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Washington's Rush to Support Startups

Jonathan Ortmans on December 12, 2011 Source: Policy Dialogue on Entrepreneurship

It was an active week for encouraging more startups in the nation’s capital. Take Thursday, December 8th. While I participated in a morning panel discussion on Capitol Hill with U.S. Senator Mary Landrieu (D-LA) and others, U.S. Senators Jerry Moran (R-Kan.) and Mark Warner (D-Va.) introduced the bipartisan Startup Act, the White House announced that the Obama administration had committed $2 billion in public and private resources to support job-creating startups, and Startup America Partnership board members—at the White House for their first official board meeting—outlined commitments from more than 50 private-sector partners that amount to over $1 billion over the next three years.

The White House announcement of collaborative measures to facilitate business growth focused on entrepreneurship education with organizations like Junior Achievement, the National Association for Community College Entrepreneurship (NACCE) and the Network for Teaching Entrepreneurship (NFTE), and their private sector partners. Two specific examples from NFTE include a partnership with the Pearson Foundation to launch Connect, a free online community for teacher collaboration and training focused on entrepreneurship education, as well as a partnership with SuperCamp/Quantum Learning Network to make its BizCamps widely available to young people across the country.

The Obama Administration focused on expanding access to capital. The U.S. Small Business Administration (SBA) will implement its $1 billion Early Stage Innovation Fund in 2012, originally announced as part of Startup America. This fund will provide matching capital to Small Business Investment Companies (SBICs), particularly early-stage small businesses seeking private institutional capital. SBA is also proposing a modification of its rules allowing private funds that invest in early stage companies to participate in the SBIC program.

The government also proposes to find new ideas among entrepreneurs and the public. President Obama launched the Startup America Policy Challenge, a competition which calls for “Policy Business Plans” that will be shared with relevant Cabinet Secretaries. The Department of Education is also reaching out for ideas through a National Education Startup Challenge, which will invite students—from middle school through college—to develop an innovative solution to an education problem and prepare a business plan for a new company or non-profit organization to deliver that solution. Judging by the discussion I was part of at the Center for Public Policy Innovation forum on Capitol Hill—“Restoring U.S. Competitiveness: Creating Jobs and Unleashing the Potential of Small Businesses Through Technology and Innovation"—we have only seen the tip of the iceberg in terms of ideas out there to improve the American entrepreneurship environment. During this event co-hosted by the Digital Dialogue Forum, industry, academic, and government voices addressed policy and regulatory challenges impacting startups, and spotlighted common myths about startups–including those that “fail.” I was joined by Senator Landrieu, Congresswoman Cathy McMorris Rodgers (R-WA), Sean Greene from the SBA, Scott Case from Startup America Partnership and Steve Felice, Dell’s global president for Consumer and Small & Medium Business.

The Startup Act introduced by U.S. Senators Jerry Moran (R-Kan.) and Mark Warner (D-Va.) outlines the following five-prong approach based on the proven track record of entrepreneurs as job and growth drivers, as exposed by Kauffman Foundation data and policy research:
  • 1) Reduce regulatory burdens: Require a cost-benefit analysis of proposed regulations with an economic impact of $100 million or more to determine the efficacy of the rule and its potential effects on the formation and growth of new businesses.<.li>

    With virtually all net job creation coming from companies less than five years old, it is refreshing to see more emphasis on new and young firms in Washington to strengthen job creation and fuel U.S. economic growth. Now comes the hard part—finding bi-partisan support for ideas like a startup visa and changes in tax laws in such a politically divided city that is already finding it hard to get anything done at the beginning of an election year.

  • 2) Attract business investment:
  • Make permanent the capital gains tax exemption for investments held for five years in Qualified Small Businesses (QSB), giving investors an incentive to partner with entrepreneurs and helping provide financial stability for the first few years of a new business’s life.
  • Provide a corporate tax credit of up to $5 million for QSBs in the first taxable year of profit, followed by a 50 percent corporate income tax exclusion in the two succeeding taxable years, to help startups finance growth.
  • Initiate reform of the Sarbanes-Oxley Act of 2002.
  • 3) Accelerate the commercialization of university research: Use existing federal research and development funding to support innovative projects at American universities in order to accelerate and improve the commercialization of cutting-edge technologies developed through faculty research.
  • 4) Attracting and retaining entrepreneurial talent:
  • Create a STEM Visa for up to 50,000 immigrants per year who graduate with a Masters or Ph.D. in science, technology, engineering or mathematics, giving them the opportunity to stay in the United States and put their skills to work.
  • Create an Entrepreneur’s Visa for up to 75,000 immigrant entrepreneurs who register a business and employ at least two non-family member employees, and invest in their business within one year of obtaining the visa. Current H-1B Visa holders or those who have completed graduate level work in a STEM field would qualify.
  • 5) Encouraging pro-growth state and local policies through the study of state laws that affect new business formation and economic growth

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