News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
June 25, 2007  

CONTACT: Kate Gilman/ Austin Bonner,  (202) 225-4038

Velázquez Introduces Legislation to Spur Angel Investment
Committee Examines Venture Capital Needs of Small Business

WASHINGTON –Entrepreneurs looking to start or expand a business remain underserved by the conventional equity markets – in fact, since 2000, venture capital investment in startup and early-stage companies has declined by more than 80 percent.  Chairwoman Nydia M. Velázquez introduced the Angels Nurture Growing Entrepreneurs into Long Term Successes (ANGELS) Act, which establishes a new program and tax credit to promote this kind of less-formal investment in small businesses through angel networks.  The introduction of the bill came on the same day that the House Small Business Committee examined methods to channel venture capital to small business owners, and on how to close this gap through both program improvements and expanding access to more sectors of investors.

“Companies that never get off the ground can’t create jobs or give back to their communities. Accessible financing alternatives are critical to enabling today’s ideas to become tomorrow’s small businesses,” said Chairwoman Nydia M. Velázquez. “We need to take action today to ensure that entrepreneurs won’t be stalled in their journey to become the next Microsoft.”

Traditional venture financing has historically been concentrated in certain geographic areas and continues to move away from the earlier stages.  To fill these gaps, SBA investment programs were created that established public-private partnerships to reach more sectors of the economy.  Through the Small Business Investment Company (SBICs) program, firms use their own funds and resources borrowed from the SBA.  Unfortunately, the SBA discontinued the licensing of new SBICs in 2005, which has contributed to the shortage of seed capital.  The New Markets Venture Capital (NMVC) program also addresses unmet equity needs, but goes the additional step of targeting low-income communities and combining financing with operational assistance.  The NMVC program has not received funding since 2001, which has stunted investment in many areas of the country.  With the lack of administration support for both the SBIC and NMVC programs, entrepreneurs are less able to secure the capital they need.   As a result, small business owners have been forced to look for alternative financing options for the infusions necessary to grow their ventures.

“For many small business owners, access to investment opportunities is what made their ventures possible,” said Chairwoman Velázquez. “It is critical that these initiatives are strengthened, not dismantled—and that we ensure small businesses have access to equity capital.”

The hearing examined potential updates to SBA’s programs to meet the needs of today’s small businesses and other ways of helping to increase access to equity capital. These changes would help them attract more investors, increasing the amount of capital available to small businesses. Broadening the NMVC program to businesses in more parts of the country and reducing the regulatory burden it places on companies were two other factors that were discussed.  While these changes are a start, it is also critical that there is a better tie for entrepreneurs to private resources, including further linking small firms with angel investors, are necessary. Chairwoman Velázquez introduced the Angels Nurture Growing Entrepreneurs into Long Term Successes (ANGELS) Act, to help strengthen this method of investment for small firms.  By strengthening access to patient capital, entrepreneurs will be able to meet their long-term goals as they start and expand ventures.

###