U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

85–595 2014

THE STARTUP MOVEMENT 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

NOVEMBER 20, 2013 

Small Business Committee Document Number 113–043 

Available via the GPO Website: www.fdsys.gov 

SBREP-219 with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

BLAINE LUETKEMER, Missouri 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JAIME HERRERA BEUTLER, Washington 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

DAVID SCHWEIKERT, Arizona 

KERRY BENTIVOLIO, Michigan 

CHRIS COLLINS, New York 

TOM RICE, South Carolina 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

YVETTE CLARKE, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRAD SCHNEIDER, Illinois 

RON BARBER, Arizona 

ANN McLANE KUSTER, New Hampshire 

PATRICK MURPHY, Florida 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

SBREP-219 with DISTILLER

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Sam Graves ..................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 2 

WITNESSES 

Adam Arredondo, Co-Leader, Kansas City Startup Village, Kansas City, KS ... 3 

Allison Lami Sawyer, CEO and Founder, Rebellion Photonics, Houston, TX .... 5 

Jeff Reid, Founding Director of the Georgetown Entrepreneurship Initiative, 

McDonough School of Business, Georgetown University, Washington, DC .... 6 

Anton Gelman, CEO, Cont3nt, Dulles, VA ............................................................ 8 

APPENDIX 

Prepared Statements: 

Adam Arredondo, Co-Leader, Kansas City Startup Village, Kansas City, 

KS ................................................................................................................... 29 

Allison Lami Sawyer, CEO and Founder, Rebellion Photonics, Houston, 

TX ................................................................................................................... 36 

Jeff Reid, Founding Director of the Georgetown Entrepreneurship Initiative, McDonough School of Business, Georgetown University, Washington, DC ..................................................................................................... 40 

Anton Gelman, CEO, Cont3nt, Dulles, VA ..................................................... 42 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

SBREP-219 with DISTILLER

SBREP-219 with DISTILLER

(1) 

THE STARTUP MOVEMENT 

WEDNESDAY, NOVEMBER 20, 2013 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 

2360, Rayburn House Office Building. Hon. Sam Graves [chairman 

of the Committee] presiding. 

Present: Representatives Graves, Luetkemeyer, Hanna, 

Schweikert, Collins, Vela ́zquez, Clarke, Schrader, Payne and Barber. 

Chairman GRAVES. Good morning, everybody. I want to thank 

all of our witnesses for being here today. 

Today’s hearing, we will examine a growing trend across America, which is the rise of startups and what that means for the 

United States. The term ‘‘startup’’ is often synonymous with high 

growth and innovation. While certain areas such as Austin or Boston, New York, and the Silicon Valley traditionally have been hubs 

for startup firms, in the past few years we are seeing the startup 

trend expand to much less obvious communities, such as Kansas 

City, which is obviously my backyard. 

On this Committee, we frequently highlight the benefits of small 

businesses to the American economy, and we know that small firms 

create the bulk of net new jobs in this country, but interestingly 

enough, research has shown that, in fact, it is a particular subset 

of small firms which are startups that are actually leading the way 

in terms of job creation. Further, a report by the Pacific Research 

Institute estimates that in a given year each net job created by 

startup firms increases a state’s gross product by almost $1.2 million, shedding light on the significant benefits growing startups can 

have on our local economy. 

The terms startup and small businesses are sometimes used 

interchangeably. However, startups frequently have unique characteristics that distinguish them from the vast majority of traditional 

small businesses. Given this, the Committee is going to examine 

how startups operate and whether the differences between startups 

and small firms are, in fact, substantial enough to necessitate different policies. 

Today, we are fortunate enough to have a panel of witnesses 

from all across the country, including areas traditionally not 

viewed as startup hotbeds where the trend is rapidly expanding. I 

want to thank all of our witnesses again for taking the time away 

from your jobs and making the trip here to Washington for this 

SBREP-219 with DISTILLER

2 

very important hearing, and I very much look forward to your testimony. 

Now, I will turn to Ranking Member Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Chairman Graves. Please bear 

with me. I am recovering from a bad cold. 

When we think of a startup business, the early days of Apple or 

Google usually come to mind. The stories are familiar. Hard-working entrepreneurs who took extraordinary risks to beat the odds. 

Like these companies, most successful startups have three things 

in common—a new product or service, extreme risk-taking due to 

uncertainty of the marketplace, and leadership that can navigate 

the complexities of today’s economy. Getting these three factors to 

align is the hardest part. On average, only one in three startups 

makes it to the tenth year, but when they do, high growth firms 

create new markets, increased competition, and attract other enterprises to provide support. As a result, startups have a disproportionate positive impact on job creation. According to the Census 

Bureau, they create jobs at nearly twice the rate of the nation’s annual net job growth rate. By starting new endeavors and developing cutting edge products, entire industries, as well as the overall economy, are renewed and energized. 

During today’s hearing, we will have an opportunity to examine 

the unique role that entrepreneurs and startups have played in the 

current economic recovery. One of the biggest obstacles facing 

startups is the lack of financing. According to the most recent 

Wells Fargo Gallup Small Business Index, 30 percent of small business owners still feel credit is difficult to obtain. Capital is the life 

blood of small businesses, but particularly for startups and high 

growth businesses that do not yet have positive cash flow. Traditional bank lending via loans is ill-suited to the high-risk nature 

of startups. Fortunately, there are still a multitude of funding 

sources for new firms to choose from, including the SBA’s SBIC 

program, angel investors, private equity, venture capital, and 

crowdfunding. 

Another area critical to the success of a business is technical assistance. SBA programs assist entrepreneurs by providing tailored 

education on everything from marketing to procurement to international trade. For a startup, this expertise can often make the difference between failure and long-term growth. These initiatives, 

like the Small Business Development Centers, have proven to be 

effective in delivering counseling and assistance to millions of entrepreneurs across the country. While the SBDC network is the 

SBA’s largest entrepreneurial assistance program, it nevertheless 

faces challenges. With lower budgets and increased levels of demand, it is between a rock and a hard place. The burden of further 

budget cuts should not be placed on the backs of job creators who 

rely on these resources to succeed. Bringing new products to 

unproven markets is inherently risky. As a result, startups face a 

number of unique challenges—obtaining financing, managing operational processes, and addressing human capital issues. 

Today we will hear from experts on the cutting edge of the startup movement who can provide the best ways to support the innovative spirit of America. 

SBREP-219 with DISTILLER

3 

In advance of the testimony, I want to thank all the witnesses 

who traveled here today for both your participation and insight 

into this important topic. Again, thank you, and I yield back. 

Chairman GRAVES. Thank you very much. 

We will introduce the witnesses. We are going to have a series 

of votes unfortunately, probably in the neighborhood of 1:15 to 

1:30, somewhere right in there, which we will recess and then we 

will come back. But I apologize for that. The vote schedule is a little bit different all the time, unfortunately. 

Our first witness is Adam Arredondo. Mr. Arredondo is the cofounder of the Kansas City Startup Village. The Kansas City Startup Village is led by local entrepreneurs to strengthen and invigorate growth throughout the Kansas City Startup community. In 

addition to his role at the Kansas City Startup Village, Mr. 

Arredondo is also the CEO and founder of Hoopla.io, which was 

recognized by Turnstone as one of the ‘‘15 Best Young Companies 

to Work For.’’ Thanks for being here, and I look forward to your 

testimony. 

STATEMENTS OF ADAM ARREDONDO, CO-LEADER, KANSAS 

CITY STARTUP VILLAGE; ALLISON LAMI SAWYER, CEO AND 

FOUNDER, REBELLION PHOTONICS; JEFF REID, FOUNDING 

DIRECTOR OF THE GEORGETOWN ENTREPRENEURSHIP INITIATIVE, MCDONOUGH SCHOOL OF BUSINESS, GEORGETOWN UNIVERSITY; ANTON GELMAN, CEO, CONT3NT 

STATEMENT OF ADAM ARREDONDO 

Mr. ARREDONDO. Thank you very much. I think it is very fitting that this week is Global Entrepreneurship Week. So Happy 

Global Entrepreneurship Week to everybody. 

But, yeah, outside of running my two companies—I have two 

Internet startups—I am also one of the co-leaders at Kansas City 

Startup Village. Kansas City Startup Village is an entrepreneur 

web effort that ended up starting September of last year with five 

startups and three properties within half a block of each other in 

the first neighborhood in the world to get Google Fiber. Not 

planned. There is no blueprint for what we are doing. But fast forward 14 months, and there is now 13 properties, 25 startups. We 

have had people visit and investigate what is happening there from 

over 45 different countries. We have also had people move there 

from 12 different states, and we have created over 70 jobs. All of 

that with zero outside funding. 

And so there are a few takeaways that are big. One is that it is 

entrepreneur-led. One of the things that is critical to really building sustainable startup communities is that entrepreneurs are at 

the forefront of it. Government corporations and universities are 

absolutely critical to that but their role is to support the entrepreneurial-led efforts. And me being here today is a perfect example 

of that. I could not afford the travel as an entrepreneur and my 

company could not either, so I reached out to some of the supporters in the community, and actually, the Wyandotte County 

Economic Development Council helped me get here so we could tell 

our story. And that is a small example, but an example of how all 

these pieces need to work together. 

SBREP-219 with DISTILLER

4 

Another key part of what we have built in the village is what we 

call startup density. And we talk about serendipitous collisions all 

the time. So many good ideas and collaborations come from entrepreneurs, like-minded, innovative people being close together in 

physical proximity leads to more of those collisions, and those have 

played a huge part of the success of the village. 

And one other thing about the village is that although Google 

Fiber is something that is unique to Kansas City—it is the only 

city in the world with it—it is the community that we have built 

that keeps people there. A good example of that is a 22-year-old entrepreneur that moved from Boston actually to Kansas City, he 

came because he wanted Google Fiber and there was a program 

there that offered him three months of free rent. And he was coming to mooch a little Google Fiber and leave, but he decided to stay 

because he said it is such an awesome community and he wanted 

to be a part of it. 

So like I said, we have had a lot of people come from around the 

world to see what we are doing, and we get asked the question all 

the time about small businesses versus startups. And one of the 

key things, and I am sure you have heard it, is a startup does not 

desire and does not look to become a small business. They want to 

become a large scaling company, an innovative company, a game 

changing company. And so that is one of the differences. And with 

that come different needs. And so one of the big needs as everyone 

knows is financing, and all of the traditional loans and SBA loans 

are all asset-based. As of yet, patents, mobile apps, algorithms cannot be converted for a loan. So honestly, I do not even spend any 

time trying to get any of those because I do not qualify. 

But I have been lucky to find a couple of grants through local 

organizations that we have been able to take advantage of. One 

was an H–1B grant through Workforce Partnership in the state of 

Kansas. We have a relationship with them, and it is for IT on-thejob training. And we have been able to use that to hire six employees. The Village has used it to hire 23. Another one is an i6 grant 

that UMKC got. And through a program called Digital Sandbox, 

they have been able to fund over 20 different startups. Again, the 

key takeaway here is that I engage with the local organizations focused on entrepreneurships and they have relationships with us 

and know what we need. All of these different communities are different around the country. And so what I would recommend to you 

guys is to focus how do you get more resources into the hands of 

the organizations that interact with us on a daily basis so they can 

find the most appropriate ways to allocate and distribute that funding. 

So thank you very much for listening, and I look forward to questions. 

Chairman GRAVES. Thank you very much. 

Our next witness is Allison Lami Sawyer. Ms. Lami Sawyer is 

the founder and CEO of Rebellion Photonics located in Houston, 

Texas. Rebellion Photonics looks to promote safety by building cameras that can spot poisonous and explosive gas leaks on oil rigs and 

refineries. And in 2012, Mrs. Sawyer was named by INC Magazine 

as one of the 30 Under 30 and most recently, just a couple of weeks 

SBREP-219 with DISTILLER

5 

ago, as a matter of fact, Rebellion Photonics won the first annual 

Wall Street Journal ‘‘Startup of the Year’’ competition. 

So welcome to the Committee. Thank you for being here. 

STATEMENT OF ALLISON LAMI SAWYER 

Mrs. SAWYER. Thank you for having me. 

So again, I am Allison Lami Sawyer, CEO and cofounder of Rebellion Photonics. We are an optics startup spun out of Rice University in Houston, Texas. And what we do is solve some of the 

world’s largest problems using optics. And how I would differentiate startups versus small businesses and really compared to all 

other businesses is startups are truly the powerhouses for engineering innovation. Once upon a time, most innovation happened 

in the labs of IBM, GE, the Halliburtons. That is not how it is anymore. Now, most large companies have moved their R&D budget 

and made it an M&A budget, mergers and acquisitions, especially 

in hardware. So your heavy industry or oil and gas safety, like us. 

So hardware startups like us or heavy tech like us, we are truly 

the ones pushing forward engineering and innovation in some of 

these really difficult problems the world faces. 

So Rebellion Photonics, our main product right now is for oil and 

gas safety. It is called the Gas Cloud Imaging camera. And what 

we are trying to solve is imaging explosive gas leaks on oil leaks, 

like Macondo, or refineries before they explode. Current technology 

is abysmal. It is point detectors that alarm up to 10 times a day. 

That is why they are ignored. For example, Macondo, they muted 

the alarms for two days. To be fair, if you got 10 alarms a day you 

would mute it, too. 

So seven guys and myself down in Houston, this is the problem 

we are facing and that we are trying to solve. And we were successful. So we started launching our first full scale installations January of this year. BP was our first customer. We have also signed 

on Chevron, and we are looking to get all Big 5 oil companies. For 

seven people, Houston, Texas, tiny, barely cash flow positive. We 

are doing a $10 million raise right now hoping to close soon, but 

this just gives you an idea that it is really not the big companies 

of the world that are changing these massive problems. It is the 

small startups all across the country. So that is how I would define 

startup. 

Two things I would like to add are one way you could help us 

is with IP, and then there is Bill 3309 in your Judiciary Committee 

today, actually. Great bill, but there is a Section 18 in the bill that 

really waters it down. So I am always afraid larger companies or 

patent trolls are going to sue me, even if they know they will lose, 

and they know they will lose because our IP is very strong. But 

they will sue me just to put me out of business so they can get a 

cheaper acquisition price. It happens all the time. So that is where 

I am coming from. It literally keeps me up at night. Even though 

we have worked so hard, it could all be taken away from me because of a lousy trick like that. 

And then a second thing is procurement. So we are focused on 

oil and gas. We do do a little with defense, mainly Air Force. So 

our cameras could also be used in drones. We could make an amazing drone camera. So our cameras do not just see colors; they actuSBREP-219 with DISTILLER

6 

ally see chemicals. Basically, they know what they are looking at. 

Bad guy gets into a 1957 Chevy. I can track him forever. So fewer 

mistakes with the drone attacks, et cetera. So this could really affect world affairs on a minor level, but we are not going to be doing 

that product, even though it could be such a special product because defense procurement is so complex and the infrastructure 

that I would require to do that product is not worth it. 

So when you are thinking of definitions and why you are changing a definition, especially if you are going to overhaul procurement 

or do anything with procurement, keep in mind we have so much 

to offer, especially defense, and we could do it faster, better, cheaper, but right now with procurement I cannot give you that product. 

And I want to. So it is something to keep in mind. 

Anyway, thank you for your time. 

Ms. VELA ́ ZQUEZ. Yes. It is my great pleasure to introduce Jeff 

Reid. He is an adjunct professor of Entrepreneurship at Georgetown University. Mr. Reid is an expert in the arenas of entrepreneurship, venture capital, startups, technology, and economic development. In 2009, Mr. Reid launched the Georgetown Entrepreneurship Initiative to capitalize on entrepreneurial thinking and 

launch new companies. Mr. Reid previously held leadership roles at 

the University of North Carolina at Chapel Hill, where he grew the 

Entrepreneurship Initiative to a number one national ranking and 

was chosen by his peers as one of the top directors in the United 

States. Mr. Reid earned a Bachelor of Science in Business Administration from Appalachian State University and an MBA from the 

University of North Carolina at Chapel Hill. Welcome. 

STATEMENT OF JEFF REID 

Mr. REID. Thank you very much for inviting me here. I am excited to be here because I am passionate about helping entrepreneurs. It is what I get up in the morning just raring to go every 

day, and I am also to say Happy Global Entrepreneurship Week. 

This week around the world there are tens of thousands of events 

in over 140 countries to celebrate entrepreneurship. So it is great 

to be here, particularly during this week. 

I do feel like I have the best job in the world. I get to work with 

students at Georgetown University, these young people who want 

to change the world through entrepreneurial pursuits. And I also 

get to work with experienced entrepreneurs who have already been 

there and done that and who want to help out our students. 

The first main point I would like to make today is that we all 

are and can be entrepreneurs. I had the great pleasure of hosting 

Professor Muhammad Yunnus, Nobel Prize winner, at Georgetown 

University, and one of the things he is famous for saying is that 

all humans are entrepreneurs. The point he is making is that going 

back in human history, if you were not entrepreneurial, you just 

did not survive. It is only in recent centuries that society has 

grown in ways that suppressed that entrepreneurial nature that is 

within all of us. 

Now, the wonderful thing is in recent years the world is changing in ways that make it so much easier for that entrepreneurial 

spirit to come out, and so we are seeing that across the United 

States and around the world, more and more startups, more and 

SBREP-219 with DISTILLER

7 

more entrepreneurs are doing the things that they are great at 

doing. And that is awesome because entrepreneurs and the 

startups they crate are among the most powerful drivers of positive 

change in our society. Entrepreneurs solve problems, they create 

jobs, they provide value for their customers, they create wealth, 

and they lift up the communities around them. And I know that 

is why we are here to celebrate and learn more about entrepreneurs. 

But as has already been mentioned, people have a wrong impression of entrepreneurs. You know, when you ask, and I do this on 

the first day of my class, I say what do you think of when you 

think of entrepreneurs? And the common answer is just what you 

would expect. It is Bill Gates, Steve Jobs, it is these tech businesses, these folks that have become billionaires. But entrepreneurs are not just the techies in Silicon Valley. You have seen 

some good examples here already today, and there are so many 

more all around our country. They come in all shapes and sizes. 

They are in every one of your districts. And we need more of them. 

So being an entrepreneur is just as much about a mindset, in my 

opinion, as it is a career choice. You can work in a startup that 

somebody else founded and be entrepreneurial. You can work in a 

large company and be entrepreneurial. You can work in a nonprofit, maybe even for the government, and be entrepreneurial. But 

what does that mean? If you are not the founder of a startup, how 

do you be entrepreneurial? What it means is embracing change, 

understanding risk, living with ambiguity, evaluating and seizing 

opportunities, solving problems, finding creative solutions, and 

being relentless in the pursuit of your goals. Those are all qualities 

that anyone can bring to their life and career. And it turns out 

those are skills and mindsets that can be taught. 

And that leads me to my next major point, is that entrepreneurship can be taught. Education matters. It is not true that every entrepreneur just wakes up in the morning and is struck by lightning, has a brilliant idea, and the next thing you know they become a millionaire and raise money and all that is good. It turns 

out there are so many things that you can learn in a university or 

other educational environment about how to be a great entrepreneur. And colleges and universities like Georgetown and so 

many others across this great country have been doing this for a 

long time and are getting better and better at it. And it is of critical importance because our education system has traditionally 

taught people how to be part of a large organization. And that is 

one of the things that we should really look at is are we teaching 

people how to be entrepreneurial or are we teaching them how to 

be just a small cog in a big hierarchical machine? 

So what can Congress do to help? First and foremost, help us celebrate entrepreneurships. Let us celebrate startups. Let us recognize as we have started to do here today, that startups are not the 

same as small businesses. There are huge differences. And the 

ways they just consider themselves are so different. We would love 

to invite you to elevate the stories about entrepreneurs in your own 

districts, attend a startup weekend, just really get to know these 

folks. Immerse yourself in the process. Support the educational efforts in your communities around entrepreneurship. If you do not 

SBREP-219 with DISTILLER

8 

know who in your community is leading entrepreneurial education 

efforts, I will help you find them. And be relentless in finding the 

solutions to the problems you face. Be entrepreneurial yourselves. 

It is an amazing thing that we have this entrepreneurial revolution 

in a country that is really known as one of the best—as the best 

in the world for entrepreneurship. Let us keep growing that. And 

thank you very much. 

Chairman GRAVES. With that we are going to have to recess for 

a short time. I apologize, Mr. Gelman. We are going to have to recess for a series of votes. It is going to be a little bit longer than 

normal but we will immediately reconvene. And my staff will be 

here to answer any questions if you are curious about when we will 

be back or where the bathrooms are and that sort of thing. 

But with that, we will recess until after this vote series. 

[Recess] 

Mr. LUETKEMEYER. Let us gavel this back in order. I apologize 

for the delay, Mr. Gelman. 

Our final witness, Mr. Gelman, is the CEO of Cont3nt located in 

Dulles, Virginia. Cont3nt is a real-time market for photo and video 

journalism. Since Cont3nt’s founding approximately one year ago, 

Mr. Gelman’s company has received numerous honors, including 

winning ‘‘Distilled Intelligence 2.0’’ and Startup America’s 

‘‘TechBuzz Challenge 2012.’’ Most recently, Mr. Gelman was named 

to Tech Biz Now, a list of 30 Under 40. Thank you for taking time 

to be with us, and you may begin. 

STATEMENT OF ANTON GELMAN 

Mr. GELMAN. Thank you very much. It is wonderful to be here 

today. Hello, Congressmen and Congresswoman. 

So again, my name is Anton Gelman. I am the CEO of a company called Cont3nt.com. We are a real-time market for breaking 

news. We enable media companies and freelancers in places like 

Egypt and Syria and here in the U.S. to take that amazing photo 

or video that they shoot and in real-time sell it to the likes of CBS 

or NBC or the local paper, get paid for it in real-time, have it on 

the air in a half-hour. We are building an eBay for breaking news. 

Or to put it a different way, we are trying to create a global free 

market for free press. 

Since we launched a little bit over a year ago, we now have 

24,000 journalists in our system, over 2,000 media companies, in 

25 countries. By the end of this year, we are going to be in 60 countries, and by the end of next year, if all goes well, we will be in 

every country in the world. 

I am responsible for creating five jobs, including my own in the 

U.S., as well as an additional four jobs abroad. And we are expanding rapidly and really kind of are in the growth stage of startup. 

We are not a lifestyle business. We are a growth company. And actually, this right here, this is three-fifths of all of our assets, of all 

of the physical infrastructure that we have. The other two fifths, 

the other two laptops, are currently in use at our office. We own 

no office space. We have no furniture. We lease it from the startup 

accelerator where we live. All of our assets are in intellectual property, they are online, they are in the cloud, and they are based in 

SBREP-219 with DISTILLER

9 

the customers and the relationships that we have built. And this 

is very different from the traditional definition of a small business. 

We are not a small business. We are a big business in the making. We think, and companies like ours, think like GE, not like the 

ma and pop shop across the street. Actually, I have been on both 

sides of the border. I have done a number of small businesses. My 

family actually immigrated here from the Soviet Union in search 

of the American dream. And I have run small businesses since I 

was like 12, and I have a tremendous amount of respect for people 

that do it. But the startup that I run right now is a very different 

thing. We act very differently, and we think very differently, and 

we require very different resources. 

So basically, a startup is not a storefront. It is a rocket ship. And 

I say this with complete seriousness. A startup is defined by its 

growth and its pace. And the big trick is that when a company 

grows from one person to 100 people in 12 months or in two years, 

that is something that the pace of that has not been met with policy or legislation that is appropriate to how it scales. 

So basically, one of the things that I would urge everyone in Congress to think about is to find ways to address these incredibly 

fast-paced companies with legislation that allows government programs to act much faster, to be able to enable a pace that is synonymous with what America has kind of been known for—for its 

leadership and entrepreneurship. For its leadership around the 

world with companies like Google and Facebook and LinkedIn and 

almost every other major company based in the U.S. 

Aside from a very rare exception, like for example, SBIR, which 

is at least somewhat palatable to a startup, most other programs, 

like even the wonderful SBA loans, they are impossible. I mean, 

this is our collateral right here. There is no way that we have two 

years of track records and any kind of credentials that we need in 

order to actually get those kinds of loans. And yet, it is quite likely 

that we will have more jobs in 12 months than five businesses of 

the same size. 

With the adoption of the Jobs Act and kind of the beginnings of 

crowdfunding and immigration reform, this stuff has been hitting 

its stride, and I love that it is actually coming to the forefront of 

policymaking. But still, it is pretty much in its infancy right now. 

I love that it is being done but we are at the very beginning of that 

process. Basically, it has yet to become very truly useful to the 

startup economy. 

I will give you an example of some of the things that do work, 

for example. Obviously, the policies in place are working kind of— 

are getting there. But, for example, in D.C., just down the street, 

so we work out of a startup accelerator about seven blocks away, 

and it was funded by $200,000 of D.C. government money. So 

$200,000, as you know, is a very, very small amount of money. 

That allowed them to set the baseline to seed that investment that 

they now have a $2.5 million run rate within four or five months. 

Two and a half million dollars run rate that they have collected on 

their own that funds his business. They have 170 companies working out of there. Over 300 jobs have been created off of this tiny, 

tiny investment. And the reason it was done was because the D.C. 

government went out and acted very quickly. They allowed the 

SBREP-219 with DISTILLER

10 

minimal amount of investment to be signed quickly and to be delivered. 

And so I thank you again for being here, and I would just offer 

that we move faster and we try to put in legislation that targets 

this incredibly fast-growing pace of companies. Thank you. 

Mr. LUETKEMEYER. Thank you. 

We will enter the question and answer phase here. Keeping with 

Chairman Graves’s model, I will defer to the end, and with that I 

yield to Congressman Collins for the first round. 

Mr. COLLINS. Thank you, Chairman. And thank you all for 

coming. 

Point of reference, I have spent my life in small business and involved in startups, and through the Center for Entrepreneurial 

Leadership at the University of Buffalo I have mentored over 200 

companies the last 20 years. And I will tell you in true disclosure, 

I have spent most of my life buying startups after they fail. So I 

am known as the second owner. So after the startup overestimates 

sales, underestimates expenses, overestimates margin, and underestimates the difficult of growth, I step in as the second person and 

then help them go to the next phase after basically they have had 

problems with the original investors, et cetera. So really, what I 

have seen is most companies do just that—overestimate sales, underestimate expenses, overestimate margins. And really, that is 

what makes them entrepreneurs, their optimism. And the optimism gets in the way. But more than not, they are undercapitalized. They are undercapitalized because they do not want to give 

up ownership. It is their idea. They want 100 percent and they will 

give you 1 percent for a lot of money because it is their idea. So 

typically, they run out of money. And when you are running out 

of money, that is not the best place to go. 

So I am really intrigued, Mrs. Sawyer. Startup company, you 

raised 1.1 million, and part of what we do at hearings is to send 

a message out to other small business folks. So I hope I am not 

asking for anything too confidential, but to raise the 1.1, was that 

friends and family or was that venture? And how much of the company did you have to give up to get the 1.1 million? 

Mrs. SAWYER. You are not going to like my answer. I have 

given up zero percent because it is debt. I was able to raise convertible debt. And in my next round though, we are doing a $10 

million equity. 

Mr. COLLINS. I was going to ask you about that as well. 

Mrs. SAWYER. That is a proper equity round, and I cannot disclose that. That will be a minority investor, but they are getting 

a sizeable chunk with pretty normal negative covenances in the 

deal. So that will be a more traditional round. 

Mr. COLLINS. Well, I am intrigued. You do not consider convertible debt dilution? 

Mrs. SAWYER. We were able to buy it back. It did not convert. 

Mr. COLLINS. Oh, you had the option to buy it back? 

Mrs. SAWYER. Correct. 

Mr. COLLINS. They did not have a put? 

Mrs. SAWYER. Yeah. I love a good contract negotiation. 

Mr. COLLINS. Wow. I guess I am never going to do business 

with you. 

SBREP-219 with DISTILLER

11 

I just wonder if anyone else—now, I was also intrigued somewhat, Mr. Reid. You were saying a startup is not a small business, 

so I almost find that—I cannot reconcile that. By definition, a 

startup is one person, five people. That is a small business, and I 

would think a startup needs capital and they need a business plan 

and they need a vision, and health insurance, and a phone system. 

So could you explain why you say they are not? 

Mr. REID. Sure. Technically, by definition, yes, you can say if 

you have a very small number of people, whatever, it is a small 

business. But as Anton pointed out I think pretty eloquently a few 

minutes ago, he, in his startup, and most of the startups that I 

work with, they do not think like a small business. And so that was 

the main point I was trying to make is that there are small businesses that do important things in our economy and they are 

happy to remain small businesses. But if you are an entrepreneur 

who is launching a startup company, then you are thinking more 

like how is your business going to grow in scale beyond the phase 

where it is a small business. 

Mr. COLLINS. Yeah. Now, I suppose that in what I will call the 

Internet software world that is probably very true. If you are making widgets, I do not know if it is quite that much. I wonder, Mrs. 

Sawyer, do you actually make your cameras? 

Mrs. SAWYER. Oh, yeah. Right in Texas near Reliant Stadium 

where they have the rodeo. It is quite fun. 

Mr. COLLINS. All right. So let us see. Five years out, where are 

your sales going to be? Mrs. SAWYER. Five years out, over $100 million. 

Mr. COLLINS. Wow. Okay. Can I write that down and call you 

in five years. 

Mrs. SAWYER. Of course. 

We have had over 2 million in revenue so far, so I bootstrapped 

the company. So when I cofounded the company I was 25 years old 

in Texas with a proof of concept, so realistically, no one was going 

to give me funding. So we had to bootstrap. And one of the ways 

we were able to do that is (a) we started selling product. Just whatever we had. We do contract work. But we also did get two SBIRs 

that were very helpful. So they were a huge part of our initial 

growth. I do not think the SBIR system is perfect. I think it is really great for research. When it comes to actually developing product 

it is a little slow. For example, we have a contract with the Air 

Force, and the way the SBIRs are structured, they are very structured. You know, there is phase one, phase two, phase three, then 

you do a joint with a large developer, eight years minimum. It does 

not take me eight years to develop a product. It is unnecessarily 

slow. I mean, the government is my customer. I could do a better 

job for the customer but they have tied my hands. It is really odd. 

Really odd. 

Mr. COLLINS. Well, thank you. My time is expired. Mr. Chairman, I yield back. 

Mr. LUETKEMEYER. Thank you. Thank you. We will yield time 

next to the ranking member, Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Mr. Reid, according to a recent report on small business formation, half of all startups fail within the first four years due mainly 

SBREP-219 with DISTILLER

12 

to the lack of capital. So that is a big challenge. To combat this 

trend, many market participants have hyped crowdfunding as the 

future of small business finance. Do you think crowdfunding is 

going to help more of these businesses survive and become established job creators? 

Mr. REID. Yes. Thank you very much for bringing up 

crowdfunding. It is a big topic in the startup world. And I think 

it absolutely will help. I do not think it is perfect, but I think it 

is a wonderful way to bring more capital to the market. I am actually wearing a watch today that I bought from Kickstarter from a 

entrepreneur that was a Georgetown student. She started a watch 

company. And this is an important way for her to raise capital, and 

I think it is great that more and more companies are finding crowd 

funding as a way to get that early funding that will help them 

grow. 

Ms. VELA ́ ZQUEZ. Do you see any unforeseen risks or concerns? 

Mr. REID. Sure. You know, just like any other system, there are 

potential challenges there, and there absolutely will be problems 

where someone does something unethical. And I think there will be 

a lot of people who even do have the best intentions who lose 

money, either from the entrepreneur’s point of view or the 

crowdfunders. And I think that is the key issue; that people have 

to understand and expect what the reality is. There is a lot of risk 

in these businesses and a lot of people will lose money. And those 

who are investing need to be really careful to know as much as 

they can about the companies they are putting money into. 

So those things are always going to exist. But the great thing 

about crowdfunding is it does allow people to find those entrepreneurs that they really want to support. So yes, there are some 

challenges and risks, but in general it is going to be an exciting 

time to see how that grows. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. Arredondo, this is in line with the question that was made 

before by my colleague, Mr. Collins. A frequent complaint from entrepreneurs receiving venture capital investment is that some control over the company is often sacrificed as a condition of the equity 

they receive. Do you believe that this is a serious shortcoming with 

equity investment? 

Mr. ARREDONDO. No, I do not. I mean, to me it is part of the 

game. We got into it knowing if we are going to raise investment 

capital, we are going to be giving up part of our company. The way 

I approach it is if I raise a million dollar round, I expect to grow 

my company several times, if not many more times beyond that; 

that it will generate far more value. So even if I give up 25 percent 

of the company, I expect my company to grow in value threefold. 

So I do not view it as a negative at all, and honestly, I view it if 

you are in a position where you can actually negotiate with different investors, that it is an opportunity for me to select the one 

that brings the most value to my company. So I do not view it as 

a negative in any way. 

Ms. VELA ́ ZQUEZ. Mrs. Sawyer. 

Mrs. SAWYER. Well, it is interesting. So the venture capital 

community, especially coastal, they are a tight knit little club, especially if you look at the demographics where they get investment. 

SBREP-219 with DISTILLER

13 

For example, I am in the hardware business, also in oil and gas. 

I have never even met a female investor in my space. So you do 

get some interesting problems with that for minorities. I mean, it 

is strange to call a woman a minority. We are 51 percent of the 

population, but there you go. 

So that is why I am kind of excited to see some of these 

Kickstarter and different models for investing. Anything that adds 

a little more competition to a market I think is good. So that is 

why I want to see more competition on the investment side. We 

focus a lot on the entrepreneurs, but quite often it takes two. And 

while I am seeing lots more diversity on the entrepreneur side, I 

am not seeing much movement on the investment side. 

So anyway, on the whole I think it is fine, although for minorities it can be an issue. 

Ms. VELA ́ ZQUEZ. I would like to discuss the federal procurement marketplace. What are the type of challenges that you have 

faced? There are some contracting programs that have been established to help women entrepreneurs access the federal marketplace. So if you could share with me the challenges that you have 

faced? 

Mrs. SAWYER. Thank you. 

So I have worked with the National Institute of Health, Air 

Force, and I am beginning to work with ARPA-E. I have talked a 

little bit with ARPA-E. I do not know what that stands for actually. 

DARPA Energy. And then we have discussed a little bit with 

DARPA. And it is kind of interesting because with the big Air 

Force, Army, those big DoD offices, it is virtually impossible for us 

to pitch a product. What they make us do is partner up with a 

large—like Lockheed, for example. But when you go to do a deal 

with Lockheed, they want to own all the IP, where all we are worth 

is IP. I mean, it is really, I will say, impossible for me to go directly 

to Air Force. So one route I have is the SBIR which we discussed. 

I can do a product in basically a year and a half, sometimes 

quicker. They will not let me deliver a product in less than eight 

years, up to 14. What were computers like 14 years ago? It is pretty much the same with cameras. It blows my mind. It blows my 

mind, and I really kind of find it quite tragic because especially for 

the Air Force, we have the designs ready to go for a stunning drone 

camera. So we are in the field of hyperspectral imaging which has 

been used, for example, when they captured Bin Laden. 

Hyperspectral was used. But what they have to do is to fly the 

drone over, take it back to a super computer, process the data in 

like three days, and then they will have some answers for you. We 

do that in real-time. The drone actually sees in real-time. So it is 

a very cool product and could have real consequences. 

You will not get it for a decade minimum, and frankly, I am not 

even going to—this is sad, but I am choosing not to do any focus 

on defense, and it is tragic because we are tech people. We love to 

see cool products, and it is really heartbreaking. So on the procurement side, cannot go directly to Air Force. SBIRs take too long. 

And so a change I would like to see is right now preference is 

given to procurement companies that have a long track record. Oh, 

wait, Lockheed has been around longer than I have been born, 

times two. I want to see the reverse. Okay? I want to see prefSBREP-219 with DISTILLER

14 

erence given to startups because I have the IP. I have it, not them. 

They do not have the internal R&D houses like they used to. 

And by the way, ever since sequestration, these big defense contractors are getting nasty. I mean, it is getting really rough out 

there. And I feel for them. I do. I am from Huntsville, Alabama, 

where we have a lot of defense contractors, but they are an example of companies who are suing startups so that we run out of cash, 

which happens so quickly because we are undercapitalized, like Mr. 

Collins said, and then they can get a quick acquisition. Buy us 

cheap and dirty. Oh, it is tragic. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you, Mr. Chairman. 

Mr. LUETKEMEYER. Thank you. Good long questioning. 

Congressman Hanna. 

Mr. HANNA. I am going to give my time to Mr. Collins. Thank 

you, Chairman. 

Mr. COLLINS. Fellow New Yorker. Thank you very much, Mr. 

Hanna. He said I was having too much fun. So I am going to have 

some more fun. 

When I mentor folks, everyone should have a vision statement, 

a vision statement you could deliver in 10 seconds or less. So you 

are on, Mr. Arredondo. Vision. Vision of your company. Vision 

statement your employees know, you know, et cetera. 

Mr. ARREDONDO. Yeah. So we want to change the local event 

space entirely. Right now there is—— 

Mr. COLLINS. You flunk. 

Mrs. Sawyer. 

Mrs. SAWYER. Rebellion Photonics vision is to change some of 

the world’s largest problems using groundbreaking optics. 

Mr. COLLINS. Kind of okay. A little general. 

Mrs. SAWYER. I usually do oil and gas. 

Mr. COLLINS. Mr. Gelman. I am skipping Mr. Reid because you 

just help other entrepreneurs. 

Mr. GELMAN. We are building a global free market for free 

press. That is our vision. 

Mr. COLLINS. Okay. So now have some more fun. Your 30-second elevator speech that you give to an investor. Who wants to go 

first? Thirty second elevator speech, go. 

Mr. ARREDONDO. Imagine the beer industry without beer distributors. You would not be able to get the beer into the hands of 

all the places you would buy it from. That is what is happening 

with local events. All the people organizing events have no one to 

distribute their events to the places people look. We are a local 

event distributor that is solving that problem. 

Mr. COLLINS. You did not tell me how much money I am going 

to make or how much money you need. Or who is your competition. 

Go ahead, Mrs. Sawyer. We are having fun. 

Mrs. SAWYER. The oil and gas industry loses a trillion dollars 

worth of oil and gas into the atmosphere every year. Dozens of 

Americans are killed on oil rigs and refineries, and it is all because 

they cannot see the gas leaks before they explode. We are Rebellion 

Photonics and that is exactly what we do. We are solving a $2 billion problem with our Gas Cloud Imaging cameras which we designed in-house three years ago. We started our first large-scale inSBREP-219 with DISTILLER

15 

stallations January of this year. We are doing a $10 billion round 

and we expect to sell for around $450 million within three years. 

Mr. COLLINS. Pretty good. Pretty good. Mr. Gelman. 

Ms. VELA ́ ZQUEZ. Would you mind, Mr. Collins. 

Mr. COLLINS. Go ahead. 

Ms. VELA ́ ZQUEZ. I am glad that BP is your customer. 

Mr. GELMAN. My company, Cont3nt.com is a real-time market 

for breaking news where we enable media companies and freelancers in places like Egypt and Syria and here in the U.S. to occupy Wall Street and the like to take that amazing photo or video 

that they shoot and in real-time sell it to the likes of CNN or BBC, 

get paid for it in real-time, and have it on the air in a half hour. 

We are like eBay for breaking news. We are actually not raising 

very much money right now, but we are expanding globally and 

join us. 

Mr. COLLINS. Good. Now, just in fairness, because I am a vision 

mission core value guy, if you go to my office, the vision statement 

is published, my six core values. And so when I came to Congress 

I had to say why am I here. So my vision in every e-mail you get 

from me or any of my staff, including two of them that are sitting 

there will say, ‘‘The United States of America will reclaim its past 

glory as the land of opportunity, providing a bright future for our 

children and grandchildren.’’ That is it. That is the vision. That is 

what I am doing here. Then you say, and how do we make it happen? And how do we cast votes? Six core values. And again, very 

succinct. ‘‘A firm belief.’’ Nydia, you might not agree with all these. 

We will see. ‘‘Smaller government, personal accountability, local decision-making, fiscal discipline, and a government that serves taxpayers and respects future generations.’’ I try for that to be as bipartisan as possible. So when we cast votes, there you go. So for 

my employees, same thing in the companies, vision, values. And so 

those folks that I mentor and help, I just try to simplify things 

down to succinct sound bites, whether it is talking to an investor, 

a bank, your employees, your vendors. 

Comments? Do you have a value statement as well as a vision 

statement? Is it published? 

Mr. ARREDONDO. No, that is great. I mean, we are moving so 

quick that in the last three weeks we have completely changed our 

business model. And that is as good as I can articulate it today, 

which will be different next week. But the nature of the business. 

Mr. COLLINS. Do any of the rest of you have it published, posted? Do the employees know what it is? Is it on your business card? 

Mr. GELMAN. We have a sign on our wall that says the beatings 

will continue until morale improves. That is used to drive much of 

the internal mission. 

Mr. COLLINS. Well, thank you. My time is expired. Thank you, 

Mr. Hanna, for letting me have some fun. I yield back my last six 

seconds. 

Mr. LUETKEMEYER. Thank you, gentlemen. 

Next we have Congresswoman Clarke from New York for five 

minutes. 

Ms. CLARKE. Thank you very much, Mr. Chairman. I thank the 

ranking member, Ms. Vela ́zquez, and I would like to thank you, 

SBREP-219 with DISTILLER

16 

our witnesses, for your insightful testimony here today. It has been 

really enlightening. 

Given the prolonged and protracted economic recovery that we 

are all experiencing on Main Street, it is vital that we do all we 

can to foster an environment where our nation’s entrepreneurs can 

thrive, creating the jobs that we so desperately need. You are who 

we are looking to to make that happen. And as we are all aware, 

as access to capital remains one of the most daunting barriers on 

entrepreneurs’ face today, and I think you all have articulated that 

in your unique ways and in your unique space, while some startups 

have been able to use personal credit as seed capital, traditional 

avenues remain elusive. I believe that the federal government can 

and should play a role in filling the gap. Government programs, 

such as SBIR, have a proven track record of providing the 

jumpstart needed to power growth and create jobs, but I see that 

a ‘‘one size fits all’’ model is not what we should be striving for. 

And I think you have driven that point home today, Mrs. Sawyer. 

So let me ask you a question. I got a sense of how vital the SBIR 

grant was for you, but if you could fashion a derivative of the program that would meet sort of the 21st century technological needs 

of research and development, how would you fashion that? And 

what direct impact on your ability to create and maintain jobs 

would that have? 

Mrs. SAWYER. Sure. I really like the SBIR program for crazy research projects, because crazy research projects really do take eight 

years, especially in the hardware space. But if there could be an 

addition to the program that is really more product focused, right 

now the SBIR—every department, NASA has a department, DOE 

has a department, Army, they all have a department, and every 

quarter or so they are going to put up a list of what they are looking for, which in theory sounds nice but in actual fact they are not 

the ones who should be putting the list up because we are the ones 

who are on the frontier of tech. So sometimes we will see the list 

and it will ask for people to write in. And it is like a little incremental change in the tech. When we are pulling out our hair, it 

is like, no, do not ask for a camera that can do a few seconds faster; ask for something, the next thing, which is us, real-time. But 

they do not even think to ask because it is not possible for them. 

They are not in that sphere. 

So it would be great if they had—I am not saying a huge part 

of the SBIR program, but a small part where you, the company, the 

startup can recommend products. That is not possible right now. 

Now, you can kind of do it if you know the right people, but 

startups, there are five of us. We do not know the right people. We 

do not have a lobbyist. So if there was just a very clear way for 

us to simply recommend and propose a new product, it sounds so 

simple, and it would be. And they can turn it down if they are not 

interested, but there is no mechanism for us to propose the next 

generation. And it would not be that much of a fix to do that. Anyway, a small thing. 

Ms. CLARKE. That is a very good proposal, and it takes someone 

in your space to be able to make that recommendation, and I would 

want to suggest that perhaps that is something that we could have 

some conversations with the agency about. 

SBREP-219 with DISTILLER

17 

Mr. Reid, as I stated earlier, traditional access to capital remains 

fairly restricted and startups typically do not have this as an option. Could co-investment from the federal government, if appropriately structured, play a role in increasing traditional financing 

opportunities for startups? 

Mr. REID. I think that is a great question, and it is a unique 

opportunity for the government. The short answer I would say is 

be careful, but probably yes. It is difficult because as we probably 

would agree, government agencies would have a really hard time 

picking winners and lowers. There is a really good reason why venture capitalists who are successful get paid what they do. And we 

also know that there are a lot of venture capitalists who are not 

successful. And I have seen people at universities who, you know, 

people in my position who end up running a venture capital fund. 

And if they are any good at it they should probably be a venture 

capitalist instead of a government employee or a university employee, that sort of thing. But if it is structured, as you said, if it 

is structured carefully in ways that really do leverage the expertise 

of the private sector, then I think that there is an opportunity 

there for government funding to really help drive some more innovation. 

Ms. CLARKE. Thank you very much, Mr. Chairman. I yield 

back. Thank you all. 

Mr. LUETKEMEYER. I yield five minutes to the Gentleman 

from Arizona, Mr. Schweikert. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

Share with me how each of you have either capitalized, raised 

money from your early days and also what you see out there in interest. I will share with you I have a fixation on getting the SEC 

to actually do pragmatic and rational rulemaking on things like the 

Jobs Act where they are about crowd funding so bureaucratic and 

expensive and funding of the trial lawyers with it that the very 

small companies we intended to help are never going to be able to 

use it. So share with me first how did you begin? How did you capitalize? 

Mr. ARREDONDO. To start it was family and friends. That is 

how we got through the first two years. We got really scrappy over 

the last six where I think in my testimony earlier I mentioned 

there was an i6 grant that UMKC in Kansas City got that we got 

approved for, got some money there. We found an OJT H–1B grant 

through Workforce Partnership and hired six employees that way. 

We landed Sprint as a client. That helps. 

Mr. SCHWEIKERT. Now, on something like that when you landed that contract, did that make the value of the income from that 

contract bankable? Were you able to take that contract and walk 

into and almost factor the future income of that? 

Mr. ARREDONDO. Honestly, it happened so fast and I was able 

to leverage that to bring on three full-time employees with that 

and then immediately found these other grants. And honestly, I did 

not even go that direction because in the past whenever I started 

the conversation it stopped two seconds later when I have no assets 

to leverage against it. So maybe if there was more conversation 

with a more traditional path I could have gone that direction. 

SBREP-219 with DISTILLER

18 

Mr. SCHWEIKERT. We will come back and talk about that because I actually think there is a revolution coming in how we capitalize. 

Share with us. How did you? 

Mrs. SAWYER. Yeah, so I have looked into factoring and getting 

cash on accounts receivable, and it is virtually impossible if you do 

not have three years of history. 

Mr. SCHWEIKERT. Well, first, share with me, how did you finance the startup? How did you begin? 

Mrs. SAWYER. It is a funny story. I was a grad student. So in 

this country there are a lot of business plan competitions for graduate students and some of them have gotten very big. We are talking about hundreds of thousands of dollars are awarded. And three 

and a half years ago I did these and we walked away with about 

$170,000 worth of cash from these business plans. They are all 

over. They are in New York, Houston, San Diego. That was our 

starting capital and then we got two SBIRs, and then we started 

delivering smaller cameras for research. So we basically sold what 

we had. We basically sold our prototypes to researchers. And then 

we also last year were able to get a little bit of debt from the City 

of Houston. So the City of Houston gave us a little bit of debt to 

stay in Houston. We have had to look everywhere, every feasible 

way to bring money in. And I have tried more traditional ways. I 

was able to get an SBA loan on one piece of equipment because the 

equipment we were buying, I mean, you could not get it for working capital, but I was able to get an SBA loan for equipment because it had an asset. 

Mr. SCHWEIKERT. For an equipment purchase. May I ask a 

range of how much that was? 

Mrs. SAWYER. Yeah, that was $475,000. 

Mr. SCHWEIKERT. Okay. 

Mr. Reid, what do you see out there? 

Mr. REID. Yeah, there are so many ways companies are now 

finding that early stage capital. Whether it comes from angel investors, friends and family, traditionally, the first money comes out of 

your own pocket. Friends and family come next, which can often 

make those Thanksgiving dinners a little bit awkward. And then 

there is a growing angel market, organizations and companies like 

AngelList and lots and lots of angel groups all over the country are 

now starting to really fill an important—— 

Mr. SCHWEIKERT. But are you surprised in what you are hearing around you that almost no one actually went—sort of we all 

went to business school, so personal friends and family, angel, secondary angel, VC, you know, private equity, and the world does not 

actually work that way and has not worked that way for several 

years now. 

Mr. REID. Yeah. So few companies actually ever raise venture 

capital. Even the companies that grow huge. Right? Venture capital 

is not the primary financing solution. And the angel investing in 

a similar way. You are absolutely right. There are so many other 

ways to raise money. 

Mr. SCHWEIKERT. I am very curious because you have a fascinating business model because in some ways what you are doing 

SBREP-219 with DISTILLER

19 

is the future of sort of this distributive type of business model 

where you are selling a content without large capital expenditures. 

Mr. REID. Yes, absolutely. And I also smile at this past conversation because that model of first you work for a company 

where you conceive the product, where I worked for National Geographic where I conceived the product, realized that the product 

was taking off but it was not possible within the company. All of 

my friends bought condos; I bought this. Then I went off and created an actual prototype, launched and got some customers. It is 

no longer possible to actually get any kind of investment from outside sources without really having a very serious prototype and 

some customers. We got some friends and family investment. We 

won a number of regional competitions. So we won Startup America, TechBuzz America, followed by—we got a little bit of money in 

that. Closed in the angel rounds. And now we are here. 

Mr. SCHWEIKERT. Okay, and I know I am way over time, but 

in many ways your concept would have married up beautifully with 

crowdfunding? 

Mr. REID. For the next round we were actually very much hoping that we could do it, but we cannot yet because of those issues 

that you are mentioning. 

And one day, if any of the other members have an interest in 

this, we really need to find a way to talk to the SEC because they 

are about to destroy that capital formation for the truly, truly 

small sort of egalitarian entrepreneur, and once again, we are 

going to lose our future in the bureaucracy. 

Mr. SCHWEIKERT. Mr. Chairman, I yield back. Thank you for 

the patience. 

Mr. LUETKEMEYER. Good job. The gentleman from New Jersey, Mr. Payne. 

Mr. PAYNE. Thank you, Mr. Chairman. 

Let us see, Mr. Reid. Earlier you mentioned several issues that 

really interest me. Specifically, your statement that entrepreneurs 

come in all shapes and sizes and every person has the ability to 

be an entrepreneur. I am interested in understanding how we grow 

more entrepreneurs from disadvantaged backgrounds. I have introduced some legislation earlier this year called the Dream Jobs Act. 

This has helped to encourage Americans who live in areas below 

the poverty line to establish or sustain their own green businesses 

among other things. I recognize that green energy is our future, 

but startups are as well. Most common efforts focus on supporting 

businesses that serve the underserved, but how can we increase 

the number of people from low income backgrounds who actually 

lose startups? 

Mr. REID. Great. Well, Mr. Payne, thank you so much for asking 

that question. Before I worked for a nice university like Georgetown, I ran a nonprofit organization right here in Washington, 

D.C., and our mission was to go into inner city schools and teach 

entrepreneurship. And that is the Network for Teaching Entrepreneurship which exists in many other cities around the country. And 

there are other organizations like BUILD and Junior Achievement 

that are doing this, and that is where I would say the answer is, 

is we would talk to the young people, whether it was the teachers 

we trained or the entrepreneurs that we would bring into these 

SBREP-219 with DISTILLER

20 

schools. And you could see the entrepreneurial talent is there, but 

the students often had no idea. No one had ever told them you can 

be an entrepreneur. So step one was just exposing them to this 

idea, this concept, and then giving them the mindset and toolset 

and helping give them the skills to do it. There is entrepreneurial 

talent in these underserved populations no matter what you want 

to define it as, and just allowing those folks to see themselves as 

entrepreneurs, to have access to training, mentorship, and resources, you will see a lot of amazing things come out. And I had 

the benefit of seeing that, too. It changes lives just by being exposed to entrepreneurship as an option. 

Mr. PAYNE. So do you think that is something that as a government we should foster and support those efforts? 

Mr. REID. Absolutely. Absolutely. Other than helping provide 

funding, I have not thought deeply about the ways government can 

help but I think those are very, very powerful organizations. The 

entrepreneurship education at all levels, not just universities, really makes a difference. 

Mr. PAYNE. Thank you. 

I will yield back at this time. Thank you. 

Mr. LUETKEMEYER. Very good. We will give five minutes to 

the gentleman from Arizona, Mr. Barber. 

Mr. BARBER. Thank you, Mr. Chairman. And thank you all for 

coming. When I hear from people like you I get very excited and 

enthusiastic because your passion is obvious and you are breaking 

a lot of barriers. I just wish our government was as nimble as you 

are because it needs to be. Obviously, we are not, and that is part 

of the problem. 

I want to talk first of all though, Mr. Reid, about the role that 

universities play. We are very fortunate, I think in Arizona, at 

least in my community, we have the University of Arizona, which 

just a year ago initiated Tech Launch Arizona, and has consolidated essentially the launch offices from across the university into 

a really solid opportunity for helping university professors who are 

really good at research but not necessarily great at building a business, commercializing their product. In the last year alone, seven 

new businesses have come out of this and 15 patents were issued. 

So we are making progress. 

I guess I would like to ask you how and what do we need to do 

to better support our colleges and universities as they grow to 

begin to build this bridge between the research lab and commercial 

application? 

Mr. REID. I am a little bit familiar with that program at the 

University of Arizona, and yes, it is an amazing thing. There is another program that I would love to point out that I think helps answer your question you may be familiar with. It is called iCorps, 

as in iCorps, C-O-R-P-S. And it is about innovation. And it is actually funded by the National Science Foundation. And some of my 

colleagues at universities where in the Washington, D.C. area have 

led a nationwide effort. And what it essentially does is it brings the 

principles of the lean startup movement into university laboratories. And it is amazing to watch the transformation. You mentioned how many scientists are not great at business. That is no 

surprise to many of us but that is a big surprise when the scientist 

SBREP-219 with DISTILLER

21 

learns it. And so through the iCorps program the scientists, the developers of this technology are paired up with business people and 

mentors, but one of the most important things they do is they actually have to go and talk to customers and that is a transformative 

experience for a scientist to actually find somebody that is willing 

to buy whatever it is that they think is the greatest technology in 

the world. And so they learn a lot and that is an incredibly powerful experience. So that program is relatively new. It has been 

around maybe just one or two years, but it has been expanding 

rapidly. Some of the federal labs in this area are beginning to 

adopt it as well. So the iCorps program is what I would absolutely 

say is a great example. 

Mr. BARBER. Go ahead, please. 

Mrs. SAWYER. I did not know if raising your hand is the right 

thing. 

So I have a lot of experience with this surprisingly, and so it is 

the Office of Technology Transfer. Every university is going to have 

an Office of Technology Transfer, and their job, their sole purpose 

is to get technology in the labs out to real products, either through 

licensing, say license it to GE, or to start a company. Both good. 

Products get out there. It is fine. But there are some really good 

Office of Technology transfer, MIT is an example, but most are 

really bad. Really bad. And the federal government actually does 

have some bargaining power. Right? Where do they get almost all 

their money? You all. NIH grants are a big one. A lot of government grants. So what I would like to see is part of—let us bring 

NIH. National Institute of Health is a huge funder of research, and 

they fund this research and it creates really cool medical devices 

that never see the light of day because the universities are not 

graded on transferring and commercializing this technology. So 

what I want to see NIH do, for example, is when you submit a 

grant application, how good is your university at technology transfer? Now, it should just be one little bit of the grading scheme for 

a grant, but it could have a huge effect, even if it is just licensing. 

But that is good, too. 

Mr. BARBER. That makes a lot of sense to me that you would 

have some incentive or push to make sure they do that. 

I appreciate you working in optics by the way. We have an optics 

cluster down in Southern Arizona that we are very proud of. And 

come visit us sometime if you do not already know about it. 

Mrs. SAWYER. Oh, I do. Arizona, University of Arizona and 

Rochester are the two powerhouses in the world for optics. I have 

hired two people from Arizona for optics. They are great. 

Mr. BARBER. Well, graduate students are staying home and 

they are also going elsewhere. That is good to know. 

I know we are close to—I am almost over time but I just want 

to ask this question of as many of you as quickly as you can answer 

it. What can we do in Congress to help you get better access to capital? I mean, I think that is one of the biggest stumbling blocks I 

have heard from your testimony. Just if you could each give a one 

or two sentence answer to that question I would appreciate it. 

Mr. ARREDONDO. Yeah, mine is really simple. I think give resources to the organizations on the ground, in the communities 

that we are working, because every community is different. You 

SBREP-219 with DISTILLER

22 

guys are not likely to create one system that works for everyone, 

and where I have found the finances so far have been the people 

that I knew already and then they got hold of a grant that they 

could actually then turn and give me access to. 

Mr. BARBER. Mrs. Sawyer. 

Mrs. SAWYER. I would like to see the restrictions on SBA loans 

loosened. It is even tough to get an SBA loan which is, I think, a 

bit silly. So we are even slightly profitable and it is almost impossible for us to get an SBA loan. So I do not know who is getting 

them. 

Mr. BARBER. Mr. Reid. 

Mr. REID. So there is something I have seen work well in North 

Carolina that I think the federal government might want to explore. It is a qualified business venture tax credit. And what it essentially does is if you invest as an angel investor or what have 

you in a qualified business venture, which certain types of startups 

qualify, then you get tax breaks for that. And that multiples or it 

leverages the private investment. I think that should be expanded 

to other states and perhaps the federal tax system as well. 

Mr. ARREDONDO. That is, in the state of Kansas, the Kansas 

Angel Tax Credit, where if you invest up to $100,000 you get a 

$50,000 tax credit against your Kansas income. That is a huge 

draw, and pretty much anyone in Kansas City that is a highgrowth startup moves and becomes a Kansas company because of 

it. 

Mr. BARBER. And finally, Mr. Gelman. 

Mr. GELMAN. Yeah. I definitely agree with the things that people have said here. I would add that the tax credits could be a very 

big thing. Empowering companies on the ground and also giving 

R&D tax credits, like Canada, for example, does. A lot of companies 

are moving out of Silicon Valley and moving to Toronto because 

they actually could write off all the R&D that they can do. And so 

that is a wonderful thing. Provide great technology. If that is one 

thing that we could do, that would be a spectacular one. 

Mr. BARBER. I think all of us in Congress have a responsibility 

to break through some of these barriers. We have a new company 

in Tucson, Strong Watch, that is developing surveillance technology 

for border security. We have Syncardia to develop the artificial 

heart. We have got some great inventions all across this country. 

We need to find government, both getting to help as well as getting 

out of the way. And I really appreciate what you have done. Keep 

on doing it and keep pushing us to do better. 

Thank you. I yield back. 

Mr. LUETKEMEYER. Thank you. 

My turn, I guess. Thank all of you for being here today. It seems 

as though each of you has found a niche, and through your hard 

work and your willingness to take a risk and sacrifice and stay determined, you have been able to succeed. And I know, Ms. Sawyer, 

I am wondering why nobody at the federal government is wanting 

to give your company a chance. For every one of you that succeeds, 

Mr. Collins buys 20-something that do not. That is the problem we 

have with startup companies, and I am sure that the government 

is sitting there trying to sift through these—which ones are going 

to make it, which ones if we do business with you are going to be 

SBREP-219 with DISTILLER

23 

here next week, next month. And as a result, they are a little reluctant sometimes to take that risk. 

So what I would think would need to be a way to approach it 

would be some sort of a private-public partnership where the government would work with you and get together and say we need 

this. And you could say, well, you can do that but we can do this 

better if you do that. And by working together I think we could 

probably come to some sort of agreement. Would you agree? 

Mrs. SAWYER. I think it is an interesting idea, but I do find, 

especially with defense, mainly with defense procurement, oh, my 

God, I mean, America is so great because of our free-market system. And through the procurement process, the defense department 

has blocked themselves out of a free market and is the opposite of 

a free market. 

So let us say, you know, 19 out of 20 startups they work with 

fail. I do not believe that, but let us say—we would still be cheaper 

than working with one of these behemoth defense contractors, even 

if 19 out of 20 of us fail. Right now procurement is fascinating because it is not how quick you get the product done or how good the 

product is; they get paid on how long they draw it out. So especially with Defense, you are not getting a great deal. So if you want 

to do a cost-benefit analysis of working with startups, I can guarantee we will be cheaper even then. So let there be other reasons 

not to work with startups, but it cannot be a cost argument. 

Mr. LUETKEMEYER. I know that I have got a technology company that works at the Department of Vets a lot and they have the 

same problems. They are one of the approved vendors that work 

with them every day. They come to them and say, hey, we need 

this, and it still takes months, and months, and months to get 

something done. So yours is not an unusual comment that I hear, 

so. 

Mr. Reid, you had a great idea with regards to the tax credits. 

Do you have an idea of return on investment of those at all? 

Mr. REID. I do not have number statistics. I know it was a program that was renewed each year and there was a huge amount 

of interest in the community each year when it was at risk of going 

away. And I was more involved in this years ago when I lived in 

North Carolina, so I have not followed the details since then. 

Mr. LUETKEMEYER. I know my state is Missouri, and we have 

gone through a process in the last few years of going through all 

the tax credits. We have got lots and lots of programs with tax 

credits. And you go through them and some of them you get a great 

return on investment and other ones you are paying people. That 

is money out the door. 

Mr. REID. I am pretty sure this would be one of the best deals. 

Mr. LUETKEMEYER. It sounded like a great idea. I was just 

kind of curious if you had some numbers on it because that would 

be very instrumental in being able to promote that and move forward with it. 

I guess one of the questions I have got is with regards to what 

regulation or set of regulations are your biggest hurdle to overcome? 

Mr. Gelman, why do you not start? 

SBREP-219 with DISTILLER

24 

Mr. GELMAN. It is tricky because when you work on the Internet, I mean, aside from there are some taxation issues and things 

like that that are happening—— 

Mr. LUETKEMEYER. My next question is going to be tax policy. 

If you want to go ahead, that is fine, too. 

Mr. GELMAN. I mean, tax policy is tricky. When you are running a web-based company, an online company, any of these growth 

web-enabled companies, you are not competing against your neighbor or the next state or the next city. You are competing against 

the entire world. And so when we have major policy decisions, like 

taxes, like Internet regulation, things like that, net neutrality, 

these have an effect because they make us less competitive against 

other countries. And those other countries can just as easily take 

our business because it is online. It is very simple. And these are 

things that we have to struggle with. 

So I would say probably the biggest thing—I would not say that 

that is the single biggest thing that is hampering kind of innovation. I think there are other problems that are significantly in excess of that. Number one is just the difficulty in there is so much 

kind of—theoretically there are so many available programs that 

are out there. There is so much incentive that is kind of out there, 

none of which is accessible to businesses like ours. And when you 

also have problems like crowdfunding is coming out and it is going 

to be a spectacular thing if it ever makes it out in a way that we 

can make it, it is going to open up a new capital market. 

At the same time, almost half of my team is abroad. The reason 

it is abroad is because the people we work with are U.S.-educated 

entrepreneurs that graduated here. They are all U.S.-educated entrepreneurs. They graduated college here. They could not get a 

visa. They had to go abroad. Now they have 25, 50, 100 person 

shops in Ukraine, Cambodia, and India. And so now we work with 

those guys over there. We have to because that is where the minds 

are. If there is any way to keep those jobs, those people here, it 

would go a long ways. If you talk to any startup around anywhere, 

in any region, be it D.C. or Silicon Valley or Kansas, they will tell 

you there is a huge talent crunch. We can never find enough people, and we cannot keep the people that we have. So I would probably focus on that as the top thing in addition to tax policy. 

Mr. LUETKEMEYER. So you are talking about visa problems is 

a big problem for your particular industry? 

Mr. GELMAN. Absolutely. Any technology. 

Mr. LUETKEMEYER. That is not something we do not hear regularly from technology companies. With the H–1B visas, we have 

got to reform that. 

Mrs. Sawyer, what is your biggest concern with regulations and/ 

or taxation? 

Mrs. SAWYER. Regulation-wise, for Rebellion Photonics, because 

we do do some defense work, we have a huge amount of additional 

accounting infrastructure that we have to do and it costs a lot of 

money. And then my engineers, it takes a lot of their time away 

from real engineering. And this is—we went through an audit. We 

passed. It is fine, but all of this somewhat ridiculous accounting, 

ridiculous accounting for a seven-person company because there is 

SBREP-219 with DISTILLER

25 

just so much structure that they treat us almost like a Lockheed. 

This is ridiculous. 

And this is, by the way, the reason you do not see many diversified defense companies. There is so much accounting and infrastructure required to be a vendor for the U.S. Government, especially Defense, that that is all you can do. 

Mr. LUETKEMEYER. Is it a barrier for you that you cannot 

overcome? 

Mrs. SAWYER. We are thinking about cutting the whole defense 

portion of our business. When you look at the defense vendors, they 

only do defense. There is a reason for it. 

Mr. LUETKEMEYER. The cost does not outweigh the benefit to 

doing business with the government. Is that what you are saying? 

Mrs. SAWYER. Yes. And then also, as a vendor, as a customer, 

you do not want your vendors to be you are their only customer. 

You want your vendors to be diversified. That way when the ebbs 

and flow of defense contracts is inherent, because of war ebb and 

flow, they do not have to shed hundreds of thousands of jobs if they 

were more diversified. But they cannot be because of the really intense procurement infrastructure that is required. I know procurement is not sexy and no one is going to take it up and change it, 

but if you did, huge cost savings, fewer people would be fired 

when—we know defense budgets change. And then also, you could 

get really cool new tech out that you currently do not. And that is 

why you do not see many startups, really innovative startups doing 

defense because they would have to give up everything else. 

Mr. LUETKEMEYER. Mr. Arredondo. 

Mr. ARREDONDO. Honestly, my biggest issue is we have run 

into the H–1B issue as well. Talent is in incredibly short supply, 

and you see a lot of people off-shoring tech work. I mean, there is 

a new company in Kansas City that specializes in tech development, and all of their work is overseas. They only have a few 

project managers in Kansas City. If there is a way to stem that 

tide, I think the United States would be able to benefit greatly 

from it. 

Mr. LUETKEMEYER. You talked in your testimony a while ago 

about collaboration with some local groups to get your company off 

the ground. What do you mean when you say collaboration? Was 

that financially or were there other things that you were talking 

about? 

Mr. ARREDONDO. I use the word collaboration a lot, so I am 

not sure 100 percent which one you are talking about. 

So it might have been when I was talking to the two grants that 

we had access to. One was Workforce Partnership, who has made— 

they have a person on their team that her job or part of her job 

is to engage with us directly and go to events and get to know us. 

And then the grant, the i6 grant through UMKC, likewise, has an 

outreach arm that reaches out to us to help us understand what 

it is about. And so again, there is a relationship there. Another example on the collaboration side of a success is Sprint is actually 

getting really engaged with startups in Kansas City, and the only 

way they have been able to be successful is they had an individual 

that spent several months just going to events, talking to us, understanding the actual problem, and then they are equipped then 

SBREP-219 with DISTILLER

26 

to make the decisions and allocate funding because they know 

where the holes are. 

So when I talk about collaboration, I mean, those are a couple 

of the examples to kind of show. And that is why I am a big advocate of finding ways to get the resources to those that are with us 

on the ground that know those needs and holes in each community 

individually. 

Mr. LUETKEMEYER. That makes a lot of sense. 

Mr. Gelman. 

Mr. GELMAN. Actually, on that collaboration topic, just to add 

to what Adam was saying and actually what Jeff was saying earlier, the trick with these growth startups is we move incredibly 

quickly, and we try to move incredibly quickly. And most of the 

time kind of the goal was just to get out of the way. However, the 

big trick with helping is that it has to help in a way that matches 

our pace. And the trick is most of the time frankly it is just not 

going to be possible for a government grant to match that pace. 

And that is fine because the government really has to be very careful about how it does things. But what the government should then 

do is instead of trying to go direct to us—I mean, often, you know, 

there are programs that can do that but they always take longer— 

they should go to the qualified community organizers, essentially 

the middle men, that are acting either as VCs. You know, we have 

an investor in our company that is a VC of a state. So the CAT 

Gap Group of Virginia is an investor in our company. They are a 

very fast paced, fast moving part of the Virginia government. 

Whatever their structure is, they essentially act like a venture capital firm. They are given money by the government and then they 

move very quickly to execute. A lot of the associations, companies, 

incubators that we work with have benefit some from government 

funding. In fact, they are much better at getting it than any entrepreneur that is focused on their business. If the government was 

better at taking this large S and giving it to the people that can 

distribute it as quickly and effectively as possible, you will see exponentially high returns on that investment and you will be 

shocked at how little investment is needed to get incredibly high 

returns. Usually, government thinks in millions of dollars. This is 

tens of thousands, hundreds of thousands of dollars that will get 

you millions. Thank you. 

Mr. LUETKEMEYER. Very good. I am out of questions. 

Ms. Vela ́zquez, would you like to have a second round? 

Ms. VELA ́ ZQUEZ. Yes. I just would like to—solicit your comments regarding the issue of more resources invested in the area 

of education, especially for those new faces in America so that we 

can prepare a new workforce with the skills that you need in the 

area of science and technology. 

And two, as part of an H–1B visa, we need to pass comprehensive immigration reform. Would you agree with me, Mr. 

Arredondo? 

Mr. ARREDONDO. I do not know if I want to dive into immigration reform. I am not particularly studied up on it. 

Ms. VELA ́ ZQUEZ. Well, the students that are here that cannot 

go on to college because they cannot get full scholarships in order 

SBREP-219 with DISTILLER

27 

to be able to attend college because of their immigration status. We 

are talking about four million students. So does that—— 

Mr. ARREDONDO. Well, I mean, immigration, I believe, is a 

part of it, but I mean, I think Estonia is starting to teach programming in grade school. I guarantee that country is going to be a 

powerhouse in the technology world here soon. And the thing about 

technology, I know a lot of it focuses on technology, but technology 

is going to be weaved into every single industry no matter what we 

do. So it is integral to everything. And I believe one of the things 

we can do is kind of acknowledge that and find ways to encourage 

it at a younger age because honestly, right now, the best programmers from the United States that I have found are the ones that 

started teaching themselves how to code when they were 10 years 

old, not the ones that went to school for it. So it is all kind of 

wrapped up in the one. 

Mr. REID. Yeah, I would love to jump in on that. 

The issue about immigration, I know there are a ton of issues 

and I am not an expert in all that, but I can say that America, one 

of the reasons we are such an amazing country for entrepreneurship is because we have welcomed some of the most amazing entrepreneurs as immigrants over the 200 plus years of our country. 

And whether they are young people who were brought here by 

their parents and are now being asked to leave or people that graduate from our universities and want to start companies and create 

jobs and wealth and are also being asked to leave, or the folks who 

would like to get hired into the fast-growing companies and are not 

allowed to, those are all things that are self-defeating. They are 

hurting our country. And it seems like those issues should not have 

to be tied up with everything else. But yes, I absolutely agree. This 

is a great entrepreneurial country, and one of the biggest reasons 

is because we have allowed those amazingly talented immigrants 

to come here and thrive here and create jobs that help the country 

overall. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mrs. Sawyer. 

Mrs. SAWYER. Yeah, I would like to add one thing to the visa 

discussion. Even if we doubled the number of people who come on 

H–1B visa, I probably still would not be able to get one because 

Yahoo and Microsoft and Facebook have legal departments who are 

going to be faster and more money than me to apply for these visas 

for their employees. So I would really like to see that when hopefully when we do get more visa allowed for tech workers, if some 

of those could be cornered off for small businesses. It does not even 

have to be startups. I will just take small businesses. That would 

be great for us little guys without the legal department because 

that competition is unfair and they will win every time. So if you 

could just give me a corner, a little corner I could fight in to get 

those it would be extremely helpful. 

Mr. GELMAN. So, I mean, obviously to your point, Congresswoman, you know, I am an immigrant myself. My family came here 

from the Soviet Union. You would look around the startup spaces 

that we work in and you will find 50 percent immigrants that are 

Americans now. And you will find a lot of people at the same time, 

as education is getting better in the U.S., teaching these kinds of 

SBREP-219 with DISTILLER

28 

things. So I run a hackathon. One of the winners of the last 

hackathon was a team of 14-year-olds from a magnet school in 

Maryland over here, and they were spectacular. There were there 

other teams that were added. There was a father with his son and 

like two other kids that were doing it. They are building spectacular products. If you can maintain that, if they can get a better 

education, if they can stay in the country, be it through college or 

after college with H–1B. 

Ms. VELA ́ ZQUEZ. After all the investment that has been made 

through public school. 

Mr. GELMAN. Exactly. And they love it here. They love it here 

and they contribute. And the more of those people that we can 

keep, the better we will be off. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. LUETKEMEYER. Well, thank each of you for being here 

today. We certainly appreciate your testimony and your hard work 

and your inspiration to us. I know each one, I see the enthusiasm 

and the patient in your eyes and in your demeanor and your testimony, and we appreciate that. We thank you very much. We wish 

you well. 

With that, I ask unanimous consent that members have five legislative days to submit statements and supporting materials for the 

record. 

Without objection, so ordered. This hearing is now adjourned. 

Thank you. 

[Whereupon, at 3:50 p.m., the Committee was adjourned.] 

SBREP-219 with DISTILLER

29 

A P P E N D I X 

House Small Business Committee Meeting 

Wednesday, November 20, 2013 

Written Testimony Submitted by Adam Arredondo 

About Me 

Thanks so much for having me. I am very excited to be here and 

I’d first like to start by wishing you all a very happy Global Entrepreneurship Week! 

My name is Adam Arredondo. I am an entrepreneur from Kansas 

City. I am the CEO & Co-founder of Hoopla.io, an internet startup. 

As a Kansas City native, it’s been incredibly exciting to be in the 

middle of all the entrepreneurial activity and momentum that has 

been building over the last several years. Kansas City is unique in 

that it’s currently the only place in the world with Google Fiber, 

the world’s fastest residential internet. However, the entrepreneur 

and startup community that has developed around it and the principles we have learned about building and nurturing it are applicable to any community across the country. 

Kansas City Startup Village 

Outside of running my company, I am a co-leader of the Kansas 

City Startup Village which is an organic, enterpreneur-led effort in 

the first neighborhood in the world to get Google Fiber. Startups 

congregate to work, network and live in this neighborhood on State 

Line Road, where Kansas and Missouri meet. My company is one 

of those startups. 

It is first important to know that Kansas City Startup Village 

was not planned. We are not following any blueprint. 

In late September of 2012, a string of serendipitous events occurred that resulted in three properties and five startup companies 

settling down half a block for each other in the first Google 

Fiberhood. One of these houses was purchased by a local startup 

leader who recruited hackers and entrepreneurs from around the 

country to live in his Google Fiber enabled house for three months 

rent-free to build their startups. 

In the 14 months since, Kansas City Startup Village has grown 

to 13 properties and 25 startups within six blocks of each other. 

Entrepreneurs have moved from 12 different states to live and 

work in the Village. Delegates and business people from over 45 

countries have visited. And, most importantly, the Kansas City 

Startup Village has created over 70 jobs ... All of this with ZERO 

outside funding. 

There are three main reasons why the village has seen such 

rapid success and notoriety. 

SBREP-219 with DISTILLER

30 

First, the efforts are 100% entrepreneur-led. We volunteer our 

time because we know that a strong Village makes for a strong 

Kansas City startup community which is better for every startup 

in it, including our own. Government, corporations and universities 

are absolutely critical in the sustainability of vibrant startup communities but those groups must allow the entrepreneurs themselves to take the lead followed by direct engagement to find the 

support mechanisms. 

A great example of this is my being here today. As an entrepreneur, neither my company nor I could afford to pay for this trip 

so I reached out to supporters around Kansas City and it was Greg 

Kindle with the Wyandotte County EDC that made sure we were 

afforded this opportunity to tell our story. 

Second, we have created startup density. In the Village, we talk 

about ‘‘serendipitous collisions’’ all the time; unplanned interactions 

between fellow entrepreneurs which often lead to new ideas and 

collaboration. Events are great for creating startup density, but are 

temporary. Kansas City Startup Village offers startup density on a 

daily basis. 

Finally, it’s important to know that although Google Fiber may 

start the conversation and perk initial interest, it’s the welcoming, 

collaborative community that gets people to stay. A perfect example 

of this is Mike Demarias, a 22-year old entrepreneur from Boston. 

Mike said, ‘‘I came to Kansas City for Google Fiber and free rent, 

but I decided to stay for of the awesome community.’’ 

Startup vs Small Business 

One of the big questions we get asked all the time is ‘‘Is there 

a difference between a startup and a small business’’. The answer 

is definitely, ‘‘Yes’’. 

Although a startup can be categorized as a small business, very 

few small businesses can be categorized as a startup. 

No startup aspires to only become a small business. Startups 

want to scale rapidly. Startups want to become the next big thing. 

Startups want to disrupt the status quo. Startups want to innovate. 

Startups also have different needs than small businesses. 

Startup Needs 

A need of most small businesses is access to capital to get the 

business off the ground. Startups are no different. However, 

startups rarely qualify for traditional financing through banks and 

other financial institutions leaving entrepreneurs to scramble to 

find other funding options. And unfortunately, those funding options are few and far between. 

My company has been lucky enough to find two grants through 

local organizations. 

We were selected to receive funding through the Digital Sandbox 

which is the result of a $1M federal i6 grant. Thanks to this grant 

SBREP-219 with DISTILLER

31 

the Digital Sandbox has been able to provide startup capital to over 

20 startups in the Kansas City area. 

We were also lucky enough to discover a grant through Workforce Partnership funding through the H-1B program. This allowed 

our company hire six new employees. This has had a huge impact 

on the progress of my company. In all, over 23 jobs were created 

in the Kansas City Startup Village alone, thanks to that grant. 

The important point here is that I accessed these grants through 

local organizations that interact with the startups on a regular 

basis and are best equipped to understand a startup’s needs, effectively distributing funds. 

My recommendations to you is to provide local EDCs like Wyandotte County EDC, workforce development organizations like 

Workforce Partnership and startup focused efforts like the Digital 

Sandbox with the funds they need to continue the good work they 

do on a daily basis. 

No community is the same. Please, focus on providing the resources to those that know their community best and allow them 

to continue their good work. 

Thanks for listening. Onward and upward! 

SBREP-219 with DISTILLER

32 

SBREP-219 with DISTILLER


Insert offset folio 33 here 85595.001

TIlEWAU. Sl.' JIlIJRNAL. 

V ..... Reat 
33 

SBREP-219 with DISTILLER


Insert offset folio 34 here 85595.002

The Entrepreneur Support Ecosystem 

Special thanks to the Enterprise Center of Johnson County 

for the following research and graphics. 

Creating a robust startup community is on the forefront of many people's minds across the 

country. In order to do so effectively, you've got to address all the pieces of the puzzle in order to 

create the environment where entrepreneurs thrive. 

Outside of the startups themselves, the support ecosystem for startups can be broken dawn into 

the fallowing buckets: 

• Consulting & Support 

• Capital Funding 

• Office Space & Co-Working 

Illustrated by the evolution of the Kansas City entrepreneur support ecosystem, you'll be able to 

see how Kansas City has begun filling in the gaps, moving toward the nurturing entrepreneurial 

environment that all cities desire. 

Although the progress is Kansas City is impressive, in no way is Kansas City at the finish line. 

The Entrepreneur Support Ecosystem 
34 

SBREP-219 with DISTILLER


Insert offset folio 35 here 85595.003

The 

Entrepreneur 

Support 

Ecosystem 

2003 

The 

Entrepreneur 

Support 

Ecosystem 

2009 
35 

SBREP-219 with DISTILLER


Insert offset folio 36 here 85595.004

The 

Entrepreneur 

Support 

Ecosystem 

2012 

The 

Entrepreneur 

Support 

Ecosystem 

TODAY 
36 

SBREP-219 with DISTILLER


Insert offset folio 37 here 85595.005

Allison lami Sawyer 

Chief Executive Officer 

www.rebellionphotonics.com 

@RebellionPhoton 

Houston, TX 

STATEMENT FOR THE RECORD 

MRS. ALLISON LAMI SAWYER 

BEFORE THE HOUSE COMMITTEE ON SMALL BUSINESS 

NOVEMBER 20. 2013 

Members of the Committee, on behalf of Rebellion Photonics, I want to thank you 

for the opportunity to speak to you today. 

My name is Allison Lami Sawyer and I am the CEO/co-founder of Rebellion 

Photonics, an optics startup out of Houston Texas. Rebellion Photonics' specialty 

is, as you would expect, Photonics, which is any engineering concerned with light 

and Rebellion's mission is to solve some of the world's toughest problems. 

Rebellion Photonics was recently named 'Startup of the Year' by Wall Street 

Journal for our work in Oil and Gas safety. 

Explosive gas leaks on oil rigs and refineries are one of the largest problems facing 

the Energy industry today. Leaks, when 

not detected early, accumulate into 

dangerous clouds that can ignite when they 

reach a certain concentration. Current leak 

detectors are grossly inadequate. 

Furthermore, the alarms are too often 

ignored by the crew, who are desensitized 

by daily false alarms. In an age where a 

single explosive accident can cost billions, 

the leak detection market required an 

entirely new way to monitor explosive gas 

leaks. 
37 

SBREP-219 with DISTILLER


Insert offset folio 38 here 85595.006

Rebellion Photonics was named Wall Street Journal 'Startup of the Year' because 

we have created the world's first Gas Cloud Imaging (GCI) camera. The Gas 

Cloud Imaging (GCI) camera offers full scene coverage at a fraction of the cost of 

other services and with a display that will not be ignored by the crew. The GCI 

continuously monitors, quantifies, and displays gas leaks in real-time video with 

automatic alarms. Rebellion began full-scale installation earlier this year with 

companies such as, BP. 

The Gas Cloud Imaging camera is a game-changing product that showcases how 

startups are capable of revolutionizing even the stodgiest industry. 

Current procurement process hurts startups and the government 

Rebellion Photonics is capable of creating a game-changing camera that would 

revolutionize the drone space while also lowering the costs of the industry. 

Currently drones need to be piloted by highly trained (i.e. expensive) professionals 

that cannot be sure of what they are seeing with regular drone cameras. Using our 

real-time chemical imaging technology, Rebellion could create drones that actually 

know what they are looking at. This would mean fewer mistakes, which could help 

American foreign relations and therefore the world. 

For example, a terrorist is identified getting into a vehicle. Rebellion's camera 

could automatically track that specific vehicle forever, even if the vehicle went 

under a tunnel or was hidden from view for a time. Rebellion's drones would also 

be able to tell the difference, automatically, between friendly fire and enemy fire. 

Essentially we could open up a whole new age of drone applications that would 

drastically cut down on the current drawbacks to using drones. 

We at Rebellion would love to create this product for our country, but 

unfortunately we cannot for one main reason - a failed procurement process. 

America owes much of its success to free market capitalism and yet the U.S. 

Government has boxed itself out of the free market due to the extremely complex 

procurement process. 

The main problems with the U.S. procurement process are: 

• There is little motivation for vendors to finish jobs early. In fact, they are 

typically paid more when they drag out the contracts. 
38 

SBREP-219 with DISTILLER


Insert offset folio 39 here 85595.007

• The process practically demands that the vendors only work for the U.S. 

government. This added infrastructure rules out the vast majority of possible 

suppliers. 

• The current potential contracts are not well advertised, so most nongovernment vendors do not know of the possibility. 

• The additional accounting and infrastructure fees that are associated with 

government contracts are unnecessarily high. 

• Government officials are not required to go actively search for the best 

possible vendor, like a normal company, but passively wait to see who 

applies. 

Everyone would benefit from a drastically streamlined procurement process: 

• Large defense contractors are currently set up to only do defense because 

the procurement process basically forces them to be. If they could act like 

normal companies, then defense contractors would be able to more easily 

diversifY. Therefore they would be able to handle the inevitable swings in 

the defense budget without massive layoffs that affect hundreds of thousands 

of U.S. citizens. 

• The government would be able to cut defense costs without sacrificing 

quality. Startup and non-defense companies are generally leaner because 

they do not have the excess infrastructure required by the current 

procurement procedures. By opening up the playing field, the government 

would benefit from vendors bidding in a free market setting. 

• Start-ups would finally be able to sell to the world's largest customers and 

have the opportunity to fix some of the world's largest problems. 

The failed rollout ofObamacare is an excellent example of the flawed procurement 

process. Dozens of US-based companies could have done a better job, but they did 

not even apply for the job because the procurement process only allows for 

government-only vendors. 

SBIR research grants are one part of the process that are successful 

It is not always obvious what will come of a federal research grant. Would you 

expect that a federal research grant from the National Institute of Health for 

"Image Slicing Spectrometer for high resolution sub-cellular microscopy" would 

eventually revolutionize oilrig and refinery safety? The researchers themselves 

could not have guessed how far their invention would go, but go it did. 
39 

SBREP-219 with DISTILLER


Insert offset folio 40 here 85595.008

Over three years ago, Robert Kester and I founded Rebellion Photonics around the 

technology he and his colleagues created using a federal research grant. Within the 

past two years we have created 7 jobs, raised $1.1 million in venture funding, 

become cash flow positive, and created products that truly make the world a safer 

place. 

Rebellion Photonics produces video cameras that can identify and quantify 

chemicals- essentially our video cameras 'see' chemicals, not just colors. While 

this type of technology, called hyperspectral imaging, has been around since the 

1980s, researchers were forced to wait minutes, even hours to see results. Our 

cameras take milliseconds and therefore allow the first true real-time chemical 

imaging video. 

The technology was initially invented to see live chemical reactions within cells 

for medical research. We do sell cameras for researchers, but with the help of grant 

funding for basic R&D we have been able to expand our product range. 

Critically, the company won $1.6 million in competitive federal grants through the 

Small Business Innovation Research (SBIR) program, which provides $2.5 billion 

in annual seed-stage funding for small businesses meeting national research needs. 

Grant funding has allowed our company to do high-risk R&D to create high impact 

products such as our Gas Cloud Imaging camera for the oil & gas market. Instead 

of traditional point detectors that are notorious for false alarming, rig and refinery 

workers will actually be able to see the leaks on their site. 

Thank you. 

Allison Lami Sawyer 

Chief Executive Officer 

(832) 274-6950 

Allison@rebellionphotonics.com 

www.rebellionphotonics.com 
40 

Testimony of Jeff Reid 

Founding Director, Georgetown University 

Entrepreneurship Initiative 

United States House, Committee on Small Business 

‘‘The Startup Movement’’ 

Wednesday, November 20, 2013 

Thank you very much for the opportunity to speak here today. 

I will be brief but hope to make a few points that are helpful for 

you as you make decisions and policies that affect the entrepreneurs of America. 

First of all, we are all entrepreneurs. I had the honor of hosting 

Nobel Peace Prize winner Muhammad Yunus at Georgetown University a few years ago, and he has famously said that ‘‘All human 

being are entrepreneurs.’’ He makes the point that, across the millennia, if humans were not entrepreneurial, they would have never 

survived. It is only through civilization in recent centuries that the 

entrepreneurial spirit was suppressed. I agree completely—we are 

all entrepreneurs, but that entrepreneurial spirit has been suppressed and is now beginning to be unleashed all over the world. 

Entrepreneurs are not just those crazy people in Silicon Valley. 

Entrepreneurs are not just young white males with piercings and 

tattoos starting tech companies over Mountain Dew and pizza. Entrepreneurs are not superhuman. All too often in our popular culture, those are the stereotypes that we see and hear about, but 

those images do not tell the whole story. When I begin teaching a 

new class at Georgetown, I often ask my students, ‘‘When you hear 

the word entrepreneur, what do you think of?’’ Their answers are 

predictable: Bill Gates, Mark Zuckerburg, Michael Dell, Richard 

Branson. They say what so many people would say, and they 

missed a huge point. Entrepreneurs come in all shapes and sizes, 

and EVERY PERSON has the ability to be an entrepreneur. 

Being an entrepreneur is as much a mindset as it is a career 

choice. You can work in a startup that somebody else founded and 

be entrepreneurial. You can work in a large company and be entrepreneurial. You can work in a non-profit, or—heaven forbid even 

a government agency and be entrepreneurial. There is a great entrepreneurial community growing right here in Washington DC, led 

by a vibrant community of leaders including the founders of 1776. 

It can be done anywhere. If Professor Yunus can find thousands 

upon thousands of successful entrepreneurs—nearly all women, by 

the way—among the rural communities in Bangladesh—some of 

the poorest regions on Earth, then we can certainly find—and develop—more entrepreneurs in communities all across America. 

And, if I can change the culture of a 225-year-old university to be 

more entrepreneurial, then it can be done anywhere. 

That leads me to my second point: Education matters. Yes, you 

can teach entrepreneurship. Entrepreneurship is not magic. It is 

not true that you must have a ‘‘great idea’’ to begin your life as an 

SBREP-219 with DISTILLER

41 

entrepreneur. It is just not true that entrepreneurs are simply 

standing in the shower one day and the so-called ‘‘great idea’’ just 

hits them as if lighting had struck, and then they go off and become millionaires. 

Colleges and universities—like Georgetown University and so 

many others—have been teaching entrepreneurship courses for decades. And now, more and more, community colleges and even K12 schools are teaching more courses and lessons that instill an entrepreneurial mindset and skillset in America’s younger generation. 

And with new curricula that emphasize evidence-based entrepreneurship, customer discovery, and lean startup principles, there 

are tools, processes, and frameworks that can make an entrepreneurial effort much more likely to succeed. 

And that is of critical importance. Our education system needs 

to change from one that teaches young people how to get a job and 

survive in a hierarchical employment environment to one that 

teaches them to embrace risk; that change is inevitable and not inherently bad; that they can pursue their passion and make a living 

doing it. 

What can Congress do to help? In short, be more like entrepreneurs. Solve problems. Serve your customers. Stop constant 

fighting and gridlock. Refuse to stand still. When you hit an obstacle, get creative and find a way to get things done. 

Other suggestions: 

• Clarify the rules. Minimize uncertainty in regulation. 

• Remove red tape. 

• Fix the idiotic immigration laws that kick out the brilliant 

entrepreneurs that want to stay here, build companies, and 

create jobs. 

• Recognize that entrepreneurs are not the same as small 

business owners. 

• Celebrate entrepreneurs. 

• Support entrepreneurship education efforts. 

In closing, I thank you for this opportunity to speak. I am passionate about growing the entrepreneurial spirit of America. I see 

young people every day who I am confident are going to change the 

world in amazingly positive ways through entrepreneurial efforts. 

I am very optimistic about the power of entrepreneurship in America, and I would be happy to answer any questions you may have, 

or help in any other way. 

SBREP-219 with DISTILLER

42 

Anton Gelman, Small Business vs Startup 

My name is Anton Gelman, I am the CEO of Cont2nt.com—a 

two-year old venture-backed startup based in Washington DC. We 

are building a market for breaking news that enables freelancers 

and media companies to sell their photo and video stories to media 

outlets around the world in realtime. We are eBay for breaking 

news—or put another way, we are trying to build a global Free 

Market for a Free Press. 

Cont3nt.com officially launched a bit over a year ago and we now 

have 24,000+ journalists, and 2000+ media companies, in 25 countries around the world. I am responsible for creating 5 jobs in the 

USA (including my own), 5 internships, and an additional 4 jobs 

abroad. We are expanding rapidly and intend to have a presence 

in every country in the world by the end of next year. 

I’ve been involved in entrepreneurship all my life—starting from 

‘‘Anton Enterprises’’—a landscaping company I started when I was 

12, to the web development and strategy firm I ran throughout college, and all the way to the company I have right now. I have run 

small businesses, and I now run a startup. And I can tell you that 

there is a WORLD of difference between the two. 

A ‘‘lifestyle business’’ is an organization that grows linearly and 

aims to provide an income and independence to the people that run 

it. I have tremendous respect for lifestyle businesses and the people 

that create them. However a ‘‘growth business’’ aka ‘‘startup’’ is 

NOT a lifestyle business and treating them the same (as we have 

been doing) does not allow us to provide services to this crucial element of the American economy. 

A startup is ‘‘a temporary organization in search of a repeatable 

business model’’ (Definition by Steve Blank). This is a very strange 

definition for what we think of as a company. But it is very true. 

Startups are not a storefront—it is a rocket-ship. I write this 

with all seriousness. The goal of a startup is to test a hypothesis 

that should take this idea worldwide and try and dominate a market segment previously un- or under- addressed. Their growth is 

never linear (if it is, they are dead), it is either exponential or outof-business. As a consequences they tackle big problems, run on intellectual property, and build jobs faster than is possible in any 

other industry. 

Startups are usually technology-based, run on intellectual property, and (often) venture funding. A company goes from theory to 

operations in 1–12 months, and can scale from the original founding team to dozens or hundreds of employees within the same period. It is fast growing, fast iterating, and acts much more like IBM 

than a mom and pop shop. As a consequence—their needs are very 

different from what has been traditionally thought of as a small 

business. 

Existing legislation is much too slow, based in existing bankingloan infrastructures, and cumbersome application processes. 

Startups don’t have 6+ months to wait for program approvals, we 

have no physical collateral to back our bank loans, and the tax 

SBREP-219 with DISTILLER

43 

breaks given to research businesses usually pass us by. Because of 

the reliance on the old ‘‘lifestyle business’’ model—almost all previous legislation and programs have been ineffective in targeting 

startups. 

As a consequence, aside from a very rare exception (like SBIR), 

I do not know any startups that are able to take any advantage of 

government programs—it is usually impractical to even think 

about it. This is a shame because for minimal investment startups 

provide exponential growth & world-changing services, and policy 

can help increase our competitiveness on the world stage. 

With the adoption of the JOBS act, the beginnings of crow-funding, and immigration reform—it is clear that this is becoming a 

mainstream issue, and we are all the happier for it. However as 

good as these efforts have been, they are in their infancy, and have 

yet to become truly useful to help the startup economy. 

I would urge policy makers and legislators to quickly implement 

the changes needed to streamline small business programs and target startup companies with resources like R&D tax credits, access 

to funding (not reliant on traditional SBA loans), immigration reform, and a network of trusted organizations that could help dispense government offerings faster and in a way that is targeted at 

growth companies. 

Æ 

SBREP-219 with DISTILLER