▶ 0:16:11We're going to go ahead and open our meeting this morning with our chairman uh giving our uh prayer and our pledge.
▶ 0:16:57So, good morning everyone. Um, I now call the committee on small business to order and without objection, the chair is authorized to declare a recess of the committee at any time. Pursuant to committee rules, I ask unanimous consent that Representative Weed be waved on to this hearing for the purpose of asking questions. Without objection, so ordered. I now recognize myself for my opening statement. Well, welcome to today's hearing, investing in America and how private equity empowers Main Street. And first, I want to thank our witnesses for all being here today.
▶ 0:17:27We know that you have traveled a long way to share your experiences, your perspectives, and we greatly value your time and your voice. Small businesses are the foundation of our communities and the driving force of the American economy. And whether it's a familyrun distribution center, a growing manufacturer, or a tech startup finding its footing, these businesses are responsible for nearly twothirds of the new job creation in America.
▶ 0:17:54In North Texas, we've seen how entrepreneurs and small family-run businesses alike can build long-asting enterprises and often outco compete their larger counterparts. Today's hearing will explore how private equity serves as a critical tool in helping entrepreneurs gain access to capital and enjoy the benefits of a long-term partnership with investors that help them navigate challenging barriers with expertise and key resources.
▶ 0:18:18From day one, the Trump administration has worked with congressional Republicans to roll back the bartms regulatory red tape that for too long has blocked private capital from reaching the businesses that need it the most. And by removing those unnecessary barriers, we can ensure that investors and entrepreneurs have the ability to make crucial investment decisions in our communities. In 2024, 85% of all private equity investments went to supporting small businesses.
▶ 0:18:45And these investments are driving local job creation, strengthening operations, and fueling business growth to new levels. Unlike traditional funding methods, private equity can bring more than just capital and allow businesses to scale up, adopt new technologies, and strengthen their workforce. Across every state and congressional district, private equity is empowering American entrepreneurs to build and expand their businesses from the ground up.
▶ 0:19:12But for far too long, private equity has been concentrated in places like Silicon Valley, New York, and Boston. And now, cities like Dallas and Austin are emerging as dynamic hubs for private equity investors and those seeking investment in small businesses. In fact, the downtown Dallas area represents one of the fastest growing innovation and investment corridors in the country.
▶ 0:19:34And I'm pleased to be able to hold this hearing today to highlight the role of private equity in the small business ecosystem and discuss how we can bring these opportunities to more Americans throughout the country. And thank you again for being here today and I look forward to the conversations ahead. I now want to recognize the distinguished man ranking member from New New Jersey, Miss McCliver for her opening remarks. Thank you so much, Madam Chair. Uh good morning to everyone. Uh small businesses are an essential part of the American economy.
▶ 0:20:03They account for more than 40% of US GDP, create approximately twothirds of new jobs, and employ nearly half of all private sector workers. Financing and access to credit is a central component to starting and growing a small business. Traditionally, small businesses have been more reliant on bank financing for their credit needs than large businesses.
▶ 0:20:25But as we will explore today, in recent years, small businesses have increasingly relied on private forms of investment and credit to meet their financing needs. As we heard at previous full committee hearing, a full committee hearing in April, the SBA's SBIC program is a responsible and effective method for small businesses and startups to partner with private equity and venture capital investors.
▶ 0:20:50Currently, the SBA partners with more than 300 privatelyowned and managed SBIC's to provide financing to small businesses with private capital. The SBIC has raised through the SBA guarantee debenture. As of 2024, the SBIC program has made more than 194,000 investments and deployed more than 130 billion of capital to small businesses.
▶ 0:21:16More broadly, private funds like private equity, private credit, and venture funds have become a critical component of our small business financing ecosystem, particularly those businesses that need retooling or just on the cuffs of growth. For example, the private equity industry invested in 18,000 businesses in 2022, 40% of which had fewer than 50 employees.
▶ 0:21:41Likewise, in 2022, venture capital activities surpassed the 200 billion mark, reaching 209.4 billion, making 2022 the second highest year ever for VC investment. So while there is no doubt that the role private funds play in the American economy and America's business, America's small businesses is significant, these funds can also present significant risk for small businesses, their employees, and their communities.
▶ 0:22:12It's important to note that these funds have drawn significant criticism over the years for the strategies they at times choose to employ. And unfortunately, like with conventional bank loans, if we look at these numbers more deeply, the research demonstrates that women minorityowned and small business business outside certain geographic areas have less access to private funds than their white-owned counterparts.
▶ 0:22:37For example, black and Hispanic female entrepreneurs receive less than 1% of all venture capital investments in 2022 in 2020, excuse me. That must change. Investing in all of America's small businesses and startups benefit not only those businesses, but the communities they service and our nation's entire GDP.
▶ 0:23:00I look forward to exploring all of these issues and more to ensure our private markets are appropriately regulated, transparent, and working for the long-term benefit of our small businesses and our employees. With that, Madam Chair, I yield back. Thank you very much. I now recognize the chairman of the full committee from the great state of Texas, Chairman uh Roger Williams, for an opening statement. Thank you, Madam Chair. Thank you for calling this hearing.
▶ 0:23:25Uh and al also thank you to all the witnesses uh who've come here today, especially the ones who've traveled all the way from the great state of Texas. Uh as a small business owner myself and an advocate for entrepreneurship, I've seen firsthand the critical role small businesses play, not just as job creators, but as engines of innovation and community development. Uh from local manufacturers to family-owned retailers, small businesses drive the America's economy.
▶ 0:23:50Yet too often, these businesses face significant barriers when it comes to securing the capital they need to grow, compete, and reinvest in their business. So that's where private equity can play a crucial role. Uh when done right, it's more than just investment. It's a partnership and helping businesses scale up, hire more workers, and stay competitive in a growing marketplace. Private equity is a powerful and at times misunderstood tool in this landscape. It can provide more than just funding.
▶ 0:24:17It brings strategic support, operational expertise, and a long-term partnership. So for small businesses navigating complex markets and evolving challenges, that kind of backing can mean the difference between stagnation and a scalable success. Here on this committee, it is our goal to ensure small businesses across America compete for private investments. When private investors look at small businesses outside the of the traditional coastal elite hubs, everyone wins.
▶ 0:24:45Whether it's a rancher in Texas or a banker in or baker in Iowa, the entrepreneurs present a prime partnership opportunity for private equity firms. So this is especially true in sectors critical to national security like manufacturing. The revitalization of American manufacturing will ensure that American economy remains resilient. It also presents an opportunity for private investors to identify reemerging manufacturing sectors poised for growth.
▶ 0:25:11So many small businesses may be at the stage where they are ready to seek private investment, but sometimes they may not yet be in a position to attract private equity investments. This is where the SBA comes into play. So, just last month, I introduced HR 3174, the Made in America Manufacturing Finance Act of 2025, a bill that would raise the maximum SBA loan for American manufacturing from 5 million to 10 million.
▶ 0:25:36This will not only uh enable existing US manufacturers to grow their business, it will help bring more manufacturing back to the US. So this committee alongside the Trump administration, administrator Leler, will once again prioritize policies that support main street America. Now we all can create an environment for Americans where small businesses can thrive and unleash the full potential of private equity investment. So I want to thank again the witnesses for being here.
▶ 0:26:02I want to thank uh my colleague, Congresswoman Van Dy, for holding this hearing and I look forward to our conversation ahead. Thank you. Thank you very much, Mr. Chairman. I will now introduce our witnesses. Our first witness here with us today is Mr. Jordan Bastable. Mr. Bastable is the co-founder and managing director of Longwater in Dallas, Texas. Mr.
▶ 0:26:22Bastable co-founded Longwater in 2009 following years of experience as a consultant with FTI Consulting and as a senior finance manager with Lineager with Lineage Power. Prior, Mr. Bastable co-founded a private investment firm while he was still in college while also working for a multi-billion dollar hedge fund where he gained experience in the day-to-day operations, deal flow, and investment management aspects of running an investment firm. Mr.
▶ 0:26:48Bastville graduated from Texas Christian Go frog where he earned a bachelor of business administration. Thank you for joining us today and I'm looking forward to our important conversation. Our ne our next witness here is Miss Miss Sarah Fields. Miss Fields is the chief executive officer at Jedha Corporation in Edmund, Oklahoma. Miss Fields joined Jedha Corporation in January of 2015 with decades of experience in business development in marketing consumer products.
▶ 0:27:18She previously served as a senior vice president and then as president at Century LLC. Miss Fields graduated from Cameron University with a bachelor of sciences in engineering technology and earned her mers of business administration from the University of Oklahoma. And thank you for joining us today and I'm looking forward to today's important conversation. I will now recognize the ranking member from New Jersey to briefly introduce our last witness befering appearing before us today. Thank you, Madam Chair.
▶ 0:27:44I would like to introduce Miss Jennifer Mendoza, co-founder of general partner, general partner of Mendoza Ventures, a Bostonbased precede fintech AI and cyber security venture capital capital firm. After having a career in enterprise sales and hospitality design, she began Mendoza Ventures to address the growing funding gap in the preced investment stage.
▶ 0:28:09The firm was launched in January of 2016 and invests internationally in the cyber security, AI, and fintech space. She is a published author, innovator, and thought leader in the technology, startup, and VC space with a passion for equity and diversity. Miss Mendoza, thank you for appearing before the subcommittee today. We look forward to your testimony. Thank you. I yel back. Thank you. We appreciate all of you being here today.
▶ 0:28:37Uh, and before um we we begin, I just want to give you just a little bit of uh uh of of background. Um, where do we go? Um, I want to remind you of the testimony and uh you have five minutes. We the chairman is much more strict than I am. At five minutes seem like he will cut you off, but you're going to hear me just kind of wrap a little bit at at five. So, just try to hurry up uh and finish your testimony and conclude it. So, I want to recognize Mr. Bastel for his five minute opening remarks.
▶ 0:29:07Chairman Vanine and Ranking Member MacGyver and members of the subcommittee. Thank you for holding this important meeting today. It's a topic I'm very passionate about. My name is Jordan Bastable and I am the co-founder of Longwater Opportunities, a private investment firm focused on the lower middle market. I also serve on the board uh and council chair of the small business investor alliance which represents funds that invest and support the growth of small businesses across America. Our journey began in 2009 with two complimentary perspectives.
▶ 0:29:37One rooted in the experience of operating a family-run business in rural America, grappling with succession and capital constraints. The other shaped by exposure to large private equity firms and the untapped potential in unserved markets. Together, we saw an opportunity to invest in small family-owned businesses, especially those lacking succession plans and access to institutional capital. Our first investment, we approached over 20 banks before finally securing financing. However, under restrictive terms.
▶ 0:30:07That experience revealed a larger truth. Small businesses consistently face systematic barriers to growth capital. And those barriers are especially acute in underserved markets. Today, Longwater has offices in Fargo, St. Louis, and Dallas. We provide a range of investment solutions from controlling equity to direct loans. But we are more than capital providers. We are partners.
▶ 0:30:30We support our portfolio companies with strategic guidance, operational expertise, and access to networks they may not otherwise ever reach. We help businesses scale, professionalize, and thrive. This is not transactional. It's relational. Let me be clear. The idea that private equity succeeds when businesses fail is simply false. In the lower middle market, success comes from helping small businesses grow into larger, stronger enterprises that create lasting jobs and value.
▶ 0:31:00Let me give you an example. We invested in a small business called Excalibur Container. We take shipping containers and convert them to ground level offices you might see at construction sites or energy sites. We came into that business and really helped provide financial um visibility for the business, expanded benefits, instituting 401ks, comprehensive health care, tuition reimbursement, um and programs for continuing education.
▶ 0:31:26We also invested in the infrastructure, included cleaning up and rehabbing old abandoned industrial sites, and investing in new capital equipment. We also invested in modernizing their digital marketing strategy and bringing skills and expertise that didn't already exist. and that they did not have the capital to in. This is what aligned private capital looks like. Capacity building, local empowerment, and revitalization.
▶ 0:31:54Good public policy should expand, not restrict the capital options available to small businesses. Whether it's a startup fighting for market share or a second generation manufacturer navigating succession or a rural enterprise facing techn technological disruption, private investment is often the bridge between survival and scale. In today's climate where traditional financing is often constrained, private capital is not just helpful, it's essential.
▶ 0:32:20I look forward to working with the subcommittee to ensure small businesses can access this kind of value added capital that helps them grow higher and succeed for the long term. Thank you very much. I now recognize Miss Fields for her five minutes opening Chair Van Dyene, Ranking Member Mcciba, and members of the subcommittee. Thank you for inviting me to speak today. My name is Sarah Fields and I serve as the CEO at Jedha Corporation.
▶ 0:32:46We are a US-based bathtub manufacturer and have been business for about 45 years located in a suburb of Oklahoma City. We have about 60 employees and generate about $20 million in annual revenue and we've been partnered with lower middle market private equity firm for about two and a half years. I want to share how that partnership has truly been an accelerator for our business not just by providing us capital but bringing to us expertise support and the kind of involvement you may not expect from private equity.
▶ 0:33:18We partnered with a smaller, more specialized private equity fund that focus on US-based manufacturing. For them, a small business like us is not just one of many. We are a big deal. That means we get direct access to senior partners, senior partners that have manufacturing operations expertise. They they help us make quick decisions and they're people that are willing to roll up their sleeves and come work in our business with us to help us solve problems and move forward quickly.
▶ 0:33:47Within the first year of their support that we had led to a 10% increase in production capacity and 8% increase in our efficiency thanks to major improvements we were able to make in our factory layout and our processes. They also helped us uncover about $350,000 in annual material savings. That is a massive change for us and really significant to a small business like us.
▶ 0:34:12We're now reinvesting those gains in improving our workplace, updating our facilities and workstations to improve retention, which is critical in our environment. In addition, these operational improvements have made us more competitive with much larger companies. We're now gaining market share, improving profitability, and reinvesting in our growth. One of the biggest advantages for private equity for us has been access to capital for acquisition, not just having to grow organically.
▶ 0:34:42Without private equity, this would not have been attainable for us. In the next six months, we plan to acquire a second manufacturing facility, which will allow us to expand our geographical reach, shorten delivery times, and serve a much broader customer base across the c across the country. We're also in the process of resouring the production of bathtubs we currently import. That move will help us improve our supply chain resiliency and quality control. Will also allow us to expand making more Americanmade products.
▶ 0:35:12As a result of that, we expect to be able to increase our workforce about 30% over the next 18 months. Private equity partnership for us and for me personally has been transformative. It's helping us grow faster, operate smarter, and create jobs. all while staying true to who we are, a small American manufacturer, and staying true to our values and our culture. Thank you again for allowing me to share my story. I'm super excited to be here and happy to answer any questions you may have.
▶ 0:35:42Thank you very much. Chair now recognizes Miss Mendoza for five minute opening remarks. Thank you, Chairman Vanine, um, Ranking Member Macyver, and members of the subcommittee for the opportunity to speak on the necess on the necessity of entrepreneurship as a cornerstone of American competitiveness. Today, I'm pleased to testify today as the founder and general partner of Mendoza Ventures, a privately held venture capital firm investing in AI, cyber security, financial technology, and dual use companies.
▶ 0:36:13my and the founder and executive director of Mendoza impact our philanthropic arm. My family has lived the American dream. We are self-made entrepreneurs who built a venture capital fund out of a technology exit. We live in the perspective that we are all trying to promote fiscal responsibility, innovative technology, and employing Americans to their absolute best capacity.
▶ 0:36:35Since 2016, our little fund has deployed over $30 million into the American economy, sustained 15 portfolio companies, generated more than 550 sustainable full-time jobs, created 140 million in revenue for our portfolio in 2024 alone, and made essential technology for our nation's tech stack in both the government and the private sector. We have funded veterans, women, and several minorities.
▶ 0:37:03In fact, our portfolio looks a lot like the demographics of our great nation. We have co-invested with some of the largest financial institutions in the world, and we have exited four companies, creating generational wealth for other American families through our company. We are philanthropists who mentor the funds and founders following our lead. This is the place where wealth is generated. Access to the American dream is through private equity.
▶ 0:37:28Over 50% of millionaires attribute their success to the growth and scale of a family or privately held business. It is proven that liquidity constraints hinder access to entrepreneurship. If you want to send a rocket, you need to build a launchpad. You cannot disassociate Main Street stability from our nation's entrepreneurial ecosystem. They are completely intertwined. Venture lives in this capital stack, creating wealth where others won't.
▶ 0:37:56and the introduction of of mega funds into an industry where the average fund size is 35 million coupled with a slowing IPO and M&A market means less capital for smaller firms and less smaller firms. Since 2021, 25% of all active venture capital firms have closed. More capital is going to fewer firms, cutting out the middle later, and that money is not going to make it to Main Street.
▶ 0:38:23In contrast, A16Z closed 7.2 2 billion and just announced a $20 billion mega fund. Funds like us enable Main Street in a way that the mega funds do not. If you're deploying that much capital, you have to write a larger check to get it out in the typical 5 to 10year period. So, a startup trying to raise today like my colleagues here are facing fewer firms and venture capital is facing the same statistics that we're seeing among the population of a growing wealth divide.
▶ 0:38:52Out of 91 billion deployed in Q1 of this year, 40 billion of that went to OpenAI. Another 4.5 billion went to the runnerup anthropic. Now take into account that the two funds leading those rounds share many LPs, endowments, foundations that have invested in them. And you see that we have a growing concentration risk in the venture ecosystem. In finance, when we have a really big problem, we like to call it an opportunity.
▶ 0:39:22Failure is learning. And if you can fail fast, you can learn and implement fast and beat the odds. Eric Reese famously says, "Success is not delivering a feature. Success is learning how to solve the customer's problem." So, the SBA has to empower and not extract. We need to start building more launchpads in more areas of the country in order to be able to launch more rockets. Um, and I'll use two examples on that.
▶ 0:39:51One is the proposed CDFI cuts that we're discussing today. Um, if anything, we have not pushed it out hard enough to really be able to meet the need of small businesses. And the other example I'll use is the great SBIC program. We went through this process um, and at the end of the process in order to partner with a fund there's a legal bill of about$1red to $150,000 for a seedstage fund. That's an investment in entire company.
▶ 0:40:19Um, and so there's a couple of things that we can do. Instead of making sweeping cuts, we can tweak what we have. What we have is working. We just need to iterate on it to meet our small businesses and our smaller funds where they are today so that they can access it. The SBI could standardize legal docs like Carta and Y Combinator have put into practice. You don't need to cut something that just needs another iteration to thrive and to help our nation thrive.
▶ 0:40:47If we do not listen to the business owners we serve, we're damaging our own cause. We need to build an innovation economy in America. When that happens, entrepreneurs everywhere have capital and opportunity. Entrepreneurship everywhere for everyone. That is the American dream. Great. Thank you very much. We'll now move on to the member questions under the five-minute rule. And I recognize myself for five minutes. Mr. festival.
▶ 0:41:14Well, private equity has proven to be a powerful tool for helping small businesses grow and and succeed historically. So, these investments though we have largely seen and concentrated in hubs like Silicon Valley. I think that that trend is finally ending. Um I think in Texas 24th district alone, we've got 180 private equitybacked businesses. Um, investors like yourself are looking towards businesses in Texas and as capital begins to shift toward emerging markets.
▶ 0:41:44Firms like yours are at the forefront of that transformation. So, can you speak to us about how your firm is helping bring investments into cities like Dallas and what impact that that has had on some of the small businesses that you're working with? Yes, absolutely. And thank you for the question. Um, I'd start by saying, you know, when you look at where our company's based, Dallas, St. Louis and Fargo. Uh they're not traditional finance hubs.
▶ 0:42:09And even a city like Fargo, people often ask, "Why are you in Fargo?" And I was going to ask, why are you in Fargo? Because there's great opportunities and it's a it's an underserved market. And it's unbelievable the number of opportunities that are seeking capital and just do not have access to capital in those part of the markets. And one of the things that is just interesting about the lower middle market is it is a relationship industry. They want to work with people that are committed to helping them grow and share the values of that long-term growth.
▶ 0:42:39And so I think it's really important that these businesses um and these capital providers continue to be in the markets and the locations where they are planning to invest and understand the people and the values of those commu communities. Now I used to live in Minet North Dakota. It was not at that point in time this long ago it was not exactly a hub for for economic activity. We had the Air Force base there and that was about it. But tell me, do you have any stories of some of these businesses that you've worked with, success stories, failure stories? Absolutely.
▶ 0:43:09I can tell you, uh, in North Dakota, for example, um, we invested recently in a garage door manufacturer in in North Dakota. We just opened up a rail car servicing location in rural North Dakota, and I'm planning to open up several more. And these are just examples of um you know opportunities where the larger private equity firms, they don't often want to fly and travel to these parts of the country because they're difficult to get to.
▶ 0:43:35And sometimes you know in reality it's hard to find and retain talent and grow in those parts of the market. But with investments and educating the talent and training the talent, there are really great people in those communities who want to work at those businesses and can drive value. Excellent. Thank you very much, Miss Fields. As you testified, private equity offers far more than just capital. It provides hands-on support uh strategic guidance, expertise in uh in fields that you may not have necessarily um within within your own company.
▶ 0:44:04Um it's a partnership that's between investors and the small businesses with each party I think focusing on achieving success. You all are on the same page. Um how has private equity investments helped you grow your business? you talked a little bit about that, but I'd like to hear you expand further on on areas like operations and workforce expansion um and whether or not you've been able to enter any new markets. Yes. Uh thank you for the question.
▶ 0:44:30Um and as you mentioned, it has been a a true partnership for us, not just uh access to capital. Um, initially when we first were owned by private equity, the um the the main thing that that they helped us do is quickly understand how to create a more efficient operation. So we did not have as much expertise as we needed to to understand what that meant.
▶ 0:44:53So for them to quickly come in and help us understand how to relay out our plant, how to make best use of the equipment that we had, not necessarily putting all new equipment into the facility, but making sure we were using making the best use of that and also how to make sure that we were using a labor that we had efficiently and using the inputs efficiently for us.
▶ 0:45:12And so that was the first thing, making sure that we could be as efficient as possible and allow us to um compete on level playing Uh secondly was about reinvesting back into our people and for us what that meant was making sure that we could make our work environment um more pleasant to work in. Sometimes manufacturing can be a little bit harsh and that means it makes it really hard to to keep and retain uh employees on the manufacturing floor.
▶ 0:45:41And there are some things that we really wanted to do uh before we had a private equity partner to make our work environment um more uh pleasing to work in and we weren't able to. We have since been able to do that and that has been exciting for us. Recently we have expanded by taking market share. We actually uh do an awful lot of business and have expanded our our business about 40% in the state of Texas uh which is a large housing market. We serve the housing market and we are presently uh in a year where we're growing about 15%. So, we're very excited. Great.
▶ 0:46:11I'd love to hear it. Um, I'm going to now recognize uh Miss McGyver uh for five minutes. Thank you so much, Chairwoman. Um, Mrs. Mendoza, small businesses have historically relied on two main sources to secure funding, approaching a bank for a loan or attracting investors. Why might a small business choose to seek investment from a private equity or a venture capital fund over a bank loan? revenue.
▶ 0:46:40I mean, they oftentimes don't meet the revenue requirements or the historical balance that you need in order to be able to get the service and the terms that you'd require from a bank. And so, what we see is that the way that our financial system works, you need on-ramps and off-ramps. So, a lot of the products that we invest in are around getting small businesses and individuals bank ready. So, what can they do to get there? Um, and so venture really fills that gap.
▶ 0:47:07I think one of the beautiful things about this table is you have the entire capital stack sitting here and we're all agreeing. Um, one of the innovative technologies that we're investing in is solving a lot of the manufacturing issues that you have with digital twinning and going all over the country and the world making those communication cycles much faster. Um, their revenue is not at the point that they could go to a bank loan and invest deeply in that technology to be able to get to the revenue that they need to grow.
▶ 0:47:37Thank you. Um, during my opening statement, I talked about African-American and Hispanic female entrepreneurs and how they receive just 0.43% of all venture capital investment in 2020. As a venture capital investor, why do you think it is so hard for these entrepreneurs and small business owners to access equity finance opportunities? I think the beautiful thing about bias is it works two ways, right? Everyone is more likely to hire someone from wherever they're from.
▶ 0:48:07And our capital stack at this moment, especially in the area of venture is really homogeneous. So as you go up into the general partnership of VC firms, there are fewer women, there are few fewer people writing the checks. One of the reasons I started this firm was I was in corporate and I had kids and it was hard. Like I just nothing illegal happened, but my basement, you know, my desk was magically in the basement as soon as I told them I was pregnant.
▶ 0:48:31And so I realized very quickly it was not going to change unless the money was coming from women that we couldn't implement the changes that we needed, unless we had a capital stack that was more reflective of our nation. Um, fast forward a few years, we've done a lot of that. Thank you for that.
▶ 0:48:50uh for these entrepreneurs and small business owners to receive more equity financing opportunities, there obviously needs to be more opportunities to forge important networks with venture partners that are likely to invest with them. What recommendations do you have for how we here in Congress can help expand these Um I had a small business in Boston recently tell me that workforce development and networking was the government's version of let them eat cake.
▶ 0:49:18um it was Boston so he was a little harsh with his words but what I think is we need to consistently partner the capital and the training and the networking at every single step of the capital stack in order to be able to scale these businesses. I think we keep trying to legislate the quick fix or the next thing or the thing that we can get done this year this session. Um but this is a long-term approach solution that we need to implement over time. We've been moving in this direction for 20 years and I think we'll continue moving here.
▶ 0:49:47Thank you for that. U Madam Chair, I yield back. Thank you very much. The chair neck now recognizes Mr. Weed from the great state of Wisconsin for 5 minutes. Thank you, Chairwoman Van Dyene, and thank you to all of our witnesses for testifying here today. Access to capital is essential for entrepreneurs to start or expand their business.
▶ 0:50:06Yesterday, we heard from Administrator Leler, whose testimony spoke to many of the reforms the SBA has taken over the past several months to reform federal lending programs that were effectively torched under the previous administration. She also testified about the deregulation efforts being undertaken to remove the bureaucratic boot that has held down small businesses the past four years, and I applaud her work to reform the SBA and make Main Street America great again.
▶ 0:50:33Private equity represents another important way for small businesses to have the capital they need to thrive. Under the previous administration, we saw 1.2 trillion dollar decline in private equity investments thanks to aggressive over overregulation that led to tens of thousands of fewer private equity investments. Fortunately for entrepreneurs across the country, House Republicans and President Trump are working hard to deregulate and extend vital tax cuts for small businesses.
▶ 0:51:00Uh, Miss Fields, thank you for your courage and being a a leader, small business owner. I give you a lot of credit. Clearly, private equity is uh um they believe in you and your leadership and your character. Uh so, thank you uh for all that you do. Uh Mr. Bastable, how is private equity helping small manufacturers uh remain competitive?
▶ 0:51:20Yeah, it's a great question and you know I think one of the things we consistently see with small manufacturers is the um the lack of access to innovation and new technologies that can help them be competitive with frankly foreign products coming into this country and whether that's digital marketing or that's leveraging new tools with AI or upgrading their ERP system or automated manufacturing equipment those are things that cost a lot of money and you know at times there are it's too much money for those companies to
▶ 0:51:50invest in and so we can come in and really help work with the teams to implement those solutions. Clearly a great benefit. Uh Miss Mendoza, when awarding loans to immigrants, do your companies use E-Verify or other federal database to ensure the recipients of your company's loans are in the United States here So we don't do equity, we don't do loans, we do equity investments. Um and our anchor bank is Bank of America.
▶ 0:52:17And so the bank holding act language is in our LPA and so we are only investing in fund three out of companies doiciled in the United States. Um in fund two we we invested internationally but it was a seedstage fund. Um and all of our founders go through a typical due diligence process like you do when you're hiring someone background checks all those things.
▶ 0:52:40So in the testimony you provided you mentioned the system you know working against certain groups of people include including those that didn't graduate from an Ivy League school or you know who do not live in the east or or the west coast. So what what is the demographic breakdown of the business owners who have applied for uh applied with you with Mendoza Ventures? Not those that have been approved for investment but those that have applied. Like I said our portfolio looks like the nation.
▶ 0:53:08So, we have a I think unquestionably we have a more diverse applicant pool because I'm a female general partner out there doing this work and like attracts like. Um, but the ones that are getting through investment committee out of 15 companies, we have two female founders. We have a Korean-American founder. We have Latino founders. We have it's we're we're lining up pretty well the demographics of the United States. Okay.
▶ 0:53:32So a statistic on your website which you founded and our general partner at says 90% of your loans go to startups led by immigrants, people of color and women. So if 90% of your loans go to startups led by immigrants, people of color and women despite only accounting well we don't know what the overall uh applicants are. Would it be fair to say that you give a preference to people based on on those factors?
▶ 0:53:56No, I think it's fair to say that we give a preference to talent in a country where 51% of the population is female, 20% of the population is Latino, and I'll have to double check my statistic, but I think it was 32% is black. Um, and if if if you are equitably distributing capital on a fair shake basis, that's what it should look like. I would like to ask the same question of the firms that have deployed to 99% white men at the same time.
▶ 0:54:22I think if you're deploying to any population and you're giving talent a chance, your deployment should look like the population that you're deploying to. We also have white male founders with great teams. All right. Well, thank you and I yield back. Thank you. I now recognize Mr. McGarvey from Kentucky for 5 minutes. Thank you, Madam Chairwoman. It's no question that private equity has sort of changed the landscape for small businesses.
▶ 0:54:47Over the last decade, the United States capital markets as a whole have enjoyed enormous growth. But a disproportionate share of that is going into the private markets rather than the traditional public equity markets. So I will just say I am not reflexively anti-private equity.
▶ 0:55:05I I understand there's a legitimate role for private equity firms and often providing capital to small businesses, but I do share the concerns of my colleagues about some of the private industry, private equities consolidation in healthcare and some of the ind industry's tactics in doing so. Um, Miss Mendoza, private equity firms have drawn criticism over the years for exactly some of those tactics. Uh, you know what they are.
▶ 0:55:31layoffs, selling off assets for quick cash, loading up a business with tons of debt, selling it off, and you know, and all the list goes on and on. And while these strategies can maximize returns for a private equity funds investors, they often leave businesses, communities, workers worse off.
▶ 0:55:51So considering these well publicized issues that we have all seen, what are the potential drawbacks for small businesses who choose to partner with private equity or private credit rather than going to traditional lending markets? And then what are the A lot of the times business are going there because traditional lending markets won't serve them. So it's just like your personal finance. When you have money and you don't need money, that's when the bank is willing to give it to you.
▶ 0:56:18And so, um, as you move down that spectrum, the terms are going to get more predatory. It is business. I think that part of the issue is also that the capital often is not coming from the communities. And so, part of the reason that we're so passionate about representation across our entire capital stack is that when the capital comes from the community, you have some checks and balances in place. You know, in New England, we fish a lot and we always say that you need local knowledge in order to be able to get anything.
▶ 0:56:47And I think a lot of those problems are endemic of a disconnect in priorities between the community and the private equity firm that's ob usually somewhere else coming in with very different goals. We need to pivot that to being building rather than extractive. Does seeking private capital through the uh negate some of those problems that could happen for a small business? Yes, I think it does because it puts a standard term out there for companies that need it.
▶ 0:57:16And so it creates essentially a competition in the marketplace where you have a more fair product for the business owner. Thank you for that. Um and Mr. Bassel, I want to talk to you. I'm from Louisville, Kentucky. So we are both from the middle of the country. In fact, I went to the University of Missouri and married to Jeff City girl. Um so have a connection with Missouri. Certainly, you know where we're from and we know that most of the private equity, investment, and job growth takes place on the coasts and in big cities around the country.
▶ 0:57:46Last Congress, the House passed the Investing in All of America Act to give SBIC's bonus leverage to invest in rural and underserved small businesses. Uh, how else can Congress increase investment in under capitalized businesses in places like my hometown of Louisville or or in St. Louis, Missouri, where you have an office. Is there a greater role for SBIC's in that?
▶ 0:58:09It's a great question and and the SBIC program is a phenomenal program and it's amazing how much capital flows into these rural communities because of that program. And I think the the bill, the investing in all America act and increasing the leverage limit will continue to drive more capital into these rural communities in the middle of America where frankly it's a lot of manufacturing industrial jobs where they make products.
▶ 0:58:33And when you talk about increasing that limit, is that something you would peg to a number or would you would you peg it so it it continues to move? I think I'm a simple person. I think picking a number and then maybe moving it in the future would be the easiest path forward. Thank you very much. Appreciate that. And Madam Chair, why don't I yield back? Thank you. I now recognize Chairman Williams from Texas for 5 minutes. Thank you, Madam Chair, and Mr. Bastable. Again, thanks for being here.
▶ 0:58:58Uh, the Trump administration has made it clear that revitalizing American manufacturing is key to strengthening our economy and creating jobs. SBA administrator Leler has mirrored those efforts with her made in America initiative, which rolls back burdens and regulations and supports progrowth policies. Therefore, many private equity firms are are are channeling critical investments into small manufacturers across the country.
▶ 0:59:20So, how is your firm helping small and midsize manufacturers modernize their operations and expand manufacturing production to remain competitive in today's economy? It's a great question and um I mentioned in my opening statement uh one particular investment we have in Graham Texas which you may be familiar with and u they refurbished shipping containers and turn them into ground level offices and one of the things we did was we invested in you know tuition reimbursement for all those employees. We invested in digital marketing.
▶ 0:59:50We invested in new manufacturing techniques to help them be competitive in the market. And as you know, Graham is not a huge city. Um, and so it's really important that you create the education that's required for these, you know, companies to retain really great talent and to bring them into the community. Well, that's great. And so, what more can be done, do you think, to make it easier for private uh equity investments to identify and invest in small manufacturers?
▶ 1:00:16Yeah, I think uh the bill that's been proposed uh the investing in all of America act um and increasing the leverage for the SBIC program is is one great way to continue to bring capital uh to uh manufacturing businesses. Okay, great. Thanks. Graham's home of the steers now. Remember that. Miss Fields, small businesses often face significant challenges that can limit their growth potential and your company's success shows how private equity investment can make a real difference in overcoming these obstacles.
▶ 1:00:44And this also provides significant returns to both the investors and the entrepreneurs. So Miss Fields, can you share how beneficial it has been to identify potential investment opportunities outside the traditional investment hubs such as Silicon Valley? Uh yes, it's a great question and and I think that you know we are we are about as far from Silicon Valley as it gets. Uh we are in the middle of Oklahoma and we are producing real product for everyday Americans.
▶ 1:01:14Everyday Americans need in their homes. And so as a small as a small business owner um we have to grow. If we don't grow, we're not going to survive. And so for us to have um private investment that allows us to make the investment in the things that we need to make at the pace that we need to make them to stay relevant in our market has been critical to us. uh without that we would not have been able to do the things that we've done.
▶ 1:01:39We would be having to be picked between can I hire a single person or can I invest in a piece of equipment but I may not be able to do both. What this allows us to do is to make the relevant investments that we need to make to stay relevant to our market and to do them in a way that allows us to accelerate. Also helps with a great uh idea we had in America called risk and reward. Right? You can take advantage of that. Madam Chair, I yield my time back. Thank you. Thank you very much. I now recognize Dr. Conway from New Jersey for 5 minutes.
▶ 1:02:08Uh thank you uh madame chair. Uh related um the issues that small businesses face are not monolithic but rather they are unique to each business which is why there is an inherent need to ensure that there is more diversity among regional managers. Increased diversity ulti ultimately helps broaden the scope for small businesses that can be impacted by private and public uh investment.
▶ 1:02:34Miss Mendoza, I I for asking my question, I can't help but um recognize and and put a point on your own personal experience with being moved to the basement, as you say, with because of a pregnancy. And um uh well, you said it wasn't illegal, certainly was wrong. And it's the kind of thing, unfortunately, that women and people of color face. And I think sadly and even more unfortunately, there are a lot of people who seem very um satisfied with that state of affairs.
▶ 1:03:03Um, Miss Mendoza, statistics show that hiring more women and multicultural investment managers at uh a fund is one of the most successful strategies for increasing investments for underserved entrepreneurs and small business owners. Uh, how can we help promote more diversity at investment funds and help our diverse small business owners? So, I think it's important to divide the conversation to I want to be clear, we don't have a race-based investment thesis.
▶ 1:03:30We are an Americanmade company investing in America with a portfolio that looks like America. Right? When you do that, you end up with diverse perspectives at the table. Just as it's important to have the diverse perspectives that are in this room, I'll use the Silicon Valley example of two guys from similar backgrounds, go to school together, get funded, and think they're going to crush it. And then the market lets them know that that is not the plan for them.
▶ 1:03:57And so usually what we see is that in a founding team, if the founders are able to bring in diverse perspectives sooner, the business has a faster path to success because they're able to get out of their own heads in a way that's very quantifiable and meet the product and the market where they meet. Moving on to um another issue in this area which I find very concerning.
▶ 1:04:26uh community def development financial institutions in tandem with new market tax credits have made an massive impact in my home state of New Jersey. Uh there have been u a billion and a half um new market tax credit investments in New Jersey and um approaching 700 million dollars worth of uh community development uh financing loans.
▶ 1:04:51Uh these are critical programs that serve as a lifeline for small businesses and historically underserved communities by providing credit, capital, and other critical financing services available. Earlier this year, President Trump issued an executive order that aims to cretail the non-stutory work of the CDFI fund. And last week, the administration issued their initial uh FY26 budget proposal that guts the program and turns it into a discretionary grant program. U be very interesting to see who will be able to walk in the door and get those grants.
▶ 1:05:20Uh the CDFI venture funds provides equity uh and debt to under capitalized businesses around the country and made more than 55 million in investments in small businesses in 2023. Additionally, CDFI venture funds provide equity and debt and equity uh features to under capitalized businesses around the country and made more than 55 million in investments in small business.
▶ 1:05:43As I mentioned, if you were going to broaden equity investments and are under capitalized small businesses, isn't um this um administration's uh guiding of these important programs exactly what we ought not be doing. I do agree with that. Back. Thank you very much. And I rec No. Oh, I don't. Sorry. I want her to answer the question. I You're back. Okay. I was You're staring at me. I'm like, okay. I was going to stop talking and let her speak of the system. I'm always messing.
▶ 1:06:12You want you want to go ahead and answer this? Yeah, I was just going to say I think Detroit's a great example of what a CDFI can do for a for a city. Um, you know, since the 80s and 90s, they've been bringing Detroit back with very similar investments. Um, and I think honestly the only failing I can think of with CDFIs is that we didn't put enough in the needs greater than the capital. And I can't name a local small business owner that knows their local CDFI off the top of their head is that we need a PR campaign for them. Right. And thank you. And now yo back. Thank you madam.
▶ 1:06:42Excellent. Thank you. I now recognize Mr. Limer from New York for 5 minutes. Thank you very much madam chairman. Uh there seems to be some misconception that by presence on the east coast perhaps it's true in the west coast as well that automatically uh funding will follow and my experience in my area is that there the same challenges exist market by market depending on the business and depending on uh the location of it within that uh district or that market.
▶ 1:07:08So, I'd like to ask each of you one question, and I'll start with Miss Mendoza, but I'd like each of you to to address it. What do you see as the things that the SBA can do proactively to better promote the programs that would help these communities to make that connection as a government agency? What tools would help us better get that message out and reach the people that can best be benefited by these programs? Miss Mendoza, and then uh the other folks on the panel, I'd appreciate that.
▶ 1:07:37I think we're a great example of this. We are um a successful venture capital firm built from scratch and we haven't gotten a single grant from every anyone because I don't have time to read the website and figure it out and apply for it when I can be potentially closing an investor. And so the one tool that you can do is meet the market where it is and lower barriers at every possible entry so that these small business owners who are already taxed for time and resources, it's very clear to them what's available to them um and how they apply for it.
▶ 1:08:12Uh yes, thank you for for that question. Um, I think for us as a small business owner, um, we often don't have time or are unaware of what opportunities are even out there for us. We're simply too busy just trying to run the day-to-day o of the business.
▶ 1:08:27Um I think uh for me being locally in Oklahoma um I sit on the board of the Oklahoma Manufacturing Alliance which is an MEP and they have been instrumental in helping us understand what is even out there to support us um for a small business. Um for them to come into our business and understand what happens for us on the local level, what we need on a local level and what is available to us has been instrumental in us being able to take advantage of these types of things.
▶ 1:08:56I think the first is to educate and make sure uh people understand what programs are available. But I think the the biggest impact would be simplification. I think we've taken something that should be relatively simple. We've made it very complex. We've made it arduous, time consuming, and I think a lot of people just drop out of the process because of the complexity associated with it. Thank you very much for your answers, Madam Chair. I uh return the time. Thank you.
▶ 1:09:25I now recognize Mr. Goodlander from New Hampshire for 5 minutes. Thank you, Madam Chair, and thank you to our witnesses for being here today and for your testimony. I I appreciate the positive examples that have been lifted up today. I came to Congress having served in the antitrust division at the Department of Justice.
▶ 1:09:43So I gave a great deal of time uh to really try and understand how private equity and venture capital firms are operating in really important industries across our economy, increasingly consolidated industries across our economy. I spent a lot of time thinking about our our housing markets and our and our healthcare industry.
▶ 1:10:02And you know, as as I've been on the job now for about 150 days, and as I've traveled around my state in New Hampshire, uh the concerns that I was looking at at the Justice Department, I'm seeing them play out in practice on the ground. Um the role that private equity firms have played in the nursing home industry, um in rolling up mental health care providers across the country.
▶ 1:10:28Um the concerns are real and I wanted to at the outset enter two articles into the record today. One is a is an oped written by one of my constituents from Nashville New Hampshire uh Melbourne Moran. He writes about the critical role of small businesses in mental health care. And um his small business Wanderlust Therapeutic Services plays a a really important role in my hometown Nasha in ensuring mental health care access.
▶ 1:10:57He he says that local health practices like his aren't branches of large corporations. They are local mom and pop counseling shops owned and operated by licensed clinicians who live and work right alongside their clients. These professionals aren't answering to shareholders or national franchise boards. They're not corporate entities. They're answering to the needs of their neighbors. And I I think he's absolutely right. I also wanted to enter into the record a a a piece from one of my former colleagues at the Justice Department, Brendan Belaloo.
▶ 1:11:26Um he points to it's a New York Times piece entitled Private Equity is gutting America and getting away with it. He points out at the outset that according to the nonpartisan National Bureau of Economic Research, private equity ownership just in the nursing home industry alone is responsible for 20,000 premature deaths over a 12-year period.
▶ 1:11:47So, I wanted to enter these articles into the record and and ask um beginning with you, Miss Mendoza, if you could comment on what you've observed in the role that private equity and venture capital firms have played in industries including in our healthcare industry and our housing industry and do you see any problems? In my opening remarks, I quoted Eric Grees from Lean Startup and his entire concept is that you need a feedback loop. You need to release a product into market, talk to the market and come back.
▶ 1:12:15I see the same problem in private equity that I see with us rolling out programs recently is that that feedback loop is broken and we're not listening to the customers that are consum that are consuming it and coming back to them. So I think anytime that you blitzcale an industry without a feedback loop and we have a history of that in the United States you end up with these issues. Um but I do want to be careful that not all private equity firms are created equal.
▶ 1:12:42I also use the example of you know we have 55 million under management A16Z's in the billions and so so I think it's a different you when you're legislating this entire industry it's a lot like trying to legislate agriculture you know there are small organic farmers there are also huge food factories and you can't put them all in the same bucket I understand that I I a follow-up question is as a general matter as a general principle do you do you agree that firm firms should
▶ 1:13:12be sued and be held accountable should be able to be sued and held accountable for any wrongs that are committed by companies in their ownership and control. So if the private equity firm has a controlling interest in that company, they would be voting board members and they should be held accountable in that role for that. Would our other witnesses like to comment on that question or No, but are you referring to the first question you asked about consolidation?
▶ 1:13:39No, I'm asking, do you think as a as as a general principle that firms should be able to be held accountable, should be suable for wrongs committed by companies that they effectively control? I mean, I think it's a nuance question depending on what it's actually happening and and as as you mentioned, you know, there are different situations and differentiz businesses um and different parts of the capital stack where private equity is involved where they may be a lender and they may have board observation rights or they
▶ 1:14:09might be a minority investor and so um it's it's a broad, you know, topic. Sure. I think though that the this cornerstone principle of accountability is part of what we need in this country to restore faith in private equity firms across our country when so many communities have felt the pain um of an unaccountable entity gobbling up some of the most important institutions in the life of our community. So I thank you and I yield back. Thank you very much.
▶ 1:14:38I now recognize Mr. Bahan from Pennsylvania for 5 minutes. Thank you, Madam Chair, for convening this important hearing and thank you to our witnesses for being here today. I've always been a strong advocate for expanding opportunities for our entrepreneurs and small businesses to start, grow, and thrive. For some, the right path may be working with the local community bank, securing an SBA loan, or receiving a government grant.
▶ 1:15:02For others, private equity can serve as a powerful engine fueling innovation, expansion, and ultimately a chance to achieve the American dream. When done right, these partnerships can help small businesses grow in ways that benefit all of us, creating good, high-paying, and meaningful jobs for hardworking Americans. Miss Fields, your work in the manufacturing sector, especially relevant to Pennsylvania's 8th congressional district, where manufacturing plays a vital role to our local economy.
▶ 1:15:28I want to revisit a particularly compelling part of your testimony that deserves to be underscored in this conversation. Uh you shared that thanks to your partnership with private equity, your company is now in a position to onshore more of its manufacturing operations and plans to grow your workforce by over 30% in the next 18 months. That kind of investment in American jobs and communities is exactly the type of success stories we should be recognizing and supporting here in Congress. Uh with that, Miss Fields, I'll turn to you for my first question.
▶ 1:15:58Um you mentioned onshoring your manufacturing operations. Could you expand on why there's such a priority for your business and what specific challenges you're encountering in doing Yes. Uh we always want to be uh an American manufacturer first and the only reason that we do not manufacture something is America is simply because we cannot compete with what it costs us to produce it here versus what it would cost us to produce it overseas. And so uh so we do presently um manufacture some products overseas.
▶ 1:16:29uh by having um private equity come alongside us and the things I had previously mentioned about allowing us to figure out how to get cost out of our operation become far more efficient and to understand how to better run a more efficient facility. It allows us to look at products that were previously unattainable to us to do for domestic manufacturing and so now we can bring those back.
▶ 1:16:52Obviously, the um the uh potential tariffs out there also allow us to continue allow us to look at that even harder for us today. And so we can now confidently make those investments that we need to make to to expand our product line and bring those products back knowing that we can produce them here in a competitive way that allows us to compete with other larger companies. What challenges are you experiencing on the workforce development side?
▶ 1:17:19um a biggest challenge is um access to workforce. So a question for us is being able to bring people into uh do manufacturing. It's sometimes hard to find workforce for for manufacturing. Uh so we partner with local um trade schools to get those people. Um and the and the additional thing also is um getting people to stay once they join us. We get them trained and getting them to stay.
▶ 1:17:48So for us to be competitive in terms of p um pay and benefits and a pleasant work environment. Well, I I appreciate that. Now, regarding the the the partnership with private equity, did you look for similarities, similar overlapping business practices or what was the if you can point to the single most beneficial part of the relationship and partnership, what would that have Um I think for us obviously uh capital is part of it but for us it is uh having expertise brought
▶ 1:18:18into our business. So our private equity firm as I mentioned is actually Mr. Bestwell's um firm that we are partnered with and they focus on manufacturing and lower middle market which is exactly in the pocket for us and so they have people on their team that have expertise that we simply did not have access to or could not afford to have access to. So the partnership and the relationship and the expertise and the support that they bring is critical to us. I appreciate that. Uh Mr. Barcible, I'll I'll pivot to you.
▶ 1:18:47Right now we're looking at relatively high interest rates around 7% which makes it difficult for businesses to justify new investments. In that context, can you elaborate on how private capital can serve as a critical tool to help businesses invest, scale, and create jobs in the United States? Yeah, it's a great question. And so as interest rates increase, it becomes more costly for them to take on debt to invest in equipment and so on so forth. And you know, when you have a private equity partner who has access to capital or equity, they can invest in those opportunities.
▶ 1:19:18And so they don't have to make interest payments every time they make an investment into their business. Do you traditionally charge like a management expense back to the company that you're partnered with? Um, minimal. Okay. With that, I I yield back. Thanks. Thank you very much. Seeing no other um questions, I want to thank our witnesses for their testimony today and for uh appearing before us.
▶ 1:19:43Uh without objection, members have five legislative days to submit additional materials and written requests for the witnesses to and to the chair which will be forwarded to the witnesses and I ask the witnesses to please respond promptly. There's no further business. Without objection, the committee is adjourned.