Monday Mouth-Off?

I’ve never run two consecutive feedback columns, but I received lots of complains about last Friday’s lack of SBIC/SBA/John Kerry emails. And since this mild outrage nicely coincides with my planned column falling apart at the last minute (Source to Dan: “I may have been wrong, can you wait a few hours…”), what follows is a variety of correspondence prompted by last Tuesday’s ramblings. To be clear, I wasn’t supporting or opposing Kerry’s claim that the SBA is providing too few SBIC licenses to minority-owned or women-owned firms. Instead, my point was that the taxpayer-funded SBA should provide a U.S. Senator with the information he requests, and also should be able to provide the media (read: me) with demographic info on SBIC applicants. If there’s nothing to hide, why is such info not forthcoming?

Sam: “The problem is that if gender and racial discrimination is happening to the women and minority owners of SBIC applicant firms, it’s probably been happening to them even before the SBIC license application process. The ‘new boy network’ you cited is an example.Let’s say, hypothetically, that the track record of the women and minority owners applying for SBIC licenses has been less rich, less impressive than the track record of the white male applicants because they haven’t had access to the new boy network… So what should the SBA do? If they take race and gender out of the analysis and look at the applicants purely objectively, you would expect that women and minority-owned firms have had fewer license apps granted as a result of their less accomplished track records.On the other hand, if SBA stats show that licenses have been granted at about the same rate for these two pools of applicants, then you actually have something more akin to an affirmative action program going on.”

Anu: “There is a study called the Diana Project sponsored by the Kauffman Foundation. It looks into if there is gender discrimination in the VC money flow and in VC hiring patterns.The report is available on the Kauffman website. I totally agree with you on that people like associating with similar looking and similar minded folks; this is not discrimination - but natural human behavior. Howeverit’s easy to use thisas an excuse for discriminatory behavior. It’s aknown fact that there is less money flowing into women-owned enterprises, and that hiring patterns in the VC industry are overwhelmingly male. So maybe it’s time for VC's to just look at how their firms operate and see if they need to start thinking of change. The easiest way to affect change wouldbeif the female LP's started looking for more women friendly shops to invest in.”

Eric: “Didn’t I just read about Axxon shutting down for lack of woman-owned startups to finance right here in Kerry’s back yard?Categorical welfare programs have never worked well, and it’s a shame that the feds feel the need to push that sort of track record into the world of VC. Perhaps the money would be better spent on initiatives like more business school scholarships for women rather than encouraging throwing money at ideas that otherwise wouldn’t see the light of day.”

George "VC's invest in good ideas, not in categories determined by the EEOC. What about Kim Polese? What about Meg Whitman? The SBA is just another government program that allows for grandstanding."

R: “I used to run an SBIC in North Carolina and the state used to push me to do more minority and rural investing. On numerous occasions, I told them that I would love to invest more in these areas, but I couldn't find credible deals. I agree with you that one of the problems is a lack of connected people in rural areas or minority communities i.e., new boy and old boy networks. Of course there are many obvious reasons for this. A less obvious reason is that most of these companies have advisors who know very little, if anything, about venture capitalor anything other than bank loans. They have had no exposure to these financing sources other than what's in the news, and of course, the news is always about someplace else. In the same vein, most entrepreneurs are unaware of these capital resources and don't know where to turn or how to access it. On those rare occasions when they do try to access venture, it's over the transom and that has the same chance of success as Kerry becoming president.”

March Madness Update
Brett Shobe, an associate with Austin Ventures, is our leader with 52 points after two rounds of NCAA tourney play. Brett has a Final Four of Texas, UConn, Memphis and Florida, with UConn defeating Texas is the final game. Continued good luck to all…