Impact Investing Convening

Speech Date: 
Wednesday, June 22, 2011
Speech Location: 
As Prepared For: 
Karen Mills, SBA Administrator

Thank you.  Thanks to that panel.  Thanks to everyone for being here.

Earlier this year, we kicked off Startup America in this room.  It’s our Administration-wide effort to celebrate, inspire, and accelerate entrepreneurship.  I announced a number of commitments from SBA.

We said we’d start a nationwide mentor corps for entrepreneurs and high-growth firms.  We did it.  We funded 4 accelerators to match 100 promising clean-energy entrepreneurs with mentors who have “been there and done that.”

We said we would go around the U.S. and get first-hand input from entrepreneurs about how to reduce barriers.  We did it.  We will soon release a report that summarizes the top ideas we found in 8 cities.

Today, we’re focused on the commitment we made in financing: an Impact Investment Initiative of $1 billion over 5 years.

As you saw from the JPMorgan report, impact investing is moving from the periphery to the mainstream in the investment community.  This asset-class can reap rewards both financially and on a larger, societal level.

Startups and small, high-growth firms in this space are hungry for that unique kind of capital, especially in underserved markets and emerging sectors. 

So, it’s all of our job to find the best ways to put that capital in their hands.

This impact investing “space” is a natural place for public-private partnership. 

It has the potential to be a powerful win-win: creating jobs while improving society and our environment.

So the question we posed to ourselves was this: What can we do to support its growth?

In these times, we knew we needed something that would give taxpayers a good bang for the buck… and something with a strong track record that could serve as a model.

The Small Business Investment Company program was a great fit.  What is SBIC?

It’s a program run by the SBA.  Through a public-private partnership, it matches the capital raised by private investment funds.

We look for experienced management teams to apply.  Currently, we have about 300 of these licensed SBICs.

We empower them to do what they do best:  find and invest in the most promising high-growth firms. 

A few examples:

Back in 1969, computers and microchips were the emerging industry. That year, an SBIC invested $300,000 in a chip manufacturer with 200 employees and $500,000 in revenues.  Today, it’s Intel: 86,000 employees and $40 billion in revenues.

In the mid-70s, another emerging industry was air cargo.  An SBIC invested $5.8 million in a small company.  Today, it’s FedEx.

There are more recent examples, too.  Action Carting Environmental Services is based in a lower-income area of New Jersey, with facilities in the Bronx and Brooklyn.  With an SBIC investment of $3.2 million in 2007, they went from 94 employees to 365.  They’ve also built one of New York City’s largest recycling facilities, which recycles 10,000 tons of waste each month.

Over the past 2 years, we’ve made SBIC work better than ever before.  We cut licensing time in half.  And last year, we supported a record $1.6 billion in financing through SBIC.

And one last thing: SBIC operates at zero subsidy, so there’s no cost to taxpayers.

That’s why we chose SBIC as the platform for our Impact Investment Initiative.

Through it, we’ll provide a 2-to-1 match to licensed funds in 2 categories of national interest: place-based and sector-based. 

1.      We will target underserved markets. America’s best ideas for social investments come from every region of the country – not just 3 or 4 states where most VC funding has   gone.

2.      We will target emerging industries. As a country, we need to move forward more quickly in areas like clean energy if we’re going to out-compete the world.

Stay tuned.  We expect to announce our first partnership under this program in the coming weeks (and we’re talking to several additional fund managers and institutional investors.)

Please talk to Sean Greene who is here today if you have questions or have an interest in joining this important effort.

We hope that our commitment at SBA and Administration-wide will catalyze more commitments from you and people you know. 

After all, it’s you, not us, that are doing pioneering work in impact investing.

Our goal is simple: help people like you do what you already do best – invest in the most promising ideas that keep America strong and prosperous.

Today, we need your input because this is the government’s first step into this space.  So, as we head into these breakout sessions, we have some tough questions on our plates:

1.      How can we remove any barriers that prevent large investors and corporations from actively engaging in impact investing?

2.      Following up on the SBA’s Reducing Barriers roundtables that I mentioned, How can we remove barriers to impact investing?

3.      How should we approach a possible standardized way of measuring return-on-investment in this unique space?

4.      What types of capital, and what kinds of financial structures would best unleash the full potential of impact investing?

Your answers will help guide the best possible policies to foster impact investing as we move forward.

In closing, let me just say that America’s entrepreneurs and small business owners are counting on us to get this right.

More than half of Americans own or work for small business.

They create 2 out of every 3 new jobs each year.

And every day… in every sector… in every corner of the country…

they’re coming up with new ideas to make our society stronger and our environment better.

Thank you for being here to show your support for them as they out-compete and out-innovate in order to win the future.