizes, streamlining
the process of registering businesses and applying for
government resources, particularly when working with strategic
offices such as the Patent & Trademark Office, the Department
of Commerce, the Small Business Administration and the Federal
Drug Administration, and enabling access to broadband in all
parts of our country.
Engaging with accelerators will allow you to better
understand how founders are supporting our country through
innovation and economic development, and to see for yourself
how the accelerator is a model not only promoting business
success, but also national leadership and economic prosperity.
I thank you for taking the time today to put a spotlight on
what I believe to be one of the greatest economic opportunities
of our time.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Chabot, Ranking Member Velazquez, and Members of
the Committee, thank you for this opportunity to testify
regarding small businesses and the accelerator model, and to
help you recognize and celebrate our nation's legacy of
entrepreneurial success.
I'm Steve Tang, President and CEO of the University City
Science Center in Philadelphia. It's an honor to join my
distinguished colleagues on today's panel.
I'd like to express my strong support for Federal
programs--such as the SBA's Growth Accelerator Fund--that
encourage and facilitate entrepreneurship.
I have an extensive background in science, business and
entrepreneurship, and a first-hand understanding of the power
and potential of technology commercialization. I've led a
company through venture funding and an initial public offering,
and served as a senior executive with a large life sciences
company as it acquired and integrated smaller companies.
Last September I was re-appointed to the Department of
Commerce's National Advisory Council on Innovation and
Entrepreneurship (or NACIE), and I have the privilege of
serving as NACIE co-chair through 2018. NACIE reports to
Commerce Secretary Ross, and is charged with identifying and
recommending solutions to issues critical to driving the
innovation economy, including enabling entrepreneurs and firms
to successfully access and develop a skilled, globally
competitive workforce.
My organization, the University City Science Center, has
been a key driver of growth and a source of stability for the
Greater Philadelphia region's life sciences and technology
sectors since its founding in 1963 as the nation's first and
largest urban research park. Today we are a dynamic hub for
innovation, entrepreneurship and technology development,
offering business incubation, acceleration and other programs
that provide support for firms at all stages of the business
life cycle.
At the Science Center, we cultivate and expand the
possibilities that open up when research moves out of the lab
and into the marketplace. Over the past 54 years, 442 companies
have receive incubation and acceleration services from the
Science Center. Today, 155 of those 442 firms are located in
Greater Philadelphia and account for 40,000 direct and indirect
jobs--or one out of every 100 jobs in the region. And these
40,000 jobs drive $13 billion in economic activity each year--
more than 2% of the region's total economic output.
To date, our biggest success story is Centocor, now known
as Janssen Biotech, a division of Johnson & Johnson. Centocor
was founded in 1979 with a vision of developing monoclonal
antibodies as a new paradigm to treat diseases such as
rheumatoid arthritis. Today, Remicade is the biggest product in
the J&J portfolio, with annual U.S. sales of $5 billion.
Another Science Center resident company, Spark Therapeutics, is
developing gene therapies that are showing early, promising
results for treating childhood blindness and potentially other
conditions such as hematologic disorders and neurodegenerative
disorders. These are just two examples of how the Science
Center has paved the way for transformational business growth
and job creation.
We are strong believers in the accelerator model as an
ideal vehicle for empowering small businesses. We define an
accelerator as a program that offers startups access to a suite
of business tools, including mentorship and professional
expertise, funding, and other support services over a defined,
limited time period, in an intensive, high-touch setting.
For example, our Phase 1 Ventures (or P1V) program works
with ``long-horizon'' technologies in pharmaceuticals, biotech,
healthcare and other fields. P1V helps early-stage companies
apply for and obtain SBIR and STTR grants, and then provides
the companies with funding, management support and access to
outside expertise, as well as connections to private sector
funding, in order to help them grow.
And our Digital Health Accelerator (or DHA) helps health IT
companies with products at the prototype stage to reach their
first sales and investment milestones. The program selects
promising companies from around the world and provides them
with funding, collaborative workspace, professional mentorship,
and introductions to key stakeholders and investors in the
Greater Philadelphia region.
As you know, in the three years since the Growth
Accelerator Fund was launched, awards of $50,000 each have been
made to 189 accelerators in 45 states, Washington, DC, and
Puerto Rico. The Science Center has been fortunate to win two
of those awards--one for P1V and the other for the DHA.
And I'm here to say that those awards, along with other
strategic and critical Federal grants, have made a real
difference. Since P1V was launched in 2015, a total of 18
startups have participated in the program, advancing
technologies developed at 12 different academic and healthcare
institutions. Together these companies have secured
approximately $3 million in public and private funding. And the
13 companies that have gone through the DHA since its inception
in 2014 have created more than 160 new jobs, generated more
than $20 million in new revenues, and raised nearly $22 million
in follow-on investment.
Thanks to the Federal support that we have received, we
have been able to accelerate the growth of startup companies
like UE LifeSciences, which is developing a low-cost, portable,
hand-held scanner that can detect breast cancer in its earliest
stages, anywhere in the world. Or Talee Bio, which is
developing a gene therapy for cystic fibrosis, the first
curative treatment for this disease. Or SimUCare, which is
enhancing the training process for doctors and nurses by
enabling them to learn how to handle medically complex
situations using the live actors, rather than manikins, to
maintain realism.
At the Science Center, we support technology
commercialization in the broadest sense, by acting as an
innovation intermediary--or linchpin--that brings together
academia, industry and capital. We create specific processes
and frameworks, like P1V and the DHA, that lower barriers,
facilitate collaboration, and enhance the likelihood of
success. But we also create more generalized incubators,
accelerators, and other resource-rich environments that combine
multiple ingredients--including funding, expertise, and support
services--to help generate the unpredictable and serendipitous
outcomes that have always fueled our nation's scientific
advancement and economic growth.
Accelerators work because they promote and reward
efficiency. We have a saying in the industry--startups need to
succeed or fail quickly, and cheaply. The only way to drive
business creation and growth is for companies to move
technologies across the value chain and get to market.
Accelerators force technologies to move quickly--and by
offering multiple layers of expertise, services and support,
accelerators often enable startups to pivot in a different
direction, in response to market demand. If Congress is
interested in stimulating entrepreneurship, and in pulling more
high-potential technologies out of academia and elsewhere into
the marketplace, then accelerators and other early-stage
support programs are a wonderful way to achieve a robust return
on investment.
Accordingly, we strongly support those targeted Federal
initiatives--such as the Growth Accelerator Fund; SBIR and
STTR; and the EDA's Regional Innovation Strategies program,
among others--that encourage innovation, entrepreneurship, and
tech-based economic development across the country. And--
equally as important--we strongly support those programs, like
the Growth Accelerator Fund, that promote greater diversity and
inclusion in our nation's small business sector. More than two-
thirds of our P1V and DHA companies are owned and/or led by
women or members of underserved groups, such as racial
minorities, veterans, or disabled individuals. We firmly
believe that the knowledge-based economy must be not only a
place of innovation and growth for the science and technology
community, but also hub for innovation and growth in the wider
community, with meaningful opportunities for all of our
citizens to pursue STEM-related careers at all levels.
Mr. Chairman, this concludes my testimony. On behalf of the
University City Science Center and NACIE, I want to thank you
for this opportunity to highlight the benefits of Federal
programs for our nation's small businesses and, more broadly,
our entrepreneurial ecosystem. I welcome your comments and
questions.
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