First, the facts: Karen Gordon Mills has been nominated by President-elect Obama to lead the Small Business Administration. She has been a private equity investor since 1993. She was founding partner and managing director of the New York firm Solera Capital from 1999 to 2007 (Forbes). She comes from the family that invented Tootsie Rolls (WSJ Blog). She is current chair of the Maine Governor's Council on Competitiveness. Her husband, Barry Mills, is president of Bowdoin College…
Second, the spin: According to President-elect Obama, "A venture capitalist who invests in small businesses, Karen understands the challenges faced by both small-business owners and the workers they employ. With a background in the private sector and experience helping Maine's governor promote growth across the state, I am confident that Karen will lead an SBA that will not only help small-business owners realize their dreams, but help our nation rebuild our economy."
Of her appointment Mills said: "America's spirit of entrepreneurship is one of our greatest assets as we compete in this global economy. I am very pleased to be joining the Obama administration in a role that fosters this entrepreneurial spirit."
Kelly Spors at the WSJ points out that "Several women's business groups had hoped the next SBA administrator would be female and promote programs that help women-owned businesses get more government contracts and loans. Maine papers today reported that Republican Sen. Olympia Snowe recommended her for the post."
Spors goes on to add this: "Many small-business experts hoped the next SBA chief would be an entrepreneur, considering the past few were not. Ms. Mills' experience founding private-equity firms and working with many start-ups may satisfy that desire. Others speculated the post might be elevated to a Cabinet position, which doesn't seem to be happening – at least yet."
Then, the naysayers:
- American Small Business League (ASBL) President Lloyd Chapman – "This is a clear indication that President-elect Obama and the democrats in Congress intend to sell America's small business contracting programs to wealthy venture capitalists. They have been putting this together for over a year now. It looks like he is going to create another loophole that will divert billions of dollars away from the middle class economy and into the hands of wealthy investors."
- Spencer Ante at Creative Capital: "Obama Did Not Tap a VC to Head the SBA; He Tapped a Private Equity/Buyout Specialist. The distinction is important. VCs take big risks by investing in new business. Private equity players take over or invest in mature companies and try to make them more efficient. Although both are considered part of the private equity industry, they play very different roles in the capital markets."
Conclusion: The Small Business Administration has not a very effective body under the outgoing Bush Administration. Congresswoman Nydia Velázquez (chair of the House's Small Business Committee) recently described the SBA. "Through budget cuts and mismanagement during the last eight years, the SBA has become nothing more than a shell of the agency it used to be," said Velázquez. She went on to say she hoped that the Obama administration would be able to reverse this trend over the next four years.
I think Spencer Arte wants to make a bigger distinction between venture capital and private equity than exists in real life. To Arte, private equity is an elephant and venture capital is a rhinoceros; they may both be powerful, but they don't crossbreed. I think a better analogy would be that PE is a hound dog and VC is a terrier. Maybe they are historically bred for different tasks, but the two can (and, in the real world, do) mix…
Will Mills be good for small business? Ask me again in a year…