Inside Goldman’s $500 Million Small Business Initiative
Goldman Sachs recently announced that it would provide $500 million in support for 10,000 small businesses, particularly those located in urban neighborhoods. A Who's Who of business leaders including the billionaire investor Warren Buffett and Harvard Business School professor Michael Porter have signed on the help. But the person who will be responsible for running the initiative day-to-day is Dina Powell, a former State Department official in the Bush administration who worked with Karen Hughes on education and cultural issues. Powell joined Goldman Sachs in 2007, as the global head of corporate engagement. Her first task was to set up a program called 10,000 Women--an initiative to foster entrepreneurship among women around the world. The small business outreach effort will be modeled on that program. Powell outlined the bank's plans in an interview with Inc.com editor Mike Hofman.
So it's a $500 million program. Can you break down how the money will be spent?
There's a $200 million contribution to management education, combined with wraparound services, and a $300 million capital investment in Community Development Financial Institutions or CDFIs, which provide capital to small businesses particularly in underserved areas.
Why are you choosing to invest money through CDFIs?
We became interested in small business as a focal point for an initiative starting a year ago because we believe, as many people do, that the vitality of the small-business sector was crucial to the overall economic recovery. The significant job creation that's needed for the recovery will inevitably fall on the shoulders of small business owners. And so we wanted to use our resources, our people, and our partners together to make an impact on the part of the economy where 65 percent of all new jobs are created. And then we started talking to Dr. Porter, who founded the Initiative for a Competitive Inner City, to study what factors contribute to the success of inner-city entrepreneurs, and we found that the list included educational opportunities, access to markets, access to networks, and access to capital. And as we were thinking about the size of the investment we wanted to make--the number of companies we needed to reach in an impactful way to achieve the results we wanted--we decided to work as partners with CDFIs because access to capital was critical, and they understand the areas we are looking to invest in. So we'll be providing them with investment capital and also with resources so, for example, some CDFIs will be able to hire more loan officers so they'll be able to get more done.
What will Warren Buffett's role be in all of this?
He has already provided us with a tremendous amount of strategic advice as a co-chair of the council. Long term, we think he'll help us communicate the belief that small businesses are the engines of economic growth. He'll also work with us on a small-business conference and an award that we'll give each year to the small business owner who best exemplifies the spirit of growth that we're looking to support.
When is that awards program set to begin?
It hasn't been decided yet, but some time in 2010.
Why are you thinking of this as a charitable program as opposed to a business opportunity?
We're thinking of it as an initiative to use our resources to help companies grow and create jobs. This program is actually modeled on another program we run called the 10,000 Women project. That program came out of some research that Goldman's economists did a few years ago, which identified women entrepreneurs around the world as a group that was underserved by educational institutions, by capital networks, and by other support services, even though they had high potential to grow their businesses. Investing in them has turned out to produce a terrific return. Now we're looking at small businesses, particularly in underserved areas, and we see another opportunity to leverage our resources there. We believe we can help entrepreneurs obtain the tools they need in order to grow.
How are you planning to encourage Goldman's employees to participate in the program as mentors or however else they might contribute?
One of the sources of pride for the team here is that we have hundreds of people on the waiting list to serve as mentors for the 10,000 Women initiative. Goldman employees have contributed in a number of ways--everything from guest lecturing a group of participants to mentoring one on one--in places from Rwanda to Afghanistan to Brazil. So there's enormous enthusiasm--and we also plan to work in select cities where there is a Goldman Sachs office nearby to use that office's skills to aid the local small business community.
So how does a small business owner get his or her name on the list?
I know I keep referring to the model I have with 10,000 Women, but I want to note that that program has a 14-percent acceptance rate, and we think 10,000 Small Businesses will operate in a similar way. To identify candidates, we'll be working with our partners such as the community colleges and universities, plus other partners like the Urban League and the Hispanic Chamber of Commerce--the gentlemen who head these organizations are on our advisory council, for example. We'll also be sourcing candidates through local chambers of commerce. Our criteria are that a business must have between $150,000 and $4 million in revenue, four or more full-time employees, and that it has been in operation for two years at a minimum.
Is the program geared more toward start-ups or toward established businesses?
Established businesses. We want people who have shown vision and passion already and are eager to use the access to skills and networking and contacts that we can provide them with. Our bottom-line objective is to aid entrepreneurial small businesses so they can go out and create jobs and grow.
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