Steve Case is chairman and chief executive of Revolution LLC and chairman of Startup America Partnership.
After President Obama delivers his State of the Union address Tuesday, pundits will prognosticate that despite any bold plans unveiled, the critical task of spurring economic growth and job creation will be deferred until after Election Day. Forecasting Washington gridlock is a safe bet after months of political standoffs on nearly every issue. Despite all the discord, however, momentum is building behind a policy aim every American can support: jump-starting job creation by improving the environment for entrepreneurs to start companies and expand existing businesses.
As a member of President Obama’s Council on Jobs & Competitiveness, I have led the effort to identify policies that can accelerate the creation and expansion of high-growth businesses — think Facebook, Chipotle and UnderArmour. Research by the Kauffman Foundation indicates that firms less than five years old have produced 40 million American jobs over the past three decades — accounting for all of the net new jobs created in that period.
Unfortunately, over the past five years, start-ups are down 23 percent. The firms that are starting are, on average, adding fewer jobs than firms had in previous decades. Public offerings have fallen significantly since the early 2000s. Companies that are trying to expand have found that accessing capital and securing talent have become more challenging. Meanwhile, as the American entrepreneurial engine slows, the pace has picked up around the world. Indeed, globalization has affected not just manufacturing and services but also entrepreneurship.
America’s best chance to achieve robust, sustainable growth and prosperity is by ensuring that the United States increases its entrepreneurial competitiveness relative to the rest of the world.
In Washington, momentum is building in both parties to pass a series of pro-entrepreneurship bills that would improve the environment for businesses to form and for existing companies to expand.
Sens. Mark Warner (D-Va.) and Jerry Moran (R-Kan.) joined last month to introduce the Startup Act. In November, Sens. Marco Rubio (R-Fla.) and Chris Coons (D-Del.) introduced the AGREE Act. Nearly a dozen other bills aimed at helping entrepreneurs have been introduced in the House and Senate the past few months.
These bills will help start-ups get access to capital during the early stages by permitting crowdfunding, a creative concept that allows ordinary investors to pool their money online to fund new businesses. The legislation would also free up additional capital by lowering the tax rate on institutional investors who make long-term investments in new businesses.
Democrats and Republicans have also introduced legislation to reform Section 404(b) of the Sarbanes-Oxley Act to make it easier for high-growth companies to go public. Unintended consequences of well-intentioned regulations have made public capital markets harder and more expensive to access: Initial public offerings of less than $50 million were 80 percent of IPOs in the 1990s but just 20 percent in the 2000s. This is a concern, as 90 percent of job creation typically happens after a company goes public — and all too often, the alternative is for a company to be sold. While job growth accelerates after an IPO, it decelerates when a firm merges or is acquired.
Critically, these bills would also help the United States win the global battle for talent. Immigration is a complex and politically sensitive issue. But it’s clear that allowing the foreign-born entrepreneurs, mathematicians and engineers attracted to our great universities to leave and start companies in China and India makes no sense from a competitiveness standpoint. An estimated 40 percent of U.S. Fortune 500 companies were started by immigrants or their children. If we want to create a new wave of Googles and Intels — firms that were co-founded by immigrant entrepreneurs — Congress should pass bipartisan legislation modifying the barriers to high-skilled immigration.
Thomas Edison said that “Vision without execution is hallucination.” I’m encouraged by the growing bipartisan recognition that entrepreneurs represent our best hope for innovation, economic growth and prosperity. But we have to execute. Republicans and Democrats must come together and pass these bills. This package of pro-entrepreneurship legislation would help lay the foundation for long-term economic growth and job creation.
The story of America has always been the story of entrepreneurship — pioneering men and women taking great risks to realize a dream. With the support of Congress and President Obama, America can once again retain its lead as the world’s most entrepreneurial nation.