- The SBIA SBIC program has been going for decades and has been a huge success for the businesses they fund as well as the taxpayer.
- SBICs invest in small to mid-size businesses in many industries with parameters around domestic employment and employee size.
- The SBIA certifies a Fund as an SBIC and the process can take one to two years of due diligence.
- The SBICs invest in small business where banks or larger private equity would not. This allows small business to grow organically, do succession, buyouts, and R&D for future investments.
- SBICs as Funds have outperformed their non SBIC peers and have been an amazing fuel for small business around the United States and the default rate with the SBIA is almost nil, meaning this is almost a ‘no cost’ to taxpayer program with amplified positive effects on our free enterprise in the small business community across the country.
Smith Brothers has a Financial Sponsor vertical where we act as Enterprise Risk Managers for private funds (debt and equity) and their portfolio of investments. We are proud to be a member of the SBIA and the conference is a great networking and educational event. I wanted to share some take aways from a session with Steve Case, co-founder of AOL, we attended earlier this week at the SBIA conference.
Steve Case is alive and well in the world of private capital. He is founder of Revolution, a Washington D.C. based investment firm that backs entrepreneurs at each stage of their development.
Revolution has three major initiatives:
- Place – They want to expand the investments in startups/venture businesses across the USA and decentralize the growth concentration.
- 75% of the VC money goes into startups in CT, NY, and MA. He has his in all parts of the USA.
- Think of what Amazon and Microsoft did for Seattle. What Dell did for Austin, TX. Startups create new jobs and boost communities for economic growth. His motto is ‘Rise of the Rest’ meaning outside the three concentration cores.
- Policy – Government with one sentence can drive or cave technology based industries.
- He had to lobby the US Government to allow consumers to use the internet. Internet was government founded and it was illegal for consumers to use it. The law change unleashed the internet to be commercialized.
- Partnership – He is looking for a third wave of technology investments.
- His book called the Third Wave: An Entrepreneur’s Vision of the Future outlines how internet was the first wave. Get people online. The second wave was software to power commercialized use of the internet (think social). The third wave is to apply technology to running of businesses to advance productivity and growth like never seen before.
- Artificial Intelligence will change and change fast. So, Revolution businesses will be businesses in agriculture that use AI to kill weeds safely preserving the plants/vegetables. Or a data firm that aggregates data on cancer patients to help diagnosis and genome treatment or restaurants using AI to expedite the supply chain.
- He mentioned AI will adopt fast where the internet took a long time. AOL was founded in 1985 and went public at $70 million valuation in 1992 and seven years later was worth $170 billion. It took a while yet then flew. AI will fly now. He shared some advice.
- Talk to people who you don’t agree with or understand – learn and get out of comfort zone.
- Think of 25 years from now – what is your job or industry going to look like knowing the power of AI?
My favorite thought of Steve’s was, think about what industry is calling for tech right now and invest in this. He believes the key to US world dominance is in our DNA – being innovative. He believes it needs to be done in a more inclusive way. Distribute the investments across the country and keep innovation as the engine that will allow us to maintain and thrive in the next 25 years.
One of our Values at Smith Brothers is Creativity. We have more work to do in AI yet I know we have and will continue to be innovative, continuing to bring our stakeholders the “Third Wave” principles to stay relevant and thriving.
I’m happy to share more about our involvement in the Financial Sponsor space, with SBIA, and in our AI advancements either in future newsletters or with you directly. Please call or email me directly if you would like to connect.
Be Sure.
Joe
Joe B. Smith
Phone: 860-306-9681
Email: jsmith@smithbrothersusa.com