Nearing the fiscal cliff, entrepreneurs and investors lobby for a long-lasting deal


Leaders from both parties are running short on time to reach a deal to avert the year-end fiscal cliff. (Andrew Harrer/BLOOMBERG)
December 12, 2012

Small business owners and their lobbying groups have sent letter after letter to lawmakers in recent months, hoping to inject their voices into the fiscal cliff negotiations and swing the tide on disputes over higher tax rates and cuts to entitlement programs.

But for start-up founders, the ones behind the high-growth firms responsible for most of the nation’s new jobs, the message to Congress is far less muddied with detailed policy requests.

“Please, just do something.”

Julie Weeks, president of female entrepreneurship group Womenable, made that plea to lawmakers during a recent hearing before the Senate Small Business and Entrepreneurship Committee, and it sums up the emerging consensus from start-up founders and investors, who are far more concerned with whether lawmakers will actually reach a fiscal cliff deal than they are with the particulars of any agreement.

“I think the uncertainty over what is happening here in Washington is the most critical element,” Weeks told members of Congress. “The churning and the lack of activity are causing more grief and lack of growth than putting a solution out there that not everybody agrees with.”

Though small businesses as a whole are widely considered the most reliable job creators, government data show that it’s actually young, small businesses — particularly ambitious, high-growth start-ups often called “gazelles” — that generate most of the nation’s net new jobs. Recently, Kauffman Foundation reported that established companies of all sizes have been consistent job-destroyers over the past three decades, while new firms have collectively added an average of 3 million jobs per year since 1977.

RELATED: Business loans teetering on the fiscal cliff

But the current stalemate in the nation’s capital is beginning to hold back their growth, particularly as investors who might otherwise inject venture capital or angel funding into those early-stage businesses sit idly by, waiting for more clarity from Washington.

“The message we are getting from the various stakeholders around the start-up ecosystem, including investors, is that there is a great deal of fatigue, and just whatever the answer is, they want to know so they can go deal with it,” Scott Case, CEO of Startup America, a national entre­pre­neur­ship initiative, said in an interview about the fiscal cliff. “These start-ups are building their companies, and frankly, the distraction over the whole thing is the biggest problem. They just want it to be over.”

Case noted that the concerns commonly cited by small business owners and advocacy groups, namely the fate of expiring tax cuts for the wealthy, were “literally not brought up once” at the hundreds of meetings he held with entrepreneurs about policy issues in the past year, drawing a stark divide between the interests of fast-growing start-ups and those of small businesses on Main Street.

Founders of young firms are much more interested in policies that could help them find more talented developers or tap into new markets, and most of those concerns have little to do with tax and entitlement reform and everything to do with immigration and trade restrictions.

So on the edge of the fiscal cliff, rather than concerning themselves with one negotiating point or another, Case says entrepreneurs and start-up investors are simply keeping a close eye on the longevity of any new rules or policies — particularly as any last-minute compromise is expected to consist of a short-term deal requiring further legislative action in the coming months and years.

“If ‘short-term’ means six months, that’s a problem, but if ‘short-term’ means two or four years down the road, so at least we have a little better idea of what we’re dealing with in the meantime, that’s a little better,” said Case, who previously founded Priceline and Precision Training Software. “Anything that looks like it’s simply kicking the problem down the road just extends the dialogue and the distraction, and that will have a serious drag on the economy next year.”

Still, a six-month deal would be much preferred to toppling off the cliff, according to Case, who added that at this point, “any deal is better than no deal.”

“I’m sure some start-up founders will be happy and others will be unhappy,” he said. “But they are all going to wake up the day after a deal gets done and get back to building their companies. That’s part of the strength of the start-up economy — no matter what, they are going to make it happen.”

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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