As Minority-Owned Businesses Are Hit Hard By Pandemic, Phillips Announces New Bill To Promote Economic Equity For New Businesses
WASHINGTON, D.C. — Rep. Dean Phillips (D-MN) announced during a hearing of the House Financial Services Committee today that he will strengthen his bill, The New Business Preservation Act (H.R. 6403), by including aggressive changes to benefit women and minority entrepreneurs. Phillips’s bill authorizes the Treasury Department to partner with states to make equity investments in new businesses alongside private venture capital companies, with special consideration given to women- and minority-owned enterprises. Sen. Amy Klobuchar (D-MN) leads the companion bill in the Senate.
“The COVID-19 pandemic will surely precipitate the failure of far too many businesses, and the hurdles to securing capital are terribly high - especially for women and minority entrepreneurs,” Phillips said. “New businesses account for a disproportionate share of innovation, economic growth, and job creation and are critical to our nation’s ability to weather and recover from the economic blow inflicted by coronavirus. We must take action today to ensure a thriving, equitable business landscape tomorrow.”
Phillips made his comments during an exchange at a hearing focusing on the state of the American economy in the House Financial Services Committee’s Diversity and Inclusion Subcommittee, which included panelists representing the U.S. Hispanic Chamber of Commerce and U.S. Black Chambers, Inc.
Startups are typically ineligible for financing of their business operations or growth by way of loans or other credit facilities from banking companies due to a lack of operating history, collateral, or current earnings and cash flow, or the business’s overall risk profile.
Under the program created by the New Business Preservation Act, the Treasury Department would make an initial investment of $1.5 billion in federal funds allocated to states in portion to each state’s percentage total population and attention it typically receives from venture capital firms. There would be another $5 million allocated to states in a second round of funding to support companies that perform well.
The program will be self-sustaining, with returns on investment reinvested in new businesses in future years. The bill also contains strict oversight measures, requires private investors to shoulder risk, and insulates investment decisions from political considerations.
Phillips plans to strengthen the mission of diversity and inclusion within the bill by adding provisions that would:
- only fund startups that are majority owned or majority managed by women and/or minorities in areas of the country currently receiving the lionshare of national VC investment—like Silicon Valley, NYC, and Boston.
- require at least 50 percent women and minority representation on the boards of venture funds who choose to participate in the 1-to-1 match in these highly sought after cities
- among the other 47 states, require at least 50 percent women and minority representation in the governing investment bodies which determine where funds will flow
- require annual reporting on diversity representation within the state's venture capital industry
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