Joni Ernst Presses Witness On Barriers Hindering Small Business Growth And Development In The U.S.

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During Wednesday’s Senate Small Business & Entrepreneurship Committee hearing, Sen. Joni Ernst (R-IA) questioned John Mickelson, a Managing Partner at Midwest Growth Partners, about small business growth in the United States.

Transcript

00:00No, thank you, Senator Hickenlooper.

00:03Okay, I will go ahead and recognize myself now for five minutes, and we'll start with

00:09you, Mr. Michelson.

00:11Your investments highlight the next generation technologies that are coming out of our farms,

00:17that are creating new jobs across America and helping our nation remain competitive

00:22globally.

00:23From your experience investing in dozens of small businesses in Iowa and across the heartland,

00:29what are their greatest barriers to growth and building here in the United States?

00:35Yeah, thank you, Senator.

00:37So certainly access to capital, as we've talked about today.

00:40So when you look at a business that's scaling, they're trying to add new people, more talented

00:47people, more educated people, and that comes at a cost.

00:53You think about technology investments and things like ERP systems, computer systems, efficiency

00:58in your manufacturing process, trying to automate as much as you can.

01:02All of that costs money.

01:03And that's a big part of just the professionalization process that you try to do in each one of our

01:08investments.

01:09And so each investment that we look at, they're successful, they've done a great job, but we're

01:12trying to take them to the next level and help them grow.

01:15And so that takes expertise, and that's largely human capital driven.

01:19And it takes capital to build out property, plant, and equipment, and invest in that technology.

01:25And Mr. Riley, as well, again, just reiterating what Senator Hickenlooper said, you've been

01:31recognized nationally for your efforts to reshore production of bicycles, an industry that had

01:37been dominated by China for decades.

01:41And thank you for doing that.

01:43I commend you for all that Guardian Bikes is doing to build higher quality bikes for children

01:49and something that is possible because of your ability to source from domestic suppliers.

01:55So you've been able to raise a significant amount of private capital to support your vision.

02:02Based on your experience, what added value and benefits do investors seem to find with

02:08made in America products?

02:13That's a great question.

02:16The way that we really went about it was to say, look, the world is changing around us.

02:22Supply chains aren't as secure as we thought they were.

02:24COVID was a perfect example of that.

02:27So to start with, building product onshore just gives you a lot more supply chain resiliency.

02:33Over and above that, it really kind of can change a business.

02:37So when you're purely relying on imports, the lead times are long.

02:41You've got to ship them all the way here.

02:43And so you have to deal with a lot more inventory.

02:45You have to plan your business just right to figure out what are we going to sell?

02:49What do we need to buy?

02:50Sometimes many months ahead of time.

02:53When you're onshore and you can produce in your own factory, you can take that demand signal.

02:58For example, when the Barbie movie came out, we started selling a lot more pink bikes.

03:02I don't know how we could have predicted that, but when you sell a lot more pink bikes and

03:07you're able to just paint more bikes pink the next day, you can just start making more pink bikes and

03:13react to that kind of demand signal.

03:14So that's a perfect example of there's all kinds of real advantages that come from on-shoring

03:19manufacturing that I think so many businesses that have relied on imports for a long time,

03:24they don't necessarily think that way because they're not in the weeds of manufacturing.

03:29But we found that there really are true business advantages over and above, you know,

03:34any cost advantage or anything like that.

03:35And just running the business, being able to react to demand, being able to have a resilient

03:40supply chain and deliver safe quality products to lots and lots of consumers.

03:45And we find that those consumers, you know, reward us for making that decision.

03:49And they want to do business with a company like us that's trying to do it here.

03:52Yeah, thank you very much.

03:54And Mr. Geis, thanks for sharing your experience both as an SBIC investor and as a leader in the SBIC industry.

04:04As you stated in your written testimony, 20 percent of SBIC investments fund American manufacturing companies.

04:12How can Congress further target the SBIC program to investments that are critical to our nation's economic

04:19and national security while maintaining a zero subsidy program?

04:25Yeah, so I would say start by supporting the SBIC critical technology initiative.

04:31And again.

04:34Thank you for the question.

04:36No, I would say by supporting the SBIC critical technology initiative.

04:42So for those who don't know, it's a partnership between the Small Business Administration

04:48and the Department of Defense to license SBICs that will invest 60,

04:53at least 60 percent of their investments in small businesses

04:56in sectors that are deemed critical to our national security.

05:01Okay, fantastic.

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