By Sramana Mitra and guest authors Irina Patterson and Candice Arnold
This is the twenty-first interview in our series on financing for entrepreneurs. Irina is talking to Sean Greene, associate administrator for investment and special advisor for innovation at the U.S. Small Business Administration. The SBA was created in 1953 as an independent agency of the federal government to assist and protect the interests of small businesses.
Irina: Hi, Sean. Let’s start with your background.
Sean: I am new to the federal government and to the administration, but my background is as an entrepreneur and a seed-stage investor. I’ve started multiple companies in the online and technology spaces, and I’ve invested in several dozen others. I come to the Small Business Administration as someone who has started and run small businesses and worked with dozens of others.
Irina: Tell us, what is your role at the SBA?
Sean: I focus on helping high-growth entrepreneurship and helping those entrepreneurs grow their businesses and create jobs. I think, first and foremost, I see an opportunity to increase the awareness of the importance of high-growth entrepreneurship in the economy and job creation.
You’ve probably seen the data. Small businesses create two-thirds of the new jobs created in the economy in any given year. That’s disproportionately concentrated in the smaller number of high-growth firms. So, concretely, I’m looking at policies and programs to help those entrepreneurs grow their businesses and create jobs.
Irina: What are your responsibilities? What do you do day to day?
Sean: It may be helpful to give you a little context for what SBA does in general and then what I do in particular. SBA’s core mission is to help small businesses in three primary areas. First, get access to capital; second, entrepreneurial development; and third, get access to government contracts and access to the government as a very large customer. That’s what SBA has done from day one.
In addition to looking at it that way, though, you can look at different sectors of the economy. What SBA is primarily known for is serving what our administrator calls the “Main Street” part of the economy: the restaurant, the dry cleaner, the car repair shop.
That’s a big part of the economy. Fifty percent of all jobs are there. But again, there’s another part of the economy, which is the high-growth sector. When you’re looking at new job creation, it’s those high-growth companies that are incredibly important.
My responsibility is looking across those three problematic areas of access to capital, access to government, and contracting and entrepreneurial development and asking, “How can we tailor a program to serve the high-growth entrepreneurs?” That includes a couple of large existing programs as well as looking at what new programs should be done.
Irina: Could you tell us more about the existing programs for high-growth entrepreneurs?
Sean: Sure. One is the Small Business Investment Company Program, which is effectively a fund of funds, providing growth capital to businesses across the country. We’ve got over three hundred funds in the program.
The way it works is the government should never be making investment decisions about what companies should be funded, so the idea is to attract high-quality investment professionals to the program. They raise private capital on their own, and then our program puts a match on top of it. So, it’s a very market-driven means of getting additional capital out there for small businesses.
Irina: What kind of funds are part of the program?
Sean: For the most part, it’s later stage. It seems like your folks are more on early stage. These are really more growth capital funds and mezzanine funds, so a little bit later stage.
There have been, historically, some early-stage ventures as well but for the most part, right now, it’s later stage. That being said, through the course of its history, this program has funded over 100,000 companies. Companies such as FedEx, AOL, and Intel have been funded out of the funds in the program. SBIC is one good program.
The second program is the Small Business Innovation Research Program, the SBIR program. The SBIR program is set aside out of federal R&D money that goes to extramural – third party – R&D places, such as universities and so forth.
In the 1980s, this program was created to say, “Let’s reserve a small percentage of those federal R&D dollars to go to small businesses because when we’re looking for innovation, when we’re looking for commercialization of technology, it’s small, hungry entrepreneurs who have a good probability of commercializing.” This program today works with elven different agencies.