The SBA’s Silicon Valley Make-Over

When most people think of the Small Business Administration (SBA), they likely think of traditional American small-businesses. One-or-two-off shops, restaurants and garages – the types of business that are often called “the engine of the American economy,” in stump speeches, particularly during elections years. The SBA, in the minds of most, is the federal investment in small business that makes loans possible and counseling available for mom and pop shops nationwide that want to put their shingle out in the marketplace.

But that description, while once apt, is increasingly the description of the SBA of the 20^th century, as the new newer edition of the SBA is pinning more of its energies on companies that are small by circumstance, namely their newness, instead of by design, reports the Washington Post.

Under the leadership of SBA head Maria Contreras-Sweet’s and her predecessor in the role Karen Mills, the SBA has sought to relocate an increasing number of the administration’s resources to programs aimed at enhancing start-ups, often technical in nature, that have high growth potential.

“We’re exporting the Silicon Valley model to Middle America to fund business incubators and growth accelerators in underserved communities,” Contreras-Sweet said during a speech this summer in Washington.

In the same speech, she alluded to the SBA’s goal of helping “start-ups go from zero to 60 in record time.”

That push is coming in various forms of programs that provides financial backing to investment funds and the dispersal of millions of dollars in grants aimed at innovation hubs and the development of regional entrepreneurship.

Stand-out programs include ScaleUp America, where funds are awarded to non-profits, universities and private companies focused on building  “entrepreneurship ecosystems” that tie together local investors, entrepreneurs and public officials.

In the last few weeks, the SBA has also funded half-million-dollar grants to four public-private partnerships as part of a new Regional Innovation Clusters program. The RIC program is specifically focused advancing technology in a given industry, like manufacturing or energy production.

Contreras-Sweet noted this program is particularly pitched to “entrepreneurs who are developing cutting-edge products and processes that will help ensure American global competitiveness.”

The SBA is also encouraging others to invest, by expanding the agency’s Impact Investment Fund.  That fund is used to provide financial support to venture capital groups and investment funds that back small but quickly growing firms.

The push by the SBA is meant to address the times, and maximize the economic output of its investments.

“Ninety-two percent of new jobs come from the expansion of existing businesses,” Contreras-Sweet noted during the announcement of the ScaleUp Program.

However the move has not been without costs, and thus without detractors.  The main criticism of the new move toward the high growth start-up model of small business is that it is taking away from the traditional focus of the SBA.  The program has pulled back on funding to the centers where financial advice is offered to starting small businesses, and the outflow of funds to traditionally underserved group has been falling off as the SBA is choosing to focus on the more white-male dominated tech industry.

Moreover, these pull backs come at a time where small business are facing particularly difficult situations.  According to The Post, the rate of new business formation in the U.S. is falling, while at the same time, business closures are accelerating.