Obama To Create Loopholes for Venture Capitalists

Press Release

Obama To Create Loopholes for Venture Capitalists

December 23, 2008

Petaluma, Calif. - President-elect Barack Obama is preparing to create significant changes in federal contracting law that will allow some of the nation's wealthiest investors to receive federal contracts earmarked for small businesses. Under the banner of "increasing access to capital" for small businesses, the policies will allow firms controlled by individual venture capitalist and even large venture capital firms to participate in federal small business contracting programs.

The Obama Administration's new pro-venture capital policy could virtually repeal the Small Business Act for legitimate American small businesses by modifying the longstanding federal definition of a small business as "independently owned."

Under the proposed Obama Administration policy, "independently owned" will be changed to include firms that are not independently owned, but are actually controlled by wealthy investors and possibly some of the nation's largest venture capital firms.

Opponents of the new policy say it appears to be designed more to increase wealthy venture capitalist access to billions of dollars in federal small business contracts as opposed to "increasing access to capital" for legitimate small businesses.

If the policy is successfully implemented it could force the average American small business to compete head-to-head with firms controlled by wealthy investors for even the smallest government orders for goods and services. Thousands of middle class jobs could be lost as billions of dollars in federal small business contracts are diverted to a small number of venture capitalist controlled firms.

The plan will likely include a provision that would exempt the venture capitalist owned firms from capital gains taxes. The Obama-Biden Transition Team website, www.change.gov mentions such a proposal.

The appointment of multi-millionaire venture capitalist Karen Mills to head the Small Business Administration (SBA) is the latest indication that President-elect Obama is moving forward with his plans to divert government small business contracts to venture capital controlled firms.

The National Venture Capital Association (NVCA) and its members have been lobbying for the new loophole in federal contracting law for more than two years. The NVCA and its members have contributed millions of dollars to Obama and key Democratic leaders in Congress such as Nancy Pelosi, John Kerry, Joe Lieberman and Hillary Clinton. (http://www.maplight.org/map/us/interest/F2500) 

"The easiest and quickest way to stimulate our nation's failing economy is for the government to spend infrastructure funds with America's 27 million small businesses that create all the new jobs and employ most Americans," American Small Business League President Lloyd Chapman said. "This new Obama policy will do just the opposite and will push our economy closer to a depression by diverting billions of dollars in federal funds away from middle class America and into the hands of small number of wealthy investors that backed Obama."


Obama Picks VC to Lead SBA


Obama Picks VC to Lead SBA

By WebCPA staff
December 22, 2008

President-elect Barack Obama has named venture capitalist Karen Mills to lead the Small Business Administration, drawing fire from one small business group.

Mills, founding partner of the equity firm Solera Capital, has advised Maine Governor John Baldacci about economic issues and is president of the MMP Group, another private equity firm in Brunswick, Maine. Obama has advocated for more assistance to start-up technology companies, particularly in the renewable energy area.

"President-elect Obama's decision to name an SBA administrator so early in the transition is a good sign for small businesses," said House Small Business Committee Chairwoman Nydia M. Velázquez, D-N.Y., in a statement. "This appointment shows that his economic team recognizes the key role that small firms play in job creation and the need to take quick steps to revitalize the agency's role in spurring growth. Through budgets cuts and mismanagement during the last eight years, the SBA has become nothing more than a shell of the agency it used to be. Reversing this course is essential, and I look forward to working with the new administrator to accomplish this during the next four years."

However, the leader of an advocacy group for small businesses objected to the selection of a venture capitalist to run the agency.

"It has sent the signal that Barack Obama is going to try to sell America's small business programs to the venture capitalists," said American Small Business League president Lloyd Chapman. "What Obama is going to do is to create a loophole that will allow venture capitalists to participate in small-business contracting programs. He has completely sold out small business America."

Chapman noted that the National Venture Capital Association has been a heavy campaign contributor to Obama and other congressional leaders, and he took exception to Mills's background. "This woman has never done anything for small businesses in her life," said Chapman. "Ninety-nine percent of small businesses in America don't have anything to do with venture capitalists. What Obama is attempting to do is change the definition of a small business to include the nation's wealthiest investors. It's very disappointing."

Source:  http://www.webcpa.com

Obama Accused Of Turning Back on Small Businesses

Press Release

Obama Accused Of Turning Back on Small Businesses

By Marc Tracy
BizBox by Slate Magazine
December 22, 2008

We've written before about the American Small Business League, the organization dedicated to seeing that federal procurement quotas are enforced. As things stand right now, of course, they aren't: the amount of federal contracts that go to small businesses is lower than the legally mandated percentage, with over $5 billion in contracts being misreported as having gone to small businesses in 2007 alone; contract quotas for woman- and minority-owned businesses have been similarly not fulfilled.

The ASBL has not been hesitant about laying much of the blame for all of this at the feet of the Bush administration. At the end of last week, though, the group issued a press release preemptively attacking President-elect Barack Obama for allegedly planning to ignore this procurement issue and for generally turning his back on small business owners in favor of venture capitalists. Unmentioned by the press release, but probably not irrelevant to the charge that Obama is favoring venture capitalists over small business owners, is the fact that Obama's pick for head of the Small Business Administration is Karen G. Mills...a prominent venture capitalist

Lloyd Chapman, the group's founder and president, said in the release, "I predict President-elect Obama will not restore the Small Business Administration's budget and staffing as he promised during the campaign. I don't think he will do anything to stop Fortune 500 firms from receiving federal small business contracts. I believe he will sign legislation to create another colossal loophole that will divert billions more in federal small business contracts to billionaire venture capitalists. People need to start noticing the dramatic difference between what Obama said during the campaign and what he is actually doing."

The release pointed to the conspicuous absence of any supportive statements on Obama's famed change.gov transition Website. It also cited the $1 million in campaign contributions that his campaign received from the venture capital lobby, which, it argued, will lead Obama to support a bill called the Small Business Investment Expansion Act of 2007, which will allegedly provide a loophole to continue the flow of ostensibly small business contracts to large corporations.

On the one hand, it seems unfair to blame Obama for things he hasn't done (or hasn't not done) yet. That said, we are glad for the ASBL: it's good that someone is already dedicated to keeping the incoming administration honest on these crucial issues. If nothing else, it helps ensure that we and the rest of the press will be watching. And if Chapman and the ASBL turn out to be right, you can be sure that theirs will not be the only angry voice.

Source:  http://bizbox.slate.com/blog/2008/12/obama_accused_of_turning_back.php

Landrieu to chair Senate small-business committee


Landrieu to chair Senate small-business committee

By Matthew Weigelt
December 19, 2008

Sen. Mary Landrieu (D-La.) will be the new chairwoman of the Small Business and Entrepreneurship Committee in the next Congress, the senator and the committee have announced.

“I intend to use my gavel to ensure that [small businesses] play an active role in our nation’s economic recovery and that the federal government is a supportive and efficient partner in their success,” she said in a statement released Dec. 15.

Landrieu has introduced several bills to help small businesses, especially in the Gulf Coast region after hurricanes Katrina and Rita in 2005. One bill would have turned places declared disaster areas into Historically Underutilized Business Zones. Businesses in such zones are given top preference for federal contract set-asides.

She also introduced a bill that would have allowed small businesses that were affected by the hurricanes to stay in the Small Business Administration’s 8(a) set-aside program for two years longer than usual. Neither bill became law.

Landrieu is taking the place of Sen. John Kerry (D-Mass.), who will become chairman of the Senate Foreign Relations Committee. While he was chairman of the small-business committee, Kerry traveled to Louisiana with Landrieu after the hurricanes.

“I saw firsthand her passion for helping small-business owners in her state and across the country,” he said.

However, Landrieu’s direction as the committee’s leader is difficult to determine, said Lloyd Chapman, president of the American Small Business League. Committee chairmen often take different paths than expected, he added.

Chapman said he was disappointed to learn that Kerry would not close loopholes that allow large companies to receive contracts set aside for small businesses.

For example, in 2006 and 2007, the Interior Department awarded more than $5.7 million in small-business contracts to large corporations, some of which are Fortune 500 companies, according to a news report from July.

“I am very hopeful that under [Landrieu’s] leadership, we will finally fill in existing loopholes in federal small-business contracting programs and get these funds going to the small businesses around the country that need them so desperately,” Chapman said.

Susan Eckerly, vice president for federal public policy at the National Federation of Independent Business, said she’s pleased with the choice of Landrieu as chairman. Eckerly said she hopes Landrieu will oppose the federal government’s practice of contract bundling, which can put small companies at a disadvantage.

Source:  http://www.fcw.com/online/news/154698-1.html