Tonka Bay Equity Partners, a private equity firm in Minnetonka, Minn., applied for a license from the federal government in early July to create a fund to funnel capital into private businesses. Last week the U.S. Small Business Administration granted that license, enabling the firm to start investing $150 million in promising ventures.
The four-month turnaround time doesn’t sound remarkable. But just a couple years ago, licensing times were so unpredictable that the wait could be up to 15 months, spooking investors and delaying the distribution of vital funds to waiting companies, says Molly Simmons, a principal at Tonka Bay who has worked in private equity for 15 years.
The Small Business Investment Company program Tonka applied to participate in, commonly known as SBIC, was created in 1958. SBICs are for-profit venture capital firms, privately owned and managed but licensed and regulated by the SBA. The program has been setting a blistering pace, distributing a record $2.59 billion in the 12 months ended in September, up 63 percent from the previous year. The program attracted $840 million in private capital this fiscal year—more than in any other in the program’s history.
Changes made through the 2009 economic stimulus package, plus increased demand for small business investment during the prolonged credit crunch, helped spur the success. Many entrepreneurs and policymakers also credit 47-year-old Sean Greene, a former entrepreneur and investor who joined the SBA in 2009. His mission as associate administrator for investment and special adviser for innovation: Streamline the steps involved in getting private money to entrepreneurs. “Small business owners don’t have time to hang out on [federal websites], and they don’t have the money to hire lobbyists,” says Greene.
NEW FINANCING PROGRAMS
Brett Palmer, president of the Small Business Investor Alliance, an SBIC trade group, says Greene has had a large impact. Wait times for SBIC licenses are down to an average of less than 6 months, and the annual rate of new licensees has more than doubled over recent years. Greene has also created two new financing programs, one aimed at distressed regions and another at early stage capital. “Most [of the recent SBIC successes] would not have been implemented without him,” says Palmer, who served in the Commerce Dept. during the George W. Bush Administration.
“I saw in Sean exactly the kind of person the government needs,” says Greene’s former business partner, Julius Genachowski, who now heads of the Federal Communications Commission and recommended Greene for the SBA job. “He’s an extraordinary leader with a private-sector background, which was very much something I wanted,” says SBA Administrator Karen Mills.
Because Greene has been both an entrepreneur (the travel startup he founded, Away.com, was one of the first strategic acquisitions by Orbitz Worldwide (OWW) and an investor (he and Genachowski co-founded Rock Creek Ventures and LaunchBox Digital), he came into the SBA with an unusual depth of knowledge, says Bob Stewart, general partner and co-founder of Spring Capital Partners, a mezzanine capital investment firm in Baltimore that participates in the SBIC program.
Greene admits he has not made the same progress with the SBIR program, which he also oversees, as he has with SBIC. SBIR, which provides more than $2 billion of research and development funding to small businesses annually, has been perpetually threatened with shutdown for the past several years. While debate plays out in Congress, Greene has launched a new website, SBIR.gov, where entrepreneurs can search for grants across the 11 federal agencies that participate in SBIR.
Fundamentally, Greene believes that resurgent small businesses are the way back to U.S. economic prosperity. And he shares the entrepreneur’s characteristic optimism: “There’s a glass of water half full sitting on my desk in front of me right now,” he says.