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[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

           EMPOWERING SMALL BUSINESSES: THE ACCELERATOR MODEL

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              MAY 3, 2017
                               __________

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                 

            Small Business Committee Document Number 115-018
              Available via the GPO Website: www.fdsys.gov
              
              
              
              
              
              
              
              
              
                                    ______

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25-240                         WASHINGTON : 2017 
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                          DON BACON, Nebraska
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                           RON ESTES, Kansas
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                         YVETTE CLARK, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Chabot................................................     1
Hon. Nydia Velazquez.............................................     1

                               WITNESSES

Ms. Starr Marcello, Executive Director, Edward L. Kaplan New 
  Venture Challenge (NVC), Polsky Center for Entrepreneurship and 
  Innovation, University of Chicago, Chicago, IL.................     5
Mr. Darrin M. Redus, Sr., Vice President, Minority Business 
  Accelerator, Cincinnati USA Regional Chamber, Cincinnati, OH...     7
Ms. Carolyn Rodz, Founder and CEO, Circular Board, Houston, TX...     8
Stephen S. Tang, Ph.D., MBA, President and CEO, University City 
  Science Center, Philadelphia, PA...............................    10

                                APPENDIX

Prepared Statements:
    Ms. Starr Marcello, Executive Director, Edward L. Kaplan New 
      Venture Challenge (NVC), Polsky Center for Entrepreneurship 
      and Innovation, University of Chicago, Chicago, IL.........    29
    Mr. Darrin M. Redus, Sr., Vice President, Minority Business 
      Accelerator, Cincinnati USA Regional Chamber, Cincinnati, 
      OH.........................................................    33
    Ms. Carolyn Rodz, Founder and CEO, Circular Board, Houston, 
      TX.........................................................    37
    Stephen S. Tang, Ph.D., MBA, President and CEO, University 
      City Science Center, Philadelphia, PA......................    40
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.
 
           EMPOWERING SMALL BUSINESSES: THE ACCELERATOR MODEL

                              ----------                              

                         WEDNESDAY, MAY 3, 2017

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2360, Rayburn House Office Building. Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, King, Luetkemeyer, 
Radewagen, Knight, Kelly, Gonzalez-Colon, Fitzpatrick, Estes, 
Velazquez, Evans, Murphy, Brat, Lawson, Clarke, Chu, Adams, 
Blum, Espaillat, Comer Schneider, Bacon, and Marshall.
    Chairman CHABOT. The Committee will come to order. We 
welcome everybody here to the Small Business Committee today.
    Before we begin this morning, I would like to welcome Ron 
Estes, who is our newest member of this Committee. He is fresh 
off a special election win, and with his background as being 
the former Kansas State treasurer, the Small Business Committee 
is lucky to have him on the team, and we welcome him here 
today. We are expecting great things from him. So thank you 
very much. Look forward to working with you.
    We also have another guest here today. Dr. Marshall, would 
you like to introduce somebody?
    Mr. MARSHALL. Sure. So my wife Laina is here for the First 
Ladies Luncheon tomorrow. Glad to have her and quite a bit of 
our extended family with us as well from Kansas. Welcome.
    Chairman CHABOT. Excellent. Very good.
    And I want to personally welcome some of the folks from 
Cincinnati here. We have the Chamber of Commerce, a bunch of 
folks that are here from the regional chamber, so they want to 
see Congress in action. So let us not disappoint them.
    Ms. VELAZQUEZ. What they want to see is a committee that 
works in a bipartisan way.
    Chairman CHABOT. That is right. And they have got one here, 
right?
    Ms. VELAZQUEZ. That is right.
    Chairman CHABOT. That is right.
    Over in Statuary Hall there is a statue of Thomas Edison. 
Now, the people of Ohio placed it in the Capitol because while 
he may have done his most famous work in New Jersey, he is, 
like the greatest Americans, an Ohio native. Sorry about that. 
We love everybody on this Committee, whether you are from Ohio 
or not. The statute depicts Edison holding his invention that 
changed the world, the lightbulb. Speaking about his career as 
an inventor and the varying degrees of success he had along the 
way, Edison famously said, ``I have not failed. I have just 
found 10,000 ways that will not work.'' Edison knew that the 
power of American innovation was not always found in the 
resulting product; it is found in the process. That process is 
what we are really here to talk about today.
    As American businesses and entrepreneurs have worked to 
bring about economic recovery over the last decade, business 
accelerators have emerged as an inspiring and effective force. 
With an end goal of pitching their ideas to a field of 
investors during a demo day, accelerators put company teams 
through a fixed-term, cohort-based program that focuses on 
mentorships. In effect, these are entrepreneurs helping 
entrepreneurs, small businesses helping small businesses, 
seeing what works, what has not worked, and what can be learned 
from it.
    While the accelerator model is not entirely new, it has 
really materialized over the last few years and can be seen 
throughout the Nation. Many of us have heard about the 
successful high-tech accelerators out in Silicon Valley, but 
there is so much more to this story. While they are operating 
all over the country with an overall goal of accelerating 
growth, they oftentimes have different focuses. Some are 
concentrating on economic development within a geographic area, 
like my hometown of Cincinnati. Some are dedicated to female 
entrepreneurs. The process accelerators use to take 
entrepreneurs through their programs is making a difference. It 
is the power of experience coming alongside the newly inspired 
and helping them turn their idea into action, helping to make 
that crucial business connection, helping to advance a funding 
opportunity, helping to achieve success.
    At this Committee, we like to say that every small business 
started with an idea, and with success, that idea turns into 
jobs. Business accelerators give us a close-up look at that 
process. As we celebrate National Small Business Week in our 
Committee, on Capitol Hill, and across the country, it is great 
to have such an impressive group of American innovators before 
us here today, and we will hear, of course, from them very 
shortly. Each one is directly involved with the running and the 
operation of an accelerator.
    I am looking forward to hearing from them directly, hearing 
about their ideas and their stories. It is our hope that we all 
come away today encouraged and reminded that we have much to 
learn from our entrepreneurs and the processes that they 
pioneer.
    I appreciate all of you being here today and look forward 
to your testimony.
    And I would now like to yield to the ranking member, Ms. 
Velazquez, for her opening statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Business accelerators help high-growth startup enterprises 
develop their products, identify promising customer segments, 
and secure resources, including vital capital and potential 
employees. It is clear that they serve an important role in 
innovation, and I am very interested to learn more about their 
impact on small firms.
    Growth accelerators have long been a powerful tool for 
helping innovative entrepreneurs grow. Each year since their 
formation in 2005, accelerators have gained in popularity. In 
fact, a number of accelerators nearly doubled each year between 
2008 and 2014, proving that this model has real potential to 
assist entrepreneurs.
    Accelerators are unique in that they provide the best of 
both worlds for both startups and investors. They serve as an 
all-inclusive, creative hub that provides technical assistance 
for growing businesses and a central location for investors to 
find vetted businesses. This arrangement reduces investor risk, 
while maximizing the capital network for high-growth companies.
    In 2015, more than $90 million was invested in the U.S. and 
Canada by 111 accelerators into nearly 3,000 startups. Silicon 
Valley firms accounted for more than one-third of that 
investment, while New York totaled about $9 million in close to 
400 startups. By opening the funding network for companies that 
might not otherwise have gained such exposure, accelerators 
contribute to stabilizing innovative businesses and the growth 
of the economy.
    Beyond promoting business expansion, growth accelerators 
also bring benefits to the communities in which they are 
located in the form of economic development and job 
opportunities. We must consider ways to see a greater presence 
of accelerators in underserved and rural areas outside of the 
popular innovation hubs.
    Another area of improvement is reaching entrepreneurs who 
have traditionally been disadvantaged. Evidence shows women and 
minorities are not participating at the same rate as their 
white male counterparts. One promising trend has been the 
emergence of accelerators focusing on these entrepreneurs. 
While this is a step in the right direction, more must be done 
because these businesses contribute greatly to our economy. 
After all, that is what today's hearing is all about, growing 
our economy and creating jobs. We already know the job creation 
power small firms hold. Now the question becomes how to 
maximize that power for startups.
    During today's hearing we will hear from some of the most 
successful, innovative accelerators from around the nation. I 
look forward to hearing their suggestions as to how can we 
replicate that success in communities across the nation.
    I thank the witnesses for being here today, and I yield 
back the balance of my time.
    Chairman CHABOT. The gentlelady yields back. Thank you very 
much.
    And if Committee members have opening statements prepared, 
we would ask that they be submitted for the record.
    And I would like to take just a moment to explain our 
lighting system here and the rules that we operate under. We 
basically operate under the 5-minute rule. Each of you gets 5 
minutes to testify and then we will all have 5 minutes to ask 
questions. And there is even a lighting system to assist you. 
The green light will be on for 4 minutes and then the yellow 
light will come on to let you know you have a minute to wrap 
up. And then the red light will come on, and if you can wrap up 
by that time we would appreciate it.
    And I would now like to introduce our very distinguished 
panel. Our first witness will be Starr Marcello. Ms. Marcello 
is the executive director of the Polsky Center for 
Entrepreneurship and Innovation at the University of Chicago, 
where she runs the Edward L. Kaplan New Venture Challenge. The 
New Venture Challenge, which aims to launch the next generation 
of companies, has an alumni list of some of the top technology 
companies in the country, such as Grubhub and Braintree. Ms. 
Marcello serves on a number of boards, including the Executive 
Advisory Board of Tech Week and the United States Association 
for Small Business and Entrepreneurship. We welcome you here 
this morning.
    Our next witness will be Darrin Redus. Mr. Redus is the 
vice president of the Cincinnati USA--that is Cincinnati USA 
Regional Chamber's Minority Business Accelerator, which has the 
mission of scaling minority-owned businesses and expanding the 
minority entrepreneurial community of the Cincinnati area. In 
partnership with larger corporations, the Minority Business 
Accelerator has been successfully piloting economic progress in 
our area for many years. As a former commercial banker from 
Cleveland, Mr. Redus--excuse me, Mr. Redus is the founder of a 
number of companies, such as the Main Street Inclusion 
Advisors, LLC, and the Redus Small Business Advisers. We thank 
you for being here as well.
    Our next witness will be Carolyn Rodz--is that Rodz?
    Ms. RODZ. Rodz.
    Chairman CHABOT. Rodz. I apologize.
    Ms. Rodz is the founder and the chief executive officer of 
Circular Board, which is a female entrepreneur-focused 
accelerator. Utilizing a virtual model, Circular Board 
concentrates on purpose, partnerships, and access to capital to 
accelerate growth. With a resume that consists of creating a 
retail line, founding of a global marketing firm, serving as a 
TD--excuse me, TEDx speaker, serving as a member of the Dell 
Women's Entrepreneur Network, and a 2016 Entrepreneur Magazine 
Woman to Watch, Ms. Rodz is a driving force in the startup 
world, and we appreciate your testimony here this morning as 
well.
    And I would now like to yield to the gentleman from 
Pennsylvania, Mr. Evans, to introduce our fourth and final 
witness.
    Mr. EVANS. Thank you, Mr. Chairman.
    It is my sincere pleasure to introduce Dr. Stephen S. Tang, 
president and CEO of University Science Center in Philadelphia. 
He is the first president in the Science Center history to have 
led the company to venture funding and initial public offering. 
University Science Center is a winner of the SBA Growth 
Accelerator Fund competition for the class of 2015 and 2016. I 
had the opportunity to work with Dr. Tang, and just yesterday, 
we both received an award from the Opportunity Industrial 
Center, OIC, of Philadelphia, founded by someone that I hold in 
high esteem, the late Reverend Leon Sullivan. Last September, 
Dr. Tang was appointed to the National Advisory Council on 
Innovativeness and Entrepreneurship, and now serves as the co-
chair where he offers recommendations to the U.S. Secretary of 
Commerce for policies and programs designed to make U.S. 
communities, businesses, and the workforce more globally 
competitive. Welcome to Dr. Tang. And thank you for your 
testimony today.
    And I yield back to the chairman.
    Chairman CHABOT. Thank you very much. The gentleman yields 
back.
    Ms. Marcello, you are recognized for 5 minutes.

  STATEMENTS OF STARR MARCELLO, EXECUTIVE DIRECTOR, EDWARD L. 
     KAPLAN NEW VENTURE CHALLENGE (NVC), POLSKY CENTER FOR 
ENTREPRENEURSHIP AND INNOVATION, UNIVERSITY OF CHICAGO; DARRIN 
 M. REDUS, SR., VICE PRESIDENT, MINORITY BUSINESS ACCELERATOR, 
CINCINNATI USA REGIONAL CHAMBER; CAROLYN RODZ; FOUNDER AND CEO, 
CIRCULAR BOARD; STEPHEN S. TANG, PH.D., MBA, PRESIDENT AND CEO, 
                 UNIVERSITY CITY SCIENCE CENTER

                  STATEMENT OF STARR MARCELLO

    Ms. MARCELLO. Thank you, Chairman Chabot, Ranking Member 
Velazquez, and members of the Committee for having me this 
morning.
    My name is Starr Marcello. I am the executive director of 
the Polsky Center for Entrepreneurship and Innovation at the 
University of Chicago. The Polsky Center drives the creation of 
new businesses at the University of Chicago and on Chicago's 
South Side. We teach entrepreneurship courses, we commercialize 
faculty technology, we run a 34,000 square foot incubator, and 
offer numerous programs to support and mentor those on their 
entrepreneurial journey.
    I am speaking to you today about our capstone program and 
accelerator, the Edward L. Kaplan New Venture Challenge. The 
NVC has been recognized as a top-ranked university accelerator 
in the country for the past 2 years by the Seed Accelerator 
Rankings Project.
    Now in its 21st year, the NVC has helped launch more than 
160 startups still in business today. NVC companies have raised 
over $600 million in venture capital funding, and have created 
more than $4 billion in value for investors through mergers and 
exits. We have two national brands in our portfolio, Grubhub 
and Braintree/Venmo, as well as emerging national brand Simple 
Mills. Grubhub, an online food delivery service, completed the 
New Venture Challenge in 2006, merged with its biggest 
competitor Seamless in 2013, and went public with its IPO in 
2014. The company in now valued about $3 billion.
    The NVC also helped launch Braintree, a payment processing 
company, which was acquired by PayPal in 2013 for $800 million. 
Those under 30 may know Braintree for one of its acquisitions, 
Venmo, which enables friends to send money to one another. By 
most recent count, Grubhub and Braintree alone have created 
1,000 new jobs in Chicago and 2,000 new jobs nationally.
    The NVC's success can be attributed to its unique structure 
and the environment in which it operates. As a leading research 
university in the third-largest city in the U.S., the 
University of Chicago is an intellectual destination for the 
most innovative minds in the world. The reputation of the 
university, its Booth School of Business and, increasingly, the 
New Venture Challenge, draws creative entrepreneurial talent to 
us. Getting top people into the accelerator is the first step 
in getting successful businesses to emerge from the program.
    The New Venture Challenge is structured as a year-long, 
tiered selection process which coincides with the academic 
year. Phase 1 focuses on team formation, Phase 2 on business 
model development, and Phase 3 on communicating the vision to 
potential investors. The program is competitive, with the 
number of teams reduced at each phase to enable those most 
viable to participate in the final ``Demo Day.''
    Phase 1 of the program begins when students arrive on 
campus in autumn. We spend several months working with 
potential applicants on team formation and opportunity 
identification. We create connections among many constituents 
of our university and community, from scientists to MBA 
students. Eligibility requires just one current UChicago 
student. The others can be friends, family members, colleagues, 
acquaintances.
    We use our National Science Foundation-funded I-Corps 
program to encourage these teams to better understand their 
potential customers and to understand how their business idea 
solves a real problem. The staff and faculty at Polsky Center 
spend time mentoring aspiring teams one on one, and in 
February, the hard work of this exploration phase results in 80 
to 100 applications to the New Venture Challenge.
    Of these, 30 teams are selected into Phase 2. In this 
phase, the entrepreneurs enroll in our New Venture Creation 
course, and spend 10 weeks testing and articulating their 
business model in front of faculty and members of the business 
community. The feedback they get is highly critical, but also 
constructive. More than 100 mentors and three full-time coaches 
participate in this phase, providing robust expertise, industry 
knowledge, and support to the teams. Our founders are working 
as hard and as fast as possible to show progress. They are 
building minimal viable products, launching pilots, and 
refining their value proposition. The deadlines create urgency, 
and the urgency creates focus.
    Based on their success in Phase 2, 10 of the 30 teams are 
selected to compete in Phase 3, the NVC Finals, our Shark Tank-
style pitch competition. The incentives to reach this last 
stage are substantial. The finalists pitch to top-level 
investors and entrepreneurs who fly in from around the Nation. 
We award a $500,000 prize package, which includes direct seed 
funding from the university and from local VCs, as well as pro 
bono legal support, design services, office space, and more.
    Our portfolio of 160 companies includes many small 
businesses of 50 or fewer employees. However, these businesses 
are designed with growth in mind. When the NVC ends, the hard 
work of scaling these companies continues. The Polsky Center 
continues to provide mentorship, connections to capital, and 
workshops for these growth-stage entrepreneurs. We help them 
understand how to increase sales and how to hire and fire while 
maintaining an entrepreneurial culture.
    During the last decade, we have also grown the NVC platform 
to support our global MBA students in Hong Kong, London, and 
the Americas; our undergraduates; and those who are focusing on 
social impact ventures. We also enable many of our local 
community entrepreneurs to leverage the resources that have 
been created as a result of the New Venture Challenge.
    Every entrepreneur I have worked with, hundreds over my 12 
years at the Polsky Center, has been driven to create value in 
the world, to solve a problem people are faced with, and to 
find ways of making people's lives better. Whether someone is a 
founder of a small business or a founder of a high-growth 
venture, these entrepreneurs are dedicating everything they 
have in pursuit of their dreams. It is an honor to do the work 
I do every day to support these founders' ambitions, and to see 
the effects not only on Chicago, but throughout the world. 
Thank you.
    Chairman CHABOT. Thank you very much.
    Mr. Redus, you are recognized for 5 minutes.

                  STATEMENT OF DARRIN M. REDUS

    Mr. REDUS. Good morning. Chairman Chabot, Ranking Member 
Velazquez, and distinguished members of the Committee, thank 
you for the opportunity to speak to you today. My name is 
Darrin Redus, and I serve as the vice president of the 
Cincinnati USA Regional Chamber, and executive director of the 
Chamber's Minority Business Accelerator.
    On behalf of the Chamber and its 4,000 member businesses 
and constituents, I would like to first thank the Committee for 
holding this hearing, and thank you, Chairman Chabot, for this 
opportunity to highlight some of the good work happening in 
your hometown.
    This is also a very personal topic for me individually as I 
have now served for the Small Business Network for more than 29 
years in a variety of senior-level capacities and 
entrepreneurial capacities as well.
    I have had the good fortune of working directly in the 
center of one of the country's first tech startups in 2006, and 
then witnessing the explosion of accelerators over the past 10 
years. Evidence of this explosion can be found in the SBA's own 
Growth Accelerator Competition, which received 832 applications 
from accelerators nationwide in 2014, up from less than 10 
organizations in 2005.
    At their very core, the very nature of accelerators, as the 
name implies, is to accelerate the growth and development of 
promising business enterprises by engaging in an intensive and 
comprehensive set of business development and mentoring 
activities designed to dramatically expedite the growth 
process. This has certainly been the case in Ohio that just 
less than 10 years ago was considered a ``flyover State'' by 
the venture capital community, denoting the historical tendency 
of the venture capital firms to primarily focus on the East or 
West Coasts for qualified deal flow and investment activity and 
literally fly over States like Ohio. Whereby today, our State 
is experiencing a robust relationship with the VC community, 
evidenced by 330 early-stage companies receiving over $1.6 
billion in venture capital since 2006.
    Whether it is helping entrepreneurs with product 
development, gaining traction with early client sales, 
facilitating key business and investor relationships, or any of 
a number of critical milestones designed to expedite capital 
and market readiness, the early returns of accelerators over 
the past 10 years have certainly been an absolute catalyst for 
this country.
    And while the economic benefits and significant 
contributions of accelerators have certainly been impressive, 
there remain segments of our population, particularly ethnic 
minority groups, that remain largely disconnected from many of 
these critical resources.
    For over a decade now, our nationally recognized 
accelerator has specifically targeted African American and 
Hispanic populations that, unfortunately, continue to lag 
behind from an economic standpoint. In fact, research by the 
Pew Research Center released just in the past 2 years indicates 
that economic disparities have actually widened for these two 
populations in terms of wealth gap and other economic 
indicators over the past 25 years. This is especially troubling 
for our Nation as a whole as ethnic minority groups are 
expected to be more than half of our national population over 
the next 20 years, and continuing such disparities threatens 
the economic vibrancy and competitiveness of the country.
    Since its inception in 2003, the Cincinnati's Minority 
Business Accelerator, in partnership with our corporate 
community that we call goal setters, has specifically sought to 
address these negative trends. Today our accelerator consists 
of 35 larger-scale African American and Hispanic firms that 
collectively do just over $1 billion in aggregate annual 
business and have created over 3,500 jobs since inception. And 
while we are certainly proud of our record to date, much work 
still remains. Our new strategic plan just launched in 
September of 2016 calls for the creation of an additional 3,500 
jobs and an addition $1 billion over the next 5 years. The 
specific strategy to be deployed to accomplish this objective 
consist of leveraging more mainstream business growth 
strategies, including mergers and acquisitions, joint ventures, 
strategic partnering, exporting and partnering with private 
equity investors, to name a few.
    In closing, a rising body of evidence as further detailed 
in studies by the Harvard Business Review, the Kauffman 
Foundation, and various others, reveals a significant 
contribution to our Nation's economy spurred by the accelerator 
model. Much more work remains, however, to ensure that this 
good work is not lost on various segments of our population. As 
ethnic minority groups become an even greater percentage of the 
total U.S. population, reversing these negative trends tied to 
widening economic disparities must be a critical component of 
the Nation's economic agenda going forward to ensure that all 
of America's citizens are contributing to economic output.
    Again, I thank you for this opportunity and look forward to 
your questions.
    Chairman CHABOT. Thank you very much.
    Ms. Rodz, you are recognized for 5 minutes.

                   STATEMENT OF CAROLYN RODZ

    Ms. RODZ. Thank you. Good morning. My name is Carolyn Rodz, 
founder of Circular Board, a virtual accelerator for high-
growth female founders. I am here today to advocate on behalf 
of our Nation's leading innovators, entrepreneurs, and 
influencers, and specifically, for one of the largest untapped 
economic and social opportunities in our country: women 
entrepreneurs. If women and men participated equally in the 
entrepreneurial ecosystem, in the United States alone GDP could 
rise by $30 billion. Yet, in spite of this, less than 5 percent 
of venture capital goes to female founders, and when we start 
to look at minorities, the numbers are significantly lower.
    The current startup ecosystem is built upon a process that 
funnels information from a small group of people, predominantly 
white males in Silicon Valley and other dense startup cities, 
to their personal social networks and trusted colleagues. When 
you consider that venture capitalists invested $58.2 billion in 
companies with all-male founders in 2016 and just $1.46 billion 
in female teams, in spite of the fact that women and diverse 
leadership teams provide stronger financial returns, it becomes 
apparent that our system for funneling capital into companies 
solely based on financial opportunity is flawed. In 2016, 5,839 
male-founded companies got venture capital funding compared to 
just 359 female-founded companies.
    In other words, companies run by men got more than 16 times 
more funding than companies run by women. And to think, 2016 
was a good year, with women-led companies making up 4.95 
percent of all venture capital deals in 2016, the highest 
percentage in over a decade, and representing just 2.19 percent 
of dollars invested.
    Which brings me to the rationale for the startup 
accelerator, which is, at its core, an advocacy group for 
founders with the intention of connecting them with the 
experts, investors, media, and processes surrounding the art of 
the startup. Think of the accelerator as a liaison between the 
founder, who likely knows much about how to operate their 
business and succeed within their industry, but often little 
about how to raise capital, get covered by the media, build 
support within their local community, and get the endorsement 
of the most influential minds in the startup ecosystem.
    At Circular Board, our most important job is to understand 
the innovation landscape so that we can share this expertise 
with our founders, who are heads-down building businesses that 
are impacting the world around us, creating jobs, and driving 
our economy forward. It is our responsibility to ensure that 
their time is spent wisely, that their business models will 
resonate with potential funders, and that, most importantly, 
they gain a voice within the relatively small and very 
homogenous startup world.
    At Circular Board, we have worked with over 13,000 female 
founders from places like Lake Oswego, Oregon, or El Paso, 
Texas, connecting them with the intellectual capital that 
resides nationwide. When these founders are armed with a 
network of experts, introduced to early-stage investors, and 
supported by a community of unique perspectives and varied 
experiences, they are better prepared to overcome the dismal 
statistics that currently define female founders.
    Take Succhi Ramesh, for example, an Indian immigrant in New 
Jersey, who has created nearly 50 jobs for women in her first 
year. Women on welfare, no less. Or Adrianne Weir of Medolac, 
who has reduced pre-term infant mortality rates by over 50 
percent through fortified human breast milk, and is currently 
raising her Series C at a $45 million valuation. Circular 
Board's accelerator founders have raised over $26 million in 
funding in the last 18 months and have created over 162 jobs. 
Overwhelmingly, our founders cite the relationships they build 
as turning points within their respective businesses.
    It is true that accelerators are popping up all over the 
country, but what is important to recognize is that each of 
these accelerators tackles a unique segment of founders, from 
industry verticals to marginalized audiences, attracting 
expertise that can support problems facing these specific 
groups of founders. Organizations like Circular Board bring 
more than mentorship. They bring energy to the startup 
landscape, forging connections, and bridging the gap between 
enterprise, government, foundations, and more. We are a loud, 
organized, and consistent voice for founders, and a pipeline 
for opportunities presented by organizations like the Small 
Business Administration, Kauffman Foundation, Case Foundation, 
and more.
    At Circular Board, we have learned that resource 
connectivity is the greatest value we can provide to a founder, 
which is why we are building a global artificial intelligence 
platform that will support women at all stages of growth and 
connect them to the tools, experts, content, and events 
relevant to their real-time needs. There is an incredible 
demand for startup accelerators, and it is our mission at 
Circular Board to avail every entrepreneur, regardless of 
gender, ethnicity, geography, capital resources, or cultural 
constraints, the opportunity to engage the right support to 
scale their business, all with the end goal of solving our 
world's most pressing problems and creating sustainable, 
meaningful impact.
    As policymakers, there are significant opportunities to 
support these accelerators, not only through government-funded 
programs like the SBA's Small Business Accelerator Fund, which 
we are grateful to be recipients of, but also by supporting 
trade agreements that open new markets for businesses of all 
sizes, streamlining the process of registering businesses and 
applying for government resources, particularly when working 
with strategic offices, such as the Patent and Trademark 
Office, Department of Commerce, Small Business Administration, 
and FDA.
    Engaging with accelerators allows you to better understand 
how founders are supporting our country through innovation and 
economic development, and to see for yourself how the 
accelerator is a model, not only promoting business success, 
but also national leadership and economic prosperity.
    I thank you for taking the time today to put a spotlight on 
what I believe to be one of the greatest economic opportunities 
of our time.
    Chairman CHABOT. Thank you very much.
    Dr. Tang, you are recognized for 5 minutes.

                  STATEMENT OF STEPHEN S. TANG

    Mr. TANG. Thank you, Chairman Chabot, Ranking Member 
Velazquez, and members of the Committee. Thank you for this 
opportunity to testify regarding small businesses and the 
accelerator model, and to help you recognize and celebrate our 
Nation's legacy of entrepreneurial success. And special thanks 
to my representative, Congressman Evans, for your kind 
introduction.
    I am Steve Tang. I am the President and the CEO of the 
University City Science Center in Philadelphia. It is an honor 
to join my distinguished colleagues in today's panel.
    I would like to begin by expressing my strong support for 
Federal programs such as SBA's Growth Accelerator Fund, which 
encourage and facilitate entrepreneurship.
    I have an extensive background in science, business, and 
entrepreneurship, and a firsthand understanding of the power 
and potential of technology commercialization. I have led a 
company through venture funding and an initial public offering, 
and I served as a senior executive of a large life science 
company as it acquired and integrated smaller companies.
    Last September, I was reappointed to the Department of 
Commerce's National Advisory Council on Innovation and 
Entrepreneurship, NACIE, and I have the privilege of serving as 
NACIE's co-chair through 2018. NACIE reports to Commerce 
Secretary Ross and is charged with identifying and recommending 
solutions to issues critical to driving the innovation economy, 
including establishing entrepreneurship and firms to 
successfully access and develop skilled, globally competitive 
workforces.
    My organization, the University City Science Center, has 
been a key driver of growth and a source of stability for the 
Greater Philadelphia region's life sciences and technology 
sectors since its founding in 1963 as the Nation's first and 
largest urban research park. Today, we are a dynamic hub for 
innovation, entrepreneurship, and technology development, 
offering business incubation, acceleration, and other programs 
that provide support for firms at all stages of the business 
life cycle.
    At the Science Center, we cultivate and expand the 
possibilities that open up when research moves out of the lab 
and into the marketplace. Over the past 52 years, 442 companies 
have received incubation and acceleration services from the 
Science Center. Today, 155 of those 442 firms are located in 
Greater Philadelphia and account for 40,000 direct and indirect 
jobs, or 1 out of every 100 jobs in the Philadelphia region. 
And these 40,000 jobs drive $13 billion in economic activity 
each year, more than 2 percent of the region's total economic 
output.
    To date, our biggest success story is Centocor, now known 
as Janssen Biotech, a division of Johnson & Johnson. Centocor 
was founded in 1979, with a vision of developing monoclonal 
antibodies as a new paradigm to treat diseases such as 
rheumatoid arthritis. Today, Remicade is the biggest product in 
J&J's portfolio, with annual U.S. sales of $5 billion. Another 
Science Center resident company, Spark Therapeutics, is 
developing gene therapies that are showing early, promising 
results for treating childhood blindness and potentially other 
conditions such as hematologic disorders and neurodegenerative 
disorders. These are just two examples of how the Science 
Center has paved the way for transformational business growth 
and job creation.
    We are strong believers in the accelerator model as a 
business vehicle for empowering small businesses. We define an 
accelerator as a program that offers startups access to a suite 
of business tools, including mentorship and professional 
expertise, funding, and other support services over a defined, 
limited time period, in an intensive, high-touch setting.
    For example, our Phase 1 Ventures, or P1V, program works 
with ``long-horizon'' technologies in pharmaceuticals, biotech, 
healthcare, and other fields. P1V helps early-stage companies 
apply for and obtain SBIR and STTR grants, and then provides 
the companies with funding, management support, and access to 
outside expertise, as well as connections to private sector 
funding, in order to keep them growing.
    And our Digital Health Accelerator, or DHA, helps health IT 
companies with products in the prototype stage to reach their 
first sales and investment milestones. The program selects 
promising companies from around the world and provides them 
with funding, collaborative workspace, professional mentorship, 
and introductions to key stakeholders and investors in the 
Greater Philadelphia region.
    As you know, in the 3 years since the Growth Accelerator 
Fund was launched, awards of $50,000 each have been made to 189 
accelerators in 45 States, Washington, D.C., and Puerto Rico. 
The Science Center has been fortunate to win two of those 
awards, one for P1V and the other for DHA.
    I am here to say that those awards, along with other 
strategic and critical Federal grants, have made a real 
difference. Since P1V was launched in 2015, a total of 18 
startups have participated in the program, advancing 
technologies developed in 12 different academic and healthcare 
institutions. Together these companies have secured 
approximately $3 million in public and private funding, and the 
13 companies that have gone through DHA, since its inception in 
2014, have created more than 160 new jobs, generating more than 
$20 million in new revenues, and raising nearly $22 million in 
follow-up funding.
    Thanks to the Federal support that we received, we have 
been able to accelerate the growth startups of companies like 
UE LifeSciences, which is developing a low-cost, portable, 
handheld scanner that can detect breast cancer in its earliest 
stages, anywhere in the world. Or Talee Bio, which is 
developing a gene therapy for cystic fibrosis, the first 
curative disease treatment for this condition. Or SimUCare, 
which is enhancing the training process for doctors and nurses 
by enabling them to learn how to handle medically complex 
situations using live actors rather than mannequins to maintain 
realism.
    At the Science Center, we support technology 
commercialization in the broadest sense by acting as an 
innovation intermediary or linchpin that brings together 
academia, industry, and capital. We create specific processes 
and frameworks, like P1V and DHA, that lower the barriers, 
facilitate collaboration, and enhance the likelihood of 
success. But we also create more generalized incubators, 
accelerators, and other resource-rich environments that combine 
multiple ingredients, including funding, expertise, and support 
services, to help generate the unpredictable and serendipitous 
outputs that have always fueled our Nation's scientific 
advancement and economic growth.
    Accelerators work because they promote and award 
efficiency. We have a saying in the industry: startups need to 
succeed or fail quickly and cheaply. The only way to drive 
business creation and growth is for companies to move 
technologies from across the value chain and get it into the 
market.
    Accelerators force technologies to move quickly, and by 
offering multiple layers of expertise, services, and support, 
accelerators often enable startups to pivot in different 
directions in response to market demand. If Congress is 
interested in stimulating entrepreneurship and pulling even 
more high-potential technologies out of academia and elsewhere 
into the marketplace, then accelerators and other key early-
stage support programs are a wonderful way to achieve a robust 
return on investment.
    Accordingly, we strongly support those targeted Federal 
initiatives, such as the Growth Accelerator Fund, SBIR and 
STTR, and the EDA's Regional Innovation Strategies program, 
among others, that encourage innovation, entrepreneurship, and 
tech-based economic development across the country. And equally 
important, we strongly support those programs, like the Growth 
Accelerator Fund, that promote greater diversity and inclusion 
in our Nation's small business sector.
    More than two-thirds of our P1V and DHA companies are owned 
or led by women or members of underserved groups, such as 
racial minorities, veterans, and disabled individuals. We 
firmly believe that the knowledge-based economy must not only 
be a place of innovation and growth for the science and 
technology community, but also a hub for innovation and growth 
in a wider community with meaningful opportunities for all of 
our citizens to pursue STEM-related careers at all levels.
    Mr. Chairman, this concludes my testimony. On behalf of the 
University City Science Center and NACIE, I want to thank you 
for this opportunity to highlight the benefits of Federal 
programs for our Nation's small businesses and, more broadly, 
our entrepreneurial ecosystem. I welcome your comments and 
questions.
    Chairman CHABOT. Thank you very much.
    I will recognize myself for 5 minutes to start the 
questioning. I will start with you, Mr. Redus, if I can.
    It is my understanding that about 40 or so large Cincinnati 
companies, corporations play a pretty significant role in your 
minority business accelerator. Could you share with us kind of 
the details of that partnership, how it works and what the 
results have been?
    Mr. REDUS. Absolutely. Thank you, Mr. Chairman.
    It is also important to note that as important as the 
startup sector is, our particular accelerator works with 
existing companies that have significant upside potential, 
which dovetails directly into the question on our partnership 
with our corporate community. By design, our work is really 
trying to create more viable vendors and suppliers to our 
corporate partners, so we have to begin with some element of 
scale already. And so our corporate partners really help us to 
identify where their money goes locally and nationally, how we 
can perhaps then align the region's minority companies with 
their natural kind of spending on a go-forward basis.
    So we start with kind of who in our landscape of minority 
businesses already has some size and scale that we can begin to 
accelerate in partnership with our corporate partners. But it 
is a direct, kind of one-on-one relationship and making sure 
that we are growing sizeable businesses that already have some 
foundation of infrastructure.
    Chairman CHABOT. Okay. Thank you very much.
    Ms. Marcello, I will go to you next. In your written 
testimony, you stated that deadlines create urgency and urgency 
creates focus. Could you expand upon that a little bit?
    Ms. MARCELLO. Thank you for the question. Certainly. In the 
phase that that comment referred to of our New Venture 
Challenge, our teams are forced to make very fast progress, and 
the deadlines that they have do not allow them to spend as much 
time as they might like going out and considering the 
competitive landscape and talking to every potential customer, 
and really considering every risk factor. They have to show 
that they can make progress given the uncertainties that face 
them as entrepreneurs do. All entrepreneurs face those 
uncertainties. And by giving them a compressed time schedule in 
which to make progress, they narrowly focus their attention and 
go out and work harder than you can imagine. And so I believe 
that entrepreneurship, with all of the time that you could 
allow, could enable someone to consider every factor, every 
reason why they might not succeed. By making the timeline 
shorter, you can drive real progress.
    Chairman CHABOT. Great. Thank you very much.
    Ms. Rodz, I will go to you next. Could you talk to us about 
how and why you selected a virtual or online model for your 
accelerator?
    Ms. RODZ. Certainly. We started Circular Board by looking 
at the existing model and why it was not working for women, and 
learned several things through that. Some around the learning 
science that relates to women; women tend to learn in a very 
collaborative environment. The other was looking at the unique 
constraints of women. Many of the women that we work with, and 
many women entrepreneurs in general, start their companies 
later in life, which means they have children. They have family 
constraints. Many are bootstrapping. Women start with half the 
capital as men, which means relocating can be very costly. And 
we wanted to target women that were in rural areas, that were 
in cities that did not have dense startup ecosystems, and found 
the virtual model to be the most beneficial structure for the 
women that we were serving.
    Chairman CHABOT. Okay. Thank you very much.
    Dr. Tang, you stated that there is a saying in the industry 
that, and I will quote it, ``Startups need to succeed or fail 
quickly and cheaply.'' Could you talk about that?
    Mr. TANG. Well, the success part is easy to explain. The 
faster you are successful, the faster you get to market, the 
more successful you will be. The failure part of it is a little 
less easy to understand, and that is if you are going to make 
mistakes, make them quickly and learn how to pivot and move on. 
And that is, I think, the core of what we see a lot of the 
activity in accelerators, it is putting that intense deadline-
based pressure to help them think creatively about their 
businesses. So failure and success are equally important.
    Chairman CHABOT. Thank you very much.
    And before my time expires I will go back to you, Dr. 
Redus, for my final question. Is the successful minority 
accelerator model that we have seen in Cincinnati, could that 
be replicated in other areas around the country?
    Mr. REDUS. Thank you, Mr. Chairman. Yes, it can. In fact, 
we are incurring discussions with a variety of communities to 
do just that. It really starts with a very thorough assessment 
of what are the existing companies in a given region. Every 
community is different, but when you start with your base, 
working with organizations like the Minority Business 
Development Agency here at the Department of Commerce, to 
understand your base and foundation, and then working with an 
all-hands-on-deck sort of approach with your corporate 
community and other business leaders, we are already seeing a 
number of communities asking us how to replicate this going 
forward.
    Chairman CHABOT. Thank you very much. My time is expired.
    The gentlelady from New York is recognized for 5 minutes.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you all. 
It has been quite enlightening. You know, sometimes we have 
programs that are created by federal agencies as pilot 
projects, not that we authorized them, so there is no 
congressional record as to the reasons for creating a program 
and the metrics to measure their success. So this hearing is 
very important to me because I have been critical of pilot 
programs without the authorization from congressional 
committees.
    So Dr. Tang, one criticism of accelerators is that we do 
not have proven metrics of this model and that job creation is 
not an accurate measure of success. What are your thoughts on 
this, and how can we best measure the performance of 
accelerators?
    Mr. TANG. Thank you, Congresswoman.
    I believe that job creation is a key metric, but not the 
only key metric. Many businesses that begin today do not 
require a large number of employees, and also, the rise of the 
1099 economy I think skews that information, also. So that is 
why we, in addition to job creation, look at the revenue growth 
as well as the amount of invested capital beyond the 
accelerator. So the accelerator does not exist in a vacuum, and 
its performance should not exist in a vacuum either. It should 
be a bridge to something bigger and better. And that is on the 
success side.
    On the failure side, I think that even when companies fail, 
the conservation of funds to help them fail so they fail 
cheaply is vitally important; also, as well as whether that 
entrepreneur repositions him or herself in the community with 
another venture.
    Ms. VELAZQUEZ. Thank you.
    Mr. Redus, what is the impact on minority business owners 
who participate in accelerators? And are they more likely to 
succeed than when receiving angel investing alone?
    Mr. REDUS. Thank you, Ranking Member Velazquez. Yes. So the 
economic impact can be measured in a variety of ways, and I 
will be brief. So certainly, as was mentioned, we measure the 
growth of the companies in terms of their revenues, the capital 
that they have raised, the jobs that they have created, the 
average payrolls that they have created, the leadership 
positions that these business owners often then go on to take 
in the community. And so from the standpoint of overall impact, 
it is far-reaching, and we also look to make sure that as our 
companies grow to scale, they in turn do business with emerging 
minority firms which furthers that impact. So to the point 
mentioned, it is a broader, far-reaching interconnected nature 
of how we measure the overall impact.
    Ms. VELAZQUEZ. Thank you.
    Ms. Marcello and Ms. Rodz, maybe the two of you or one of 
you mentioned the fact that there is a tendency for venture 
capitalists to invest significantly more in male-owned 
businesses. Women have received only 7 percent of venture 
capital raised in the U.S. and only 10 percent worldwide 
between 2010 and 2015. Because of this, and you also stated 
that, women are turning to unconventional sources, like 
accelerators. What has your experience been in the investment 
turnout for your women-owned businesses?
    Ms. RODZ. Yeah, we see, you know, there is an incredible 
interest in the venture capital community to invest in women 
entrepreneurs, and we hear repeatedly that they are having a 
hard time finding these women-owned companies. And 
interestingly, we have had them flock to us, and a lot of it is 
because of the model that is created and the way that money 
flows. Investors will overwhelmingly say that it is partly 
looking at the analytics behind our company, but then partly 
also gut feel, and that relies a lot on who they know. And so 
one of the goals that we focus on at Circular Board is making 
those personal connections to investors so that they can get to 
know the female founders that are running these high-growth 
companies.
    We are also really focused on these unconventional methods 
of raising capital. I am proud to say that 100 percent of the 
companies through Circular Board that have funded have 
succeeded, and that is in large part because we are able to 
leverage the community. And we are also looking a lot at 
private family offices and individuals as well, and getting 
more women involved in investing.
    Ms. VELAZQUEZ. Would you allow----
    Chairman CHABOT. Yeah. The gentlelady would like to----
    Ms. VELAZQUEZ. Ms. Marcello, would you like to comment? 
Thank you, Mr. Chairman.
    Chairman CHABOT. Sure.
    Ms. MARCELLO. Certainly. The Polsky Center at the 
University of Chicago, in addition to supporting our 
entrepreneurs, also supports our students who are looking to 
enter the investment side of entrepreneurship and become part 
of the venture capital community and invest actually in 
startups. And what we have seen as well is an interest from the 
finance side, from the venture community, in hiring more women 
in as investors who build that diversity into their outlook of 
entrepreneurs who should receive the funding. So I think there 
is evidence going on that more women might be also investing 
and joining the finance side of entrepreneurship and having 
more diversity in terms of looking at entrepreneurs.
    Ms. VELAZQUEZ. Thank you.
    Chairman CHABOT. Thank you.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Chairman CHABOT. Thank you. The gentlelady's time is 
expired.
    The gentleman from Mississippi, Mr. Kelly, who is the 
chairman of the Subcommittee on Investigations, Oversight, and 
Regulations, is recognized for 5 minutes.
    Mr. KELLY. Thank you, Mr. Chairman.
    I am constantly amazed at the quality of the panels that we 
have here in the Small Business hearings, and that is a great 
thanks to our chairman and our ranking member. You are all very 
accomplished professionals, and I just thank you for taking the 
time out of your busy schedules to be here.
    Ms. Rodz, can you describe the application process startups 
go through to gain admittance into your accelerator program? 
And how many startups do you accept at one time?
    Ms. RODZ. We run a 12-week virtual program. We accept 
between--we have had anywhere between 20 founders and 80 
founders per class. The founders apply online. They submit a 
video application, as well as a write-up on their concept, on 
why it matters, and how they plan to scale. We then review 
those applications among our team, our mentor community and 
investors that we work with, and then follow up with phone 
interviews and make the selections from there.
    Mr. KELLY. Thank you. And Ms. Marcello, say I am an 
applicant for the New Venture Challenge. As a small business, 
what do I experience? Who do I first talk to? Who do I interact 
with? How does that interaction work? And can you just kind of 
walk me through the process like that, please?
    Ms. MARCELLO. Certainly. So as an applicant to the New 
Venture Challenge, you may very well walk into my office. 
However, Polsky Center has a staff of 45 individuals who are 
committed to entrepreneurship on the university campus. And so 
there is a tremendous amount of support right at the initial 
phase for people who are curious about whether the New Venture 
Challenge is the right accelerator program for their business 
and for them. And that web of support at the university level 
helps guide the entrepreneur at that point through the 
application process. We have the luxury at the University of 
Chicago, and with the New Venture Challenge, of having a lot of 
time on the front end before applications are actually do to 
make sure everyone understand what the New Venture Challenge 
can provide to them and how it will help their business go from 
point A to point B.
    Mr. KELLY. Thank you very much.
    And Mr. Redus, what is the employee structure of the 
Minority Business Accelerator? And if you will tell me how many 
employees you have, please.
    Mr. REDUS. Thank you. Yes, our direct FTE is five dedicated 
individuals. We work also with a number of 1099 kind of coaches 
and business advisors, as well as an extended network of 
corporate partners that contribute expertise as well.
    Mr. KELLY. And just down the line, I guess Dr. Tang, I do 
not hear a lot about the accelerator. So if I am a small 
business or someone who is starting to get into the small 
business, what can we do better to make sure that people know 
about the accelerator programs and know who to reach out to and 
how to do that?
    Mr. TANG. We have a saying at the Science Center, which is 
celebrate what you want to see more of. And so I think the way 
to get the word out is to have those that have been 
successfully through the program, which have maintained their 
success and sustainability, really do the talking for us. We 
will certainly do our best, and I think agencies within the 
government, like SBA, will do theirs as well. But nothing 
speaks like success like those that have succeeded.
    Mr. KELLY. Thank you. And then just, you know, I have spent 
a lot of time in the last 2 weeks, they like to on the news say 
vacation. I guess working 8:00 to 8:00 is a vacation for those 
guys because I was in the district, meeting with people. And I 
felt the entrepreneurial spirit. It felt like a lot of people 
right now want to start up and create businesses. And if we 
could start and each of you just go down and tell me what you 
are hearing in your area, and do you think that people are like 
looking forward to investing in small businesses right now?
    Ms. MARCELLO. The answer is yes. Absolutely. In the Chicago 
area, people are very interested in starting new businesses. 
Entrepreneurship is of great interest to most people. There are 
more and more early-stage investors coming out of the woodwork 
and more angel networks forming to enable capital for those 
entrepreneurs to succeed. I think the entrepreneurs that are 
looking to get started, they need three primary things: access 
to talent, access to capital, and access to space. And so what 
we have tried to do at the Polsky Center is provide that 
foundation and meet the needs of this growing energy around 
entrepreneurship that exists.
    Mr. REDUS. Yes, in the Cincinnati region, the 
entrepreneurial spirit has never been greater. We have just a 
robust ecosystem. Investors nationally and regionally are 
coming to the region on a regular basis.
    I would also add that as it specifically relates to 
minority entrepreneurs, there is a greater emphasis, as there 
should be, on equity versus debt. There is a longstanding 
mindset in the minority community on overdependence on debt. 
The equity capital market by its very definition looks for 
growth and scale, and the equity capital markets have not 
necessarily been that diverse. And so there is a big push to 
drive more of the minority community towards the equity capital 
environment.
    Mr. KELLY. Mr. Chairman, if you will indulge, I would 
really like to hear the other two answers, but if you all will 
keep them short I would appreciate that.
    Chairman CHABOT. Absolutely. I want to hear it, too.
    Ms. RODZ. We are seeing at Circular Board a real national 
convergence in terms of the expertise and access, which is 
really exciting, and partly why I am very excited about our 
virtual model. We are able to bring together mentors that 
founders are demanding who may reside in California or New York 
when that founder is in Cincinnati. And it is, I think, a real 
testament to the democratization of intellectual and financial 
capital, and I think is going to be the real next wave for 
founders everywhere, being able to converge that access.
    Mr. TANG. Mr. Congressman, I think there was definitely a 
pickup in the Greater Philadelphia area in urban centers. I 
think that should be expected. I think the unexpected and 
delightfully positive result is in the less populated areas of 
the State of Pennsylvania, Delaware, and New Jersey, where we 
serve, we are also seeing a pickup. And I think the unique 
challenge there is the access to resources. So would it not be 
great if a country, like the United States, could have an on-
demand model of servicing entrepreneurs where the resources in 
high-density regions, urban centers, could be used anywhere in 
the country, rural or other places, where they do not have the 
resources? So I think that is the next challenge.
    Chairman CHABOT. The gentleman's time is expired.
    The gentleman from Pennsylvania, Mr. Evans.
    Have I been given the wrong thing? Our bad.
    Ms. Chu is next? Okay, the gentlelady from California. We 
apologize. Ms. Chu is recognized for 5 minutes.
    Ms. CHU. Dr. Tang, my district of Pasadena, California, is 
brimming with entrepreneurial innovation and creativity. The 
combination of technical education institutions, like Caltech, 
innovative companies, and entrepreneurs has created a startup 
innovation Eco Lab in the district. A cornerstone of that is 
Idea Lab, which is one of the longest-running technology 
incubators in the country. Since 1996, Idea Lab has created 
over 150 companies with more than 45 IPOs and acquisitions, 
including successful companies like codeSpark and eSolar.
    So Mr. Tang, could you tell me what makes a startup a 
better candidate for an accelerator or a better candidate for 
an incubator like Idea Lab or, for that matter, for an angel 
investor?
    Mr. TANG. Yes. Congresswoman, I first of all recognize the 
success of the companies and the resources in your district. I 
think each one of those situations, incubator, accelerator, and 
just other general support programs, really depends on the 
availability of capital for those programs. So entrepreneurs 
are very adept in adapting their business plan for the funding 
source.
    I think that accelerators help when you want to accomplish 
a set of goals in a shorter period of time. Incubation is a 
longer horizon. There is probably less goal orientation. That 
is why typically companies last a year or two within 
incubators.
    So I think particularly in the high-tech areas, which 
obviously institutions like Caltech in your district, benefit 
well from accelerators because they have a beginning, a middle, 
and end to them.
    Ms. CHU. Are there ways in which the Federal or State and 
local governments can successfully partner with the tech 
community, like the one in my district, to encourage economic 
development? Now, I know you talked about the SBA Growth 
Accelerator Fund competition. Would you consider that a 
success? And I say that because that last time that was in 
operation was 2014. But are there other ways in which we could 
have partnerships with government?
    Mr. TANG. Yes. I think that the partnership with government 
is essential. I think what you have heard from this panel is 
that there is a market failure. The market failure is not 
enough folks in underserved communities who want to become 
entrepreneurs can become entrepreneurs, whether they are 
minorities or veterans or women entrepreneurs. So government 
has a role here.
    The other factor I think is that innovation has to be 
scalable within the community. In other words, it does not do 
any good for a local community to invest in innovation and have 
that company go elsewhere. So the place really does have to 
matter. There has to be a rich ecosystem that supports those 
entrepreneurs with the kind of connections they need. And I 
think the biggest connection has to be with customers, first 
customers. So entrepreneurs need to be able to sell in the 
local environment and have somebody buy it so they can have 
referenceable clients and customers that are close by. So there 
is a role for local, State, and Federal Government, clearly.
    Ms. CHU. And how would that partnership be made?
    Mr. TANG. A great example is the Department of Commerce's 
EDA, regional innovation strategies, which look at the greater 
set of resources in and around a company; the local, the State, 
and Federal level, and integrate those together. So I think 
there has to be a partnership between not only the public 
sector--State, local, Federal--and the private industry as well 
to help these startups.
    Ms. CHU. Okay. Mr. Redus, we know that women and minorities 
are not participating in high-tech incubators and accelerators 
at the same rate as their white male counterparts and, in fact, 
in 2012, women and minority-owned businesses represented 
respectively only 14 percent and 19 percent of all businesses 
in the high-tech sector. That is why the work of your 
accelerator is so significant. And just last year you were able 
to work with minority businesses to generate $30 million in 
average annual revenue performed and create over 250 new jobs. 
And you have an ambitious goal to create 3,500 new jobs in the 
next 5 years.
    Can you tell me what strategies do you use for attracting 
minority firms that are different from other accelerators?
    Mr. REDUS. Thank you. One important distinction again is 
that our accelerator by design does focus on existing companies 
that already have some base of size or scale. Typically, that 
means at least a million dollars in annual revenue, and we 
scale them from there, which in part speaks to our ability to 
put such a lofty job creation number out there which we have 
done once already, because these companies are now the size and 
scale to be more attractive to such strategies as acquisitions, 
being more relevant to private equity funds, et cetera. So that 
is one piece.
    The second piece of that as relates to just pure tech 
startup environments, I would also just mention that part of 
the way we can be more inclusive in that environment is looking 
at all the various roles that are played in the typical 
ecosystem. So as important as entrepreneurs are, there are 
angel investors, there are subject matter expertise. There are 
people that serve on boards of these emerging companies, the 
management of these emerging companies. Every one of those 
roles is an opportunity for diverse engagement. That will then 
start to create more organic inclusion in every ecosystem.
    Chairman CHABOT. Thank you. The gentlelady's time is 
expired.
    The gentlelady from Puerto Rico, Ms. Gonzalez-Colon, is 
recognized for 5 minutes.
    Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And thank you 
for having this panel here.
    Mr. Tang, you speak about having opportunities for this 
Growth Accelerator Fund as it was launched, awards in so many 
States, including Puerto Rico. And I would like to know what 
kind of award was given in any specific case in the island and 
in the rest of the States so we can have a specific kind of 
startups or accelerator process you have got on the island.
    Mr. TANG. Congresswoman, I am embarrassed to say I do not 
know the specifics of the awards in Puerto Rico or really any 
of the other awards.
    Ms. GONZALEZ-COLON. Can you give us a specific case, even 
in the States, that we can use as an example?
    Mr. TANG. Yes. Well, I provided two that I am very well 
aware of from the awards that we receive from the SBA 
accelerator fund. One was Phase 1 Ventures, which looks at 
long-horizon technologies. That is technology that takes a long 
time to develop, mainly in the high-tech areas. And the other 
one is the digital health accelerator, which takes more mature 
companies that are looking for their first sale and to ramp up 
sales.
    So I guess the point is that it does not matter the domain 
or the vertical industry that the company resides in. What 
matters is that they are facing a particular challenge, either 
scaling technology or tying technological risk, or scaling up 
sales. So those are the fundamentals.
    Ms. GONZALEZ-COLON. You said in your statement that you 
were like an intermediary in the Science Center. Why do you say 
that?
    Mr. TANG. Yes. So this has to do with, I think, the market 
inefficiency between ideas in the marketplace. And that is, in 
our world it is typical that academic researchers create the 
ideas, but academic researchers culturally are not business 
people. And so to try to match and bridge that gap between the 
idea people and the business people is why innovation 
intermediaries like the University City Science Center exist. 
So you are always going to have that sort of cultural 
dissidence, and the lack of skills to convert the technology 
into the marketplace, and that is why organizations like us 
exist.
    Ms. GONZALEZ-COLON. And my question then will be is there 
always any kind of relationship between the State, at the 
agencies, the Department of Commerce, SBA, the universities, 
each State organization, and the accelerators?
    Mr. TANG. Well, I think it is very common for there to be 
an economic development role, and that can be local, State, or 
Federal. And different organizations exist on different funding 
streams. The Science Center has been around so long, 54 years, 
that we do not rely primarily on government funding, and it 
makes very efficient use of the funds. But I do think that 
because there is so much at stake in developing jobs locally, 
that is why you see the involvement at the State and the local 
level.
    Ms. GONZALEZ-COLON. Thank you.
    Mr. Redus, you said that there is small business 
accelerator. What is the number of complaints that you hear for 
these small businesses?
    Mr. REDUS. Number of complaints?
    Ms. GONZALEZ-COLON. If you heard?
    Mr. REDUS. We do not really get complaints, if you will.
    Ms. GONZALEZ-COLON. There are no complaints? But the thing 
is----
    Mr. REDUS. There is more around what are the opportunities 
as relates to how do we, one, get more access to capital, of 
course, capacity building? So they are really just looking at 
where are the barriers that we need to address? So we really 
focus on those two issues in particular, capital readiness and 
capacity readiness.
    Ms. GONZALEZ-COLON. So there is no complaining about 
regulation?
    Mr. REDUS. Certainly, as it relates to doing business with 
the Federal Government. There is certainly an opportunity for 
growth at both the State and Federal level. There is always 
more of that that could be done. So that is a terrific 
opportunity for partnering to be sure.
    Ms. GONZALEZ-COLON. Yeah, I am asking because I would like 
to know about the differences between the jurisdictions in each 
State regarding this kind of opportunity between the 
accelerator version and small businesses, if each State is 
managing this differently to improve their economy, to improve 
those startups, to see if that kind of relationship between 
those universities and accelerators may improve that to happen 
as they did in California, of course, and to use that as an 
example.
    And as this Committee is trying to improve that kind of 
environment, to try to use this and use that success story, 
what kind of a specific recommendation you may bring to us 
today to amend or recommend specific legislation today. Do you 
have any?
    Mr. REDUS. I would recommend, there are opportunities, 
certainly, to incentivize greater engagement as it relates to 
what has now been a proliferation of accelerators across the 
country. Many organizations' accelerators now go to their State 
and Federal partners to fund these operations. And so when you 
look at what the ecosystem has become as relates to the various 
roles that I played, angel investors, subject matter expertise, 
and C-level management, if every one of the roles was more 
inclusive, you would start to have more organic inclusion in 
these ecosystems. Angel investors is a great example because 
typically angel investors will bring a network with them. If we 
had more women and minority angel investors, and they certainly 
meet the requisite criteria of an accredited investor from an 
income standpoint, well standpoint, but they are not being 
engaged as much as they should be. So that in and of itself is 
an opportunity to incentivize that sort of activity as folks 
approach for grants, start having more of the kind of metrics 
around the broader roles of engagement.
    Ms. GONZALEZ-COLON. Thank you, sir.
    Chairman CHABOT. Thank you. The gentlelady's time is 
expired.
    The gentleman from Pennsylvania, Mr. Evans, who is the 
ranking member of the Subcommittee on Economic Growth, Tax, and 
Capital Access, is recognized for 5 minutes.
    Mr. EVANS. Thank you, Mr. Chairman.
    The question I would like to start off to all of you is 
what could the accelerator model do better? That is a question 
I want to ask each one. What could the accelerator model do 
better? And go down the line and give me some feedback on that, 
whoever wants to start first.
    Mr. TANG. Congressman, I think first and foremost, it has 
to be we have to target companies that are successful where 
they are funded. In other words, we have to make sure that they 
have not only a good idea and a good business plan and a good 
team, but they have something to contribute and connect them to 
the community. I think that will help in many ways. Job 
creation and keeping jobs where they are funded are helpful as 
well.
    Ms. RODZ. Accelerators certainly can utilize the very tools 
that we are encouraging the businesses that we work with to 
use. We are very focused on integrating technology into our 
platform in order to gain a more robust view of the individual 
founders that we are working with to better connect them to the 
broader resources available in the startup ecosystem, to reach 
far beyond what we know and the resources that we are aware of, 
and to start to partner with other accelerators and resources 
in the community, with government institutions and 
corporations, to understand all the initiatives and outreach 
that they have and the resources they have access to, to start 
to tie all those together, something that we are very focused 
on at Circular Board.
    Mr. REDUS. One of the opportunities to get better, as much 
as this is already a focus, it can still be more so, and that 
is continuing to build bridges. When I think about the general 
nature of accelerators who connect the disconnected from 
resources, particularly as it relates to investors, key 
customers, et cetera, there is always more work to be done to 
really help entrepreneurs who are disconnected from those 
environments to, one, go deep with respect to readiness for 
those environments. And then after that readiness has been 
addressed, then further the connectivity to the actual 
resources that so many entrepreneurs are still disconnected 
from.
    Ms. MARCELLO. I would just add that the outputs of an 
accelerator are only going to be as good as the inputs. And as 
all of us running accelerators can tell you, it is our 
responsibility to make sure that our entrepreneurs are 
considering which accelerator program might be right for them. 
The growth of accelerator programs means that entrepreneurs do 
have some options in terms of going to an accelerator that 
focuses on their industry or their geography, or a different 
system that they want to be a part of. And their success can be 
contingent on making that selection. So I think we have a role 
to play in guiding them along those lines so that they can 
leverage the ecosystem that is best for them.
    Mr. EVANS. I want to follow up on the questions the ranking 
member asked. Ms. Rodz, you said, how can we best market the 
availability of accelerators to women?
    Ms. RODZ. One of the big problems is that women are not 
currently integrated into the startup ecosystem, and a lot of 
the marketing initiatives and outreach programs are looking at 
current programs. What we have really focused on and why we 
have been able to engage so many women from so many different 
areas is looking at places outside of the entrepreneurial 
resources that exist, looking at women's chambers of commerce, 
looking at social organizations, looking at moms' groups and 
people that are innovating across the country in very different 
ways, but really are not aware of all of the entrepreneurial 
resources that exist. And so I think it is important to get 
beyond what we know to start to really utilize the media. We 
have had incredible partnerships with the media and have been 
able to be recognized in, you know, major outlets in order to 
get exposure. Something that we are very focused on is how do 
we start to integrate more women and pull them into the 
ecosystem.
    Mr. EVANS. Dr. Tang, obviously, I am a little biased since 
that is where I am from, Philadelphia, but what has made 
accelerators in Philadelphia so successful?
    Mr. TANG. Congressman, you know, we have great assets in 
higher education and the medical arts in Philadelphia. And so 
what we do is try to make good companies out of good science. 
And so I think, as Starr mentioned, the inputs are very 
important. So I think the secret sauce in Philadelphia is we 
are at a good starting place in terms of intellectual capital, 
intellectual property, and talent, to begin with. It is then 
about converting that into something that is commercially 
viable, something that people want to buy. And I think that is, 
right now, what we are working on is that conversion from very 
good inputs to very good outputs.
    Mr. EVANS. I yield back the balance of my time. Thank you, 
Mr. Chairman.
    Chairman CHABOT. Thank you very much. The gentleman yields 
back.
    The gentlelady from North Carolina, Ms. Adams, who is the 
ranking member of the Subcommittee on Investigations, 
Oversight, and Regulations, is recognized for 5 minutes.
    Ms. ADAMS. Thank you, Mr. Chair and Ranking Member 
Velazquez, for hosting the meeting today. And I want to thank 
all the witnesses for your testimony.
    Charlotte, North Carolina, is honored to be home to a few 
accelerators, and these accelerators are critical to innovation 
and job creation.
    Dr. Tang, I have spoken to a number of folks in my district 
who are concerned about the lack of a skilled workforce, 
especially in the STEM fields. So how is your center involved 
in working to fill this gap and how does it build on your work 
with entrepreneurs?
    Mr. TANG. Yes. Thank you for the question, Congresswoman.
    The University City Science Center is located literally at 
the fault line between the haves and have-nots in Philadelphia. 
We have great anchor institutions, like University of 
Pennsylvania, Children's Hospital of Philadelphia, Drexel 
University, and yet to our northern border of the Science 
Center, we have Mantua and Powelton Village, which are part of 
a Federal Promise Zone. So what we are trying to do is create 
more access and inclusion in the programs that we have, 
beginning with middle school and high school students.
    And the real magic to what we are doing in a program called 
First-Hand is to create opportunities for these school children 
to be mentored by not only scientists, but by entrepreneurs. 
That is scientists, entrepreneurs who are founding companies, 
who are creating their own dreams with the benefit of 
accelerators and incubators and the like. So it is infusing 
young people with the possibilities of innovation and 
entrepreneurship at an early age. From there, what we try to do 
is create opportunities for developing adults into skilled 
workers that can be working for these high-growth companies.
    So our job, if you will, in Philadelphia, is to create 
good-paying, high-growth jobs in high-growth companies in high-
growth industries. I think if we can do that we will create a 
lot more inclusion of the surrounding community.
    Ms. ADAMS. Thank you.
    Charlotte-Mecklenburg faces a number of barriers to 
economic opportunity and economic mobility. Ms. Marcello, can 
you elaborate on in what ways do accelerators, either directly 
or indirectly, promote this type of high-quality job creation?
    Ms. MARCELLO. Yes. Accelerators, you know, do provide this 
new path for high-quality job creation in that a program like 
the New Venture Challenge is going through a tiered process by 
which we are looking at how these companies can be most viable 
and create a high number of jobs.
    So I mentioned the New Venture Challenge, a lot of the 
companies that come out are small, but they have growth 
potential. And part of what we are evaluating as we go through 
and look at these companies is whether they are scalable and 
how big of an impact can they have not only on Chicago and our 
region, but throughout the country, and maybe throughout the 
world. And so as we look at the business ideas and the 
entrepreneurs and the skill sets and the resources that they 
need, we look at that with the growth strategy in mind hoping 
that a real impact will result from that.
    Ms. ADAMS. Thank you. Thank you very much.
    Mr. Redus, thank you, first of all, for your important work 
with Minority Business Accelerator. Many incubators and 
accelerators are located in high-income, less diverse 
communities. So do you think encouraging these centers to form 
in urban areas might increase diversity? And how can we support 
more minority entrepreneurs?
    Mr. REDUS. Thank you, Congresswoman. Yes. In fact, I would 
wholeheartedly support that. There are some examples across the 
country where there are incubators and accelerators directly in 
the urban core, and it absolutely makes a difference. One of 
the barriers, of course, is connectivity; often transportation 
and various other barriers. So the short answer is, yes, it 
absolutely can make a difference. And I think working with our 
various business leaders, government leaders, higher education, 
et cetera, to specifically craft strategies around that, and 
looking at the economic lift of doing so. So often we have to 
first kind of create, based on that particular geography and 
the level of folks that are disconnected, if connected, if now 
part of an equity equation, what is the economic upside of 
that? And that certainly drives investment in the urban core.
    Ms. ADAMS. Thank you very much. Mr. Chair, I yield back. My 
time is up.
    Chairman CHABOT. The gentlelady yields back. Thank you.
    The gentleman from Florida, Mr. Lawson, the ranking member 
of the Subcommittee on Health and Technology, is recognized for 
5 minutes.
    Mr. LAWSON. Thank you very much, Mr. Chairman.
    Dr. Tang, can you discuss how innovation and technology 
have impacted the growth of accelerators?
    Mr. TANG. I think technology has really enabled many 
accelerators. Carolyn spoke of her accelerator being virtual. I 
think that is something that could not happen without the role 
of technology. So technology both enables these accelerators to 
do their work in an efficient manner, information technology, 
the technology itself that these companies are basing their 
ideas on. So having good starting points with sound science is 
actually very key to what we are doing with accelerators.
    Mr. LAWSON. Okay, thank you. And can you also describe what 
accelerators will evolve into over the next 10 years?
    Mr. TANG. I am not an expert at predicting the future, but 
I would say that more and more, as success of the accelerators 
is better known, they will become more successful, and I think 
evolve in their own right to the point where you can connect 
people, regardless of where they reside, to valuable resources 
and expertise that they could not get if they walked down the 
street. So to me, it is an on-demand model where the best 
advice gets to the best idea and the best entrepreneur at 
exactly the right time.
    Mr. LAWSON. And one other question is how has the global 
market been affected by the growth of accelerators?
    Mr. TANG. Well, the global market, I think, is both enabled 
and caused by the technology. So it is very possible to have 
teams that exist around the world. And, in fact, in the world 
of information technology, have software development that 
happens around the clock. So that consecutiveness across the 
globe enables better invention and ideas and enables better 
commercial success.
    Mr. LAWSON. And anyone can respond to this. I think about 2 
weeks ago when a panel was here they stated that the fastest-
growing small business was minority women-owned businesses. You 
know, from the standpoint, how does accelerators enhance that 
opportunity for them to bring about more job growth?
    Ms. RODZ. I think ultimately it boils down to 
accessibility. The more accelerators we have and the more focus 
each of those accelerators has, it opens up opportunities for 
all of these groups. I think across the board, I am going to 
guess that everyone on this panel is in favor of inclusive 
entrepreneurship. I think it is something that we all want and 
believe in, and I think the more we can create these 
opportunities, the more inclusive it is going to result.
    Mr. REDUS. I would just like to add to that just briefly 
that certainly, the number of women and minority entrepreneurs 
has increased the number of new businesses. It is also a 
question of what type of businesses are they? Higher potential, 
scalable businesses, et cetera. And so part of the additional 
challenge is making sure that as the numbers improve in terms 
of just pure number of entrepreneurs, what are the industries? 
What are the growth models?
    We still have a ton of work to do to drive more larger-
scale, high-potential women and minority firms, so that the 
actual numbers of new business starts is absolutely improving, 
but the types of businesses need to be further examined.
    Mr. LAWSON. You know, every time I have the opportunity to 
ask this $10 million question, you all have given extraordinary 
testimony. What can this Committee do to help enhance the 
opportunity for more accelerators, more people having access to 
capital, and so forth as they work on issues here in the Small 
Business Committee?
    Mr. REDUS. I will start. One of the things that I think is 
critical, and I mentioned this to some degree, but every 
Federal initiative by and large in the past around access to 
capital, particularly for minority entrepreneurs, has been 
around access to debt capital. And so you drive a certain 
mindset. There is a very different way of thinking around debt 
versus equity. And so a specific and intentional focus on 
driving more discussion and issues and activities around equity 
capital, because it drives a growth mindset, whether you are a 
tech company or not, just the ability to think bigger about 
your opportunity will attract equity capital. But that is a 
very different way of thinking that still has to go a lot 
further as relates to minority entrepreneurs.
    Mr. LAWSON. Anyone else care to comment?
    Mr. TANG. Congressman, that is a very big question. I think 
that we need more of an entrepreneurial mindset in our economy, 
beginning with young people and the people that are making 
their way through college and into the work environment. 
Obviously, they need incentives. I think there can be better 
incentives, tax incentives to start businesses and for 
communities to support businesses. But I also look at the 
overhang of student loan debt as preventing young people from 
going into entrepreneurial pathways. There is such a focus on 
getting a job and paying down the debt that they are unlikely, 
I think, to be entrepreneurs. And so I am concerned about the 
pipeline of entrepreneurs from the young to the old.
    Mr. LAWSON. Mr. Chairman, I know just before I yield back--
I have to yield back--that is a big issue with me. I have a lot 
of university students in my area back in Florida, and one of 
the things that they talk about all the time is they hope that 
we can do something from the standpoint to encourage them. So I 
really wish I had more time with Dr. Tang. But anyway, I yield 
back. I certainly hope it comes back up again in the Committee.
    Chairman CHABOT. We appreciate the gentleman raising that 
very important issue. Thank you. And it is something that let 
us carry on further discussions about it.
    I want to thank our very distinguished panel. I think you 
all did a great job here today, and thank you for celebrating 
National Small Business Week with us. This Committee likes to 
find out what is working, what is maybe not working, and 
emphasize what is working, and business accelerators are a part 
of the small business world which we think merits a lot more 
activity and encouragement by the Federal Government, which 
oftentimes means do not mess it up for you. And we will try not 
to. And we will work together in a bipartisan manner not to do 
that and to try to encourage what does succeed.
    So thank you all for shedding a lot more information on the 
Committee members that were here today.
    And I would ask unanimous consent that members have 5 
legislative days to submit statements and supporting materials 
for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
Committee, we are adjourned. Thank you very much.
    [Whereupon, at 12:30 p.m., the Committee was adjourned.]
    
    
    
                            A P P E N D I X

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Good morning. Chairman Chabot, Ranking Member Velazquez, 
and distinguished Members of the Committee, thank you for the 
opportunity to speak with you today. My name is Darrin Redus, 
and I serve as Vice President of the Cincinnati USA Regional 
Chamber, and Executive Director of the Minority Business 
Accelerator, an initiative of the Cincinnati Chamber.

    The Cincinnati USA Regional Chamber is one of the nation's 
largest Chambers, representing the interests of nearly 4,000 
member businesses in a 15 county region across three states--
southwestern Ohio, northern Kentucky, and southwestern Indiana. 
It is the purpose of the Chamber to grow the vibrancy and 
economic prosperity of our region. The Chamber works to 
accomplish this goal by being inclusive and regional in all 
that we do, and by leading with a bold voice for business, 
expanding the talent base and harnessing the power of the 
region's unique offerings.

    On behalf of the Chamber and its member businesses and 
constituents I'd like to first thank the committee for holding 
this hearing as small businesses are certainly the beating 
heart of our community as they are for communities across the 
country.

    This is also a very personal topic for me individually as I 
have now served for the better part of 29 years in any of a 
number of capacities in support of small businesses--be that as 
a commercial banker and financial services executive for 16 
years, an entrepreneur myself and founder of 3 different 
startups, as well as an investor, consultant and economic 
development professional over the most recent 12 years in 
supporting small business and entrepreneurial ecosystems 
nationwide.

    I've had the good fortune of being directly in the center 
of today's topic having been on the leadership team of one of 
the country's first wave of tech accelerators in 2006, and then 
serving as a consultant in various capacities as incubators and 
accelerators have literally exploded over the past 10 years 
with now hundreds of such organizations around the world. 
Evidence of the explosion can be found in the SBA's Growth 
Accelerator Competition which took in 832 applications from 
accelerators nationwide in 2014, up from less than 10 such 
organizations on record in 2005.\1\
---------------------------------------------------------------------------
    \1\ 2014 Growth Accelerator Competition Quarterly Metrics and 
Results as of 1/31/15, prepared by SBA Office of Investment & 
Innovation in February, 2015

    At their core, the very nature of accelerators--as the name 
implies--is to accelerate the growth and development of 
promising business enterprises by engaging in an intensive and 
comprehensive set of business development and mentoring 
activities that, without the intervention and guidance of such 
resources, would significantly lengthen the growth process, if 
it would happen at all. This has certainly been the case for 
states such as Ohio that just less the 10 years ago were 
considered ``fly over states'' by the venture capital 
community--denoting the historical tendency of venture capital 
firms to primarily focus on the east or west coasts for 
qualified deal flow and investment activity and ``fly over'' 
states such as Ohio. Whereby today our state is experiencing a 
vibrant and robust investment climate with national VCs 
directly tied to the great work of our statewide network of 
incubators and accelerators that comprise our entrepreneurial 
ecosystem. In fact, since 2006 over 330 early-stage companies 
across Ohio have received over $1.6 billion in follow-on equity 
capital from regional and national VCs.\2\
---------------------------------------------------------------------------
    \2\ Ohio Third Frontier Commission Meeting published on 3/29/17.

    Whether it's helping entrepreneurs with product 
development, gaining traction with early client sales, 
facilitating key relationships with industry experts and 
subject matter expertise, or any of a number of critical 
milestones designed to expedite the investor and market 
readiness of a promising business, the early returns of 
accelerators over the past 10 years certainly speak to their 
overall importance as a significant catalyst to our nation's 
---------------------------------------------------------------------------
economy.

    And while the economic benefits and significant 
contributions of accelerators have certainly been impressive, 
there remain segments of our population, particularly many 
ethnic minority groups, that remain largely disconnected from 
many of these critical resources.

    The Cincinnati USA Regional Chamber's Minority Business 
Accelerator (the ``Accelerator'') has been its premier minority 
business and inclusion program for over a decade--specifically 
targeting African American and Hispanic populations that 
unfortunately continue to lag behind from an economic 
standpoint. In fact research by the Pew Research Center 
released in the past two years indicates that economic 
disparities have actually widened for these two populations, 
now representing the largest gap in wealth and other key 
economic indicators in the past 25 years. This is especially 
troubling for our nation as a whole as ethnic minority 
populations are expected to represent over half of the nation's 
population over the next 20 years, and such continuing economic 
disparities threatens the entire economic vibrancy and overall 
competitiveness of the nation.

    Since its inception in 2003, Cincinnati's Minority Business 
Accelerator has specifically sought to address these negative 
trends. Today our Minority Business Accelerator is recognized 
as a national best practice by such organizations as The Surdna 
Foundation and the Association of Chamber of Commerce 
Executives, and consists of 35 larger scale African American 
and Hispanic firms that collectively generate just over $1 
billion in aggregate annual revenues, and have created over 
3,500 jobs in the region since the program's inception. The 
Accelerator's approach focuses on preparing high potential 
minority firms for larger scale business opportunities with 
corporate and institutional buyers through an intensive process 
of capacity building, capital readiness, and strategic growth 
initiatives. The Accelerator further collaborates with over 40 
major corporations (referred to as our Goal Setters) that work 
intentionally and strategically to conduct greater levels of 
business with minority firms that demonstrate the capacity and 
capability to scale. Over the most recent year, clients of the 
Accelerator have continued to demonstrate strong results as 
evidenced by:

     $30 million Average Annual Revenue per firm

     24% Average Year over Year Revenue Growth

     Over 250 new jobs created

    Moreover, the Accelerator also manages a $2 million loan 
fund called the L. Ross Love GrowthBridge Fund, which was 
created in 2013 to further address the shortfall of financial 
capital for growth-oriented minority firms.

    And while we are certainly proud of our efforts to date, 
much more work remains. Our new strategic plan, just launched 
in September of 2016, calls for the creation of an additional 
3,500 new jobs in the region over the next 5 years, and an 
additional $1 billion in aggregate annual revenue growth across 
the portfolio of minority firms assisted by the Accelerator.

    The specific strategy to be deployed to accomplish this 
objective consists of leveraging more ``mainstream'' business 
growth strategies such as mergers and acquisitions, joint 
ventures, strategic partnering, exporting, and partnering with 
private equity investors, to name a few. An even greater 
commitment from our corporate Goal Setter partners to further 
diversify their respective and collective supply chains will 
also be a cornerstone of our anticipate results going forward.

    As large corporations and other institutional buyers 
increasingly operate in a global marketplace, minority-owned 
enterprises and small businesses as a whole, must continue to 
expand their capacity and scale to remain viable strategic 
partners for these larger institutional clients. This will in 
part be accomplished through a greater focus on risked-based 
equity capital, and the encouragement of higher growth 
enterprises that this form of capital supports. A continuing 
over-dependence on debt capital with minimal equity (as has 
been well-documented for minority firms), and failing to adopt 
more mainstream business growth strategies such as the 
aforementioned approaches of joint ventures and acquisitions, 
will continue to threaten the longer term competitiveness of 
minority firms and ultimately the nation as a whole.

    In closing, a rising body of evidence as further detailed 
in studies by the Harvard Business Review, the Kauffman 
Foundation and various others, reveals a significant 
contribution to our nation's economy spurred on by the 
accelerator model. Much more work remains however to further 
insure that this good work is not lost on various segments of 
our population. As ethnic minority groups become an even 
greater percentage of the total U.S. population, reversing the 
negative trends tied to widening economic disparities must 
become a critical component of the nation's economic agenda to 
ensure that all of America's citizens are contributing to 
economic output.

    Again, thank you for this opportunity and I'm happy to take 
any questions that you have.

                              *** END ***
    Good afternoon. My name is Carolyn Rodz, Founder of 
Circular Board, a virtual accelerator for high-growth female 
founders. I am here today to advocate on behalf of our nation's 
leading innovators, entrepreneurs and influencers, and 
specifically for one of the largest untapped economic and 
social opportunities in our country: women entrepreneurs. If 
women and men participated equally in the entrepreneurial 
ecosystem, the United States' GDP could rise by $30 billion. 
Yet in spite of this, less than 5% of venture capital goes to 
female founders, and when we start to look at minorities, the 
numbers are significantly lower.

    The current startup ecosystem is built upon a process that 
funnels information from a small group of people, predominantly 
white males in Silicon Valley and other dense startup cities, 
to their personnel social networks and trusted colleagues. When 
you consider that venture capitalists invested $58.2 billion in 
companies with all-male founders in 2016, and just $1.46 
billion in all female teams, in spite of the fact that all-
women and diverse leadership teams provide stronger financial 
returns, it becomes apparent that our system for funneling 
capital into companies solely based on financial opportunity is 
flawed. In 2016, 5,839 male-founded companies got venture 
capital funding, compared to just 359 female-founded 
companies--in other words, companies run by men got more than 
16 times more funding than companies run by women.

    And to think: 2016 was a good year, with women-led 
companies making up 4.95% of all venture capital deals in 2016, 
the highest percentage over the past decade, and representing 
just 2.19% of dollars invested.

    Which brings me to the rationale for the startup 
accelerator, which is, at its core, an advocacy group for 
founders with the intention of connecting them with the 
experts, investors, media and processes surrounding the art of 
the startup. Think of the accelerator as a liaison between a 
founder, who likely knows much about how to operate their 
business and succeed within their industry, but often little 
about how to raise capital, get covered by the media, build 
support within their local community and get the endorsement of 
the most influential minds in the startup ecosystem.

    At Circular Board, our most important job is to understand 
the innovation landscape, so that we can share this expertise 
with our founders, who are heads down building businesses that 
are impacting the world around us, creating jobs, and driving 
our economy forward. It is our responsibility, as their guides, 
to ensure that their time is spent wisely, that their business 
models will resonate with potential funders, and that, most 
importantly, they gain a voice within the relatively small, and 
relatively homongenous, startup world.

    At Circular Board, we lead companies through a 12-week, 
100% virtual accelerator that attracts founders from places 
like Lake Oswego, Oregon, or El Paso, Texas, and connects them 
with the intellectual capital that resides nationwide. When 
these founders are armed with a network of experts, introduced 
to early stage investors, and supported by a community of 
unique perspectives and varied experiences, they are better 
prepared to overcome the dismal statistics that currently 
define female founders. Take Suuchi Ramesh, for example, an 
Indian immigrant in New Jersey who has created nearly 50 jobs 
for women on welfare and generated over $1 mm in revenues in 
her first 18 months of business. Or Adrianne Weir of Medolac, 
who has reduced pre-term infant mortality rates by over 50% 
through fortified human breast milk, and is currently raising 
her Series C with an estimated valuation of $45 million. 
Overall, Circular Board founders have raised over $26 million 
in funding, and have created over 162 jobs. Overwhelmingly, our 
founders cite the relationships they built as the turning 
points within their respective businesses.

    It is true, that accelerators are popping up all over the 
country, but what is important to recognize is that each of 
those accelerators tackles a unique segment of founders, from 
industry verticals to marginalized audiences to impact centered 
hubs, attracting expertise that can support the specific 
problems facing these groups of founders. Accelerators like 
Circular Board bring more than mentorship, they bring energy to 
the startup landscape, forging connections and bridging the gap 
between enterprise, government, foundations and more. They are 
a loud, organized and consistent voice for founders, and a 
pipeline for opportunities presented by organizations like the 
Small Business Administration, Kauffman Foundation, Case 
Foundation and more.

    Through our five cohorts, we've learned that resource 
connectivity is the greatest value we can provide to a founder, 
which is why we are pouring all of our resources into building 
a global artificial intelligence platform that will support 
women at all stages of growth, and connect them to the tools, 
experts, content and events relevant to their real-time needs 
and unique company profile. There is an incredible demand for 
startup accelerators, and it is our mission at Circular Board 
to avail every entrepreneur, regardless of gender, ethnicity, 
geography, capital resources or cultural constraint, the 
opportunity to engage the right support to scale their 
business, all with the end goal of solving our world's most 
pressing problems and creating sustainable, meaningful impact.

    I urge each of you today to actively engage with 
accelerators in need of your expertise. As policymakers, there 
are significant opportunities to support these accelerators, 
not only through government funded programs like the SBA's 
Small Business Growth Accelerator Fund, which we are grateful 
to be recipients of, but also by supporting trade agreements 
that open new markets for businesses of all sizes, streamlining 
the process of registering businesses and applying for 
government resources, particularly when working with strategic 
offices such as the Patent & Trademark Office, the Department 
of Commerce, the Small Business Administration and the Federal 
Drug Administration, and enabling access to broadband in all 
parts of our country.

    Engaging with accelerators will allow you to better 
understand how founders are supporting our country through 
innovation and economic development, and to see for yourself 
how the accelerator is a model not only promoting business 
success, but also national leadership and economic prosperity. 
I thank you for taking the time today to put a spotlight on 
what I believe to be one of the greatest economic opportunities 
of our time.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman Chabot, Ranking Member Velazquez, and Members of 
the Committee, thank you for this opportunity to testify 
regarding small businesses and the accelerator model, and to 
help you recognize and celebrate our nation's legacy of 
entrepreneurial success.

    I'm Steve Tang, President and CEO of the University City 
Science Center in Philadelphia. It's an honor to join my 
distinguished colleagues on today's panel.

    I'd like to express my strong support for Federal 
programs--such as the SBA's Growth Accelerator Fund--that 
encourage and facilitate entrepreneurship.

    I have an extensive background in science, business and 
entrepreneurship, and a first-hand understanding of the power 
and potential of technology commercialization. I've led a 
company through venture funding and an initial public offering, 
and served as a senior executive with a large life sciences 
company as it acquired and integrated smaller companies.

    Last September I was re-appointed to the Department of 
Commerce's National Advisory Council on Innovation and 
Entrepreneurship (or NACIE), and I have the privilege of 
serving as NACIE co-chair through 2018. NACIE reports to 
Commerce Secretary Ross, and is charged with identifying and 
recommending solutions to issues critical to driving the 
innovation economy, including enabling entrepreneurs and firms 
to successfully access and develop a skilled, globally 
competitive workforce.

    My organization, the University City Science Center, has 
been a key driver of growth and a source of stability for the 
Greater Philadelphia region's life sciences and technology 
sectors since its founding in 1963 as the nation's first and 
largest urban research park. Today we are a dynamic hub for 
innovation, entrepreneurship and technology development, 
offering business incubation, acceleration and other programs 
that provide support for firms at all stages of the business 
life cycle.

    At the Science Center, we cultivate and expand the 
possibilities that open up when research moves out of the lab 
and into the marketplace. Over the past 54 years, 442 companies 
have receive incubation and acceleration services from the 
Science Center. Today, 155 of those 442 firms are located in 
Greater Philadelphia and account for 40,000 direct and indirect 
jobs--or one out of every 100 jobs in the region. And these 
40,000 jobs drive $13 billion in economic activity each year--
more than 2% of the region's total economic output.

    To date, our biggest success story is Centocor, now known 
as Janssen Biotech, a division of Johnson & Johnson. Centocor 
was founded in 1979 with a vision of developing monoclonal 
antibodies as a new paradigm to treat diseases such as 
rheumatoid arthritis. Today, Remicade is the biggest product in 
the J&J portfolio, with annual U.S. sales of $5 billion. 
Another Science Center resident company, Spark Therapeutics, is 
developing gene therapies that are showing early, promising 
results for treating childhood blindness and potentially other 
conditions such as hematologic disorders and neurodegenerative 
disorders. These are just two examples of how the Science 
Center has paved the way for transformational business growth 
and job creation.

    We are strong believers in the accelerator model as an 
ideal vehicle for empowering small businesses. We define an 
accelerator as a program that offers startups access to a suite 
of business tools, including mentorship and professional 
expertise, funding, and other support services over a defined, 
limited time period, in an intensive, high-touch setting.

    For example, our Phase 1 Ventures (or P1V) program works 
with ``long-horizon'' technologies in pharmaceuticals, biotech, 
healthcare and other fields. P1V helps early-stage companies 
apply for and obtain SBIR and STTR grants, and then provides 
the companies with funding, management support and access to 
outside expertise, as well as connections to private sector 
funding, in order to help them grow.

    And our Digital Health Accelerator (or DHA) helps health IT 
companies with products at the prototype stage to reach their 
first sales and investment milestones. The program selects 
promising companies from around the world and provides them 
with funding, collaborative workspace, professional mentorship, 
and introductions to key stakeholders and investors in the 
Greater Philadelphia region.

    As you know, in the three years since the Growth 
Accelerator Fund was launched, awards of $50,000 each have been 
made to 189 accelerators in 45 states, Washington, DC, and 
Puerto Rico. The Science Center has been fortunate to win two 
of those awards--one for P1V and the other for the DHA.

    And I'm here to say that those awards, along with other 
strategic and critical Federal grants, have made a real 
difference. Since P1V was launched in 2015, a total of 18 
startups have participated in the program, advancing 
technologies developed at 12 different academic and healthcare 
institutions. Together these companies have secured 
approximately $3 million in public and private funding. And the 
13 companies that have gone through the DHA since its inception 
in 2014 have created more than 160 new jobs, generated more 
than $20 million in new revenues, and raised nearly $22 million 
in follow-on investment.

    Thanks to the Federal support that we have received, we 
have been able to accelerate the growth of startup companies 
like UE LifeSciences, which is developing a low-cost, portable, 
hand-held scanner that can detect breast cancer in its earliest 
stages, anywhere in the world. Or Talee Bio, which is 
developing a gene therapy for cystic fibrosis, the first 
curative treatment for this disease. Or SimUCare, which is 
enhancing the training process for doctors and nurses by 
enabling them to learn how to handle medically complex 
situations using the live actors, rather than manikins, to 
maintain realism.

    At the Science Center, we support technology 
commercialization in the broadest sense, by acting as an 
innovation intermediary--or linchpin--that brings together 
academia, industry and capital. We create specific processes 
and frameworks, like P1V and the DHA, that lower barriers, 
facilitate collaboration, and enhance the likelihood of 
success. But we also create more generalized incubators, 
accelerators, and other resource-rich environments that combine 
multiple ingredients--including funding, expertise, and support 
services--to help generate the unpredictable and serendipitous 
outcomes that have always fueled our nation's scientific 
advancement and economic growth.

    Accelerators work because they promote and reward 
efficiency. We have a saying in the industry--startups need to 
succeed or fail quickly, and cheaply. The only way to drive 
business creation and growth is for companies to move 
technologies across the value chain and get to market.

    Accelerators force technologies to move quickly--and by 
offering multiple layers of expertise, services and support, 
accelerators often enable startups to pivot in a different 
direction, in response to market demand. If Congress is 
interested in stimulating entrepreneurship, and in pulling more 
high-potential technologies out of academia and elsewhere into 
the marketplace, then accelerators and other early-stage 
support programs are a wonderful way to achieve a robust return 
on investment.

    Accordingly, we strongly support those targeted Federal 
initiatives--such as the Growth Accelerator Fund; SBIR and 
STTR; and the EDA's Regional Innovation Strategies program, 
among others--that encourage innovation, entrepreneurship, and 
tech-based economic development across the country. And--
equally as important--we strongly support those programs, like 
the Growth Accelerator Fund, that promote greater diversity and 
inclusion in our nation's small business sector. More than two-
thirds of our P1V and DHA companies are owned and/or led by 
women or members of underserved groups, such as racial 
minorities, veterans, or disabled individuals. We firmly 
believe that the knowledge-based economy must be not only a 
place of innovation and growth for the science and technology 
community, but also hub for innovation and growth in the wider 
community, with meaningful opportunities for all of our 
citizens to pursue STEM-related careers at all levels.

    Mr. Chairman, this concludes my testimony. On behalf of the 
University City Science Center and NACIE, I want to thank you 
for this opportunity to highlight the benefits of Federal 
programs for our nation's small businesses and, more broadly, 
our entrepreneurial ecosystem. I welcome your comments and 
questions.

                                 [all]
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