[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

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

                             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
                            
                            
                            
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        Available via the World Wide Web: http://www.govinfo.gov
        
        
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              U.S. GOVERNMENT PUBLISHING OFFICE 
 39-847 PDF             WASHINGTON : 2020        
        
        
        
        
        
            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                     ONE HUNDRED SIXTEENTH CONGRESS

                              ----------                              
                     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

                              ----------                              

                           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

                              ----------                              


                       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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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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