[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
INVESTING IN AMERICA: HOW PRIVATE EQUITY
EMPOWERS MAIN STREET
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HEARING
BEFORE THE
SUBCOMMITTEE ON ECONOMIC GROWTH,
TAX, AND CAPITAL ACCESS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JUNE 5, 2025
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 119-013
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-591 WASHINGTON : 2025
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HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
JAKE ELLZEY, Texas
MARK ALFORD, Missouri
NICK LALOTA, New York
BRAD FINSTAD, Minnesota
TONY WIED, Wisconsin
ROB BRESNAHAN, Pennsylvania
BRIAN JACK, Georgia
TROY DOWNING, Montana
KIMBERLYN KING-HINDS, Northern Marina Islands
DEREK SCHMIDT, Kansas
JIMMY PATRONIS, Florida
NYDIA VELAZQUEZ, New York, Ranking Member
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
LAMONICA MCIVER, New Jersey
GIL CISNEROS, California
KELLY MORRISON, Minnesota
GEORGE LATIMER, New York
DEREK TRAN, California
LATEEFAH SIMON, California
JOHNNY OLSZEWSKI, Maryland
HERB CONAWAY, New Jersey
MAGGIE GOODLANDER, New Hampshire
Lauren Holmes, Majority Staff Director
Melissa Jung, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Beth Van Duyne.............................................. 1
Hon. LaMonica McIver............................................. 2
WITNESSES
Mr. Jordan Bastable, Co-Founder and Managing Director, LongWater,
Dallas, TX..................................................... 5
Ms. Sarah Fields, Chief Executive Officer, Jetta Corporation,
Edmond, OK..................................................... 6
Ms. Senofer E. Mendoza, Founder, General Partner, Mendoza
Ventures, National Advisory Committee for Innovation and
Entrepreneurship, Brookline, MA................................ 7
APPENDIX
Prepared Statements:
Mr. Jordan Bastable, Co-Founder and Managing Director,
LongWater, Dallas, TX...................................... 23
Ms. Sarah Fields, Chief Executive Officer, Jetta Corporation,
Edmond, OK................................................. 26
Ms. Senofer E. Mendoza, Founder, General Partner, Mendoza
Ventures, National Advisory Committee for Innovation and
Entrepreneurship, Brookline, MA............................ 28
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
New York Times Letter........................................ 38
UnionLeader Letter........................................... 43
INVESTING IN AMERICA: HOW PRIVATE EQUITY EMPOWERS MAIN STREET
----------
THURSDAY, JUNE 5, 2025
House of Representatives,
Committee on Small Business,
Subcommittee on Economic Growth,
Tax, and Capital Access,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2360, Rayburn House Office Building, Hon. Beth Van Duyne
[chairwoman of the Subcommittee] presiding.
Present: Representatives Van Duyne, Bresnahan, McIver,
McGarvey, Latimer, Conaway, and Goodlander.
Also Present: Representatives Williams, and Wied.
Chairwoman VAN DUYNE. We are going to go ahead and open our
meeting this morning with our Chairman giving our prayer and
our Pledge.
ALL. I pledge allegiance to the Flag of the United States
of America, and to the Republic for which it stands, one
nation, under God, indivisible, with liberty and justice for
all.
Chairwoman VAN DUYNE. So, good morning, everyone. I now
call the Committee on Small Business to order. And without
objection, the Chair is authorized to declare a recess of the
Committee at any time. Pursuant to Committee rules, I ask
unanimous consent that Representative Wied be waved on to this
hearing for the purpose of asking questions. Without objection,
so ordered.
I now recognize myself for my opening statement.
Well, welcome to today's hearing, Investing in America and
How Private Equity Empowers Main Street. And first, I want to
thank our witnesses for all being here today. We know that you
have traveled a long way to share your experiences and your
perspectives, and we greatly value your time and your voice.
Small businesses are the foundation of our communities and
the driving force of the American economy. And whether it is a
family-run distribution center, a growing manufacturer, or a
tech startup finding its footing, these businesses are
responsible for nearly two-thirds of the new job creation in
America.
In North Texas, we have seen how entrepreneurs and small
family-run businesses alike can build long-lasting enterprises
and often outcompete their larger counterparts. Today's hearing
will explore how private equity serves as a critical tool in
helping entrepreneurs gain access to capital and enjoy the
benefits of a long-term partnership with investors that help
them navigate challenging barriers with expertise and key
resources.
From day one, the Trump administration has worked with
congressional Republicans to roll back the burdensome
regulatory red tape that for too long has blocked private
capital from reaching the businesses that need it the most. And
by removing those unnecessary barriers, we can ensure that
investors and entrepreneurs have the ability to make crucial
investment decisions in our communities.
In 2024, 85 percent of all private equity investments went
to supporting small businesses. And these investments are
driving local job creation, strengthening operations, and
fueling business growth to new levels. Unlike traditional
funding methods, private equity can bring more than just
capital and allow businesses to scale up, adopt new
technologies, and strengthen their workforce. Across every
state and congressional district, private equity is empowering
American entrepreneurs to build and expand their businesses
from the ground up.
But for far too long, private equity has been concentrated
in places like Silicon Valley, New York, and Boston. And now
cities like Dallas and Austin are emerging as dynamic hubs for
private equity investors and those seeking investment in small
businesses. In fact, the downtown Dallas area represents one of
the fastest growing innovation and investment corridors in the
country.
And I am pleased to be able to hold this hearing today to
highlight the role of private equity in the small business
ecosystem and discuss how we can bring these opportunities to
more Americans throughout the country. And thank you again for
being here today and I look forward to the conversations ahead.
I now want to recognize the distinguished Ranking Member
from New Jersey, Ms. McIver, for her opening remarks.
Mrs. MCIVER. Thank you so much, Madam Chair. Good morning
to everyone.
Small businesses are an essential part of the American
economy. They account for more than 40 percent of U.S. GDP,
create approximately two-thirds of new jobs, and employ nearly
half of all private sector workers. Financing and access to
credit is a central component to starting and growing a small
business. Traditionally, small businesses have been more
reliant on bank financing for their credit needs than large
businesses. But as we will explore today, in recent years,
small businesses have increasingly relied on private forms of
investment and credit to meet their financing needs.
As we heard at previous full Committee hearing in April,
the SBA's SBIC program is a responsible and effective method
for small businesses and startups to partner with private
equity and venture capital investors. Currently, the SBA
partners with more than 300 privately owned and managed SBICs
to provide financing to small businesses with private capital
the SBIC has raised through the SBA guarantee debenture.
As of 2024, the SBIC program has made more than 194,000
investments and deployed more than 130 billion of capital to
small businesses. More broadly, private funds like private
equity, private credit, and venture funds have become a
critical component of our small business financing ecosystem,
particularly those businesses that need retooling or just on
the cusp of growth. For example, the private equity industry
invested in 18,000 businesses in 2022, 40 percent of which had
fewer than 50 employees. Likewise, in 2022, venture capital
activities surpassed the 200 billion mark, reaching 209.4
billion, making 2022 the second highest year ever for VC
investment.
So while there is no doubt that the role private funds play
in the American economy and America's small businesses is
significant, these funds can also present significant risk for
small businesses, their employees, and their communities. It is
important to note that these funds have drawn significant
criticism over the years for the strategies they at times
choose to employ. And unfortunately, like with conventional
bank loans, if we look at these numbers more deeply, the
research demonstrates that women, minority-owned, and small
business outside certain geographic areas have less access to
private funds than their white-owned counterparts.
For example, Black and Hispanic female entrepreneurs
receive less than 1 percent of all venture capital investments
in 2022--in 2020, excuse me. That must change. Investing in all
of America's small businesses and startups benefit not only
those businesses, but the communities they service and our
nation's entire GDP. I look forward to exploring all of these
issues and more to ensure our private markets are appropriately
regulated, transparent, and working for the long-term benefit
of our small businesses and our employees.
With that, Madam Chair, I yield back.
Chairwoman VAN DUYNE. Thank you very much.
I now recognize the Chairman of the full Committee from the
great state of Texas, Chairman Roger Williams for an opening
statement.
Mr. WILLIAMS. Thank you, Madam Chair. Thank you for calling
this hearing and also thank you to all the witnesses who have
come here today, especially the ones who traveled all the way
from the great state of Texas.
As a small business owner myself and an advocate for
entrepreneurship, I have seen firsthand the critical role small
businesses play, not just as job creators, but as engines of
innovation and community development. From local manufacturers
to family-owned retailers, small businesses drive the America's
economy. Yet too often, these businesses face significant
barriers when it comes to securing the capital they need to
grow, compete, and reinvest in their business. So that is where
private equity can play a crucial role. When done right, it is
more than just an investment. It is a partnership in helping
businesses scale up, hire more workers, and stay competitive in
a growing marketplace.
Private equity is a powerful and at times misunderstood
tool in this landscape. It can provide more than just funding.
It brings strategic support, operational expertise, and long-
term partnership. So for small businesses navigating complex
markets and evolving challenges, that kind of backing can mean
the difference between stagnation and scalable success.
Here on this Committee, it is our goal to ensure small
businesses across America compete for private investments. When
private investors look at small businesses outside of the
traditional coastal elite hubs, everyone wins. Whether it is a
rancher in Texas or a banker--or a baker in Iowa, the
entrepreneurs present a prime partnership opportunity for
private equity firms.
So this is especially true in sectors critical to national
security, like manufacturing. The revitalization of American
manufacturing will ensure that American economy remains
resilient. It also presents an opportunity for private
investors to identify reemerging manufacturing sectors poised
for growth.
So many small businesses may be at the stage where they are
ready to seek private investment, but sometimes they may not
yet be in a position to attract private equity investments.
This is where the SBA comes into play. So just last month, I
introduced H.R. 3174, the Made in America Manufacturing Finance
Act of 2025, a bill that would raise the maximum SBA loan for
American manufacturing from 5 million to 10 million. This will
not only enable existing U.S. manufacturers to grow their
business, it will help bring more manufacturing back to the
U.S.
So this Committee, alongside the Trump administration and
Administrator Loeffler, will once again prioritize policies
that support Main Street America. Now we all can create an
environment for Americans where small businesses can thrive and
unleash the full potential of private equity investment.
So I want to thank again the witnesses for being here. I
want to thank my colleague Congresswoman Van Duyne for holding
this hearing, and I look forward to our conversation ahead.
Thank you.
Chairwoman VAN DUYNE. Thank you very much, Mr. Chairman.
I will now introduce our witnesses. Our first witness here
with us today is Mr. Jordan Bastable. Mr. Bastable is the
cofounder and managing director of LongWater in Dallas, Texas.
Mr. Bastable cofounded LongWater in 2009 following years of
experience as a consultant with FTI Consulting and as a senior
finance manager with Lineage Power. Prior, Mr. Bastable
cofounded a private investment firm while he was still in
college, while also working for a multibillion-dollar million
hedge fund where he gained experience in day-to-day operations,
deal flow, and investment management aspects of running an
investment firm. Mr. Bastable graduated from Texas Christian
University----
Mr. WILLIAMS. Go Frogs.
Chairwoman VAN DUYNE.--where he earned a bachelor of
business administration. Thank you for joining us today and I
am looking forward to our important conversation.
Our next witness here is Ms. Sarah Fields. Ms. Fields is
the chief executive officer at Jetta Corporation in Edmond,
Oklahoma. Ms. Fields joined Jetta Corporation in January of
2015 with decades of experience in business development and
marketing consumer products. She previously served as a senior
vice president and then as president at Century LLC. Ms. Fields
graduated from Cameron University with a bachelor of sciences
in engineering technology and earned her master's of business
administration from the University of Oklahoma.
And thank you for joining us today and I am looking forward
to today's important conversation.
I will now recognize the Ranking Member from New Jersey to
briefly introduce our last witness appearing before us today.
Mrs. MCIVER. Thank you, Madam Chair. I would like to
introduce Ms. Senofer Mendoza, cofounder of General Partner of
Mendoza Ventures, a Boston-based Pre C, fintech, AI, and
cybersecurity venture capital firm. After having a career in
enterprise sales and hospitality design, she began Mendoza
Ventures to address the growing funding gap in the pre-C
investment stage. The firm was launched in January of 2016 and
invested in internationally in the cybersecurity, AI, and
fintech space. She is a published author, innovator, and
thought leader in the technology startup and VC space with a
passion for equity and diversity.
Ms. Mendoza, thank you for appearing before the
Subcommittee today. We look forward to your testimony.
Thank you. I yield back.
Chairwoman VAN DUYNE. Thank you. We appreciate all of you
being here today.
And before we begin, I just want to give you just a little
bit of background. Where do we go? I want to remind you of the
testimony and you have 5 minutes. The Chairman is much more
strict than I am. At 5 minutes he will cut you off, but you are
going to hear me just kind of wrap a little bit at 5. So just
try to hurry up and finish your testimony and conclude it.
So I want to recognize Mr. Bastable for his 5-minute
opening remarks.
STATEMENTS OF MR. JORDAN BASTABLE, CO-FOUNDER AND MANAGING
DIRECTOR, LONGWATER; MS. SARAH FIELDS, CHIEF EXECUTIVE OFFICER,
JETTA CORPORATION; AND MS. SENOFER E. MENDOZA, FOUNDER, GENERAL
PARTNER, MENDOZA VENTURES, NATIONAL ADVISORY COMMITTEE FOR
INNOVATION AND ENTREPRENEURSHIP
STATEMENT OF JORDAN BASTABLE, CO-FOUNDER AND MANAGING DIRECTOR,
LONGWATER
Mr. BASTABLE. Chairman Van Duyne and Ranking Member McIver
and Members of the Subcommittee, thank you for holding this
important meeting today. It is a topic I am very passionate
about.
My name is Jordan Bastable and I am the cofounder of
LongWater Opportunities, a private investment firm focused on
the lower middle market. I also serve on the board and council
chair of the Small Business Investor Alliance, which represents
funds that invest and support the growth of small businesses
across America.
Our journey began in 2009 with two complementary
perspectives: one rooted in the experience of operating a
family-run business in rural America, grappling with succession
and capital constraints; the other is shaped by exposure to
large private equity firms and the untapped potential in
unserved markets. Together we saw an opportunity to invest in
small family-owned businesses, especially those lacking
succession plans and access to institutional capital.
Our first investment, we approached over 20 banks before
finally securing financing. However, under restrictive terms.
That experience revealed a larger truth: small businesses
consistently face systematic barriers to growth capital and
those barriers are especially acute in underserved markets.
Today, LongWater has offices in Fargo, St. Louis, and Dallas.
We provide a range of investment solutions from controlling
equity to direct loans. But we are more than capital providers.
We are partners. We support our portfolio companies with
strategic guidance, operational expertise, and access to
networks they may not otherwise ever reach. We help businesses
scale, professionalize, and thrive. This is not transactional,
it is relational.
Let me be clear. The idea that private equity succeeds when
businesses fail is simply false. In the lower middle market,
success comes from helping small businesses grow into larger,
stronger enterprises that create lasting jobs and value. Let me
give you an example. We invested in a small business called
Excalibur Container. We take shipping containers and convert
them to ground level offices you might see at construction
sites or energy sites. We came into that business and really
helped provide financial visibility for the business, expanded
benefits, instituting 401(k)'s, comprehensive health care,
tuition reimbursement, and programs for continuing education.
We also invested in the infrastructure, including cleaning
up and rehabbing old abandoned industrial sites and investing
in new capital equipment. We also invested in modernizing their
digital marketing strategy and bringing skills and expertise
that didn't already exist and that they did not have the
capital to invest in.
This is what aligned private capital looks like: capacity
building, local empowerment, and economic revitalization. Good
public policy should expand, not restrict, the capital options
available to small businesses. Whether it is a startup fighting
for market share or a second generation manufacturer navigating
succession or a rural enterprise facing technological
disruption, private investment is often the bridge between
survival and scale. In today's climate where traditional
financing is often constrained, private capital is not just
helpful, it is essential.
I look forward to working with the subcommittee to ensure
small businesses can access this kind of value-added capital
that helps them grow higher and succeed for the long term.
Chairwoman VAN DUYNE. Thank you very much.
I now recognize Ms. Fields for her 5 minutes opening
statement.
STATEMENT OF SARAH FIELDS, CEO, JETTA CORPORATION
Ms. FIELDS. Chair Van Duyne, Ranking Member McIver, and
Members of the Subcommittee, thank you for inviting me to speak
today. My name is Sarah Fields and I serve as the CEO at Jetta
Corporation. We are a U.S.-based bathtub manufacturer and have
been business for about 45 years, located in a suburb of
Oklahoma City. We have about 60 employees and generate about
$20 million in annual revenue and we have been partnered with
lower middle market private equity firm for about 2-1/2 years.
I want to share how that partnership has truly been an
accelerator for our business, not just by providing us capital,
but bringing to us expertise, support, and the kind of
involvement you may not expect from private equity.
We partnered with a smaller, more specialized private
equity fund that focused on U.S.-based manufacturing. For them,
a small business like us is not just one of many. We are a big
deal. That means we get direct access to senior partners,
senior partners that have manufacturing operations expertise.
They help us make quick decisions and they are people that are
willing to roll up their sleeves and come work in our business
with us to help us solve problems and move forward quickly.
Within the first year of their support, we have led to a 10
percent increase in production capacity and 8 percent increase
in our efficiency thanks to major improvements we were able to
make in our factory layout and our processes. They also helped
us uncover about $350,000 in annual material savings. That is a
massive change for us and is really significant to a small
business like us. We are now reinvesting those gains in
improving our workplace, updating our facilities and
workstations to improve retention. which is critical in our
manufacturing environment.
In addition, these operational improvements have made us
more competitive with much larger companies. We are now gaining
market share, improving profitability, and reinvesting in our
growth.
One of the biggest advantages for private equity for us has
been access to capital for acquisition, not just having to grow
organically. Without private equity, this would not have been
attainable for us. In the next six months, we plan to acquire a
second manufacturing facility, which will allow us to expand
our geographical reach, shorten delivery times, and serve a
much broader customer base across the country.
We are also in the process of restoring the production of
bathtubs we currently import. That move will help us improve
our supply chain resiliency and quality control. It will also
allow us to expand, making more American-made products. As a
result of that, we expect to be able to increase our workforce
about 30 percent over the next 18 months.
Private equity partnership for us and for me personally has
been transformative. It is helping us grow faster, operate
smarter, and create jobs, all while staying true to who we are,
a small American manufacturer, and staying true to our values
and our culture.
Thank you again for allowing me to share my story. I am
super excited to be here and happy to answer any questions you
may have.
Chairwoman VAN DUYNE. Thank you very much.
The Chair now recognizes Ms. Mendoza for 5 minute opening
remarks.
STATEMENT OF SENOFER MENDOZA, FOUNDER, GENERAL PARTNER, MENDOZA
VENTURES AND THE NATIONAL ADVISORY COMMITTEE FOR INNOVATION AND
ENTREPRENEURSHIP (NACIE)
Ms. MENDOZA. Thank you, Chairman Van Duyne, Ranking Member
McIver, and Members of the Subcommittee for the opportunity to
speak on the necessity of entrepreneurship as a cornerstone of
American competitiveness today. I am pleased to testify today
as the founder and general partner of Mendoza Ventures, a
privately held venture capital firm investing in AI,
cybersecurity, financial technology, and dual-use companies,
and the founder and executive director of Mendoza Impact, our
philanthropic arm.
My family has lived the American Dream. We are self-made
entrepreneurs who built a venture capital fund out of a
technology exit. We live in the perspective that we are all
trying to promote fiscal responsibility, innovative technology,
and employing Americans to their absolute best capacity. Since
2016, our little fund has deployed over $30 million into the
American economy, sustained 15 portfolio companies, generated
more than 550 sustainable full-time jobs, created 140 million
in revenue for our portfolio in 2024 alone, and made essential
technology for our nation's tech stack in both the government
and the private sector. We have funded veterans, women, and
several minorities. In fact, our portfolio looks a lot like the
demographics of our great nation.
We have co-invested with some of the largest financial
institutions in the world and we have exited four companies,
creating generational wealth for other American families
through our company. We are philanthropists who mentor the
funds and founders following our lead. This is the place where
wealth is generated. Access to the American Dream is through
private equity. Over 50 percent of millionaires attribute their
success to the growth and scale of a family or privately held
business.
It is proven that liquidity constraints hinder access to
entrepreneurship. If you want to send a rocket, you need to
build a launchpad. You cannot disassociate main street
stability from our nation's entrepreneurial ecosystem. They are
completely intertwined. Venture lives in this capital stack,
creating wealth where others won't. And the introduction of
mega funds into an industry where the average fund size is 35
million, coupled with a slowing IPO and M&E market, means less
capital for smaller firms and less smaller firms.
Since 2021, 25 percent of all active venture capital firms
have closed. More capital is going to fewer firms, cutting out
the middle later, and that money is not going to make it to
main street. In contrast, A16Z closed 7.2 billion and just
announced a $20 billion mega fund. Funds like us enable main
street in a way that the mega funds do not. If you're deploying
that much capital, you have to write a larger check to get it
out in the typical 5- to 10-year period. So a startup trying to
raise today, like my colleagues here, are facing fewer firms.
And venture capital is facing the same statistics that we are
seeing among the population of a growing wealth divide.
Out of 91 billion deployed in Q1 of this year, 40 billion
of that went to OpenAI, another 4.5 billion went to the runner-
up, Anthropic. Now, take into account that the two funds
leading those rounds share many LPs, endowments, foundations
that have invested in them, and you see that we have a growing
concentration risk in the venture capital ecosystem.
In finance, when we have a really big problem, we like to
call it an opportunity. Failure is learning. And if you can
fail fast, you can learn and implement fast and beat the odds.
Eric Ries famously says success is not delivering a feature.
Success is learning how to solve the customer's problem. So the
SBA has to empower and not extract. We need to start building
more launchpads in more areas of the country in order to be
able to launch more rockets.
And I will use two examples on that. One is the proposed
CDFI cuts that we are discussing today. If anything, we have
not pushed it out hard enough to really be able to meet the
need of small businesses. And the other example I will use is
the great SBIC program. We went through this process and at the
end of the process, in order to partner with the fund, there is
a legal bill of about 100- to $150,000. For a seed stage fund
that is an investment in an entire company.
And so there is a couple of things that we can do. Instead
of making sweeping cuts, we can tweak what we have. What we
have is working. We just need to iterate on it to meet our
small businesses and our smaller funds where they are today, so
that they can access it. The SBI could standardize legal docs,
like Carta and Y Combinator have put into practice. You don't
need to cut something that just needs another iteration to
thrive and to help our nation thrive. If we do not listen to
the business owners we serve, we are damaging our own cause.
We need to build an innovation economy in America. When
that happens, entrepreneurs everywhere have capital and
opportunity. Entrepreneurship everywhere for everyone, that is
the American Dream.
Chairwoman VAN DUYNE. Great. Thank you very much.
We will now move on to the Member questions under the 5-
minute rule, and I recognize myself for 5 minutes.
Mr. Bastable, private equity has proven to be a powerful
tool for helping small businesses grow and succeed
historically. So these investments, though, that we have
largely seen and concentrated in hubs like Silicon Valley, I
think that trend is finally ending. I think in Texas 24th
District alone, we have got 180 private equity-backed
businesses. Investors like yourself are looking towards
businesses in Texas. And as capital begins to shift toward
emerging markets, firms like yours are at the forefront of that
transformation.
So can you speak to us about how your firm is helping bring
investments into cities like Dallas and what impact that has
had on some of the small businesses that you're working with?
Mr. BASTABLE. Yes, absolutely. Thank you for the question.
I would start by saying, you know, when you look at where
our company is based, Dallas, St. Louis, and Fargo, they are
not traditional finance hubs. And even a city like Fargo,
people often ask why are you in Fargo?
Chairwoman VAN DUYNE. I was going to ask, why are you in
Fargo?
Mr. BASTABLE. Because there is great opportunities and it
is an underserved market, and it is unbelievable the number of
opportunities that are seeking capital and just do not have
access to capital in those part of the markets. And one of the
things that is just interesting about the lower middle market
is it is a relationship industry. They want to work with people
that are committed to helping them grow and share the values of
that long-term growth. And so I think it is really important
that these businesses and these capital providers continue to
be in the markets and the locations where they are planning to
invest and understand the people and the values of those
communities.
Chairwoman VAN DUYNE. I used to live in Minot, North
Dakota. At that point in time, it was long ago, it was not
exactly a hub for economic activity. We had the Air Force Base
there and that was about it. But tell me, do you have any
stories of some of these businesses that you've worked with,
success stories, failure stories?
Mr. BASTABLE. Absolutely. I can tell you, in North Dakota,
for example, we invested recently in a garage door manufacturer
in North Dakota. We just opened up a railcar servicing location
in rural North Dakota and are planning to open up several more.
And these are just examples of, you know, opportunities where
the larger private equity firms, they don't often want to fly
and travel to these parts of the country because they are
difficult to get to. And sometimes, you know, in reality, it is
hard to find and retain talent and grow in those parts of the
market. But with investments in educating the talent and
training the talent, there are really great people in those
communities who want to work at those businesses and can drive
value.
Chairwoman VAN DUYNE. Excellent. Thank you very much.
Ms. Fields, as you testified, private equity offers far
more than just capital. It provides hands-on support, strategic
guidance, expertise in fields that you may not have necessarily
within your own company. It is a partnership that is between
investors and the small businesses, with each party, I think,
focusing on achieving success. We all are on the same page.
How has private equity investments helped you grow your
business? You talked a little bit about that, but I would like
to hear you expand further on areas like operations and
workforce expansion and whether or not you've been able to
enter any new markets.
Ms. FIELDS. Yes, thank you for the question. And as you
mentioned, it has been a true partnership for us, not just
access to capital.
Initially, when we first were owned by private equity, the
main thing that they helped us do is quickly understand how to
create a more efficient operation. We did not have as much
expertise as we needed to understand what that meant. So for
them to quickly come in and help us understand how to re-lay
out our plant, how to make best use of the equipment that we
had, not necessarily putting all new equipment into the
facility, but making sure we were making the best use of that,
and also how to make sure that we were using a labor that we
had efficiently and using the inputs efficiently for us. That
was the first thing, making sure that we could be as efficient
as possible and allow us to compete on a level playing field.
Secondly was about reinvesting back into our people. And
for us, what that meant was making sure that we could make our
work environment more pleasant to work in. Sometimes
manufacturing can be a little bit harsh, and that makes it
really hard to keep and retain employees on the manufacturing
floor. There are some things that we really wanted to do before
we had a private equity partner to make our work environment
more pleasing to work in, and we weren't able to. We have since
been able to do that. That has been exciting for us.
Recently, we have expanded by taking market share and have
expanded our business about 40 percent in the state of Texas--
--
Chairwoman VAN DUYNE. Great.
Ms. FIELDS.--which is a large housing market. We serve the
housing market, and we are presently in a year where we are
growing about 15 percent. So we are very excited.
Chairwoman VAN DUYNE. Great. I love to hear it.
I am going to now recognize Ms. McIver for 5 minutes.
Mrs. MCIVER. Thank you so much, Chairwoman.
Mrs. Mendoza, small businesses have historically relied on
two main sources to secure funding: approaching a bank for a
loan or attracting investors. Why might a small business choose
to seek investment from a private equity or a venture capital
fund over a bank loan?
Ms. MENDOZA. Revenue. I mean, they oftentimes don't meet
the revenue requirements or the historical balance that you
need in order to be able to get the service and the terms that
you require from a bank. And so what we see is that the way
that our financial system works, you need on ramps and off
ramps. So a lot of the products that we invest in are around
getting small businesses and individuals bank ready. So what
can they do to get there? And so venture really fills that gap.
I think one of the beautiful things about this table is you
have the entire capital stack sitting here and we are all
agreeing. One of the innovative technologies that we are
investing in is solving a lot of the manufacturing issues that
you have with digital twinning and going all over the country
and the world, making those communication cycles much faster.
Their revenue is not at the point that they could go to a bank
loan and invest deeply in that technology to be able to get to
the revenue that they need to grow.
Mrs. MCIVER. Thank you. During my opening statement, I
talked about African-American and Hispanic female entrepreneurs
and how they receive just 0.43 percent of all venture capital
investment in 2020. As a venture capital investor, why do you
think it is so hard for these entrepreneurs and small business
owners to access equity finance opportunities?
Ms. MENDOZA. I think the beautiful thing about bias is it
works two ways, right? Everyone is more likely to hire someone
from wherever they are from. And our capital stack at this
moment, especially in the area of venture, is really
homogenous. So as you go up into the general partnership of VC
firms, there are fewer women, there are fewer people writing
the checks.
One of the reasons I started this firm was I was in
corporate and I had kids and it was hard. Like nothing illegal
happened, but my basement--you know, my desk was magically in
the basement as soon as I told them I was pregnant. And so I
realized very quickly it was not going to change unless the
money was coming from women, that we couldn't implement the
changes that we needed unless we had a capital stack that was
more reflective of our nation. Fast forward a few years, we
have done a lot of that.
Mrs. MCIVER. Thank you for that. For these entrepreneurs
and small business owners to receive more equity financing
opportunities, there obviously needs to be more opportunities
to forge important networks with venture partners that are
likely to invest with them. What recommendations do you have
for how we here in Congress can help expand these networks?
Ms. MENDOZA. I had a small business in Boston recently tell
me that workforce development and networking was the
government's version of let them eat cake. It was Boston, so he
was a little harsh with his words. But what I think is we need
to consistently partner the capital and the training and the
networking at every single step of the capital stack in order
to be able to scale these businesses. I think we keep trying to
legislate the quick fix or the next thing or the thing that we
can get done this year, this session. But this is a long-term
approach solution that we need to implement over time. We have
been moving in this direction for 20 years and I think we will
continue moving here.
Mrs. MCIVER. Thank you for that.
Madam Chair, I yield back.
Chairwoman VAN DUYNE. Thank you very much.
The Chair now recognizes Mr. Wied from the great state of
Wisconsin for 5 minutes.
Mr. WIED. Thank you, Chairwoman Van Duyne, and thank you to
all of our witnesses for testifying here today.
Access to capital is essential for entrepreneurs to start
or expand their business. Yesterday we heard from Administrator
Loeffler, whose testimony spoke to many of the reforms the SBA
has taken over the past several months to reform federal
lending programs that were effectively torched under the
previous administration. She also testified about the
deregulation efforts being undertaken to remove the
bureaucratic boot that has held down small businesses the past
4 years. And I applaud her work to reform the SBA and make Main
Street America Great Again.
Private equity represents another important way for small
businesses to have the capital they need to thrive. Under the
previous administration, we saw a $1.2 trillion decline in
private equity investments thanks to aggressive overregulation
that led to tens of thousands of fewer private equity
investments. Fortunately for entrepreneurs across the country,
House Republicans and President Trump are working hard to
deregulate and extend vital tax cuts for small businesses.
Ms. Fields, thank you for your courage in being a leader,
small business owner. I give you a lot of credit. Clearly,
private equity is--they believe in you and your leadership and
your character. So thank you for all that you do.
Mr. Bastable, how is private equity helping small
manufacturers remain competitive?
Mr. BASTABLE. Yeah, it is a great question. And, you know,
I think one of the things we consistently see with small
manufacturers is the lack of access to innovation and new
technologies that can help them be competitive with, frankly,
foreign products coming into this country. And whether that is
digital marketing or that is leveraging new tools with AI or
upgrading their ERP system or automated manufacturing
equipment, those are things that cost a lot of money. And you
know, at times there are--it is too much money for those
companies to invest in. And so we can come in and really help
work with the teams to implement those solutions.
Mr. WIED. Clearly a great benefit.
Ms. Mendoza, when awarding loans to immigrants, do your
companies use E-Verify or other federal database to ensure the
recipients of your company's loans are in the United States
here legally?
Ms. MENDOZA. So we don't do loans. We do equity
investments. And our anchor bank is Bank of America. And so the
Bank Holding Act language is in our LPA. And so we are only
investing in Fund III out of companies domiciled in the United
States. In Fund II, we invested internationally, but it was a
seed stage fund. And all of our founders go through a typical
due diligence process, like you do when you are hiring someone,
background checks, all those things.
Mr. WIED. So in the testimony provided you mentioned the
system, you know, working against certain groups of people,
including those that didn't graduate from an Ivy League school
or, you know, who did not live in the East or the West Coast.
So what is the demographic breakdown of the business owners who
have applied for--applied with you, with Mendoza Ventures? Not
those that have been approved for investment, but those that
have applied.
Ms. MENDOZA. Like I said, our portfolio looks like the
nation. So we have a--I think unquestionably we have a more
diverse applicant pool because I am a female general partner
out there doing this work, and like attracts like. But the ones
that are getting through Investment Committee, out of 15
companies, we have 2 female founders. We have a Korean-American
founder, we have Latino founders, we have--we are lining up
pretty well with the demographics of the United States.
Mr. WIED. Okay. So a statistic on your website, which you
founded and are general partner at, says 90 percent of your
loans go to startups led by immigrants, people of color, and
women. So if 90 percent of your loans go to startups led by
immigrants, people of color, and women, despite only
accounting--well, we don't know what the overall applicants
are, would it be fair to say that you give a preference to
people based on those factors?
Ms. MENDOZA. No, I think it is fair to say that we give a
preference to talent in a country where 51 percent of the
population is female, 20 percent of the population is Latino.
And I will have to double check my statistic, but I think it
was 32 percent is Black. And if you are equitably distributing
capital on a fair shake basis, that is what it should look
like.
I would like to ask the same question of the firms that
have deployed to 99 percent white men at the same time. I think
if you are deploying to any population and you are giving
talent a chance, your deployment should look like the
population that you are deploying to. We also have white male
founders with great teams.
Mr. WIED. All right. Well, thank you. And I yield back.
Chairwoman VAN DUYNE. Thank you.
I now recognize Mr. McGarvey from Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Madam Chairwoman. It is no
question that private equity has sort of changed the landscape
for small businesses. Over the last decade, the United States
capital markets as a whole have enjoyed enormous growth, but a
disproportionate share of that is going into the private
markets rather than the traditional public equity markets.
So I will just say I am not reflexively anti-private
equity. I understand there is, there is a legitimate role for
private equity firms and often providing capital to small
businesses. But I do share the concerns of my colleagues about
some of the private industry--private equity's consolidation in
healthcare, and some of the industry's tactics in doing so.
Ms. Mendoza, private equity firms have drawn criticism over
the years for exactly some of those tactics. You know what they
are: layoffs, selling off assets for quick cash, loading up a
business with tons of debt, selling it off, and, you know, and
the list goes on and on. And while these strategies can
maximize returns for a private equity fund's investors, they
often leave businesses, communities, workers worse off. So
considering these well-publicized issues that we have all seen,
what are the potential drawbacks for small businesses who
choose to partner with private equity or private credit rather
than going to traditional lending markets? And then what are
the advantages?
Ms. MENDOZA. A lot of the times business are going there
because traditional lending markets won't serve them. So it is
just like your personal finance. When you have money and you
don't need money, that is when the bank is willing to give it
to you. And so as you move down that spectrum, the terms are
going to get more predatory. It is business.
I think that part of the issue is also that the capital
often is not coming from the communities. And so part of the
reason that we are so passionate about representation across
our entire capital stack is that when the capital comes from
the community, you have some checks and balances in place. You
know, in New England we fish a lot and we always say that you
need local knowledge in order to be able to get anything. And I
think a lot of those problems are endemic of a disconnect in
priorities between the community and the private equity firm
that is usually somewhere else coming in with very different
goals. We need to pivot that to being building rather than
extractive.
Mr. MCGARVEY. Does seeking private capital through the SBIC
negate some of those problems that could happen for a small
business?
Ms. MENDOZA. Yes, I think it does because it puts a
standard term out there for companies that need it. And so it
creates essentially a competition in the marketplace where you
have a more fair product for the business owner.
Mr. MCGARVEY. Thank you for that. And Mr. Bastable, I want
to talk to you. I am from Louisville, Kentucky, so we are both
from the middle of the country. In fact, I went to the
University of Missouri and married a Jeff City girl. So have a
connection with Missouri certainly. You know where we are from
and we know that most of the private equity investment and job
growth takes place on the coasts and in big cities around the
country. Last Congress, the House passed the Investing in All
of America Act to give SBICs bonus leverage to invest in rural
and underserved small businesses.
How else can Congress increase investment in under
capitalized businesses in places like my hometown of Louisville
or in St. Louis, Missouri, where you have an office? Is there a
greater role for SBIC is in that?
Mr. BASTABLE. It is a great question. And the SBIC program
is a phenomenal program and it is amazing how much capital
flows into these rural communities because of that program. And
I think the bill, the Investing in All America Act, and
increasing the leverage limit will continue to drive more
capital into these rural communities in the middle of America
where, frankly, it is a lot of manufacturing industrial jobs
where they make products.
Mr. MCGARVEY. And when you talk about increasing that
limit, is that something you would peg to a number or would you
peg it so it continues to move?
Mr. BASTABLE. I think, I am a simple person, I think
picking a number and then maybe moving it in the future would
be the easiest path forward.
Mr. MCGARVEY. Thank you very much. Appreciate that.
And Madam Chairwoman, I yield back.
Chairwoman VAN DUYNE. Thank you.
I now recognize Chairman Williams from Texas for 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chair. And Mr. Bastable,
again, thanks for being here.
The Trump administration has made it clear that
revitalizing American manufacturing is key to strengthening our
economy and creating jobs. SBA Administrator Loeffler has
mirrored those efforts with her Made in America Initiative,
which rolls back burdens from regulations and supports pro
growth policies. Therefore, many private equity firms are
channeling critical investments into small manufacturers across
the country.
So how is your firm helping small- and mid-sized
manufacturers modernize their operations and expand
manufacturing production to remain competitive in today's
economy?
Mr. BASTABLE. That is a great question. And I mentioned in
my opening statement one particular investment we have in
Graham, Texas, which you may be familiar with. And they
refurbish shipping containers and turn them into ground level
offices. And one of the things we did was we invested in, you
know, tuition reimbursement for all those employees. We
invested in digital marketing, we invested in new manufacturing
techniques to help them be competitive in the market. And as
you know, Graham is not a huge city, and so it is really
important that you create the education that is required for
these, you know companies to retain really great talent, and to
bring them into the community.
Mr. WILLIAMS. Well, that is great. And so what more can be
done, do you think, to make it easier for private equity
investments to identify and invest in small manufacturing?
Mr. BASTABLE. Yeah, I think the bill that has been
proposed, the Investing in All of America, Act and increasing
the leverage for the SBIC program is one great way to continue
to bring capital to manufacturing businesses.
Mr. WILLIAMS. Okay, great, thanks. Graham's home of the
Steers. Now, remember that.
Ms. Fields, small businesses often face significant
challenges that can limit their growth potential. And your
company's success shows how private equity investment can make
a real difference in overcoming these obstacles and this also
provides significant returns to both the investors and the
entrepreneurs. So Ms. Fields, can you share how beneficial it
has been to identify potential investment opportunities outside
the traditional investment hubs, such as Silicon Valley?
Ms. FIELDS. Yes, it is a great question. And I think that,
you know, we are about as far from Silicon Valley as it gets.
We are in the middle of Oklahoma and we are producing real
product that everyday Americans need in their homes. As a small
business owner, we have to grow. If we don't grow, we are not
going to survive. To have private investment that allows us to
make the investment in things that we need to make at the pace
that we need to make them to stay relevant in our market has
been critical to us. Without that, we would not have been able
to do the things that we have done. We would be having to pick
between can I hire a single person or can I invest in a piece
of equipment? But I may not be able to do both. What this
allows us to do is to make the investments that we need to make
to stay relevant to our market and to do them in a way that
allows us to accelerate.
Mr. WILLIAMS. Also helps with a great idea we had in
America called risk and reward. Right? You take advantage of
that.
Madam Chair, I yield my time back. Thank you.
Chairwoman VAN DUYNE. Thank you very much.
I now recognize Dr. Conaway from New Jersey for 5 minutes.
Mr. CONAWAY. Thank you, Madam Chair. Related to the issues
that small businesses face are not monolithic, but rather they
are unique to each business, which is why there is an inherent
need to ensure that there is more diversity among regional
managers. Increased diversity ultimately helps broaden the
scope for small businesses that can be impacted by private and
public investment.
Ms. Mendoza, before asking my question, I can't help but
recognize and put a point on your own personal experience of
being moved to the basement, as you say, because of a pregnancy
and, well, you said it wasn't illegal, it certainly was wrong.
And it is the kind of thing, unfortunately, that women and
people of color face. And I think, sadly, even more
unfortunately, there are a lot of people who seem very
satisfied with that state of affairs.
Ms. Mendoza, statistics show that hiring more women and
multicultural investment managers at a fund is one of the most
successful strategies for increasing investments for
underserved entrepreneurs and small business owners. How can we
help promote more diversity at investment funds and help our
diverse small business owners?
Ms. MENDOZA. So I think it is important to divide the
conversation to, I want to be clear, we don't have a race-based
investment thesis. We are an American-made company investing in
America with a portfolio that looks like America.
Mr. CONAWAY. Great.
Ms. MENDOZA. And when you do that, you end up with diverse
perspectives at the table, just as it is important to have the
diverse perspectives that are in this room. I will use the
Silicon Valley example of two guys from similar backgrounds, go
to school together, get funded, and think they are going to
crush it. And then the market lets them know that that is not
the plan for them. And so usually what we see is that in a
founding team, if the founders are able to bring in diverse
perspectives sooner, the business has a faster path to success
because they are able to get out of their own heads in a way
that is very quantifiable and meet the product and the market
where they meet.
Mr. CONAWAY. Moving on to another issue in this area which
I find very concerning. Community development and financial
institutions in tandem with new market tax credits have made a
massive impact in my home state of New Jersey. There have been
a billion and a half new market tax credit investments in New
Jersey and approaching $700 million worth of community
development financing loans. These are critical programs that
serve as a lifeline for small businesses in historically
underserved communities by providing credit, capital, and other
critical financing services available.
Earlier this year, President Trump issued an executive
order that aims to curtail the nonstatutory work of the CDFI
fund. And last week the administration issued their initial
fiscal year 2026 budget proposal that guts the program and
turns it into a discretionary grant program. Very interesting
to see who will be able to walk in the door and get those
grants. The CDFI venture funds provides equity and debt to
undercapitalized businesses around the country and made more
than 55 million in investments in small businesses in 2023.
Additionally, CDFI venture funds provide equity and debt and
equity features to undercapitalized businesses around the
country and made more than $55 million in investments in small
businesses, as I mentioned.
If you were going to broaden equity investments in our
undercapitalized small businesses, isn't this administration's
gutting of these important programs exactly what we ought not
be doing?
Ms. MENDOZA. I do agree with that.
Mr. CONAWAY. I yield back.
Chairwoman VAN DUYNE. Thank you very much.
I now----
Mr. CONAWAY. No. Oh, I don't. Sorry. I want her to answer
the question. I will yield in a second.
Chairwoman VAN DUYNE. Okay. I was like, you are staring at
me. I am like, okay.
Mr. CONAWAY. I was going to stop talking and let her
finish.
Chairwoman VAN DUYNE. Ms. Mendoza.
Ms. MENDOZA. Speaking of the system, I will always mess up.
Chairwoman VAN DUYNE. Do you want to go ahead and answer?
Ms. MENDOZA. Yeah. I was just going to say I think Detroit
is a great example of what a CDFI can do first for a city. You
know, since the '80s and '90s they have been bringing Detroit
back with very similar investments. And I think, honestly, the
only failing I can think of with CDFIs is that we didn't put
enough in, the need is greater than the capital. And I can't
name a local small business owner that knows their local CDFI
off the top of their head is that we need a PR campaign for
them.
Mr. CONAWAY. Great. And thank you. And now I yield back.
Thank you, madam.
Chairwoman VAN DUYNE. Excellent. Thank you.
I now recognize Mr. Latimer from New York for 5 minutes.
Mr. LATIMER. Thank you very much, Madam Chairman.
There seems to be some misconception that by presence on
the East Coast, perhaps it is true on the West Coast as well,
that automatically funding will follow. And my experience in my
area is that the same challenges exist market by market,
depending on the business and depending on the location of it
within that district or that market. So I would like to ask
each of you one question, and I will start with Ms. Mendoza,
but I would like each of you to address it. What do you see as
the things that the SBA can do proactively to better promote
the programs that would help these communities to make that
connection as a government agency? What tools would help us
better get that message out and reach the people that can best
be benefited by these programs?
Ms. Mendoza and then the other folks on the panel, I would
appreciate that.
Ms. MENDOZA. I think we are a great example of this. We are
a successful venture capital firm built from scratch, and we
haven't gotten a single grant from anyone because I don't have
time to read the website and figure it out and apply for it
when I can be potentially closing an investor. And so the one
tool that you can do is meet the market where it is and lower
barriers at every possible entry so that these small business
owners who are already taxed for time and resources, it is very
clear to them what is available to them and how they apply for
it.
Ms. FIELDS. Yes. Thank you for that question. I think for
us as a small business owner, we often don't have time or are
unaware of what opportunities are even out there for us. We are
simply too busy just trying to run the day-to-day of the
business. I think for me being locally in Oklahoma, I sit on
the board of the Oklahoma Manufacturing Alliance, which is an
MEP, and they have been instrumental in helping us understand
what is even out there to support us for a small business. For
them to come into our business and understand what happens for
us on the local level, what we need on a local level, and what
is available to us has been instrumental in us being able to
take advantage of these types of things.
Mr. BASTABLE. I think the first is to educate and make sure
people understand what programs are available. But I think the
biggest impact would be simplification. I think we have taken
something that should be relatively simple and we have made it
very complex. We have made it arduous, time-consuming, and I
think a lot of people just drop out of the process because of
the complexity associated with it.
Mr. LATIMER. Thank you very much for your answers.
Madam Chair, I return the time.
Chairwoman VAN DUYNE. Thank you.
I now recognize Ms. Goodlander from New Hampshire for 5
minutes.
Ms. GOODLANDER. Thank you, Madam Chair. And thank you to
our witnesses for being here today and for your testimony.
I appreciate the positive examples that have been lifted up
today. I came to Congress having served in the antitrust
division at the Department of Justice. So I gave a great deal
of time to really try and understand how private equity and
venture capital firms are operating in really important
industries across our economy, increasingly consolidated
industries across our economy. I spent a lot of time thinking
about our housing markets and our healthcare industry. And, you
know, as I have been on the job now for about 150 days and as I
have traveled around my state in New Hampshire, the concerns
that I was looking at at the Justice Department, I am seeing
them play out in practice on the ground. The role that private
equity firms have played in the nursing home industry in
rolling up mental healthcare providers across the country, the
concerns are real.
And I wanted to, at the outset, enter two articles into the
record today. One is an op-ed written by one of my constituents
from Nashua, New Hampshire, Melbourne Moran. He writes about
the critical role of small businesses in mental healthcare. And
his small business, Wanderlust Therapeutic Services, plays a
really important role in my hometown Nashua in ensuring mental
healthcare access. He says that local health practices like his
aren't branches of large corporations. ``They are local mom-
and-pop counseling shops, owned and operated by licensed
clinicians who live and work right alongside their clients.
These professionals aren't answering to shareholders or
national franchise boards. They are not corporate entities.
They are answering to the needs of their neighbors.'' And I
think he is absolutely right.
I also wanted to enter into the record a piece from one of
my former colleagues at the Justice Department, Brendan Ballou.
He points to--it is a New York Times piece entitled ``Private
Equity is Gutting America and Getting Away with It.'' He points
out at the outset that according to the nonpartisan National
Bureau of Economic Research, private equity ownership just in
the nursing home industry alone is responsible for 20,000
premature deaths over a 12-year period.
So I wanted to enter these articles into the record and
ask, beginning with you, Ms. Mendoza, if you could comment on
what you have observed in the role that private equity and
venture capital firms have played in industries, including in
our healthcare industry and our housing industry, and do you
see any problems?
Ms. MENDOZA. In my opening remarks, I quoted Eric Ries from
Lean Startup, and his entire concept is that you need a
feedback loop. You need to release a product into market, talk
to the market, and come back. I see the same problem in private
equity that I see with us rolling out programs recently is that
that feedback loop is broken and we are not listening to the
customers that are consuming it and coming back to them. So I
think anytime that you blitzscale an industry without a
feedback loop, and we have a history of that in the United
States, you end up with these issues.
But I do want to be careful that not all private equity
firms are created equal. I also use the example of, you know,
we have 55 million under management, A16Z is in the billions.
And so I think it is a different--when you are legislating this
entire industry, it is a lot like trying to legislate
agriculture. You know, there are small organic farmers. There
are also huge food factories, and you can't put them all in the
same bucket.
Ms. GOODLANDER. I understand that. A follow-up question is
as a general matter, as a general principle, do you agree that
firms should be sued and be held accountable, should be able to
be sued and held accountable, for any wrongs that are committed
by companies in their ownership and control?
Ms. MENDOZA. So if the private equity firm has a
controlling interest in that company, they would be voting
board members and they should be held accountable in that role
for that.
Ms. GOODLANDER. Would our other witnesses like to comment
on that question or?
Mr. BASTABLE. No, but are you referring to the first
question you asked about consolidation?
Ms. GOODLANDER. No, I am asking do you think as a general
principle that firms should be able to be held accountable,
should be suable for wrongs committed by companies that they
effectively control?
Mr. BASTABLE. I mean, I think it is a nuanced question
depending on what is actually happening. And as you mentioned,
you know, there are different situations in different sized
businesses and different parts of the capital stack where
private equity is involved, where they may be a lender and they
may have board observation rights, or they might be a minority
investor. And so it is a broad, you know, topic.
Ms. GOODLANDER. Sure. I think, though, that this
cornerstone principle of accountability is part of what we need
in this country to restore faith in private equity firms across
our country when so many communities have felt the pain of an
unaccountable entity gobbling up some of the most important
institutions in the life of our community.
So I thank you and I yield back.
Chairwoman VAN DUYNE. Thank you very much.
I now recognize Mr. Bresnahan from Pennsylvania for 5
minutes.
Mr. BRESNAHAN. Thank you, Madam Chair, for convening this
important hearing. And thank you to our witnesses for being
here today.
I have always been a strong advocate for expanding
opportunities for our entrepreneurs and small businesses to
start, grow, and thrive. For some, the right path may be
working with the local community bank, securing an SBA loan, or
receiving a government grant. For others, private equity can
serve as a powerful engine fueling innovation, expansion, and
ultimately a chance to achieve the American Dream. When done
right, these partnerships can help small businesses grow in
ways that benefit all of us, creating good, high-paying, and
meaningful jobs for hardworking Americans.
Ms. Fields, your work in the manufacturing sector,
especially relevant to Pennsylvania's Eighth Congressional
District, where manufacturing plays a vital role to our local
economy, I want to revisit a particularly compelling part of
your testimony that deserves to be underscored in this
conversation. You shared that thanks to your partnership with
private equity, your company is now in a position to onshore
more of its manufacturing operations and plans to grow your
workforce by over 30 percent in the next 18 months. That kind
of investment in American jobs and communities is exactly the
type of success stories we should be recognizing and supporting
here in Congress.
With that, Ms. Fields, I will turn to you for my first
question. You mentioned onshoring your manufacturing
operations. Could you expand on why they are such a priority
for your business and what specific challenges you are
encountering in doing so?
Ms. FIELDS. Yes. We always want to be an American
manufacturer first and the only reason that we do not
manufacture something in America is simply because we cannot
compete with what it costs us to produce it here versus what it
would cost us to produce it overseas. And so, we do presently
manufacture some products overseas.
By having private equity come alongside us and the things I
had previously mentioned about allowing us to figure out how to
get cost out of our operation, become far more efficient, and
to understand how to better run a more efficient facility, it
allows us to look at products that were previously unattainable
to us to manufacture domestically. Now we can bring those back.
Obviously, the potential tariffs out there also allow us to
look at that even harder today. And so we can now confidently
make those needed investments to expand our product line and
bring those products back, knowing that we can produce them
here and compete with other larger companies.
Mr. BRESNAHAN. What challenges are you experiencing on the
workforce development side?
Ms. FIELDS. Our biggest challenge is access to workforce.
So a question for us is being able to bring people in to do
manufacturing. It is sometimes hard to find people, so we
partner with local trade schools to get those people.
Additionally it is hard getting people to stay. Once they
join us, we get them trained, and getting them to stay so we
have to be competitive in terms of pay, benefits and a pleasant
work environment.
Mr. BRESNAHAN. Well, I appreciate that. Now, regarding the
partnership with private equity, did you look for similarities,
similar overlapping business practices, or what was the--if you
can point to the single most beneficial part of the
relationship and partnership, what would that have been?
Ms. FIELDS. I think for us, obviously, capital is part of
it, but for us it is having expertise brought into our
business. Our private equity firm, as I mentioned, is actually
Mr. Bastable's firm that we are partnered with and they focus
on manufacturing in the lower middle market, which is exactly
in the pocket for us. They have people on their team that have
expertise that we simply did not have access to or could not
afford to have access to. The partnership, the relationship,
the expertise and the support that they bring is critical to
us.
Mr. BRESNAHAN. I appreciate that.
Mr. Bastable, I will pivot to you. Right now we are looking
at relatively high interest rates, around 7 percent, which
makes it difficult for businesses to justify new investments.
In that context, can you elaborate on how private capital can
serve as a critical tool to help businesses invest, scale, and
create jobs in the United States?
Mr. BASTABLE. Yeah, it is a great question. And so as
interest rates increase, it becomes more costly for them to
take on debt, to invest in equipment, and so on and so forth.
And, you know, when you have a private equity partner who has
access to capital or equity, they can invest in those
opportunities and so they don't have to make interest payments
every time they make an investment into their business.
Mr. BRESNAHAN. Do you traditionally charge like a
management expense back to the company that you are partnered
with?
Mr. BASTABLE. Minimal.
Mr. BRESNAHAN. Okay. With that, I yield back. Thanks.
Chairwoman VAN DUYNE. Thank you very much.
Seeing no other questions, I want to thank our witnesses
for their testimony today and for appearing before us.
Without objection, Members have 5 legislative days to
submit additional materials and written requests for the
witnesses and to the Chair, which will be forwarded to the
witnesses. And I ask the witnesses to please respond promptly.
If there is no further business, without objection, the
Committee is adjourned.
[Whereupon, at 11:04 a.m., the Subcommittee was adjourned.]
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