New VEDC With Barragan’s Exit

The Valley Economic Development Center entered this month with a new chapter in its history of serving small businesses in the San Fernando Valley. The Sherman Oaks financial and training assistance organization is looking for a new chief executive following the unexpected departure last month of its longtime head, Roberto Barragan. Senior Vice President Alex Guerrero told the Business Journal the center’s board of directors has created a search committee to find a new chief executive. It will hire an executive search firm to identify and solicit resumes from prospective candidates and make up a short list of people to interview. The full 17-member board will then vote on the final selection, Guerrero said. In the meantime, the board is comfortable in having Guerrero; Robert Lopez, the chief operating officer; and Robert Dennen, the chief financial officer, handle daily operations since all the employees were reporting to the three of them anyway, Guerrero said. “That stability and continuity allows the board to be deliberate in who they are looking for and what they are looking for in a new chief executive,” he said. The nonprofit is known for making loans to small businesses, particularly ones that may be challenged in getting traditional financing. According to its latest annual report, the center last year closed on $22.2 million in microloans and small business loans. That was about an 11 percent increase from the previous year. Also during 2015, the center assisted in financing 132 businesses, created 934 jobs and retained 3,909 jobs. Kenn Phillips, chief executive of the Valley Economic Alliance, a business attraction and retention organization located in the same building as the VEDC, said Barragan excelled at diversifying the services the center offered, taking it from loans to business consulting and training that has benefited thousands of business owners. “Many people have been able to start their business with the traditional type of training and with microfinancing to get them going,” Phillips said. Going forward, the VEDC does not plan on starting any new strategic initiatives but will focus on growing its business in the markets it already serves within the state and in other cities, Guerrero said. What will evolve is making the loan process more efficient, starting with a new automated platform available this month, he added. The new system improves the borrower experience by reducing the time for the application process. For example, the updated system gives a borrower permission to have the VEDC directly access tax returns from the IRS and statements from banks rather than having them scan and email them to the center. “Anything that would help them be more efficient and help us be more efficient we think this is going to take a lot of time off the process,” Guerrero said. Involuntary departure The VEDC celebrated its 40th anniversary on Sept. 24 at an outdoor gala at Grand Park in downtown Los Angeles. Barragan had a low profile at that black tie event. A week later, Barragan, 57, notified the VEDC staff of his resignation, effective Oct. 28. He agreed to stay as an advisor to the organization’s board until a replacement is named. According to insiders familiar with the situation, Barragan did not leave voluntarily and there was no single incident or issue that led to the board’s action. Instead, it was a disagreement over management style and a belief that Barragan’s skills no longer served an organization the size of the VEDC, the insiders said. “That way of operating is one the board felt could be better used with a different style of leadership,” one insider who requested anonymity said. Insiders did not mention any financial issue. However, according to the VEDC’s most recent Form 990 filed with the IRS, the nonprofit had a down year in 2014. It saw a 10 percent decrease in its revenue to $12.2 million. While, expenses increased about 25 percent – including a $1 million boost in salaries. The nonprofit’s “revenue less expenses” line was about $2.23 million – a drop of 60 percent. Barragan had been with the Sherman Oaks small business lender for 20 years, starting out leading a business assistance program in the east San Fernando Valley and later becoming the organization’s first director of lending. He became chief executive in 1999. Under his management, the VEDC grew to become the largest nonprofit business development corporation in the greater Los Angeles area with five area locations. The center opened the Pacoima Development Credit Union in 2005 to provide a banking alternative in the east Valley and the Pacoima Entrepreneur Center last year to provide small business and online-incubation services to entrepreneurs, as well as workforce development services to help low-income individuals find and retain employment. National expansion followed with offices opening in Oakland, Chicago, Las Vegas, the New York tri-state region and Miami. And that, according to insiders, may have led to Barragan’s exit. The center’s board felt Barragan’s management style was more appropriate for a growing, entrepreneurial organization than a large mature one. At this point, the VEDC finds itself no longer matched Barragan’s skillset, these insiders said. “When you are running so many programs there is a different style of leadership you are looking for,” one insider familiar with the situation said. In an emailed statement to the Business Journal, Barragan did not specifically address his leaving the organization or his future plans. He did say that he was proud of the work the VEDC did to help small business owners in undeserved area succeed. “Small businesses are essential to creating jobs that strengthen our communities,” Barragan wrote in the statement. “With respect, cooperation, and a passionate desire to do the right thing, VEDC has made a difference.” VEDC officials had no comment on Barragan’s departure other than what was put out in an email statement. “Over the past 20 years, Roberto led the VEDC to national prominence as a highly regarded community development financial institution. Under his leadership, the VEDC launched numerous community and business programs including the African American Loan Fund, the Women’s Entrepreneur Center, new business and technical training programs and many others,” the statement said. Dream jobs In a 2012 interview with the Business Journal, Barragan addressed his future with the VEDC and how long he would remain as chief executive. The national strategy he was implementing at the time was important and exciting and he needed the support of the board to continue it, he explained. “As long as my board supports me and continues to support, in part, a vision I’m excited about, I’m going to be around,” Barragan said in the interview. While there was no formal succession plan in place, there had been a reorganization of the VEDC’s hierarchy that could replace him, Barragan said in the interview. “We have three vice presidents now, two of which easily could be my replacement,” he added. As for what he would do after the VEDC, Barragan said he had two dream jobs. One was administrator of the Small Business Administration. The other was deputy mayor for economic development at the city of Los Angeles. “I’ve said enough about economic development in the city that I’d like to be the one to come up with a development strategy,” Barragan said in the interview.