The Washington Post

SBA launches new $2.5 million accelerator competition despite pushback from Congress


Despite criticism from lawmakers, the Small Business Administration isn’t backing down from new initiatives designed to support early-stage technology upstarts. (J.D. Harrison / The Washington Post)

During an interview last week, Maria Contreras-Sweet, the new head of the Small Business Administration, said she will urge her team to keep looking for new ways to help the agency stay current, despite criticism from lawmakers that the department should stick to its core programs and stop funding new initiatives.

Days later, it has become even more clear: She and the agency aren’t backing down.

On Monday, Contreras-Sweet announced plans to move forward on one of the very programs that has drawn objections from several lawmakers on the House Small Business Committee. Under the new initiative, the agency plans to award $50,000 to each of 50 business accelerators, incubators and co-working spaces (or individuals with plans to launch such a program), for a total spend of $2.5 million, searching for ones that fill geographic and sector-specific gaps in the market.

“We want to export the Silicon Valley model across the nation,” Contreras-Sweet said while announcing the competition in San Francisco during a kickoff event for National Small Business Week.

As part of its search for applicants, the agency is planning several “demo days” around the country, where the directors from various incubators and accelerator programs can pitch their models and share best practices with one another. The SBA held its first such event earlier this year during the South by Southwest festival in Austin, Texas.

The competition is part of a broader push by the agency to provide more resources and assistance to innovative, early-stage companies that have the potential to expand (and create jobs) more quickly than traditional mom-and-pop businesses.

“It’s important for us to stay current,” Contreras-Sweet said during her first press interview last week. She added that, while the agency will not pull back on its signature lending and counseling programs for small businesses, it must find ways to better support fast-growing upstarts.

“We can’t be a stagnant department and say ‘this is the way we’ve always done it, so we must always do it that way,’ ” she added.

However, some believe the agency is straying too far from its mission.

Citing the very competition the agency kicked off on Monday, Rep. Nydia Velazquez, the top Democrat on the House Small Business Committee, recently argued that the agency appears to be trying to solve a problem that doesn’t exist. She pointed out that more than 100 accelerators exist nationwide with a combined $5 billion in funding commitments from investors — without any federal assistance.

“Clearly, there’s not a need,” Velazquez said during a hearing earlier this month.

In response, SBA officials have said that, while plenty of accelerator and incubator programs have sprouted in recent years, they are heavily concentrated on the coasts. Javier Saade, the head of the agency’s office of investment and innovation, says the competition is meant to spur the development of similar work spaces in underserved markets.

In addition, the department will give priority to accelerators that support female entrepreneurs and those that cater to early-stage manufacturing companies; both of which the agency says struggle to secure capital, counseling and mentorship opportunities.

Addressing another concern for lawmakers — that the agency doesn’t always review the success of its programs or measure the return on its investments — the SBA will require the recipients of the $50,000 grants to report to the agency every three months for the first year with updates on the number of jobs they have generated, funding they have raised, start-ups they have launched and corporate partnerships obtained.

“We have to be responsible with the assets we are assigned,” Contreras-Sweet said. However, she added, “that needs to be tempered with this idea of advancing and innovation.”

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.
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