He's chosen a venture capitalist as the head of the organization that is supposed to serve the nation's small businesses.
News announcements have touted her venture capital background as if it's somehow a benefit. But is it?
Does Karen Mills' background as a VC qualify her to head up an agency to serve small businesses?
I'd say "It's not a relevant qualification -- if anything, it's a negative." Why? Because the vast majority of the nation's businesses would never qualify for venture capital. So if you are going to look at it through the lens of doling out venture money, most of those businesses wouldn't rate a second look from a VC -- or even a first look.
Is someone who views the world of businesses as being those that would qualify for venture capital, predisposed to serve the 27 million small businesses that would never qualify for VC money?
Let's look at three points:
- The SBA has come under criticism for not serving enough small businesses, serving businesses that are too large, and not making enough loans. Well, if you're going to make more loans and serve more small businesses, you need to be looking at expanding micro-lending programs. Because that is what would touch many more small businesses (including the roughly 20 million of whom are single-person businesses). And the reality is, most small businesses don't need a whole lot of money to grow. So micro-lending makes the most sense if you want to reach the most small businesses.
- Few businesses get venture capital money. The predisposition of VCs is to just say "no." They have to be very choosy, because they are taking big risks with big money. They look for high-growth businesses. Fact is, most small businesses in the United States are not high growth businesses. The mission of the SBA is to "aid, counsel, assist and protect the interests of small business concerns." Not "high growth businesses" but "small businesses." Two completely different things.
- Venture capitalists make a small number of investments and take big risks. But should that be the role of the U.S. taxpayer (which funds the SBA)? VCs make big money because they take big risks -- and they also lose money on many of their investments. Underwriting SBA loans and serving a wide swatch of small businesses requires a different mindset, than the VC's "big risk, big payday" mindset.
As Dawn Rivers Baker says, while it looks like the majority of small businesses will just continue to be ignored, let's give her a chance and see what she does.
Meanwhile, what do you think? Negative or positive to bring in a venture capitalist to head up the Small Business Administration? Sound off in the comments below, and be sure to give your reasons.