Todd Young Asks Witness How To Use Investment Tools To Expand Entrepreneurs’ Access To Capital

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During Wednesday’s Senate Small Business & Entrepreneurship Committee hearing, Sen. Todd Young (R-IN) questioned John Mickelson, a Managing Partner at Midwest Growth Partners, about expanding access to capital for U.S. entrepreneurs.

Transcript

00:00Well, thank you, Senator Shaheen. I will pick up with Mr. Riley, giving him the Hoosier privilege.

00:11A Hoosier by choice, by way of Sacramento and his company, Guardian Bikes, located in Seymour, Indiana.

00:19I think it's a prime example of how a small business can grow into a successful and thriving American company

00:27and even help reshore an industry. Doesn't happen in every case, but we should celebrate it and the jobs you create

00:36and the opportunities associated with all of that when it does.

00:41So your insights, Mr. Riley, into how the policies that we put in place here in Washington, D.C.,

00:48which can be detached and removed from the daily cadences and concerns of regular people sometimes,

00:54they would be invaluable to our whole process, and so I appreciate all of your comments this morning.

01:01Whether it's developing skilled workers through apprenticeships or connecting start-ups to research institutions and capital,

01:09public-private partnerships are already proving what's possible when sectors work together.

01:16Too many small businesses, especially in rural communities, lack access to the same networks or infrastructure,

01:23or talent pipelines that they need to compete and grow.

01:28Mr. Riley, how have public-private partnerships, if at all, helped support or scale your small business operations?

01:38And you can expand on that if you would like. In your experience, what do you see as the most effective roles

01:46for the government and the private sector in making these partnerships work?

01:53Thank you, Senator Young. I'm proud to be a new Hoosier of a couple years.

01:59So, in Guardian-Dweig's case, when we were first starting, we did utilize a SBA 7A loan.

02:07And that was instrumental in getting the company off the ground, getting some working capital in.

02:13But in our case, when we really started looking into starting a factory,

02:18it was clear that we needed several million dollars to get this thing started,

02:22both because of some of the equipment that we needed,

02:25but also because we were starting something that no bike company had done in the United States in many decades.

02:31And we knew that there'd be at least, say, 12 to 18 months of time when we had to kind of go into money-losing mode

02:37to learn how to run a factory, to get the thing up and running.

02:41And so, we relied on a SBA 7A loan, but also some private equity, not private equity,

02:48but I should say individuals investing some money for equity in the business.

02:55That was instrumental, but it was also challenging.

02:58That was me going around, pitching a lot of different individuals, getting them to believe in the vision,

03:03taking 50 to $100,000 checks left and right to try to pile together a few million dollars

03:09in order for us to really kind of execute on this vision of starting a factory in the USA.

03:14So, I think to the extent that, you know, what we've done is challenging,

03:20and in a lot of industries it is challenging to actually reshore production and reshore a supply chain,

03:25and it does take capital.

03:26So, I think to the extent that, you know, the government can make flows of capital easier

03:32for companies that are looking to reshore production and build production in the United States, that's helpful.

03:37So, I'm just going to stop there, and though we're both from Indiana, we didn't choreograph this,

03:42because that's a great lead-in to Mr. Mickelson.

03:47And my questions for you, sir, you mentioned in your testimony the importance of programs like the Rural Business Investment Company,

03:55RBIC, and the Small Business Investment Company, SBIC, to help create jobs and drive economic growth in the Midwest,

04:04which I especially care about.

04:06So, how can we use our federal investment tools more effectively, in your informed estimation,

04:12to expand access to capital for rural entrepreneurs, and ensure that small businesses in underserved areas can grow and compete?

04:22Yeah, thank you, Senator, for the question. I'll stay on the theme here and stick with Indiana.

04:27We actually had an investment in Franklin, Indiana, which you might be familiar with.

04:30It's not a large metropolitan area, but there were two great entrepreneurs there that...

04:34I live, like, a few miles away.

04:36Okay, perfect.

04:38He really didn't choreograph this, but thank you.

04:42Yeah.

04:43Yeah.

04:44I know.

04:45Sometimes it happens.

04:47Yeah.

04:48All right.

04:49Please.

04:50Yeah, so, two great entrepreneurs there.

04:52They were young.

04:53They were, obviously, risk-takers.

04:55They started a business, but they had not had the resources to scale the business or professionalize the business.

05:01So, when we invested with them, we brought in systems.

05:04We brought in people.

05:05They originally had one location.

05:07By the time we exited the investment, they had 13 locations.

05:10They had a full C-suite of teams.

05:12And so, that would not have been, you know, possible without programs like the RBIC and SBIC.

05:18And so, two ways that you could help that.

05:20I mentioned the Investing in All of America Acts.

05:23Passing that would help create more opportunities for situations like this.

05:27And then on the RBIC side, the RBIC program does not have leverage like the SBIC program has.

05:32And so, that's one thing that we've been working with the USDA with for a long time to try to get that put into place.

05:37Thanks so much.

05:39Unless there are any other Indiana stories.

05:42So, Senator.

05:43Senator.

05:44Senator.

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