[Senate Hearing 116-279]
[From the U.S. Government Publishing Office]
S. Hrg. 116-279
BARRIERS TO ENTRY IN THE TECH INDUSTRY FOR DIVERSE ENTREPRENEURS
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FIELD HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 3, 2019
__________
Printed for the use of the Committee on Small Business and
Entrepreneurship
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
39-847 PDF WASHINGTON : 2020
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SIXTEENTH CONGRESS
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MARCO RUBIO, Florida, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
Michael A. Needham, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
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Opening Statements
Page
Duckworth, Hon. Tammy, a U.S. Senator from Illinois.............. 1
Witnesses
Panel 1
DiMenco, Ms. Emilia, President and CEO, Women's Business
Development Center, Chicago, IL................................ 3
Kaufman, Ms. Melissa, Founding Executive Director, The Garage at
Northwestern University, Evanston, IL.......................... 12
Aglipay, Ms. Geri, Midwest Outreach Manager and National Women's
Entrepreneur Manager, Small Business Majority, Chicago, IL..... 18
Panel 2
Meek, Ms. Kimberly, Founder and CEO, Hacha Products, Geneva, IL.. 30
Kollhoff, Ms. Katie, CEO, NUMiX Materials, Inc., Chicago, IL..... 36
Darby, Ms. Patrice, Founder and CEO, GoNanny, Chicago, IL........ 45
Alphabetical Listing
Aglipay, Ms. Geri
Testimony.................................................... 18
Prepared statement........................................... 20
Responses to questions submitted by Senator Duckworth........ 61
Darby, Ms. Patrice
Testimony.................................................... 45
Prepared statement........................................... 47
DiMenco, Ms. Emilia
Testimony.................................................... 3
Prepared statement........................................... 7
Responses to questions submitted by Senator Duckworth........ 54
Duckworth, Hon. Tammy
Opening statement............................................ 1
Kaufman, Ms. Melissa
Testimony.................................................... 12
Prepared statement........................................... 14
Responses to questions submitted by Senator Duckworth........ 58
Kollhoff, Ms. Katie
Testimony.................................................... 36
Prepared statement........................................... 38
Responses to questions submitted by Senator Duckworth........ 65
Meek, Ms. Kimberly
Testimony.................................................... 30
Prepared statement........................................... 32
Responses to questions submitted by Senator Duckworth........ 64
BARRIERS TO ENTRY IN THE TECH INDUSTRY FOR DIVERSE ENTREPRENEURS
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THURSDAY, OCTOBER 3, 2019
United States Senate,
Committee on Small Business
and Entrepreneurship,
Chicago, IL.
The Committee met, pursuant to notice, at 2:43 p.m., in
Harold Washington Public Library, Hon. Tammy Duckworth,
presiding.
Present: Senator Duckworth.
OPENING STATEMENT OF HON. TAMMY DUCKWORTH, A U.S. SENATOR FROM
ILLINOIS
Senator Duckworth. The hearing will come to order. Well,
welcome everyone. I want to thank all the witnesses as well as
those who are in attendance today. This is an official hearing
of the Senate's Committee on Small Business and
Entrepreneurship. With us today are Maggie Moore who is with
the the Senate Chairman staff, Senator Rubio's staff. And then
also Kevin Wheeler from Senator Cardin, Minority member's
staff.
I am just going to make some quick remarks as well as
introduce everyone and then we will turn it over to our
witnesses to each give your prepared statements. Today's
hearing is titled ``Barriers to Entry in the Tech Industry for
Diverse Entrepreneurs,'' and it will address the challenges
that diverse tech entrepreneurs face when starting their
businesses. It will come as no surprise to many in this room
that there remains a lack of diversity in the lending space,
some of which can be traced to a lack of diversity in venture
capital investment firms themselves.
For instance, a study by The Information found that in
2018, only 1 percent of private venture capital investment
firms have black decision makers and only 1.5 percent of those
same firms have Hispanic decision makers. That amounts to a
total of 7 in 11 individuals, respectively, out of over 700
firms surveyed. Think of that. That is absolutely unacceptable.
It is no wonder then that according to a recent report
examining nearly 10,000 startups, black founders represent only
1 percent of the venture capital black firm and Latin-x
founders only 1.8 percent.
Women of all races, too, continue to be underrepresented in
this space. While women now represent 15 percent of all
partners, and accelerators, and corporate venture firms, up
from only 8 percent in 2017, that representation is not keeping
pace with women-owned businesses, which grew by 58 percent
between 2007 and 2018, and women of color-owned businesses,
which grew by an outstanding 163 percent during that same time
period.
We must better invest in women and minority entrepreneurs,
especially here in Illinois. That is why I have joined Senator
Cardin in introducing legislation to establish an Office of
Emerging Markets within the SBA's Office of Capital Access.
This office would be responsible for ensuring SBA's access to
capital initiatives and programs--from the Micro-loan program
and the Small Business Investment Company program--and it would
address the needs of diverse entrepreneurs in new and emerging
markets.
We also need to make sure there is a strong pipeline for
women and minorities to enter the tech industry before
beginning their companies, starting at colleges and
universities. Last week, I joined my colleague, Senator Hirono,
in introducing two bills addressing this very issue. First, the
Women and Minorities in STEM Booster Act 2019 would require the
National Science Foundation to award competitive grants that
support the recruitment and retention of women and minorities
in STEM. The second is the STEM Opportunities Act of 2019,
which would require Federal agencies to collect more
comprehensive demographic data and develop guidance on
identifying barriers to the participation advancement of women
and minorities in STEM.
Investing in these pipelines will ensure a better
representation in all tech fields, thereby increasing the
likelihood of women starting their own tech companies. But I am
here to listen to and learn from you. So I would like to now
introduce the first panel of witnesses.
Our first witness joining us today is Emilia DiMenco,
President and Chief Executive Officer of the Women Business
Development Center. Under her direction, the WBDC has expanded
its Women's Business Enterprise Certification program to a
nine-state Midwest region, opening offices in its five major
markets and three additional offices in the Chicago metro
region. Since Ms. DiMenco's arrival, the WBDC has dramatically
expanded its direct lending program to a pool of nearly $1.7
million. It has also expanded the Latina Business programs,
offering bilingual business services, developed an e-learning
library, and launched an entrepreneurship program to serve
military veterans. Prior to her leadership at the WBDC, Ms.
DiMenco spent 30 years at BMO Harris, being elevated to
Executive Vice President in the corporate and commercial bank.
She also led BMO Harris' Women in Business initiative which
under her leadership made BMO Harris the bank of choice for
many women business owners. Emilia holds a B.S. and an M.B.A.
degree in Finance from DePaul University. Welcome. Our next
witness is Melissa Kaufman. Ms. Kaufman is a Founding Executive
Director of The Garage at Northwestern. The Garage is a
community and physical space for Northwestern students
interested in entrepreneurship to learn, iterate, and grow.
She is a former Googler, startup executive, and
entrepreneur with a decade of experience at consumer technology
companies in Silicon Valley. Currently, she is a committee
member of Chicago Next, a member of P33, and a venture partner
at Chicago Ventures. She was named Chicago's Fierce 50 in 2016
and Crain Tech's 50 in 2018. She received her B.A. in Computer
Science from Dartmouth College--a school I did not have the GPA
to get into.
[Laughter.]
Finally, Geri Aglipay--I hope I said that correctly. Ms.
Aglipay is the National Manager of Women's Entrepreneurship and
Midwest Outreach Manager, overseeing small business majorities
outreach education, policy, and advocacy efforts in greater
Chicago. These efforts enhance financial capacity and economic
security for small business owners, their employees, and their
families.
She lectures on access to capital and financing small
businesses with partners in Government, nonprofits, banks,
community organizations, and more, to increase awareness of
growth, responsible financing, and how to get funding to grow
in certain small business ownership. She is a member of the
steering committee for the Illinois Asset Building Coalition
and was selected to the Cultivate Women of Color Leadership
program. Thank you all so much for taking the time to be here
today. And Ms. DiMenco, please get us started.
STATEMENT OF EMILIA DiMENCO, PRESIDENT AND CEO, WOMEN'S
BUSINESS DEVELOPMENT CENTER
Ms. DiMenco. Thank you, Senator Duckworth, for inviting me
here today to represent the Women Business Development Center.
Founded in 1986, the WBDC launched one of the first Women
Business Centers in the country and, as you know, there are
over 100 today. In Fiscal Year 2019 to set the stage, the WBDC
provided counseling services to over 2,400 business owners and
certified over 2,000 women's business enterprises. The
certified businesses alone generated more than $21 billion in
revenues and employed over 87,000 individuals. And with our
assistance, I am proud to share with you that these women were
awarded over $400 million in public- and private-sector
contracts.
For emerging businesses, we also helped our clients source
and we directly lent over $3 million in capital. I would like
to thank you for taking the time today to learn more about the
barriers to entry in the technology industry for diverse
entrepreneurs. As you know, it takes immense courage and
passion to be an entrepreneur, no matter what demographic boxes
you might check, but for women and minority entrepreneurs, it
is even more difficult. I am going to share a well-known
success story with you and that is a tech business called
LuminAid. It was started by Andrea Sreshta and Anna Stork. They
were students when they invented the first solar light product
to address the disaster relief efforts in Haiti post-earthquake
in 2010. So they had $10,000 and in 2011 they launched
LuminAid. Today, this Chicago-based company has about 125
employees and it has expanded its product line from disaster
relief to everyday living.
We have all heard stories of entrepreneurs selling a house
or cashing in their 401k to fund their business idea and we
have heard of people losing everything in pursuit of their
dreams. Entrepreneurs should not have to jeopardize critical,
irreplaceable assets to explore innovative ideas that improve
the quality of all of our lives and create jobs for people in
our communities as the founders of LuminAid did. For certain
businesses with high growth potential and sought-after
industries, angel investors and venture capitalists are
abundant.
For most companies, however, innovation and growth, in
addition to their personal resources if they had any, are
fueled by alternative providers of capital, such as community
development and financial institutions, CDFIs, micro lenders,
and SBA-supported products offered through traditional avenues.
Access to capital is particularly hard for women and minority-
owned businesses, both debt and equity capital. And it is
essential for them also to start growing and expand their
businesses. And as you have already pointed out, with the
statistics that you cited in your opening comments, only 2.2
percent of all venture capital funding went to female-founded
teams.
Black and Latino entrepreneurs received even less, just 1
percent of all startup financing. The only thing that makes
these numbers worse is that this is where the innovation is
coming. It is coming from women, and particularly women of
color, higher than the general market overall. However, it is
not just about having access to capital. It is about the right
mix of capital. And in the finance world, it is referred to as
capitalization. I mentioned the founders of LuminAid. Their
company grew capital from a variety of sources, from
crowdfunding to their first outside equity investor in 2015.
And while LuminAid is a success story, there are many more
entrepreneurs struggling to find the right capital.
We see this routinely at the WBDC with thousands of hours
of the advisory services we provide. To truly address the
barriers to entry, we must ensure that the right type and mix
of capital is available throughout our communities and, just as
important, the right mix of technical assistance to support the
entrepreneurs to pursue the funding that they need to grow and
sustain their dreams so that their dream doesn't become a
nightmare. Business acceleration assistance is needed, and it
is more than office space and investors looking for hockey
stick opportunities. It is about providing owners with the
support they need to grow their business in their best
interests so that they earn living wages, create wealth, and
they create new jobs for others.
There are ample examples for our Government agencies to
support innovation and entrepreneurship to accelerate economic
growth, and I would like to talk very briefly about two
programs. First, the ScaleUp program, which started in 2015.
The WBDC was one of eight organizations across the country
selected to run a ScaleUp pilot, and we did it in Aurora,
Illinois. It was to help companies get to the million dollar
mark. And the reason we were looking to accelerate them to the
million dollar mark is because that is where the most jobs are
created and that is where there is sustainability of the
business. This program was so successful that we brought it to
low- to moderate-income communities within the city of Chicago.
The owners that we served through the ScaleUp program to
date have created and retained over 700 jobs and have access
equity and debt capital close to $1 million. They identify as
87 percent female, 13 percent male, 47 percent black, and 27
percent Hispanic. The public funding for the ScaleUp program
was discontinued in 2017. We have been lucky, and we have been
able, with the data we collected in the success of the pilot,
we were able to obtain private funding. Expanding programs for
ScaleUp-like programs is one way to address the issues of
barrier.
The second example is for earlier stage companies, the
Federal and State technology grants provided by the SBA which
provide commercialization support to access Federal grants for
entrepreneurs. Through this program, grantees like the WBDC
increase access to early stage funding for entrepreneurs and
researchers who are traditionally underrepresented in the $2.5
billion annual U.S. Small Business Innovation Research program.
In 2017, the WBDC was awarded a FAST grant to reach out and
enable diverse communities to pursue similar grants.
During the course of the WBDC's two-year program, we helped
60 companies receive technical assistance; 37 of them were
women, 9 were African American, 3 were Hispanics, and 3 were
veteran-owned businesses, but the most impressive thing is that
they realized $4.5 million in capital raised for contracts
awarded. This is non-dilutive equity which builds wealth for
the business owner and keeps the wealth within the community.
Unfortunately, FAST grants, as you know, are not awarded in
every State to support equitable opportunity to pursue similar
grants. In fact, less than half the States have this program.
When we received this grant two years ago, it was the first
time in 3 years that it was awarded to the State of Illinois.
And since it expired, our State once again is at a
disadvantage. Expanding funding for the SBA's FAST program so
that every State has access to this program to support its
entrepreneurs in pursuing similar grants is another way to
address the issues with barriers for innovative tech
entrepreneurs.
I can give you more examples, but I am not going to do that
because I know I am running out of time. I will be finished
shortly. We can address barriers to entry by supporting such
programs that work but also we can make the programs that we
support more effective, and we can do that by cost-effectively
expanding geographic reach using a hub and spoke model so that
infrastructure, administration, and fundraising for those
programs can be done centrally while people that are serving
their clients are locally rooted. We can increase operational
effectiveness by removing the redundancy in the systems that
are the programs that are offered out, and we can make sure
that between programs they can communicate with each other.
We can address success for programs--we can address that
the success of these programs, that the measurement is more
impact based versus effort based. And we can embrace and
leverage technology to offer virtual services and support. We
understand that balancing a budget requires choices, but it is
alarming that proving programs designed to help underserved
communities have been eliminated or underfunded or operated
inefficiently. While the WBDC and many other organizations,
some of which are represented here, scramble to continue to
support proven programs impacted by budget cuts, we simply
cannot do it alone. And that is why forums such as this are so
important. By coming out to the community and hearing firsthand
what is working and what is not, we can work together to find
solutions that are not just wise investments but also effective
investments.
Despite considerable progress over the years, there is
still work to be done to achieve economic parity. Without
access to capital, it can be difficult for entrepreneurs to get
their business off the ground, let alone grow their business
enough to start creating jobs and benefiting their community.
At the WBDC, we know that with the right tools and assistance
our clients are more successful in securing funding for their
businesses, and we also know that there are proven Federal
programs that also support diverse entrepreneurs.
Today, we ask that you continue to invest in expanding and
improving these programs. And again, I thank you for this
opportunity, and I am happy to answer any questions.
[The prepared statement of Ms. DiMenco follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Duckworth. Thank you. I look forward to your
participation in the discussion.
Ms. Kaufman, welcome.
STATEMENT OF MELISSA KAUFMAN, FOUNDING EXECUTIVE DIRECTOR, THE
GARAGE AT NORTHWESTERN UNIVERSITY
Ms. Kaufman. Thank you for the opportunity to share The
Garage at Northwestern's perspective on barriers to entry in
the tech industry for diverse entrepreneurs. I joined
Northwestern in 2015 to build, develop, and grow the
University's first student center hub for entrepreneurship and
innovation called The Garage. The Garage is one of the most
unique and modern spaces on our Evanston campus. It is carved
out of the second level of a parking structure, and the space
is a technology playground with a nod to Silicon Valley and is
open to all Northwestern students from any school and any level
of study.
Most of the early adopters of the space were male students,
many of whom were studying engineering. As a former Googler and
startup executive in San Francisco, I am no stranger to being
the only woman in the room. While I would have hoped I was
setting an example as a leader of innovation at Northwestern, I
realize that breaking down the barriers to entry to
entrepreneurship takes more than opening a new space. From
programming to networking opportunities, we have developed ways
for empowering female student entrepreneurs to do more than
stay on the sidelines in the tech industry, and many of the
lessons we have learned from our own operations are applicable
to other underrepresented groups.
Last year, The Garage launched the Propel program. The
program's goals are to promote diversity and inclusion and
entrepreneurship by providing networking, mentorship, and
financial resources to women. We are aware of how
Northwestern's population continues to change. Today,
Northwestern student population is 20 percent Pell Grant
recipients, 61 percent are funded through financial aid, and
over 10 percent are first-generation students, and we hope to
expand the Propel program to include other underrepresented
groups at Northwestern in the future. First, we believe that it
is important for students to see entrepreneurs and leaders that
look like them. Whether that is women, people of color, or
first-generation students, we have witnessed the impact that a
one-on-one in-person conversation can have.
We discovered this last year when we took a group of
students from the program called Propellers to New York City--
they are on their second trip today. The most transformative
moments came from a roundtable at Northwestern's New York
office. The result was an open and enlightening dialogue and
one student shared the comfort she felt being in a room with
other supporting women. This transparent access to more senior
women gives students the extra nudge they need to become the
future leaders and founders we need. Second, we have learned
the impact that individualized encouragement has had for female
students. We have found that offering thoughtful communication
and paths to funding gives women student founders explicit
permission to pursue their entrepreneurial projects.
As an example of this, I would like to share the story of
Samantha Letscher one of our students. Sam applied to The
Garage's full-time summer program for promising student
startups with her idea for BOSSY. She shared that a mentor to
her, an adjunct male faculty member at Northwestern, told her
to apply to the summer program. She was accepted and worked on
her idea and went on to win prize money at the end of the
summer. She graduated from Northwestern in 2018, and now,
BOSSY, her Chicago-based startup, features an online directory
listing hundreds of women-owned businesses that consumers can
shop from.
Sam tells us that she never would have applied to The
Garage's program without that push from her professor. She may
have never seen the impact that her idea could have had. Sam is
still working on BOSSY and currently serves as a mentor for the
Propel program, allowing her work to come back full circle. An
entrepreneurial mindset is a critical skill set for the future.
It teaches students to be adaptable and resilient problem
solvers.
At The Garage, we are aiming to ensure that all students,
regardless of their background, gender, or race are offered the
same opportunities to develop this skill set. We are committed
to doing this through meaningful networking, equal and fair
access to funding opportunities, and individualized
encouragement from mentors.
Thank you.
[The prepared statement of Ms. Kaufman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Duckworth. Ms. Aglipay.
STATEMENT OF GERI AGLIPAY, MIDWEST OUTREACH MANAGER AND
NATIONAL WOMEN'S ENTREPRENEUR MANAGER, SMALL BUSINESS MAJORITY
Ms. Aglipay. Congresswoman Duckworth, thank you again for
inviting me to speak with you today about barriers facing
diverse entrepreneurs and solutions to address inequities in
accessing capital. As a Midwest Outreach Manager and National
Women's Entrepreneurship Manager for Small Business Majority, I
have seen firsthand how entrepreneurship can create lasting
impact for both an individual and their community. At Small
Business Majority, our mission is to empower America's
entrepreneurs to build up driving and inclusive economy.
As part of our work, small business majority promotes a
policy agenda that can stimulate our economy and increase
prosperity for all, but today I want to focus on two key areas
of our agenda to support diverse entrepreneurs. One, expanding
access to traditional responsible lending, and two tackling
predatory lending practices, understanding that these issues
disproportionately impact women and people of color.
Despite the importance of small businesses to our economy,
small business owners face hurdles accessing capital which you
have heard from my previous colleagues as well and in your
opening statements but what is more significant is for
entrepreneurs of color and borrowers in the community, and
women and veterans have trouble more especially accessing that
capital. For example, women- and minority-owned businesses
receive approximately 45 percent of conventional small business
loans.
And according to the U.S. minority business development
agencies, businesses owned by people of color were three times
more likely to be denied a loan than non-minority firms, and
when they do access alone, their average loan amount is
actually less than half the amount of white-owned businesses.
And while women-owned businesses are the fastest growing
segment of our economy in the United States, research shows
women in general start off with fewer assets and receive
inequitable access to both loans and venture capital, and women
receive nearly 50 percent less funding than their male
counterparts. It is this credit gap that hurts the
profitability of these small business owners and inhibits their
ability to grow.
The small business credit gap will not be overcome without
increasing traditional, flexible, and safe financing options. I
will cover a few of our key recommendations, but more of them
can be found on our website. But first we must expand the SBA
loan programs like the 7A loan guarantee program, the 504 loan
guarantee program, and the Microloan program. For example,
Congress should pass legislation such as the Microloan
Expansion Act of 2019, which will increase capital for
entrepreneurs.
Second, we should make permanent the SBA 7A Community
Advantage program, which is a pilot actually set to expire in
2022. This program is a vital resource for mission-based
lenders and provides both loans and assistance to underserved
markets. We also need to ensure that women and entrepreneurs of
color get equitable access to capital by increasing funding for
the counseling capital and contracting services provided by
Women Business Centers like the WBDC, small business
development agencies and centers, and the Minority Business
Development Agency. This includes for instance increasing the
cap on matching grants for Women Business Centers.
Additionally, we must address predatory lending practices
in small business lending. There is innovation in small
business financing, and it is making it faster and easier for
people to borrow, but this innovation must be built on
transparency and fairness. This is needed because alternative
financing and brokers operate in an almost unregulated space,
which leaves small business institutes vulnerable to predatory
practices. While there are some funding institutions that are
fair disclosing their terms and rates, many lenders are
exploiting and offering desperate entrepreneurs predatory loan
products.
Loan terms are often unclear and not disclosed and
borrowers later discover they are locked into hidden fees,
higher interest rates than anticipated, and other unfavorable
loan terms, which leaves them on the hook for much more than
they expected, and the result is many lose their personal
assets and business as well.
While the Federal Truth in Lending Act does offer some
protection to consumers from this exploitation, the law itself
actually does not apply to small business owners. This is why
we would like to see Congress enact legislation extending the
Federal Truth in Lending Act disclosure requirements to small
business loans and credit products as was done in the State of
California last year. Our research shows small businesses
strongly support this type of regulation. Second, any policy
should promote small business lending practices that are
responsible by lenders and brokers as outlined in the small
business borrowers bill of rights, specifically by requiring
transparency around rates and terms, including annual
percentage rate, and curbing the practices of rates such as
double-dipping among other issues.
We would like to see Congress pass the Small Business
Lending Fairness Act, a bipartisan legislation that was
introduced but this legislation would prohibit confessions of
judgment. Confessions of judgments are clauses where borrowers
agree in advance to waive their right to contest any dispute
with the lender, which often costs them their entire savings.
In closing, we know that small businesses inject economic
vitality into their communities.
However, they need the proper resources and public policies
to support them, with attention to entrepreneurs who struggle
to access resources and economic security most, namely women
and entrepreneurs of color. Thank you for the opportunity to
comment on these important issues for small businesses here in
Illinois and across the country, and I am happy to answer any
questions.
[The prepared statement of Ms. Aglipay follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Duckworth. Thank you. Thank you all for being here.
Let us begin with my first question on--this is for all the
witnesses. Each of you has spoken about the work you do
supporting entrepreneurs at all levels, from enhancing access
to capital for diverse business owners to helping students and
entrepreneurs develop their tech startups and make their
businesses successful. Based on your experiences, could each of
you starting with.
Ms. DiMenco speak about what you believe to be the most
critical investment the Federal Government can make to help
women and minorities enter the tech industry and gain better
access to capital and support. If you just choose one or two
things, what would be like the most immediate thing that you
think we should be able to do at the Federal Government, and
then what do you think would be the most impactful?
Ms. DiMenco. There are two things that inhibit all
entrepreneurs including tech entrepreneurs because you do not
have collateral to secure the loan. Fifty percent of the
problem is there isn't sufficient quality technical assistance.
So an innovator as creative as they are might not have the
business and financial acumen to understand capitalization and
understand how you talk to a senior lender, how you talk to a
venture capitalist, how you talk to a mezzanine player of some
type.
So that is half the battle has to do with technical
assistance. We work long hours with the financial institutions
in Chicago as they send us entrepreneurs that are not prepared
to talk to them. Sometimes it is nothing more than helping them
pull the package together that the bank requires. So half the
problem is technical assistance. The other half of the problem
is there aren't sufficient alternative providers of capital
that address the issues that startup entrepreneurs who do not
have connections and who do not have resources need.
So, for example, in the Chicagoland area, there are a lot
of community development financial institutions, but there are
few that I can count on one hand that are CDFIs that serve
small business. So helping to fuel more CDFIs and provide
alternative types of products to address the issues and it is
not high-interest loans is the other half of the problem.
So problem one has to do with the entrepreneurs not
provided. Problem two is there aren't enough products to fuel
the innovation that we need to revitalize communities.
Senator Duckworth. Thank you.
Ms. Kaufman.
Ms. Kaufman. So I think the top two things, the first is
really around how you can support diverse entrepreneurs. Both
of my co-witnesses have talked a lot about some of the funding
opportunities, but for me, it breaks down to two things. You
need funding and you also need connections to other people
through a network.
Both of my co-witnesses speak to the funding piece and/or
any opportunities around grants, but I think that there may be
opportunities to elevate some of these diverse entrepreneurs. I
truly do believe that more younger founders need to see people
who look like them in leadership roles so anything that the
Government can do to invite them to DC or elevate them or give
them a platform so that they can be seen by others would be
very important.
The second thing is that there are a number of great things
going on in the private sector that I think the Government can
put some backing behind. For example, Melinda Gates has pledged
$1 billion to gender equality and I think that that is a
wonderful initiative that could use more support.
Senator Duckworth. So when you talk about networks, are
you--Ms. DiMenco certainly when you think about, where do the
other tech startups that are run by men, where are they getting
their access capital? Some of it is, and you sort of touched on
this, personal relationships, networks, and the kind of things
that you are talking about. Beyond just seeing a role model,
but you know, if you don't know somebody who doesn't know
somebody, then you don't have someone to invest in your startup
the ways of other more traditional, you know males get that
investment. Am I touching on that correctly?
Ms. Kaufman. So, yes, you don't know what you don't know,
right, and in certain communities and in certain networks that
you might grow up in or live in you have access to people that
can help you. But there is another issue and it addresses, for
people like you. If we admit it or not, we have an affinity for
people that look like us. There is a comfort level. There is a
trust. There is a belief, and we need to ensure that those that
are making decisions look more like our communities.
In corporate America, it starts at the board level. You
don't advance women and minorities when the board doesn't
reflect that. The same is true of venture capitalists, right?
They all look a certain way and there are not bad people. They
just--we all have that affinity. So it is really, really
important that we encourage diversity as we monitor, guide more
of these venture capitalists that are coming together. We just
need to encourage more of that, and I think it will naturally
happen.
Senator Duckworth. Ms. Aglipay.
Ms. Aglipay. You know to add to that I think that the other
challenge is why you see more men accessing the capital,
venture capital is that simply women start off with less
assets. You know, they start off with less assets, so it is
difficult for them to find the capital to begin with when men
have a little bit more in their wealth to start a business.
And Emilia is right. You don't know what you don't know.
Hence for us one of the points that we are advocating for is
for increased appropriations for women business centers and
Small Business Development Centers. If you go to many of the
SBDCs and WBCs, you begin to see and you get the training and
technical assistance by people who look like them because I
believe these centers actually aim to have a diverse and
inclusive staffing so that they can provide the assistance
people need to navigate how to start the business, how to talk
to different sorts of capitalization regarding loans, venture
capital, or even a broker, how to navigate what type of funding
you need, when do you need to use a line of credit versus when
you need to take a term loan out.
So that definitely is one of it. It is the value in it,
funding the technical assistance centers and the resources
through the SBA is incredibly important and significant. And so
we advocate for more of that funding to go towards Women
Business Centers and Small Business Development Centers. Not
only that, I think one thing that people tend to forget is they
are quality assistance with certified trained staff, and it is
free for people. I could jump on a flight to San Francisco,
Silicon Valley, go to the SBDC there and it would be fine, and
people don't know enough about those assistance that they can
get through the technical assistance through the SBA. Second
part, the capital startup.
As I said, women do start off with less than men. You know,
they are not connected to the technical assistance that they
need. Part of it is because we do need to fund WBCs and SBDCs
more. But also they are turning to these alternative ways
that--we need more flexible capital like for the CDFIs but
unfortunately we are competing in a space in the financial
world where there is a ton and a plethora of online funders.
And some of them may be great but some are not, and because
it is not regulated right now by the Federal Government, many
times entrepreneurs, especially women and owners of color are
turning to the quick online sources for funding for capital and
that sets them a step back into developing their businesses.
Many of them are turning to merchant cash advances or they see
a company that is on the New York Stock Exchange and assume
that because the company is on the New York Stock Exchange, it
must be regulated. It is not.
Or they will see a celebrity person from a show who is a
businessman promoting a small business lending product, which
in fact is not regulated. One of the things here in Chicago
when we work with our partners like WBDC and others is we often
hear business owners of color and women are falling prey to
these quick cash capital products as well which are
unregulated. Fees can go as high as 400 percent and they
oftentimes want access to your bank accounts and cash
statements for immediate payment even if you have no sales for
that day.
Senator Duckworth. Thank you.
Ms. DiMenco. I would like to respectfully clarify something
Geri said who I admire very much. We do not provide free
services. They are paid for by our tax dollars. We just do not
charge for them.
[Laughter.]
Senator Duckworth. Well, this gets to my next question, Ms.
DiMenco. You mentioned that the WBDC has had to raise private
dollars to continue programs such as ScaleUp, which is now
discontinued, and FAST grants, for example. And then those are
not always awarded in every State. How successful have you been
raising these private dollars to continue these programs even
after they were discontinued or did you not receive those
dollars for--having received them for 2020, for example.
Ms. DiMenco. So as it relates to SCALA, the pilot that was
funded by the Small Business Administration gave us the data
and gave us the--because it was targeted to businesses that
were already established, but it was for growth, we were able
to attract corporate dollars for that. But if not for the pilot
and not for the data, the group, the success, and the growth
from that program, we would not have been able to raise that
money.
Corps were delighted to have funding for 2020. Corporate
funding is not always sustainable with changes in CEO levels.
The average life of a CEO used to be 7 to 10 years now it is 3
to 5 years and that results in priorities changing. So what is
great about public funding is it helps us at an earlier level,
and it is more sustainable. Regarding the FAST funding, it
ended on the 30th of September and we are in pursuit of private
funding, but we have not achieved--we have not gotten private
funding for 2020 yet.
Senator Duckworth. Thank you. Ms. Kaufman, giving your
experiences as a successful entrepreneur business woman working
in Silicon Valley and on Chicago, what key differences do you
see between here and the Bay Area, and are there things that
can be done differently or better either here or there to
promote greater diversity in tech?
Ms. Kaufman. So my observations of over the past four years
of being here is that culturally we are much more risk-averse
in Chicago than in the Bay Area. And I mean that at a societal
level meaning if an individual wants to pursue an
entrepreneurial path, that may mean me raising an eyebrow and
not ending frowned upon in some circles. Similarly with my
students at Northwestern who have been I would say kind of
programmed up to achieve, they think that there are certain
jobs with titles that lead to success and they are kind of
looking for the next stepping stone.
So kind of breaking that down for some of our top-achieving
students and helping them understand that there are other paths
in life. And I also see it when it comes to the funding
standpoint, which is that startups in Chicago tend to have to
prove themselves in their revenue model much more so to receive
venture capital funding versus in the Bay Area you can get an
idea in a napkin funded.
Senator Duckworth. So do you think there is a difference
though? I mean, we are talking about between minority- and
women-owned businesses. I mean the statistics also said that
the growth in Black owned entrepreneur firms rose 168 percent
over the last several years. So I think that there is a desire,
the ability, and the passion to take a shot at it among the
minority community and I think sometimes it might even be--this
is just me speaking--I always feel like there is a sense of no
one else is going to give you a job, I might as well try and
start something myself. Is that not carrying over into tech? Is
that what is happening where you see entrepreneurs----
Ms. Kaufman. I think so. I think those stats most likely
apply to--when you look at all new businesses, probably the
vast majority of them are small businesses. We are not thinking
of the big technology companies that you hear of. I think we
have seen more women taking companies and taking them public
over the last maybe five years. I cannot think of a woman of
color who has taken a company public in the same period of
time.
Senator Duckworth. Thank you. Ms. Aglipay, do you want to
say anything about entrepreneurship among women of color in
terms of whether tech or general entrepreneurs with the small
businesses?
Ms. Aglipay. Yes. I mean, I think for women of color what
it is, is it speaks to what Melissa was saying regarding the
lack of networks as well for providing the assistance that you
need not only from mentors but also peer mentors, too. When I
speak with a lot of women of color who are entrepreneurs, I
find that they can't find it in the mainstream so they are
informally creating their own networks, you know, with one
another so that they could feel more supported simply because
the added fact that they happen to be a person of color and are
facing barriers that most other--if you are not a person, you
are not sympathetic to the challenges that you have wondering
if you didn't get that loan or you didn't get that funding from
your pitch because you are also a woman and on top of that
woman of color.
So it is also dealing with the gender, cultural norms there
within accessing capital and getting that network that you
need. I believe there needs to be more funding to support women
of color mentorship networks which would be fantastic if we
accorded that to Women Business Centers to help foster more
formal networks across the country for women in the tech field
to bring that there and to find ways to leverage their assets
and navigate capital, too. So there is a, trying to say, you
know, a colorism factor for women entrepreneurs who are of
color that impacts the way that they view how they start their
businesses and the fact also many of them, women and women of
color, start with less assets, too.
Senator Duckworth. Thank you. Well, I want to thank each of
the witnesses from the first panel. We have a limited amount of
time. I could keep on going, but this is not the last time we
are going to discuss these issues. And so I want to thank the
first panel for being here and for your participation, and we
are going to take a couple minutes and switch to panel number
two. Thank you.
We will move on to our next panel. As you are settling in,
I will start introductions in the interest of time. We have Ms.
Kimberly Meek, Ms. Katie Kollhoff, and Ms. Patrice Darby. Ms.
Meek is Founder and CEO of Hacha Products Corporation, and its
subsidiary, SolvePFAS Group.
Hacha Products is an industrial product distributer
specializing in products and services used in facilities
maintenance, repair by operations, and is a certified woman-
owned business enterprise--minority business enterprise, an
economically disadvantaged, woman-owned small business.
SolvePFAS is a vertically integrated laboratory and data
company dedicated to testing and tracking PFAS in the Nation's
water supply.
Ms. Meek has 30 years of experience as a business owner and
has been able to use a portion of her business profits to fund
local before and after school meal programs. Next we have Ms.
Katie Kollhoff. Ms. Kolhoff is a Co-Founder and CEO of NUMiX
Materials, an ion exchange materials company specializing in
the removal of heavy metals from complex liquid streams
complemented by the recycling of valuable metals within the
domestic supply chain. She leads a team at NUMiX, manages
customer and stakeholder engagement, as well as develops and
executes business strategy. She is a chemical engineer with 15
years of experience in chemical process performance analysis,
risk management, and hazardous chemical operations.
Finally, Ms. Patrice Darby. Ms. Darby is the Founder and
CEO of GoNanny, a child care management and logistics platform
that provides child care solutions for families, child center
programs, and institutions. Through her digital platform, she
has paired families with over 200 childcare professionals who
are vetted through the proprietary system she and her team
created. Ms. Darby has over a decade of childcare experience
and is committed to helping families develop more balanced
lives by merging childcare with technology. Welcome to each of
you and we will begin with Ms. Meek.
STATEMENT OF KIMBERLY MEEK, FOUNDER AND CEO, HACHA PRODUCTS
Ms. Meek. Thank you. Well, good afternoon, Senator
Duckworth. I am honored to share my testimony with you today.
Technology startup success rate data are commonly accepted but
they never tell the whole story. Minority and women
participation rates are far lower to begin with and failure
rates are far higher. Thus for diverse technology
entrepreneurs, a large percentage of an already small sample
size fail.
Mere survival is considered a success but to truly succeed,
to thrive and grow, access to tech talent and financial capital
are critical. For any startup to survive requires sound
business planning, access to market, and a well-developed
solution. With a toehold in the market, the entrepreneur's own
efforts can sustain the business indefinitely with cash flow.
Diverse entrepreneurs in Illinois are fortunate to have several
resources available, including the Women Business Development
Center and the Chicago Minority Supplier Development Council.
These organizations have proven invaluable to diverse
entrepreneurs and established businesses including mine. But
for a tech startup to grow and thrive beyond the first years
requires multi-discipline strategic and tactical planning, a
unique or superior solution, access to broader markets, and
especially talent and financial capital. Again, diverse
entrepreneurs benefit from resources like the WBDC and the
CMSDC for planning and market access, but the war for talent in
a robust economy and private capital in a bidding war for
retiring Baby Boomers businesses leave diverse tech
entrepreneurs with few options.
Allow me to illustrate with my own company, Hacha Products
Corporation, founded in 2015 with my own personal funds and
with help from the WBDC and the CMSDC. In early 2019, we
launched a subsidiary, SolvePFAS, funded with internal retained
earnings. We had an extraordinary opportunity and a business
model to capture it. SolvePFAS is a vertically integrated
laboratory and data company dedicated to testing and tracking
per- and polyfluorinated alkyl substances in the Nation's water
supply. PFAS are a large group of manmade chemicals that are
fire resistant, and repel oil, stains, grease, and water.
Introduced in 1945, they were used for decades in fire-fighting
foams, fabric and carpet stain repellants, nonstick cookware,
waterproof clothing and shoes, fast food wrappers, personal
care products, and many other consumer goods.
And though they have been gradually, voluntarily phased out
of U.S. manufacturing processes, imported products are likely
to still contain them. These chemicals are very persistent,
meaning they do not break down easily and they are found at low
levels throughout the environment in air, water, and soil. The
Federal and State Departments of Human Health Services have
found them in a significant number of drinking water supplies
across the United States and fully expect to find more. PFAS
exposure poses a significant harm to human health.
Unfortunately, they bioaccumulate in human tissue over many
years and remain forever. The CDC reports that PFOA, the toxic
chemical compound used to make Teflon, is now in the blood of
99 percent of Americans. The SolvePFAS market is quantifiable
and growing rapidly. Our solution is unique and compelling,
developed in collaboration with five world class research
institutions, the University of Chicago's Pritzker School of
Molecular Engineering, The Center for Data and Computing, and
Searle Chemistry Laboratory, as well as Argonne National
Laboratory, and The University of Illinois at Chicago Mass
Spectrometry Laboratory, and with best in class industry leader
Agilent Technologies.
We have built a dedicated product laboratory in Chicago as
a means to an end to generate PFAS data. This issue is fast
becoming a reoccurring topic in C-suite and boardroom
discussions. Ultimately, we enable risk management through data
for every manufacturer that uses water-based operations. With a
promising market and a unique solution, SolvePFAS is primed for
stellar growth. And yet, two systemic risk factors threaten
access to talent and affordable financial capital.
Historically, minority and women entrepreneurs have
struggled for even proportional access. Without it, chances for
profitable, sustainable growth are greatly reduced at the
onset. My recommendation, an endowed, proven boots on the
ground organization with discretionary funds and the authority
to deploy it to finance growth. No one is closer to diverse
entrepreneurs than the WBDC and the CMSDC. No one understands
the strategies and hacks better than they do.
Senator Duckworth, I sincerely appreciate your interest in
tech entrepreneurs like me. Thank you for inviting me here
today, and for your time and consideration.
[The prepared statement of Ms. Meek follows:]
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Senator Duckworth. Thank you.
Ms. Kollhoff.
STATEMENT OF KATIE KOLLHOFF, CEO, NUMIX MATERIALS, INC.
Ms. Kollhoff. Good afternoon and thank you for the
opportunity to testify today. Thank you, Senator Duckworth, for
your time and your interest in entrepreneurship, and hard work
on behalf of the people of Illinois and the United States
alike. We really appreciate that, and we appreciate your
representation. My name is Katie Kollhoff. I am a Co-Founder
and the CEO of an early stage, deep technology company, NUMiX
Materials.
My co-founders and I are developing more efficient ways to
remove dissolved heavy metal contamination from water to enable
better water treatment complemented by concentration and
recycling of valuable metals within the domestic supply chain
of those same metals. Using the power of chemistry, we extract
those offending metals using less time, less material, and
creating less waste than conventional processes. The problem we
are tackling affects every industry and every individual and
solving it in the face of a changing climate becomes
increasingly important as we necessarily move toward climate
resilience.
In our company, we approach our technical issues scale-up
and testing with optimism, though we have faced a number of
challenges in our short life--we are about a year and a half
old at this point. While our path is unique, many entrepreneurs
face similar struggles. Starting a new business in the United
States is difficult by any measure. Starting a technology-based
business increases the complexity, and since technology is
commonly understood as software, the uphill battle for physical
science companies like ours is yet again steeper. We recognize
three major barriers as we work toward meeting our business and
technical goals, and the first of those we have heard a lot
about so far today, access to capital.
The second representation, mentorship, and education. And
the third is affordable healthcare. First, access to capital is
widely recognized as a challenge. I have a lot of the same
statistics that have already been mentioned here today so I am
glad to see that that work checks out. Most adventure-backed
firms are software firms. In the private investment space,
outsized returns are expected within the life of the fund,
which is typically 10 years. Compared to software companies,
which can scale exponentially given the virtual nature of their
delivered product, private investment is scarcer to come by for
transformational deep science-based businesses.
Of that private investment, we see only patient capital
from philanthropic funds and wealthy individuals willing to
invest in step changes that will promote resilience in the face
of climate change and allow humans to sustain life on earth. By
way of an example, as China will no longer take our recycling,
what do we do with our waste at the end of its life when we can
no longer land apply the biosolids from our water treatment
processes because of PFAS contamination or lead content? What
do we do with it? Where do the physical materials to
manufacture the next generation of mobile phones and computers,
internet of things, sensors, batteries, electrical systems,
solar panels, where do those materials come from? How do we
make food last longer?
The goal of waste reduction and resource preservation is
frequently squarely at odds with the revenue generation model
for VC-backed high-growth companies, as the sustainability
field is seeking to decrease the overall materials consumed,
not increase it by attractive multipliers year-over-year as VC
requires. These step changes must come from paradigm shifts in
the way we source, create, use, and dispose of physical
materials, with chemistry at the very heart of our problems and
our solutions. Second, I would like to address representation.
As an example of barrier to entry in venture capital for
diverse investors is also quite high. Around 8 percent of
partners at the largest VC firms are women, and African-
American and Latino individuals comprise less than 1 percent.
So then it is not really surprising that the entrepreneur pool
mirrors the VC pool as we heard from--heard earlier that
investors tend to fund founders who look like them.
Meanwhile women comprise 47 percent of the workforce in the
United States, yet they hold less than 25 percent of the jobs
in the STEM industries, with the gap widening at the top where
women make up just 2 percent of tech CEOs, and again generally
in software technology. We need inclusive communities tackling
the biggest problems and I believe this starts with early
education focusing on real-world problem-solving.
Finally, access to affordable healthcare is perhaps the
most immediate barrier facing entrepreneurs as they decide to
take the leap into entrepreneurship. There is even a name for
it--entrepreneurship block. For an early stage company, a
medical emergency for an uninsured or underinsured co-founder
would spell the end of the enterprise. Without private
investment, without independent wealth, the healthcare system
in the United States exists as a significant barrier to
technical entrepreneurship.
I thank you again for the opportunity to share our story. I
urge you to continue inviting experts to testify. I urge you to
continue hosting focus groups with entrepreneurs to hear the
issues that we face, and to continue listening to the people
who are stubbornly focused on making dreams into reality and
helping those around them along the way.
Thank you.
[The prepared statement of Ms. Kollhoff follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Duckworth. Thank you.
Ms. Darby.
STATEMENT OF PATRICE DARBY, FOUNDER AND CEO, GONANNY
Ms. Darby. Thank you so much, Ms. Duckworth, for giving me
the opportunity to speak here today. I really appreciate it. As
a second-generation childcare expert and entrepreneur, I was
equipped early on with the capacity and willingness to develop,
organize, and manage a business within the childcare industry.
This grew as a lifestyle of solving massive problems and
creating timeless impact. I remember studying the historical
development of childcare and I was intrigued.
However, I was also faced with the realization, in order
for childcare businesses to be sustainable over the next two to
three decades, these businesses must merge with technology.
This led me to building a high-growth tech startup. GoNanny is
a childcare management and logistics platform providing
childcare solutions for families, child-centered businesses,
and institutions. We have built a proprietary vetting system
that has validated the dependability, safety, and
trustworthiness of over 200 childcare professionals. We have
utilized technology to develop a safe infrastructure with a
proven and tested methodology for executing short incremental
child care and safe pick-ups and drop-offs seamlessly.
Now, we are equipping childcare institutions with this
technology infrastructure as a tool for creating sustainability
and economic growth for all small businesses within the child
care sector. I share this background because there is no
coincidence to the structure of our business model.
When I started this journey in tech, I realized the largest
barrier to my success was access to the capital necessary for a
high-growth tech startup--that is a different kind of capital.
In 2016, I took my business plan to Chase Bank, the Small
Business Administration, Accion Chicago, and the Women Business
Development Center in search of getting capital to launch my
business. I was turned down by all four. Why? Because I did not
have collateral. I just came out of college. I also did not
have credit. I never started building my credit and so I was
rejected. That was very challenging, despite the fact that
these institutions publicized funding for small businesses who
could not get approved by traditional lenders.
I needed customers to validate my model but how do you get
customers without the funding to build the platform? The only
solution I had was to sell everything I owned, move out of my
condo, and move into my sister's apartment. I slept on the
floor for eight months. And I used that funding to start my
company GoNanny. That was my startup capital. Through humility,
grit, and determination I eventually created a demo. I took my
product to downtown Chicago and I stood on the corner of Wells
and North Avenue. Parents who walked by tried my demo and some
signed up for the service. I gained valuable customer discovery
and validation.
Quickly after, I had my first paying customers. GoNanny
experienced year after year growth by 240 percent via word of
mouth, and the influx was greater than our infrastructure could
support. Once again, I found myself in need of capital in order
to create the infrastructure necessary to scale my business. I
reached out to various funds, and institutions in order to
nourish my robust growth. This time with renewed confidence as
my business concept had been proven with significant revenue
induction and returning customers.
This is our second year of business and we have--over 80
percent of our customers have returned for the second year and
45 percent have increased their usage by 20 percent or more.
Unfortunately, despite all that I had accomplished and
regardless of projected growth, I still have yet to receive the
necessary funding that a high-growth tech start-up requires.
Funds like Accion Chicago and even the Entrepreneurs of
Color Fund are designed to create access to capital for
minority companies but still adhere to a traditional lending
structure, or the process is extremely challenging, creating an
additional barrier to entry, thereby eliminating the majority
that it was designed to help. My hope is that the information
gathered here today creates a system that removes these
barriers to entry based upon feedback from entrepreneurs like
myself and others represented here today.
[The prepared statement of Ms. Darby follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Duckworth. Thank you. Maybe some of the folks on
the first panel can help you.
[Laughter.]
Well, thank you all for your opening statements. To begin
this panel, I would like to hear from everyone. Each of you
discussed your own unique challenges to beginning and growing
your business, but one persistent hurdle that all of you have
is finding access to capital. Can each of you, starting with
Ms. Meek, discuss how you overcame or are working through that
hurdle, and you just touched on some of this, and what steps
the Federal Government can take to make sure that tech business
owners in the future have an easier time finding the sources of
funding that you need.
Ms. Meek. Thank you, Senator Duckworth. I would say my
first barrier is that it is not only capital, it is not only
financial capital, it is human capital as well. I have been
fortunate with the WBDC to introduce me in a network and
actually always seem to open doors with me. I have been very
fortunate that through the WBDC, I met the University of
Chicago, then went to Argonne Labs, and I went to UIC, and that
whole process is just to me as important as financial capital,
and it exposed and really changed the direction of my company
based on finding this problem and then seeking a solution.
So I would say the WBDC helped overcome the networking
barrier that you speak of. As it relates to financial capital,
the WBDC has given me opportunities to the various grants and
various loans at times. But as a startup, it is difficult. I
have been able, you know, to fund this myself. Do I see an
opportunity? I think I am in a market where it is so important
and I am so committed, and I know that it is water. If I don't
get someone's attention about water, then I am doing something
really wrong and that is how I look at it.
And PFAS, I feel like I am now the spokesperson for Teflon
pans that, you know, tell them probably they do not want me
working for them. But I know that what I am doing is relevant,
so if it is relevant, all those barriers--I mean I am speaking
to a person who can overcome the obstacles. What am I going to
say? That is part of life and they can never stop us.
So it is just, to me, it is a step that I just have to keep
going and that if the financial is not there, I am going to
figure out how to make it there. Either that you know, we are
picking up some business through opportunity. And it seems like
everybody wants to give me money when I start making money.
When you don't need it, I always can get money from a bank.
[Laughter.]
Senator Duckworth. Ms. Kollhoff, how did you find access to
capital? How did you get that access?
Ms. Kollhoff. Philanthropic grants and Government-supported
grants have been key for us so far. We have been fortunate to
earn support from the Department of Energy's competitions such
as the now inactive Clean Tech University prize and the Argonne
National Lab-embedded entrepreneurship program called Chain
Reaction Innovations, which provides both funding and access to
laboratory space and resources for companies developing
physical technologies to take from the bench scale to market
ready.
We have participated in the Hallmark National Science
Foundation Innovation Corps program, which trained scientists
on developing commercial opportunities for deep technologies.
We have also received very early stage support from
philanthropic-backed organizations such as VentureWell. None of
these granting organizations has taken equity in our company
unlike many accelerator and incubator models, allowing us to
maintain control of our own company at its earliest stage and
preserve valuable equity for future fundraising and partnership
events.
These funding opportunities have ranged from $2,000 to
$220,00, providing the seed capital to de-risk the physical
technology and further develop their commercial opportunity.
And though we have not yet--we have not received funding
through the Small Business Innovation Research program yet--I
hope. It also comprises a key part of the funding landscape for
deep tech companies and note that the amount available through
each of those varies by the agency, and when budgets are cut
for certain agencies, the impact on associated entrepreneurship
efforts is also deeply affected.
For instance, BPA's program is the smallest of all the
agencies and that is where I think our solutions are the best
so that is pretty disheartening but also an amazing set of
programs that are vital to deep technology companies.
Senator Duckworth. Thank you. So, Ms. Darby, what are you
looking at now that you sold all your stuff the first year and
have nothing else to sell?
[Laughter.]
Ms. Darby. Yes, so we are, you know, speaking with
investors. The challenge with that is for my background, I
don't have any investors that are connected to me, you know, in
my family's sector. So it is really, you know, about networking
and getting more introductions. If people don't know you and
you are not connected to their network, they don't trust you
and you never get that meeting. It doesn't matter how much
revenue you brought in that year.
And so that is a big challenge. I was also looking, you
know, at funds that the State and the City of Chicago offer and
one of them was the fact that Chase Bank partnered with Accion
Chicago and introduced the Color Fund, the Color for
Entrepreneur Fund. And so I actually reached out to that fund
and was told that it is just that you go through the regular
system, and that regular system already denied me. So that
doesn't create access for people of color, even though they are
using it, you know, as a tool that should.
And so I think for us we are looking at, you know, is there
any funding out there for our company, our tech startup that is
supposed to be bringing in $3 million next year because we
closed a YWCA, Metropolitan Chicago contract and it is for the
next four years. And so I think, you know, I am trying to be
strategic about how do we, how do I find a mix of funding? Is
there access to funding from the State that could subsidize,
offset, you know, giving up some equity to investors.
Ms. Kollhoff. And can I add to that quickly? And so I think
that there are investment vehicles with State funds, but they
are often managed by typical VC firms who don't invest in
people like us, generally speaking. And so that is pretty
frustrating to note also that you know, even if there appears
to be a mandate, it doesn't necessarily feel like that is
actually getting through.
Senator Duckworth. Ms. Darby, I am going to follow up with
you after the hearing. We are running short on time. We could
go on, I could go on for quite a while, but I have time I think
just for one more question. And this will be for Ms. Kollhoff.
We know that the Small Business Innovation program is one of
the most valuable Federal programs for developing science-based
companies. Its goal is to stimulate tech innovation to increase
private sector commercialization and encourage participation
and innovation by small businesses across the country.
In your testimony you put forth ideas on how to improve the
SBIR program that go further than simply expanding it, which we
can all agree would be beneficial to keeping the United States
competitive in the global economy. Could you describe some of
these improvements and how they would help companies like yours
access that critical funding? What some of the improvements
could be?
Ms. Kollhoff. Yes, I would be happy to. So some of those
thoughts, I think deep matching funds here in the State of
Illinois would be incredibly useful to keeping businesses here
in Illinois. I know a number of other States have those and
they are incredibly valuable since the SBIR program is already
selecting the most competitive companies. It is a good
filtering mechanism as well.
I think that it would be interesting to provide healthcare
coverage for clusters of entrepreneurs including SBIR
recipients, other Federal funding recipients, or companies
younger than five years old. And then, I think it would be
valuable to allow a portion of the SBIR total to be used for a
commercialization or business person, if that person is a part
of that inclusive community that we are hoping to build more
of.
So right now there can be no allowance of a salary for non-
research personnel but allowing a diverse entrepreneur to take
a commercialization role as part of that SBIR funding would be
incredibly useful.
Senator Duckworth. Okay. Thank you. Do either, Ms. Darby,
Ms. Meek, want to add anything to some of those
recommendations?
Ms. Meek. No. I agree.
Senator Duckworth. We are out of time. I do apologize for
the short nature of this, but this will not be the last one of
these hearings. And I do want to thank both panels of witnesses
for coming forward and sharing your stories with us. We will be
following up with this when I go back, week after next.
I will get back to the Small Business committee and share
my experiences with my colleagues, and hopefully we can get
back to trying to fix some of the Federal programs and try to
find ways to address access for women- and minority-owned
business. Thank you again. And with that this hearing stands
adjourned.
[Whereupon, at 3:57 p.m., the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
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