In an effort to inspire more of us to help identify and remove barriers faced by the entrepreneurs in our local entrepreneurship ecosystems, today, 170+ nations begin to celebrate their makers, doers and risk takers with national Global Entrepreneurship Week campaigns.
While the United States still scores at the top of most global entrepreneurship and innovation indexes, there are now 25 startup ecosystems with an ecosystem value above $10 billion each and an additional 54 that have an ecosystem value between $1 billion and $10 billion. If America’s future economic competitiveness in large part depends on our entrepreneurs, we need a more sustained and comprehensive national conversation about making the path easier for more Americans to participate in the entrepreneurial economy.
New businesses (those less than five years old) are the primary source of almost all net new jobs in the United States. While most entrepreneurs behind those new businesses have a business plan to overcome hurdles, the United States does not.
The recent release of America’s New Business Plan from the Start Us Up Coalition is therefore a very welcome contribution to help drive a national conversation among policymakers and interested citizens. Over the past two years, an exciting bottom up movement fueled by the likes of the Kauffman Foundation has been brewing in small towns across the nation around helping the “rest of the rest” rise, and community developed entrepreneurship ecosystems are starting to form and mature. Now is the right time for America’s policymakers to engage in a conversation with their communities around how we remove unnecessary barriers to U.S. entrepreneurs in creating and growing new ventures. America’s New Business Plan is a balanced and informative “playbook” to help policymakers do just that.
Developed from months of deep and inclusive deliberation with communities of interested citizens, entrepreneurs, and the communities around them, this new guide offers a refreshingly simple roadmap to understanding why and how to remove barriers to anyone in America who wishes to take a risk and create new value for their community.
Although it is not the first time entrepreneurship advocates have presented a case for taking action, past efforts have not always included such specific doable recommendations, especially at the state and local policymaker level.
The Start Us Up Coalition, for which the Global Entrepreneurship Network is a member, offers a four-pillar approach.
1. Enabling new businesses to thrive.
First we have to level the playing field by doing away with dated regulations and requirements, many of which only well-resourced large companies can successfully navigate and endure. Local, state and national governments would benefit from revisiting their bodies of often times outdated regulations, licensing requirements, and bureaucratic permits. When most of them were created, no one assessed their impact on local job creators, knew about global digital markets, the growing gig economy or other economic rules and realities which might make them unnecessary today. America’s New Business Plan calls for an Entrepreneurship Impact Statement for all new laws, rules and regulations that affect firms less than 5 years old.
Second, state and local economic development policies still focus on attracting businesses from elsewhere in the nation, which of course is a zero-sum game for the nation. Policymakers need to nurture innovation and entrepreneurship through organic, home-grown entrepreneurial communities that become magnets for founder talent not competitors for existing companies.
Part of the debate around attracting talent has been one around making our borders more porous for innovators and job creators. The Startup Chile immigration program for example has become a model for a dozen or more governments to use in building talent-recruitment policies via startup visas and e-residency options (see examples on the Startup Nations Atlas of Policies). But the 2019 Index of Dynamic Entrepreneurship (IDE) shows that other aspects of the policy and regulatory environment for new businesses have not kept pace with that country’s entrepreneurial economy slowing the impact the Startup Chile program. As IDE co-author Hugo Kantis points out, the country shows a deficit in entrepreneurship education in schools not to mention all the regulatory gaps. The government is now rapidly moving to fix those with a plethora of inward-looking entrepreneurship and innovation policy tools including streamlining the regulatory process for starting a new firm and streamlining licensing requirements.
Americans may not have the appetite at this time for opening our borders to foreign talent but even if we could, without the right rules and incentives, the Startup Chile program shows us it may not work. Just as entrepreneurs constantly validate and correct their sails, so government must re-evaluate regulatory frameworks, and if necessary pivot their policy approaches real time in order to smooth the path for local communities to innovate, start companies, hire and scale.
2. Access to capital is a matter of equal access across the population, and of the right kind of capital.
America’s New Business Plan calls for capital to flow to startups from all parts of the country and into the hands of talented but untapped portions of the population.
This is a challenge globally and will be the subject of a 2020 Startup Nations Ministerial where Cabinet-level officials will share fresh out-the-box policy ideas to unleash start-up and scale-up capital to places and communities where it has been lacking. A recent report from India went so far as to suggest direct causality between the recent maturation of their robust angel investor communities and the explosion of new starts in the very poorest parts of that nation. Further, our 2019 global survey on barriers revealed that countries are struggling to awaken private investors interest in providing follow-on entrepreneurial capital due to barriers under policymaker control.
While capital is a key ingredient for any new venture and obtaining it is a litmus test for any entrepreneurial idea, evidence supports claims about the lack of access to certain kinds of entrepreneurial finance as one of the top barriers. As America’s New Business Plan suggests, capital is not flowing to enough deserving founders and if you ignore the untapped power of women, and entrepreneurs of color, the economy suffers. Further while there is plenty of venture capital, it is not a good fit for most startups not to mention the fact that seventy-five percent of venture money in the US goes to California, New York and Massachusetts.
International data supports the same conclusion. The OECD Centre for Entrepreneurship, SMEs, Regions and Cities even went further by demonstrating that in many parts of the world women are systemically discouraged from accessing capital.
America’s New Business Plan offers clear ideas to enable local, state and federal policymakers to start fixing the many clogs in the funding pipeline, including adjusting existing capital access programs to prioritize new firms, funding new State innovative patient capital investment models, and establishing metrics in terms of new jobs created, revenues and the race, gender, socioeconomic class and geography of those who access capital.
3. Expand entrepreneurial capacity.
The know-how to start a business derives from a combination of education and experience. Different training programs that have proliferated around the globe were born in response to deficient formal education mechanisms when it comes to business skills. Various private-sector programs now offer training and guidance (e.g. incubators, accelerators, along ad hoc training courses) to a select cast of entrepreneurs.
America’s New Business Plan asks policymakers to expand the pool of entrepreneurial talent by:
- supporting policies that connect entrepreneurs to mentors, resources and programs that teach them the skills they need at each stage of business development;
- embedding entrepreneurial learning and real-world learning experiences in classrooms; and
- developing a continuous pipeline of lifetime learning opportunities.
Around the world, difficulties in reforming education across all levels has been the most persistent roadblock to developing entrepreneurial capacity as it requires political will, consensus and teacher re-training. America’s New Business Plan offers ideas for correcting deficiencies in the K-16 education system.
As an immediate step, advocates argue for governments to create an Entrepreneurship Corps, or “E-Corps”, where those from underserved backgrounds can serve their nation by helping new and struggling entrepreneurs. Founders of new firms invariably prefer to find new knowledge on demand from mentors and peers over formal often dated curriculum.
4. Remove unnecessary limitations to entrepreneurial risk-taking
Becoming an entrepreneur often means forgoing not just a stable income, but also employer-derived safety nets, such as health insurance and retirement savings. In face of this reality, the Coalition calls for policymakers to address Americans’ financial concerns that limit risk-taking.
What does supporting risk-taking mean in practice? In the United States, it means for example that policymakers must consider the impact of student debt on an American’s decision to strike out on their own. Further, since employer-based healthcare is the norm in the U.S., policymakers must also think about providing tax incentives to new businesses to offset health care costs as they grow their businesses and create jobs.
The relationship between the fear of failure in a culture and the availability of basic health care, education and affordable housing is often neglected, much to the detriment of economic dynamism. Across economic structures, the problem can take different nuances. GEN partners in Ireland, Sweden and Belgium, for example, have pointed out that even in such economies with strong safety nets, the loss of basic social welfare benefits when leaving employment feeds a risk averse mentality.
At a recent event I attended on Capitol Hill, Kauffman Foundation president, Wendy Guillies lead a discussion among 20 successful women entrepreneurs along with United States Senators. The conversation raced along with these strong with these moxie women sharing example after example of how they had overcome barriers to their success. Then, all of a sudden in the middle of an energized conversation one of the entrepreneurs nearly shed a tear as she spoke of the catastrophic implications due to the chronic health care needs of a dependent spouse where her health coverage to stop. At that moment, it was clear that no matter how much courage, intelligence, hard work and sheer grit entrepreneurs may have, it only takes one basic barrier to wipe it away.
Global Entrepreneurship Week offers a moment each year when Americans can see how entrepreneurship can empower any community no matter how economically or politically disadvantaged. We should take pride that, better than foreign aid, our entrepreneurs and risk takers have shown others with no hope or opportunity how to fish themselves. However, as more policymakers around the world start positioning entrepreneurship as a national priority and not just a side ring at the circus, U.S. policymakers should be looking in every community of our nation at how to sustain our pioneering spirit if we are to retain our reputation and economic strength as the shining city of the Hill.