A $10 billion federal initiative that could transform the capital landscape for entrepreneurs is evolving rapidly. The State Small Business Credit Initiative (SSBCI) was included in the $1.9 trillion federal stimulus package enacted in March. The inclusion of SSBCI was an extraordinary victory for entrepreneurs, but the greatest opportunity lies in its implementation, which is now underway. If implemented properly, the initiative has the potential for once-in-a-generation change. The entrepreneurial community needs to be vigilant to ensure maximum impact.

SSBCI is not a new program. From 2010 to 2017, it provided $1.5 billion to states, territories, tribal governments, and the District of Columbia to spur private capital investment. The new SSBCI is about seven times larger than the first version. But we learned important lessons from last time. To make the most of the program, capital should be treated not merely as a one-time, direct infusion into businesses. Instead, capital can be structured to catalyze the development of new investment funds, thus creating multiplier effects in perpetuity. These "funds-of-funds" become pools of capital that help create more pools of capital.  I believe every region should have its own fund-of-funds.

We have seen the success of this strategy in other countries. For example, Israel's Yosma program, a government-sponsored fund-of-funds, allowed the country to build the most successful venture capital industry per capita on the planet. Most of Latin America's venture capital industry was spawned in the same way, through a multinational government-sponsored fund-of-funds called the Multilateral Investment Fund. In the United States, however, only a few states created funds-of-funds with their last round of SSBCI money, and most of them put heavy constraints on these programs. We now have a new and bigger opportunity, and the proceeds from new funds-of-funds could be recycled to form evergreen institutions -- perpetual flywheels that, once in motion, continue to build momentum and compound the initial amounts invested.

In addition, SSBCI capital should be used as anchor investors in new funds, leading the way to fill gaps in the capital markets. And governments should think flexibly beyond traditional models of lending and venture capital that serve fewer than 17 percent of entrepreneurs by fostering diverse capital models, such as revenue-based investing, flexible venture capital, crowdfunding, and profit-sharing models. 

The next steps are critical. The U.S. Department of Treasury has recently issued its dollar allocations for different states based on job losses, and the magnitudes speak for themselves. California will get the largest amount at $894,973,879; New York is next at $377,125,918. Twenty-nine states, the District of Columbia, and territories will each get the smallest allocation of $56,234,176. Missouri is included in this group, receiving about double the $27 million it got last time.

The U.S. Treasury has also published a timeline of programmatic milestones. By May 10, states, territories, and the District of Columbia must send notice of their intent to apply for the funds; the deadline for tribal governments is June 11. Not every state participated last time, but it is hard to imagine a state passing up this opportunity. Complete applications are due by December 11.

As this process unfolds, entrepreneurs, capital providers, and other entrepreneurial champions should make their voices heard. States and other jurisdictions are just beginning to explore ways to make the most of this opportunity.  They would benefit from hearing entrepreneurial voices - through both formal and informal channels. 

To share information about SSBCI and encourage input, the Center for American Entrepreneurship and Right to Start, in collaboration with Cromwell Schmisseur as subject matter experts, recently presented two webinar events. Both events were recorded and are available online. The first webinar focuses on the federal-state funding structure of SSBCI and recommendations for ways that various stakeholders can engage in the design and implementation of the initiative. The second webinar emphasizes specific challenges faced during implementation of the first SSBCI (2010-2017), potential solutions, and recommendations for Treasury on the relaunch. The webinars were attended by state and local officials, economic development professionals, financial institutions, and private investors, among other entrepreneurial champions.

As a moderator in both webinars, I found they provided vital insights and sparked lively discussions. For me, the biggest take-away was the significant variation in the needs and processes of different states and, therefore, the importance of involving entrepreneurs, entrepreneurial champions, and startup investors to influence how SSBCI gets properly implemented in each place.