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Carlos E. Peña

Smith Soc Featured Member

Questions and Answers with Adam Smith Society Members.

Carlos E. Peña | C.U. Boulder Chapter

Carlos E. PenaCarlos is passionate about the transformative power of finance, and he wholeheartedly believes that the best way to generate positive change in the world is through the effective allocation of capital towards high-impact businesses.

Before attending the Leeds School of Business at C.U. Boulder, Carlos was a senior loan officer at nonprofit microlender Accion Chicago, where he coached startups and secured over $1 million in financing for 100+ small-business owners. Prior to Accion, he worked as an analyst in Deloitte’s Financial Advisory Services, conducting research and performing valuations of public and private businesses.

Outside of work, Carlos is actively involved in the startup ecosystem as a mentor to entrepreneurs and a freelance consultant. Previous consulting work includes performing financial analysis for an angel investing club and assisting a family foundation to launch a micro-finance fund in Central America. Originally from Ecuador, Carlos came to the U.S. to attend the University of Notre Dame, from which he graduated with a double degree in finance and economics.

How has your experience in the startup world and finance sector related to or informed your views on economics?

My work in the finance sector, particularly in the early-stage investing field, has given me a deep understanding of the many ways in which capital can be deployed to generate an impact. Additionally, through my experiences at microlending and impact-investing institutions, I have seen firsthand how, driven by a more conscientious understanding of progress and a desire to see real change in the world, individuals and institutions alike are increasingly demanding that their investments generate more than just financial returns.

What are some of the biggest obstacles that firms or entrepreneurs run into when looking for capital?

It depends on the type of firm and the capital being sought. For brick-and-mortar businesses, which commonly use debt to fund their operations, the challenge is to meet banks’ underwriting criteria. Bank loan applications are primarily denied because of such factors as lack of sufficient collateral and limited credit: small-business operators often do not have large personal asset bases and are less likely to have interacted with the formal financial market in order to build up a positive track record.

Tech-enabled enterprises, which can rapidly scale and carry more risk relative to traditional businesses, instead finance their growth through equity—namely, angel and venture capital. The biggest obstacle to securing this type of capital is convincing investors that the assumptions underlying the projected exponential growth of your company are sound and that you have the right team to execute your growth plans. This is very different from proving that you would be able to make regular payments, which a debt investor would care about.

In what ways do you think that public policy can help spur new businesses and encourage capital investing?

Public policy can create incentives to attract capital to underserved areas, such as with New Market Tax Credit allocations. This program allows individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries that fund businesses in low-income communities. These tax credits essentially give investors an additional return that compensates for the lower risk-adjusted proceeds resulting from investing in underserved communities.

Policy can also boost entrepreneurial activity by lowering the cost of doing business, as the state of Illinois did in December 2017 when it reduced startup, annual filing, and other fees for limited liability companies (LLCs). Finally, policy can change to increase the ways in which business can be funded, such as when the JOBS Act allowed startups and small businesses to raise capital through crowdfunding platforms in exchange for equity.

What drew you to the Adam Smith Society? You’re on the leadership team of a new chapter: What are you most looking forward to this coming academic year?

I strongly believe that the best way to generate positive change in the world is through the effective allocation of capital toward high-impact businesses. I was drawn to the Adam Smith Society because it’s an excellent platform to discuss the benefits of free markets.

One of our goals as a chapter is to work closely with C.U. Boulder’s environmental and sustainability programs and to champion the idea that businesses can be a force for good if they adopt sustainable practices and take account of all stakeholders, as opposed to exclusively focusing on profits. There is a vibrant social entrepreneurship ecosystem in Colorado and a rapidly growing tech sector in Boulder; the potential to combine the two to create innovative business models that can better the world is very enticing. To this end, I am looking forward to our first event, which will focus on impact investing and the intersection of capitalism and philanthropy.

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