“Investing in America: How Private Equity Empowers Main Street”

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34                   INVESTING IN AMERICA: HOW PRIVATE EQUITY5                              EMPOWERS MAIN STREET67=======================================================================89                                HEARING1011                               BEFORE THE1213                        SUBCOMMITTEE ON ECONOMIC GROWTH,14                            TAX, AND CAPITAL ACCESS1516                                 OF THE1718                      COMMITTEE ON SMALL BUSINESS19                             UNITED STATES20                        HOUSE OF REPRESENTATIVES2122                    ONE HUNDRED NINETEENTH CONGRESS2324                             FIRST SESSION2526                               __________2728                              HEARING HELD29                              JUNE 5, 20253031                               __________3233[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3435            Small Business Committee Document Number 119-01336             Available via the GPO Website: www.govinfo.gov3738                                __________3940                   U.S. GOVERNMENT PUBLISHING OFFICE4160-591                  WASHINGTON : 20254243-----------------------------------------------------------------------------------4445                   HOUSE COMMITTEE ON SMALL BUSINESS4647                    ROGER WILLIAMS, Texas, Chairman48                        PETE STAUBER, Minnesota49                        DAN MEUSER, Pennsylvania50                         BETH VAN DUYNE, Texas51                           JAKE ELLZEY, Texas52                         MARK ALFORD, Missouri53                         NICK LALOTA, New York54                        BRAD FINSTAD, Minnesota55                          TONY WIED, Wisconsin56                      ROB BRESNAHAN, Pennsylvania57                          BRIAN JACK, Georgia58                         TROY DOWNING, Montana59             KIMBERLYN KING-HINDS, Northern Marina Islands60                         DEREK SCHMIDT, Kansas61                        JIMMY PATRONIS, Florida62               NYDIA VELAZQUEZ, New York, Ranking Member63                       MORGAN MCGARVEY, Kentucky64                       HILLARY SCHOLTEN, Michigan65                      LAMONICA MCIVER, New Jersey66                        GIL CISNEROS, California67                       KELLY MORRISON, Minnesota68                        GEORGE LATIMER, New York69                         DEREK TRAN, California70                       LATEEFAH SIMON, California71                       JOHNNY OLSZEWSKI, Maryland72                        HERB CONAWAY, New Jersey73                    MAGGIE GOODLANDER, New Hampshire7475                 Lauren Holmes, Majority Staff Director76                 Melissa Jung, Minority Staff Director7778                           C O N T E N T S7980                           OPENING STATEMENTS8182                                                                   Page83Hon. Beth Van Duyne..............................................     184Hon. LaMonica McIver.............................................     28586                               WITNESSES8788Mr. Jordan Bastable, Co-Founder and Managing Director, LongWater,89  Dallas, TX.....................................................     590Ms. Sarah Fields, Chief Executive Officer, Jetta Corporation,91  Edmond, OK.....................................................     692Ms. Senofer E. Mendoza, Founder, General Partner, Mendoza93  Ventures, National Advisory Committee for Innovation and94  Entrepreneurship, Brookline, MA................................     79596                                APPENDIX9798Prepared Statements:99    Mr. Jordan Bastable, Co-Founder and Managing Director,100      LongWater, Dallas, TX......................................    23101    Ms. Sarah Fields, Chief Executive Officer, Jetta Corporation,102      Edmond, OK.................................................    26103    Ms. Senofer E. Mendoza, Founder, General Partner, Mendoza104      Ventures, National Advisory Committee for Innovation and105      Entrepreneurship, Brookline, MA............................    28106Questions for the Record:107    None.108Answers for the Record:109    None.110Additional Material for the Record:111    New York Times Letter........................................    38112    UnionLeader Letter...........................................    43113114     INVESTING IN AMERICA: HOW PRIVATE EQUITY EMPOWERS MAIN STREET115116                              ----------117118                         THURSDAY, JUNE 5, 2025119120              House of Representatives,121               Committee on Small Business,122                   Subcommittee on Economic Growth,123                                   Tax, and Capital Access,124                                                    Washington, DC.125    The Subcommittee met, pursuant to call, at 10:00 a.m., in126Room 2360, Rayburn House Office Building, Hon. Beth Van Duyne127[chairwoman of the Subcommittee] presiding.128    Present: Representatives Van Duyne, Bresnahan, McIver,129McGarvey, Latimer, Conaway, and Goodlander.130    Also Present: Representatives Williams, and Wied.131    Chairwoman VAN DUYNE. We are going to go ahead and open our132meeting this morning with our Chairman giving our prayer and133our Pledge.134    ALL. I pledge allegiance to the Flag of the United States135of America, and to the Republic for which it stands, one136nation, under God, indivisible, with liberty and justice for137all.138    Chairwoman VAN DUYNE. So, good morning, everyone. I now139call the Committee on Small Business to order. And without140objection, the Chair is authorized to declare a recess of the141Committee at any time. Pursuant to Committee rules, I ask142unanimous consent that Representative Wied be waved on to this143hearing for the purpose of asking questions. Without objection,144so ordered.145    I now recognize myself for my opening statement.146    Well, welcome to today's hearing, Investing in America and147How Private Equity Empowers Main Street. And first, I want to148thank our witnesses for all being here today. We know that you149have traveled a long way to share your experiences and your150perspectives, and we greatly value your time and your voice.151    Small businesses are the foundation of our communities and152the driving force of the American economy. And whether it is a153family-run distribution center, a growing manufacturer, or a154tech startup finding its footing, these businesses are155responsible for nearly two-thirds of the new job creation in156America.157    In North Texas, we have seen how entrepreneurs and small158family-run businesses alike can build long-lasting enterprises159and often outcompete their larger counterparts. Today's hearing160will explore how private equity serves as a critical tool in161helping entrepreneurs gain access to capital and enjoy the162benefits of a long-term partnership with investors that help163them navigate challenging barriers with expertise and key164resources.165    From day one, the Trump administration has worked with166congressional Republicans to roll back the burdensome167regulatory red tape that for too long has blocked private168capital from reaching the businesses that need it the most. And169by removing those unnecessary barriers, we can ensure that170investors and entrepreneurs have the ability to make crucial171investment decisions in our communities.172    In 2024, 85 percent of all private equity investments went173to supporting small businesses. And these investments are174driving local job creation, strengthening operations, and175fueling business growth to new levels. Unlike traditional176funding methods, private equity can bring more than just177capital and allow businesses to scale up, adopt new178technologies, and strengthen their workforce. Across every179state and congressional district, private equity is empowering180American entrepreneurs to build and expand their businesses181from the ground up.182    But for far too long, private equity has been concentrated183in places like Silicon Valley, New York, and Boston. And now184cities like Dallas and Austin are emerging as dynamic hubs for185private equity investors and those seeking investment in small186businesses. In fact, the downtown Dallas area represents one of187the fastest growing innovation and investment corridors in the188country.189    And I am pleased to be able to hold this hearing today to190highlight the role of private equity in the small business191ecosystem and discuss how we can bring these opportunities to192more Americans throughout the country. And thank you again for193being here today and I look forward to the conversations ahead.194    I now want to recognize the distinguished Ranking Member195from New Jersey, Ms. McIver, for her opening remarks.196    Mrs. MCIVER. Thank you so much, Madam Chair. Good morning197to everyone.198    Small businesses are an essential part of the American199economy. They account for more than 40 percent of U.S. GDP,200create approximately two-thirds of new jobs, and employ nearly201half of all private sector workers. Financing and access to202credit is a central component to starting and growing a small203business. Traditionally, small businesses have been more204reliant on bank financing for their credit needs than large205businesses. But as we will explore today, in recent years,206small businesses have increasingly relied on private forms of207investment and credit to meet their financing needs.208    As we heard at previous full Committee hearing in April,209the SBA's SBIC program is a responsible and effective method210for small businesses and startups to partner with private211equity and venture capital investors. Currently, the SBA212partners with more than 300 privately owned and managed SBICs213to provide financing to small businesses with private capital214the SBIC has raised through the SBA guarantee debenture.215    As of 2024, the SBIC program has made more than 194,000216investments and deployed more than 130 billion of capital to217small businesses. More broadly, private funds like private218equity, private credit, and venture funds have become a219critical component of our small business financing ecosystem,220particularly those businesses that need retooling or just on221the cusp of growth. For example, the private equity industry222invested in 18,000 businesses in 2022, 40 percent of which had223fewer than 50 employees. Likewise, in 2022, venture capital224activities surpassed the 200 billion mark, reaching 209.4225billion, making 2022 the second highest year ever for VC226investment.227    So while there is no doubt that the role private funds play228in the American economy and America's small businesses is229significant, these funds can also present significant risk for230small businesses, their employees, and their communities. It is231important to note that these funds have drawn significant232criticism over the years for the strategies they at times233choose to employ. And unfortunately, like with conventional234bank loans, if we look at these numbers more deeply, the235research demonstrates that women, minority-owned, and small236business outside certain geographic areas have less access to237private funds than their white-owned counterparts.238    For example, Black and Hispanic female entrepreneurs239receive less than 1 percent of all venture capital investments240in 2022--in 2020, excuse me. That must change. Investing in all241of America's small businesses and startups benefit not only242those businesses, but the communities they service and our243nation's entire GDP. I look forward to exploring all of these244issues and more to ensure our private markets are appropriately245regulated, transparent, and working for the long-term benefit246of our small businesses and our employees.247    With that, Madam Chair, I yield back.248    Chairwoman VAN DUYNE. Thank you very much.249    I now recognize the Chairman of the full Committee from the250great state of Texas, Chairman Roger Williams for an opening251statement.252    Mr. WILLIAMS. Thank you, Madam Chair. Thank you for calling253this hearing and also thank you to all the witnesses who have254come here today, especially the ones who traveled all the way255from the great state of Texas.256    As a small business owner myself and an advocate for257entrepreneurship, I have seen firsthand the critical role small258businesses play, not just as job creators, but as engines of259innovation and community development. From local manufacturers260to family-owned retailers, small businesses drive the America's261economy. Yet too often, these businesses face significant262barriers when it comes to securing the capital they need to263grow, compete, and reinvest in their business. So that is where264private equity can play a crucial role. When done right, it is265more than just an investment. It is a partnership in helping266businesses scale up, hire more workers, and stay competitive in267a growing marketplace.268    Private equity is a powerful and at times misunderstood269tool in this landscape. It can provide more than just funding.270It brings strategic support, operational expertise, and long-271term partnership. So for small businesses navigating complex272markets and evolving challenges, that kind of backing can mean273the difference between stagnation and scalable success.274    Here on this Committee, it is our goal to ensure small275businesses across America compete for private investments. When276private investors look at small businesses outside of the277traditional coastal elite hubs, everyone wins. Whether it is a278rancher in Texas or a banker--or a baker in Iowa, the279entrepreneurs present a prime partnership opportunity for280private equity firms.281    So this is especially true in sectors critical to national282security, like manufacturing. The revitalization of American283manufacturing will ensure that American economy remains284resilient. It also presents an opportunity for private285investors to identify reemerging manufacturing sectors poised286for growth.287    So many small businesses may be at the stage where they are288ready to seek private investment, but sometimes they may not289yet be in a position to attract private equity investments.290This is where the SBA comes into play. So just last month, I291introduced H.R. 3174, the Made in America Manufacturing Finance292Act of 2025, a bill that would raise the maximum SBA loan for293American manufacturing from 5 million to 10 million. This will294not only enable existing U.S. manufacturers to grow their295business, it will help bring more manufacturing back to the296U.S.297    So this Committee, alongside the Trump administration and298Administrator Loeffler, will once again prioritize policies299that support Main Street America. Now we all can create an300environment for Americans where small businesses can thrive and301unleash the full potential of private equity investment.302    So I want to thank again the witnesses for being here. I303want to thank my colleague Congresswoman Van Duyne for holding304this hearing, and I look forward to our conversation ahead.305Thank you.306    Chairwoman VAN DUYNE. Thank you very much, Mr. Chairman.307    I will now introduce our witnesses. Our first witness here308with us today is Mr. Jordan Bastable. Mr. Bastable is the309cofounder and managing director of LongWater in Dallas, Texas.310Mr. Bastable cofounded LongWater in 2009 following years of311experience as a consultant with FTI Consulting and as a senior312finance manager with Lineage Power. Prior, Mr. Bastable313cofounded a private investment firm while he was still in314college, while also working for a multibillion-dollar million315hedge fund where he gained experience in day-to-day operations,316deal flow, and investment management aspects of running an317investment firm. Mr. Bastable graduated from Texas Christian318University----319    Mr. WILLIAMS. Go Frogs.320    Chairwoman VAN DUYNE.--where he earned a bachelor of321business administration. Thank you for joining us today and I322am looking forward to our important conversation.323    Our next witness here is Ms. Sarah Fields. Ms. Fields is324the chief executive officer at Jetta Corporation in Edmond,325Oklahoma. Ms. Fields joined Jetta Corporation in January of3262015 with decades of experience in business development and327marketing consumer products. She previously served as a senior328vice president and then as president at Century LLC. Ms. Fields329graduated from Cameron University with a bachelor of sciences330in engineering technology and earned her master's of business331administration from the University of Oklahoma.332    And thank you for joining us today and I am looking forward333to today's important conversation.334    I will now recognize the Ranking Member from New Jersey to335briefly introduce our last witness appearing before us today.336    Mrs. MCIVER. Thank you, Madam Chair. I would like to337introduce Ms. Senofer Mendoza, cofounder of General Partner of338Mendoza Ventures, a Boston-based Pre C, fintech, AI, and339cybersecurity venture capital firm. After having a career in340enterprise sales and hospitality design, she began Mendoza341Ventures to address the growing funding gap in the pre-C342investment stage. The firm was launched in January of 2016 and343invested in internationally in the cybersecurity, AI, and344fintech space. She is a published author, innovator, and345thought leader in the technology startup and VC space with a346passion for equity and diversity.347    Ms. Mendoza, thank you for appearing before the348Subcommittee today. We look forward to your testimony.349    Thank you. I yield back.350    Chairwoman VAN DUYNE. Thank you. We appreciate all of you351being here today.352    And before we begin, I just want to give you just a little353bit of background. Where do we go? I want to remind you of the354testimony and you have 5 minutes. The Chairman is much more355strict than I am. At 5 minutes he will cut you off, but you are356going to hear me just kind of wrap a little bit at 5. So just357try to hurry up and finish your testimony and conclude it.358    So I want to recognize Mr. Bastable for his 5-minute359opening remarks.360361  STATEMENTS OF MR. JORDAN BASTABLE, CO-FOUNDER AND MANAGING362DIRECTOR, LONGWATER; MS. SARAH FIELDS, CHIEF EXECUTIVE OFFICER,363JETTA CORPORATION; AND MS. SENOFER E. MENDOZA, FOUNDER, GENERAL364  PARTNER, MENDOZA VENTURES, NATIONAL ADVISORY COMMITTEE FOR365                INNOVATION AND ENTREPRENEURSHIP366367STATEMENT OF JORDAN BASTABLE, CO-FOUNDER AND MANAGING DIRECTOR,368                           LONGWATER369370    Mr. BASTABLE. Chairman Van Duyne and Ranking Member McIver371and Members of the Subcommittee, thank you for holding this372important meeting today. It is a topic I am very passionate373about.374    My name is Jordan Bastable and I am the cofounder of375LongWater Opportunities, a private investment firm focused on376the lower middle market. I also serve on the board and council377chair of the Small Business Investor Alliance, which represents378funds that invest and support the growth of small businesses379across America.380    Our journey began in 2009 with two complementary381perspectives: one rooted in the experience of operating a382family-run business in rural America, grappling with succession383and capital constraints; the other is shaped by exposure to384large private equity firms and the untapped potential in385unserved markets. Together we saw an opportunity to invest in386small family-owned businesses, especially those lacking387succession plans and access to institutional capital.388    Our first investment, we approached over 20 banks before389finally securing financing. However, under restrictive terms.390That experience revealed a larger truth: small businesses391consistently face systematic barriers to growth capital and392those barriers are especially acute in underserved markets.393Today, LongWater has offices in Fargo, St. Louis, and Dallas.394We provide a range of investment solutions from controlling395equity to direct loans. But we are more than capital providers.396We are partners. We support our portfolio companies with397strategic guidance, operational expertise, and access to398networks they may not otherwise ever reach. We help businesses399scale, professionalize, and thrive. This is not transactional,400it is relational.401    Let me be clear. The idea that private equity succeeds when402businesses fail is simply false. In the lower middle market,403success comes from helping small businesses grow into larger,404stronger enterprises that create lasting jobs and value. Let me405give you an example. We invested in a small business called406Excalibur Container. We take shipping containers and convert407them to ground level offices you might see at construction408sites or energy sites. We came into that business and really409helped provide financial visibility for the business, expanded410benefits, instituting 401(k)'s, comprehensive health care,411tuition reimbursement, and programs for continuing education.412    We also invested in the infrastructure, including cleaning413up and rehabbing old abandoned industrial sites and investing414in new capital equipment. We also invested in modernizing their415digital marketing strategy and bringing skills and expertise416that didn't already exist and that they did not have the417capital to invest in.418    This is what aligned private capital looks like: capacity419building, local empowerment, and economic revitalization. Good420public policy should expand, not restrict, the capital options421available to small businesses. Whether it is a startup fighting422for market share or a second generation manufacturer navigating423succession or a rural enterprise facing technological424disruption, private investment is often the bridge between425survival and scale. In today's climate where traditional426financing is often constrained, private capital is not just427helpful, it is essential.428    I look forward to working with the subcommittee to ensure429small businesses can access this kind of value-added capital430that helps them grow higher and succeed for the long term.431    Chairwoman VAN DUYNE. Thank you very much.432    I now recognize Ms. Fields for her 5 minutes opening433statement.434435       STATEMENT OF SARAH FIELDS, CEO, JETTA CORPORATION436437    Ms. FIELDS. Chair Van Duyne, Ranking Member McIver, and438Members of the Subcommittee, thank you for inviting me to speak439today. My name is Sarah Fields and I serve as the CEO at Jetta440Corporation. We are a U.S.-based bathtub manufacturer and have441been business for about 45 years, located in a suburb of442Oklahoma City. We have about 60 employees and generate about443$20 million in annual revenue and we have been partnered with444lower middle market private equity firm for about 2-1/2 years.445I want to share how that partnership has truly been an446accelerator for our business, not just by providing us capital,447but bringing to us expertise, support, and the kind of448involvement you may not expect from private equity.449    We partnered with a smaller, more specialized private450equity fund that focused on U.S.-based manufacturing. For them,451a small business like us is not just one of many. We are a big452deal. That means we get direct access to senior partners,453senior partners that have manufacturing operations expertise.454They help us make quick decisions and they are people that are455willing to roll up their sleeves and come work in our business456with us to help us solve problems and move forward quickly.457    Within the first year of their support, we have led to a 10458percent increase in production capacity and 8 percent increase459in our efficiency thanks to major improvements we were able to460make in our factory layout and our processes. They also helped461us uncover about $350,000 in annual material savings. That is a462massive change for us and is really significant to a small463business like us. We are now reinvesting those gains in464improving our workplace, updating our facilities and465workstations to improve retention. which is critical in our466manufacturing environment.467    In addition, these operational improvements have made us468more competitive with much larger companies. We are now gaining469market share, improving profitability, and reinvesting in our470growth.471    One of the biggest advantages for private equity for us has472been access to capital for acquisition, not just having to grow473organically. Without private equity, this would not have been474attainable for us. In the next six months, we plan to acquire a475second manufacturing facility, which will allow us to expand476our geographical reach, shorten delivery times, and serve a477much broader customer base across the country.478    We are also in the process of restoring the production of479bathtubs we currently import. That move will help us improve480our supply chain resiliency and quality control. It will also481allow us to expand, making more American-made products. As a482result of that, we expect to be able to increase our workforce483about 30 percent over the next 18 months.484    Private equity partnership for us and for me personally has485been transformative. It is helping us grow faster, operate486smarter, and create jobs, all while staying true to who we are,487a small American manufacturer, and staying true to our values488and our culture.489    Thank you again for allowing me to share my story. I am490super excited to be here and happy to answer any questions you491may have.492    Chairwoman VAN DUYNE. Thank you very much.493    The Chair now recognizes Ms. Mendoza for 5 minute opening494remarks.495496STATEMENT OF SENOFER MENDOZA, FOUNDER, GENERAL PARTNER, MENDOZA497VENTURES AND THE NATIONAL ADVISORY COMMITTEE FOR INNOVATION AND498                    ENTREPRENEURSHIP (NACIE)499500    Ms. MENDOZA. Thank you, Chairman Van Duyne, Ranking Member501McIver, and Members of the Subcommittee for the opportunity to502speak on the necessity of entrepreneurship as a cornerstone of503American competitiveness today. I am pleased to testify today504as the founder and general partner of Mendoza Ventures, a505privately held venture capital firm investing in AI,506cybersecurity, financial technology, and dual-use companies,507and the founder and executive director of Mendoza Impact, our508philanthropic arm.509    My family has lived the American Dream. We are self-made510entrepreneurs who built a venture capital fund out of a511technology exit. We live in the perspective that we are all512trying to promote fiscal responsibility, innovative technology,513and employing Americans to their absolute best capacity. Since5142016, our little fund has deployed over $30 million into the515American economy, sustained 15 portfolio companies, generated516more than 550 sustainable full-time jobs, created 140 million517in revenue for our portfolio in 2024 alone, and made essential518technology for our nation's tech stack in both the government519and the private sector. We have funded veterans, women, and520several minorities. In fact, our portfolio looks a lot like the521demographics of our great nation.522    We have co-invested with some of the largest financial523institutions in the world and we have exited four companies,524creating generational wealth for other American families525through our company. We are philanthropists who mentor the526funds and founders following our lead. This is the place where527wealth is generated. Access to the American Dream is through528private equity. Over 50 percent of millionaires attribute their529success to the growth and scale of a family or privately held530business.531    It is proven that liquidity constraints hinder access to532entrepreneurship. If you want to send a rocket, you need to533build a launchpad. You cannot disassociate main street534stability from our nation's entrepreneurial ecosystem. They are535completely intertwined. Venture lives in this capital stack,536creating wealth where others won't. And the introduction of537mega funds into an industry where the average fund size is 35538million, coupled with a slowing IPO and M&E market, means less539capital for smaller firms and less smaller firms.540    Since 2021, 25 percent of all active venture capital firms541have closed. More capital is going to fewer firms, cutting out542the middle later, and that money is not going to make it to543main street. In contrast, A16Z closed 7.2 billion and just544announced a $20 billion mega fund. Funds like us enable main545street in a way that the mega funds do not. If you're deploying546that much capital, you have to write a larger check to get it547out in the typical 5- to 10-year period. So a startup trying to548raise today, like my colleagues here, are facing fewer firms.549And venture capital is facing the same statistics that we are550seeing among the population of a growing wealth divide.551    Out of 91 billion deployed in Q1 of this year, 40 billion552of that went to OpenAI, another 4.5 billion went to the runner-553up, Anthropic. Now, take into account that the two funds554leading those rounds share many LPs, endowments, foundations555that have invested in them, and you see that we have a growing556concentration risk in the venture capital ecosystem.557    In finance, when we have a really big problem, we like to558call it an opportunity. Failure is learning. And if you can559fail fast, you can learn and implement fast and beat the odds.560Eric Ries famously says success is not delivering a feature.561Success is learning how to solve the customer's problem. So the562SBA has to empower and not extract. We need to start building563more launchpads in more areas of the country in order to be564able to launch more rockets.565    And I will use two examples on that. One is the proposed566CDFI cuts that we are discussing today. If anything, we have567not pushed it out hard enough to really be able to meet the568need of small businesses. And the other example I will use is569the great SBIC program. We went through this process and at the570end of the process, in order to partner with the fund, there is571a legal bill of about 100- to $150,000. For a seed stage fund572that is an investment in an entire company.573    And so there is a couple of things that we can do. Instead574of making sweeping cuts, we can tweak what we have. What we575have is working. We just need to iterate on it to meet our576small businesses and our smaller funds where they are today, so577that they can access it. The SBI could standardize legal docs,578like Carta and Y Combinator have put into practice. You don't579need to cut something that just needs another iteration to580thrive and to help our nation thrive. If we do not listen to581the business owners we serve, we are damaging our own cause.582    We need to build an innovation economy in America. When583that happens, entrepreneurs everywhere have capital and584opportunity. Entrepreneurship everywhere for everyone, that is585the American Dream.586    Chairwoman VAN DUYNE. Great. Thank you very much.587    We will now move on to the Member questions under the 5-588minute rule, and I recognize myself for 5 minutes.589    Mr. Bastable, private equity has proven to be a powerful590tool for helping small businesses grow and succeed591historically. So these investments, though, that we have592largely seen and concentrated in hubs like Silicon Valley, I593think that trend is finally ending. I think in Texas 24th594District alone, we have got 180 private equity-backed595businesses. Investors like yourself are looking towards596businesses in Texas. And as capital begins to shift toward597emerging markets, firms like yours are at the forefront of that598transformation.599    So can you speak to us about how your firm is helping bring600investments into cities like Dallas and what impact that has601had on some of the small businesses that you're working with?602    Mr. BASTABLE. Yes, absolutely. Thank you for the question.603    I would start by saying, you know, when you look at where604our company is based, Dallas, St. Louis, and Fargo, they are605not traditional finance hubs. And even a city like Fargo,606people often ask why are you in Fargo?607    Chairwoman VAN DUYNE. I was going to ask, why are you in608Fargo?609    Mr. BASTABLE. Because there is great opportunities and it610is an underserved market, and it is unbelievable the number of611opportunities that are seeking capital and just do not have612access to capital in those part of the markets. And one of the613things that is just interesting about the lower middle market614is it is a relationship industry. They want to work with people615that are committed to helping them grow and share the values of616that long-term growth. And so I think it is really important617that these businesses and these capital providers continue to618be in the markets and the locations where they are planning to619invest and understand the people and the values of those620communities.621    Chairwoman VAN DUYNE. I used to live in Minot, North622Dakota. At that point in time, it was long ago, it was not623exactly a hub for economic activity. We had the Air Force Base624there and that was about it. But tell me, do you have any625stories of some of these businesses that you've worked with,626success stories, failure stories?627    Mr. BASTABLE. Absolutely. I can tell you, in North Dakota,628for example, we invested recently in a garage door manufacturer629in North Dakota. We just opened up a railcar servicing location630in rural North Dakota and are planning to open up several more.631And these are just examples of, you know, opportunities where632the larger private equity firms, they don't often want to fly633and travel to these parts of the country because they are634difficult to get to. And sometimes, you know, in reality, it is635hard to find and retain talent and grow in those parts of the636market. But with investments in educating the talent and637training the talent, there are really great people in those638communities who want to work at those businesses and can drive639value.640    Chairwoman VAN DUYNE. Excellent. Thank you very much.641    Ms. Fields, as you testified, private equity offers far642more than just capital. It provides hands-on support, strategic643guidance, expertise in fields that you may not have necessarily644within your own company. It is a partnership that is between645investors and the small businesses, with each party, I think,646focusing on achieving success. We all are on the same page.647    How has private equity investments helped you grow your648business? You talked a little bit about that, but I would like649to hear you expand further on areas like operations and650workforce expansion and whether or not you've been able to651enter any new markets.652    Ms. FIELDS. Yes, thank you for the question. And as you653mentioned, it has been a true partnership for us, not just654access to capital.655    Initially, when we first were owned by private equity, the656main thing that they helped us do is quickly understand how to657create a more efficient operation. We did not have as much658expertise as we needed to understand what that meant. So for659them to quickly come in and help us understand how to re-lay660out our plant, how to make best use of the equipment that we661had, not necessarily putting all new equipment into the662facility, but making sure we were making the best use of that,663and also how to make sure that we were using a labor that we664had efficiently and using the inputs efficiently for us. That665was the first thing, making sure that we could be as efficient666as possible and allow us to compete on a level playing field.667    Secondly was about reinvesting back into our people. And668for us, what that meant was making sure that we could make our669work environment more pleasant to work in. Sometimes670manufacturing can be a little bit harsh, and that makes it671really hard to keep and retain employees on the manufacturing672floor. There are some things that we really wanted to do before673we had a private equity partner to make our work environment674more pleasing to work in, and we weren't able to. We have since675been able to do that. That has been exciting for us.676    Recently, we have expanded by taking market share and have677expanded our business about 40 percent in the state of Texas--678--679    Chairwoman VAN DUYNE. Great.680    Ms. FIELDS.--which is a large housing market. We serve the681housing market, and we are presently in a year where we are682growing about 15 percent. So we are very excited.683    Chairwoman VAN DUYNE. Great. I love to hear it.684    I am going to now recognize Ms. McIver for 5 minutes.685    Mrs. MCIVER. Thank you so much, Chairwoman.686    Mrs. Mendoza, small businesses have historically relied on687two main sources to secure funding: approaching a bank for a688loan or attracting investors. Why might a small business choose689to seek investment from a private equity or a venture capital690fund over a bank loan?691    Ms. MENDOZA. Revenue. I mean, they oftentimes don't meet692the revenue requirements or the historical balance that you693need in order to be able to get the service and the terms that694you require from a bank. And so what we see is that the way695that our financial system works, you need on ramps and off696ramps. So a lot of the products that we invest in are around697getting small businesses and individuals bank ready. So what698can they do to get there? And so venture really fills that gap.699    I think one of the beautiful things about this table is you700have the entire capital stack sitting here and we are all701agreeing. One of the innovative technologies that we are702investing in is solving a lot of the manufacturing issues that703you have with digital twinning and going all over the country704and the world, making those communication cycles much faster.705Their revenue is not at the point that they could go to a bank706loan and invest deeply in that technology to be able to get to707the revenue that they need to grow.708    Mrs. MCIVER. Thank you. During my opening statement, I709talked about African-American and Hispanic female entrepreneurs710and how they receive just 0.43 percent of all venture capital711investment in 2020. As a venture capital investor, why do you712think it is so hard for these entrepreneurs and small business713owners to access equity finance opportunities?714    Ms. MENDOZA. I think the beautiful thing about bias is it715works two ways, right? Everyone is more likely to hire someone716from wherever they are from. And our capital stack at this717moment, especially in the area of venture, is really718homogenous. So as you go up into the general partnership of VC719firms, there are fewer women, there are fewer people writing720the checks.721    One of the reasons I started this firm was I was in722corporate and I had kids and it was hard. Like nothing illegal723happened, but my basement--you know, my desk was magically in724the basement as soon as I told them I was pregnant. And so I725realized very quickly it was not going to change unless the726money was coming from women, that we couldn't implement the727changes that we needed unless we had a capital stack that was728more reflective of our nation. Fast forward a few years, we729have done a lot of that.730    Mrs. MCIVER. Thank you for that. For these entrepreneurs731and small business owners to receive more equity financing732opportunities, there obviously needs to be more opportunities733to forge important networks with venture partners that are734likely to invest with them. What recommendations do you have735for how we here in Congress can help expand these networks?736    Ms. MENDOZA. I had a small business in Boston recently tell737me that workforce development and networking was the738government's version of let them eat cake. It was Boston, so he739was a little harsh with his words. But what I think is we need740to consistently partner the capital and the training and the741networking at every single step of the capital stack in order742to be able to scale these businesses. I think we keep trying to743legislate the quick fix or the next thing or the thing that we744can get done this year, this session. But this is a long-term745approach solution that we need to implement over time. We have746been moving in this direction for 20 years and I think we will747continue moving here.748    Mrs. MCIVER. Thank you for that.749    Madam Chair, I yield back.750    Chairwoman VAN DUYNE. Thank you very much.751    The Chair now recognizes Mr. Wied from the great state of752Wisconsin for 5 minutes.753    Mr. WIED. Thank you, Chairwoman Van Duyne, and thank you to754all of our witnesses for testifying here today.755    Access to capital is essential for entrepreneurs to start756or expand their business. Yesterday we heard from Administrator757Loeffler, whose testimony spoke to many of the reforms the SBA758has taken over the past several months to reform federal759lending programs that were effectively torched under the760previous administration. She also testified about the761deregulation efforts being undertaken to remove the762bureaucratic boot that has held down small businesses the past7634 years. And I applaud her work to reform the SBA and make Main764Street America Great Again.765    Private equity represents another important way for small766businesses to have the capital they need to thrive. Under the767previous administration, we saw a $1.2 trillion decline in768private equity investments thanks to aggressive overregulation769that led to tens of thousands of fewer private equity770investments. Fortunately for entrepreneurs across the country,771House Republicans and President Trump are working hard to772deregulate and extend vital tax cuts for small businesses.773    Ms. Fields, thank you for your courage in being a leader,774small business owner. I give you a lot of credit. Clearly,775private equity is--they believe in you and your leadership and776your character. So thank you for all that you do.777    Mr. Bastable, how is private equity helping small778manufacturers remain competitive?779    Mr. BASTABLE. Yeah, it is a great question. And, you know,780I think one of the things we consistently see with small781manufacturers is the lack of access to innovation and new782technologies that can help them be competitive with, frankly,783foreign products coming into this country. And whether that is784digital marketing or that is leveraging new tools with AI or785upgrading their ERP system or automated manufacturing786equipment, those are things that cost a lot of money. And you787know, at times there are--it is too much money for those788companies to invest in. And so we can come in and really help789work with the teams to implement those solutions.790    Mr. WIED. Clearly a great benefit.791    Ms. Mendoza, when awarding loans to immigrants, do your792companies use E-Verify or other federal database to ensure the793recipients of your company's loans are in the United States794here legally?795    Ms. MENDOZA. So we don't do loans. We do equity796investments. And our anchor bank is Bank of America. And so the797Bank Holding Act language is in our LPA. And so we are only798investing in Fund III out of companies domiciled in the United799States. In Fund II, we invested internationally, but it was a800seed stage fund. And all of our founders go through a typical801due diligence process, like you do when you are hiring someone,802background checks, all those things.803    Mr. WIED. So in the testimony provided you mentioned the804system, you know, working against certain groups of people,805including those that didn't graduate from an Ivy League school806or, you know, who did not live in the East or the West Coast.807So what is the demographic breakdown of the business owners who808have applied for--applied with you, with Mendoza Ventures? Not809those that have been approved for investment, but those that810have applied.811    Ms. MENDOZA. Like I said, our portfolio looks like the812nation. So we have a--I think unquestionably we have a more813diverse applicant pool because I am a female general partner814out there doing this work, and like attracts like. But the ones815that are getting through Investment Committee, out of 15816companies, we have 2 female founders. We have a Korean-American817founder, we have Latino founders, we have--we are lining up818pretty well with the demographics of the United States.819    Mr. WIED. Okay. So a statistic on your website, which you820founded and are general partner at, says 90 percent of your821loans go to startups led by immigrants, people of color, and822women. So if 90 percent of your loans go to startups led by823immigrants, people of color, and women, despite only824accounting--well, we don't know what the overall applicants825are, would it be fair to say that you give a preference to826people based on those factors?827    Ms. MENDOZA. No, I think it is fair to say that we give a828preference to talent in a country where 51 percent of the829population is female, 20 percent of the population is Latino.830And I will have to double check my statistic, but I think it831was 32 percent is Black. And if you are equitably distributing832capital on a fair shake basis, that is what it should look833like.834    I would like to ask the same question of the firms that835have deployed to 99 percent white men at the same time. I think836if you are deploying to any population and you are giving837talent a chance, your deployment should look like the838population that you are deploying to. We also have white male839founders with great teams.840    Mr. WIED. All right. Well, thank you. And I yield back.841    Chairwoman VAN DUYNE. Thank you.842    I now recognize Mr. McGarvey from Kentucky for 5 minutes.843    Mr. MCGARVEY. Thank you, Madam Chairwoman. It is no844question that private equity has sort of changed the landscape845for small businesses. Over the last decade, the United States846capital markets as a whole have enjoyed enormous growth, but a847disproportionate share of that is going into the private848markets rather than the traditional public equity markets.849    So I will just say I am not reflexively anti-private850equity. I understand there is, there is a legitimate role for851private equity firms and often providing capital to small852businesses. But I do share the concerns of my colleagues about853some of the private industry--private equity's consolidation in854healthcare, and some of the industry's tactics in doing so.855    Ms. Mendoza, private equity firms have drawn criticism over856the years for exactly some of those tactics. You know what they857are: layoffs, selling off assets for quick cash, loading up a858business with tons of debt, selling it off, and, you know, and859the list goes on and on. And while these strategies can860maximize returns for a private equity fund's investors, they861often leave businesses, communities, workers worse off. So862considering these well-publicized issues that we have all seen,863what are the potential drawbacks for small businesses who864choose to partner with private equity or private credit rather865than going to traditional lending markets? And then what are866the advantages?867    Ms. MENDOZA. A lot of the times business are going there868because traditional lending markets won't serve them. So it is869just like your personal finance. When you have money and you870don't need money, that is when the bank is willing to give it871to you. And so as you move down that spectrum, the terms are872going to get more predatory. It is business.873    I think that part of the issue is also that the capital874often is not coming from the communities. And so part of the875reason that we are so passionate about representation across876our entire capital stack is that when the capital comes from877the community, you have some checks and balances in place. You878know, in New England we fish a lot and we always say that you879need local knowledge in order to be able to get anything. And I880think a lot of those problems are endemic of a disconnect in881priorities between the community and the private equity firm882that is usually somewhere else coming in with very different883goals. We need to pivot that to being building rather than884extractive.885    Mr. MCGARVEY. Does seeking private capital through the SBIC886negate some of those problems that could happen for a small887business?888    Ms. MENDOZA. Yes, I think it does because it puts a889standard term out there for companies that need it. And so it890creates essentially a competition in the marketplace where you891have a more fair product for the business owner.892    Mr. MCGARVEY. Thank you for that. And Mr. Bastable, I want893to talk to you. I am from Louisville, Kentucky, so we are both894from the middle of the country. In fact, I went to the895University of Missouri and married a Jeff City girl. So have a896connection with Missouri certainly. You know where we are from897and we know that most of the private equity investment and job898growth takes place on the coasts and in big cities around the899country. Last Congress, the House passed the Investing in All900of America Act to give SBICs bonus leverage to invest in rural901and underserved small businesses.902    How else can Congress increase investment in under903capitalized businesses in places like my hometown of Louisville904or in St. Louis, Missouri, where you have an office? Is there a905greater role for SBIC is in that?906    Mr. BASTABLE. It is a great question. And the SBIC program907is a phenomenal program and it is amazing how much capital908flows into these rural communities because of that program. And909I think the bill, the Investing in All America Act, and910increasing the leverage limit will continue to drive more911capital into these rural communities in the middle of America912where, frankly, it is a lot of manufacturing industrial jobs913where they make products.914    Mr. MCGARVEY. And when you talk about increasing that915limit, is that something you would peg to a number or would you916peg it so it continues to move?917    Mr. BASTABLE. I think, I am a simple person, I think918picking a number and then maybe moving it in the future would919be the easiest path forward.920    Mr. MCGARVEY. Thank you very much. Appreciate that.921    And Madam Chairwoman, I yield back.922    Chairwoman VAN DUYNE. Thank you.923    I now recognize Chairman Williams from Texas for 5 minutes.924    Mr. WILLIAMS. Thank you, Madam Chair. And Mr. Bastable,925again, thanks for being here.926    The Trump administration has made it clear that927revitalizing American manufacturing is key to strengthening our928economy and creating jobs. SBA Administrator Loeffler has929mirrored those efforts with her Made in America Initiative,930which rolls back burdens from regulations and supports pro931growth policies. Therefore, many private equity firms are932channeling critical investments into small manufacturers across933the country.934    So how is your firm helping small- and mid-sized935manufacturers modernize their operations and expand936manufacturing production to remain competitive in today's937economy?938    Mr. BASTABLE. That is a great question. And I mentioned in939my opening statement one particular investment we have in940Graham, Texas, which you may be familiar with. And they941refurbish shipping containers and turn them into ground level942offices. And one of the things we did was we invested in, you943know, tuition reimbursement for all those employees. We944invested in digital marketing, we invested in new manufacturing945techniques to help them be competitive in the market. And as946you know, Graham is not a huge city, and so it is really947important that you create the education that is required for948these, you know companies to retain really great talent, and to949bring them into the community.950    Mr. WILLIAMS. Well, that is great. And so what more can be951done, do you think, to make it easier for private equity952investments to identify and invest in small manufacturing?953    Mr. BASTABLE. Yeah, I think the bill that has been954proposed, the Investing in All of America, Act and increasing955the leverage for the SBIC program is one great way to continue956to bring capital to manufacturing businesses.957    Mr. WILLIAMS. Okay, great, thanks. Graham's home of the958Steers. Now, remember that.959    Ms. Fields, small businesses often face significant960challenges that can limit their growth potential. And your961company's success shows how private equity investment can make962a real difference in overcoming these obstacles and this also963provides significant returns to both the investors and the964entrepreneurs. So Ms. Fields, can you share how beneficial it965has been to identify potential investment opportunities outside966the traditional investment hubs, such as Silicon Valley?967    Ms. FIELDS. Yes, it is a great question. And I think that,968you know, we are about as far from Silicon Valley as it gets.969We are in the middle of Oklahoma and we are producing real970product that everyday Americans need in their homes. As a small971business owner, we have to grow. If we don't grow, we are not972going to survive. To have private investment that allows us to973make the investment in things that we need to make at the pace974that we need to make them to stay relevant in our market has975been critical to us. Without that, we would not have been able976to do the things that we have done. We would be having to pick977between can I hire a single person or can I invest in a piece978of equipment? But I may not be able to do both. What this979allows us to do is to make the investments that we need to make980to stay relevant to our market and to do them in a way that981allows us to accelerate.982    Mr. WILLIAMS. Also helps with a great idea we had in983America called risk and reward. Right? You take advantage of984that.985    Madam Chair, I yield my time back. Thank you.986    Chairwoman VAN DUYNE. Thank you very much.987    I now recognize Dr. Conaway from New Jersey for 5 minutes.988    Mr. CONAWAY. Thank you, Madam Chair. Related to the issues989that small businesses face are not monolithic, but rather they990are unique to each business, which is why there is an inherent991need to ensure that there is more diversity among regional992managers. Increased diversity ultimately helps broaden the993scope for small businesses that can be impacted by private and994public investment.995    Ms. Mendoza, before asking my question, I can't help but996recognize and put a point on your own personal experience of997being moved to the basement, as you say, because of a pregnancy998and, well, you said it wasn't illegal, it certainly was wrong.999And it is the kind of thing, unfortunately, that women and1000people of color face. And I think, sadly, even more1001unfortunately, there are a lot of people who seem very1002satisfied with that state of affairs.1003    Ms. Mendoza, statistics show that hiring more women and1004multicultural investment managers at a fund is one of the most1005successful strategies for increasing investments for1006underserved entrepreneurs and small business owners. How can we1007help promote more diversity at investment funds and help our1008diverse small business owners?1009    Ms. MENDOZA. So I think it is important to divide the1010conversation to, I want to be clear, we don't have a race-based1011investment thesis. We are an American-made company investing in1012America with a portfolio that looks like America.1013    Mr. CONAWAY. Great.1014    Ms. MENDOZA. And when you do that, you end up with diverse1015perspectives at the table, just as it is important to have the1016diverse perspectives that are in this room. I will use the1017Silicon Valley example of two guys from similar backgrounds, go1018to school together, get funded, and think they are going to1019crush it. And then the market lets them know that that is not1020the plan for them. And so usually what we see is that in a1021founding team, if the founders are able to bring in diverse1022perspectives sooner, the business has a faster path to success1023because they are able to get out of their own heads in a way1024that is very quantifiable and meet the product and the market1025where they meet.1026    Mr. CONAWAY. Moving on to another issue in this area which1027I find very concerning. Community development and financial1028institutions in tandem with new market tax credits have made a1029massive impact in my home state of New Jersey. There have been1030a billion and a half new market tax credit investments in New1031Jersey and approaching $700 million worth of community1032development financing loans. These are critical programs that1033serve as a lifeline for small businesses in historically1034underserved communities by providing credit, capital, and other1035critical financing services available.1036    Earlier this year, President Trump issued an executive1037order that aims to curtail the nonstatutory work of the CDFI1038fund. And last week the administration issued their initial1039fiscal year 2026 budget proposal that guts the program and1040turns it into a discretionary grant program. Very interesting1041to see who will be able to walk in the door and get those1042grants. The CDFI venture funds provides equity and debt to1043undercapitalized businesses around the country and made more1044than 55 million in investments in small businesses in 2023.1045Additionally, CDFI venture funds provide equity and debt and1046equity features to undercapitalized businesses around the1047country and made more than $55 million in investments in small1048businesses, as I mentioned.1049    If you were going to broaden equity investments in our1050undercapitalized small businesses, isn't this administration's1051gutting of these important programs exactly what we ought not1052be doing?1053    Ms. MENDOZA. I do agree with that.1054    Mr. CONAWAY. I yield back.1055    Chairwoman VAN DUYNE. Thank you very much.1056    I now----1057    Mr. CONAWAY. No. Oh, I don't. Sorry. I want her to answer1058the question. I will yield in a second.1059    Chairwoman VAN DUYNE. Okay. I was like, you are staring at1060me. I am like, okay.1061    Mr. CONAWAY. I was going to stop talking and let her1062finish.1063    Chairwoman VAN DUYNE. Ms. Mendoza.1064    Ms. MENDOZA. Speaking of the system, I will always mess up.1065    Chairwoman VAN DUYNE. Do you want to go ahead and answer?1066    Ms. MENDOZA. Yeah. I was just going to say I think Detroit1067is a great example of what a CDFI can do first for a city. You1068know, since the '80s and '90s they have been bringing Detroit1069back with very similar investments. And I think, honestly, the1070only failing I can think of with CDFIs is that we didn't put1071enough in, the need is greater than the capital. And I can't1072name a local small business owner that knows their local CDFI1073off the top of their head is that we need a PR campaign for1074them.1075    Mr. CONAWAY. Great. And thank you. And now I yield back.1076Thank you, madam.1077    Chairwoman VAN DUYNE. Excellent. Thank you.1078    I now recognize Mr. Latimer from New York for 5 minutes.1079    Mr. LATIMER. Thank you very much, Madam Chairman.1080    There seems to be some misconception that by presence on1081the East Coast, perhaps it is true on the West Coast as well,1082that automatically funding will follow. And my experience in my1083area is that the same challenges exist market by market,1084depending on the business and depending on the location of it1085within that district or that market. So I would like to ask1086each of you one question, and I will start with Ms. Mendoza,1087but I would like each of you to address it. What do you see as1088the things that the SBA can do proactively to better promote1089the programs that would help these communities to make that1090connection as a government agency? What tools would help us1091better get that message out and reach the people that can best1092be benefited by these programs?1093    Ms. Mendoza and then the other folks on the panel, I would1094appreciate that.1095    Ms. MENDOZA. I think we are a great example of this. We are1096a successful venture capital firm built from scratch, and we1097haven't gotten a single grant from anyone because I don't have1098time to read the website and figure it out and apply for it1099when I can be potentially closing an investor. And so the one1100tool that you can do is meet the market where it is and lower1101barriers at every possible entry so that these small business1102owners who are already taxed for time and resources, it is very1103clear to them what is available to them and how they apply for1104it.1105    Ms. FIELDS. Yes. Thank you for that question. I think for1106us as a small business owner, we often don't have time or are1107unaware of what opportunities are even out there for us. We are1108simply too busy just trying to run the day-to-day of the1109business. I think for me being locally in Oklahoma, I sit on1110the board of the Oklahoma Manufacturing Alliance, which is an1111MEP, and they have been instrumental in helping us understand1112what is even out there to support us for a small business. For1113them to come into our business and understand what happens for1114us on the local level, what we need on a local level, and what1115is available to us has been instrumental in us being able to1116take advantage of these types of things.1117    Mr. BASTABLE. I think the first is to educate and make sure1118people understand what programs are available. But I think the1119biggest impact would be simplification. I think we have taken1120something that should be relatively simple and we have made it1121very complex. We have made it arduous, time-consuming, and I1122think a lot of people just drop out of the process because of1123the complexity associated with it.1124    Mr. LATIMER. Thank you very much for your answers.1125    Madam Chair, I return the time.1126    Chairwoman VAN DUYNE. Thank you.1127    I now recognize Ms. Goodlander from New Hampshire for 51128minutes.1129    Ms. GOODLANDER. Thank you, Madam Chair. And thank you to1130our witnesses for being here today and for your testimony.1131    I appreciate the positive examples that have been lifted up1132today. I came to Congress having served in the antitrust1133division at the Department of Justice. So I gave a great deal1134of time to really try and understand how private equity and1135venture capital firms are operating in really important1136industries across our economy, increasingly consolidated1137industries across our economy. I spent a lot of time thinking1138about our housing markets and our healthcare industry. And, you1139know, as I have been on the job now for about 150 days and as I1140have traveled around my state in New Hampshire, the concerns1141that I was looking at at the Justice Department, I am seeing1142them play out in practice on the ground. The role that private1143equity firms have played in the nursing home industry in1144rolling up mental healthcare providers across the country, the1145concerns are real.1146    And I wanted to, at the outset, enter two articles into the1147record today. One is an op-ed written by one of my constituents1148from Nashua, New Hampshire, Melbourne Moran. He writes about1149the critical role of small businesses in mental healthcare. And1150his small business, Wanderlust Therapeutic Services, plays a1151really important role in my hometown Nashua in ensuring mental1152healthcare access. He says that local health practices like his1153aren't branches of large corporations. ``They are local mom-1154and-pop counseling shops, owned and operated by licensed1155clinicians who live and work right alongside their clients.1156These professionals aren't answering to shareholders or1157national franchise boards. They are not corporate entities.1158They are answering to the needs of their neighbors.'' And I1159think he is absolutely right.1160    I also wanted to enter into the record a piece from one of1161my former colleagues at the Justice Department, Brendan Ballou.1162He points to--it is a New York Times piece entitled ``Private1163Equity is Gutting America and Getting Away with It.'' He points1164out at the outset that according to the nonpartisan National1165Bureau of Economic Research, private equity ownership just in1166the nursing home industry alone is responsible for 20,0001167premature deaths over a 12-year period.1168    So I wanted to enter these articles into the record and1169ask, beginning with you, Ms. Mendoza, if you could comment on1170what you have observed in the role that private equity and1171venture capital firms have played in industries, including in1172our healthcare industry and our housing industry, and do you1173see any problems?1174    Ms. MENDOZA. In my opening remarks, I quoted Eric Ries from1175Lean Startup, and his entire concept is that you need a1176feedback loop. You need to release a product into market, talk1177to the market, and come back. I see the same problem in private1178equity that I see with us rolling out programs recently is that1179that feedback loop is broken and we are not listening to the1180customers that are consuming it and coming back to them. So I1181think anytime that you blitzscale an industry without a1182feedback loop, and we have a history of that in the United1183States, you end up with these issues.1184    But I do want to be careful that not all private equity1185firms are created equal. I also use the example of, you know,1186we have 55 million under management, A16Z is in the billions.1187And so I think it is a different--when you are legislating this1188entire industry, it is a lot like trying to legislate1189agriculture. You know, there are small organic farmers. There1190are also huge food factories, and you can't put them all in the1191same bucket.1192    Ms. GOODLANDER. I understand that. A follow-up question is1193as a general matter, as a general principle, do you agree that1194firms should be sued and be held accountable, should be able to1195be sued and held accountable, for any wrongs that are committed1196by companies in their ownership and control?1197    Ms. MENDOZA. So if the private equity firm has a1198controlling interest in that company, they would be voting1199board members and they should be held accountable in that role1200for that.1201    Ms. GOODLANDER. Would our other witnesses like to comment1202on that question or?1203    Mr. BASTABLE. No, but are you referring to the first1204question you asked about consolidation?1205    Ms. GOODLANDER. No, I am asking do you think as a general1206principle that firms should be able to be held accountable,1207should be suable for wrongs committed by companies that they1208effectively control?1209    Mr. BASTABLE. I mean, I think it is a nuanced question1210depending on what is actually happening. And as you mentioned,1211you know, there are different situations in different sized1212businesses and different parts of the capital stack where1213private equity is involved, where they may be a lender and they1214may have board observation rights, or they might be a minority1215investor. And so it is a broad, you know, topic.1216    Ms. GOODLANDER. Sure. I think, though, that this1217cornerstone principle of accountability is part of what we need1218in this country to restore faith in private equity firms across1219our country when so many communities have felt the pain of an1220unaccountable entity gobbling up some of the most important1221institutions in the life of our community.1222    So I thank you and I yield back.1223    Chairwoman VAN DUYNE. Thank you very much.1224    I now recognize Mr. Bresnahan from Pennsylvania for 51225minutes.1226    Mr. BRESNAHAN. Thank you, Madam Chair, for convening this1227important hearing. And thank you to our witnesses for being1228here today.1229    I have always been a strong advocate for expanding1230opportunities for our entrepreneurs and small businesses to1231start, grow, and thrive. For some, the right path may be1232working with the local community bank, securing an SBA loan, or1233receiving a government grant. For others, private equity can1234serve as a powerful engine fueling innovation, expansion, and1235ultimately a chance to achieve the American Dream. When done1236right, these partnerships can help small businesses grow in1237ways that benefit all of us, creating good, high-paying, and1238meaningful jobs for hardworking Americans.1239    Ms. Fields, your work in the manufacturing sector,1240especially relevant to Pennsylvania's Eighth Congressional1241District, where manufacturing plays a vital role to our local1242economy, I want to revisit a particularly compelling part of1243your testimony that deserves to be underscored in this1244conversation. You shared that thanks to your partnership with1245private equity, your company is now in a position to onshore1246more of its manufacturing operations and plans to grow your1247workforce by over 30 percent in the next 18 months. That kind1248of investment in American jobs and communities is exactly the1249type of success stories we should be recognizing and supporting1250here in Congress.1251    With that, Ms. Fields, I will turn to you for my first1252question. You mentioned onshoring your manufacturing1253operations. Could you expand on why they are such a priority1254for your business and what specific challenges you are1255encountering in doing so?1256    Ms. FIELDS. Yes. We always want to be an American1257manufacturer first and the only reason that we do not1258manufacture something in America is simply because we cannot1259compete with what it costs us to produce it here versus what it1260would cost us to produce it overseas. And so, we do presently1261manufacture some products overseas.1262    By having private equity come alongside us and the things I1263had previously mentioned about allowing us to figure out how to1264get cost out of our operation, become far more efficient, and1265to understand how to better run a more efficient facility, it1266allows us to look at products that were previously unattainable1267to us to manufacture domestically. Now we can bring those back.1268Obviously, the potential tariffs out there also allow us to1269look at that even harder today. And so we can now confidently1270make those needed investments to expand our product line and1271bring those products back, knowing that we can produce them1272here and compete with other larger companies.1273    Mr. BRESNAHAN. What challenges are you experiencing on the1274workforce development side?1275    Ms. FIELDS. Our biggest challenge is access to workforce.1276So a question for us is being able to bring people in to do1277manufacturing. It is sometimes hard to find people, so we1278partner with local trade schools to get those people.1279    Additionally it is hard getting people to stay. Once they1280join us, we get them trained, and getting them to stay so we1281have to be competitive in terms of pay, benefits and a pleasant1282work environment.1283    Mr. BRESNAHAN. Well, I appreciate that. Now, regarding the1284partnership with private equity, did you look for similarities,1285similar overlapping business practices, or what was the--if you1286can point to the single most beneficial part of the1287relationship and partnership, what would that have been?1288    Ms. FIELDS. I think for us, obviously, capital is part of1289it, but for us it is having expertise brought into our1290business. Our private equity firm, as I mentioned, is actually1291Mr. Bastable's firm that we are partnered with and they focus1292on manufacturing in the lower middle market, which is exactly1293in the pocket for us. They have people on their team that have1294expertise that we simply did not have access to or could not1295afford to have access to. The partnership, the relationship,1296the expertise and the support that they bring is critical to1297us.1298    Mr. BRESNAHAN. I appreciate that.1299    Mr. Bastable, I will pivot to you. Right now we are looking1300at relatively high interest rates, around 7 percent, which1301makes it difficult for businesses to justify new investments.1302In that context, can you elaborate on how private capital can1303serve as a critical tool to help businesses invest, scale, and1304create jobs in the United States?1305    Mr. BASTABLE. Yeah, it is a great question. And so as1306interest rates increase, it becomes more costly for them to1307take on debt, to invest in equipment, and so on and so forth.1308And, you know, when you have a private equity partner who has1309access to capital or equity, they can invest in those1310opportunities and so they don't have to make interest payments1311every time they make an investment into their business.1312    Mr. BRESNAHAN. Do you traditionally charge like a1313management expense back to the company that you are partnered1314with?1315    Mr. BASTABLE. Minimal.1316    Mr. BRESNAHAN. Okay. With that, I yield back. Thanks.1317    Chairwoman VAN DUYNE. Thank you very much.1318    Seeing no other questions, I want to thank our witnesses1319for their testimony today and for appearing before us.1320    Without objection, Members have 5 legislative days to1321submit additional materials and written requests for the1322witnesses and to the Chair, which will be forwarded to the1323witnesses. And I ask the witnesses to please respond promptly.1324    If there is no further business, without objection, the1325Committee is adjourned.1326    [Whereupon, at 11:04 a.m., the Subcommittee was adjourned.]1327                            A P P E N D I X13281329[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]13301331                                 [all]