Now that the so-called JOBS Act has passed, Congress is searching for the next big idea to give entrepreneurs a boost. The Jumpstart Our Businesses Act aimed to simplify the fundraising process for small companies and reduced the requirements for them to go public. Entrepreneurs and investors were largely pleased with the outcome, but some say further policies are necessary to enhance small-business growth .
To that end, Senate Small Business Committee Chair Sen. Mary L. Landrieu (D-La.) is holding the third in a series of roundtables Wednesday morning on growing jobs through entrepreneurship. The hearing will feature policy pitches from academics, local officials, accelerators and successful start-ups, such as the handmade goods e-commerce site Etsy and the Arlington-based energy information company Opower.
“These roundtables are a thoughtful look at entrepreneurial ecosystems, which are the relationship between entrepreneurs and their current environments,” Committee spokesman Robert Sawicki said in an e-mail. “Our ultimate goal is to take the ideas that come out of these discussions and use them as the foundation for a major piece of entrepreneurship legislation.”
On Small Business caught up with some of the participants to ask them what the next challenge is for entrepreneurs and what they think Congress should do about it.
Evan Burfield, chairman of Startup DC.
Along with leading the Washington branch of the national Startup America initiative, Burfield is also a serial entrepreneur and the head of Synteractive, a cloud computing and business intelligence company.
The single biggest challenge D.C. start-ups face, according to Burfield, is finding the right talent in order to grow.
Software engineers are in high demand nationally, but Burfield says the D.C. region specifically lacks agile, creative coders who are willing to work at odd hours and for little pay -- at least in the initial years of a start-up’s life. Because of that, many area start-ups can’t hire the types of employees they need, he said.
“Start-ups need people with strong critical thinking abilities, the ability to communicate effectively, and the ability to get things done,” he said. “That’s the single biggest labor market challenge we face today.”
The real-world example:
Burfield likes the solution that the D.C. daily deals company LivingSocial came up with for the lack of quality developers: It trains new ones. LivingSocial partnered with Hungry Academy, a five-month program that pays people while it teaches them to become programmers. The participants get a salary, health insurance during their training and a guaranteed job with LivingSocial at the end. (LivingSocial is led by Tim O’Shaughnessy, who is a son-in-law of The Washington Post Co. chairman Donald E. Graham.)
“They’re setting up an entire training apprenticeship program in how to write code and work in the way that a company like LivingSocial needs,” Burfield said.
Burfield wants more apprenticeship programs. But companies need tax incentives and federal dollars in order to train workers, he said. Rather than simply fund career training for those who become unemployed, he argues the federal government should help companies give eager workers some brand-new coding chops instead.
Alex Laskey, president and founder of the Arlington-based Opower.
Five years ago, Laskey co-founded Opower, an information company that utilities enlist in order to help customers save energy, and he has since grown it to 250 employees.
Laskey has two things he’d like to see in Congress.
First, Opower allows utility companies to provide their customers with data on their energy use so that they can make small changes in order to cut their utility bills. It also provides recommendations -- such as ways to better insulate your home -- to customers depending on where they live, the time of year and their energy habits.
At the state level, energy companies reap the benefits from lower energy consumption because some states provide monetary incentives to utilities that encourage their consumers to be more energy-efficient.
“Many states tell utilities that if you’re able to demonstrate efficiency, we’ll allow you to raise your rates slightly, so their margins and profits are up even though their revenue is down,” he explained. “They no longer make money on the sale of commodities but the service they’re providing.”
But there are no such incentives at the federal level, and Laskey would like to see that changed so that Opower and companies like it could flourish across the country.
Secondly, he shares Burfield’s concern that there’s a talent gap among start-ups. Many foreign students who obtain STEM degrees in the U.S. later return to their home countries because there are almost twice as many applicants for H-1B visas as there are slots available.
“We should be opening up our arms and borders to allow talented engineers to come here,” he said.
The real-world example:
Talented immigrants are crucial to start-up growth, Laskey argues. Foreign-born residents made up 12.5 percent of the U.S. population in 2008 but nearly 40 percent of technology company founders and 52 percent of founders of companies in Silicon Valley, according to investor Brad Feld and researchers at the Kauffman Foundation.
Laskey supports the Start-up Visa Act, introduced last year, which grants special visas to immigrant entrepreneurs. He’d also like to see the cap on H-1B visas raised and the quota system for certain countries ended.
“Our one competitive advantage is that America is a place people always want to come to,” he said. “We have to enable people to come and enable them to create businesses.”
Scott Gerber, founder of the Young Entrepreneur Council.
Gerber is an entrepreneur who launched a company called Sizzleit, which makes promotional videos, shortly after graduating from New York University’s film school. He’s since left in order to head the Young Entrepreneur Council, a nonprofit comprised of young entrepreneurs. (The Young Entrepreneur Council is a content partner with On Small Business.)
For the past few months, the YEC has been asking 30 different non-profits, entrepreneurs and big businesses what the government can do in order to help young people start more businesses. They’ve written a book -- #FixYoungAmerica-- and have laid out policy proposals they hope the Senate will take up.
“We wanted to begin the conversation about youth entrepreneurship as a viable path out of unemployment,” Gerber said.
Gerber said he believes that for young people who want to start businesses, there are too many barriers to entry and not enough training at schools and in colleges. To him the high youth unemployment rate is a sign that entrepreneurship may simply be the best option for a large chunk of recent college grads.
“We’ve been set up in our grandfathers’ economy -- the work hard, get good grades and get a good job mantra,” he said. “Your options usually don’t include entrepreneurship because you haven’t been trained in that way. When you do attempt entrepreneurship, you come up against barriers due to poor legislation or a lack of quality resources.”
The real-world example:
After giving a recent speech at a university, Gerber said he met a distraught student who, 30 days before graduation, both couldn’t find a job and didn’t know how to start a company.
“The student said, ‘I’m terrified. I’ve sent out 400 resumes and gotten no response. I was never offered an entrepreneurship class because we don’t have those at my college,’” Gerber said. “What is he supposed to do?”
The YEC offers a smorgasbord of policy ideas, but several of them focus on veterans. For example, Gerber advocates for the Veterans Entrepreneurial Transition (VET) Act of 2011, which was introduced in the House last October and would allow qualifying veterans to use GI Bill entitlements to start a franchise, as well as the Help Veterans Own Franchises Act, a franchise tax-credit that was introduced last year as part of a larger entrepreneur bill.
Furthermore, Gerber said he thinks Congress could help schools better prepare students for entrepreneurship by allowing educators to buy educational entrepreneurship materials with federal dollars and by directing more SBA microloans to young entrepreneurs.
Patricia G. Greene, the Paul T. Babson Chair in Entrepreneurial Studies at Babson College in Wellesley, Mass.
At the start-up-centric Babson, nearly every student takes some courses in entrepreneurship. Greene also serves as a board member of the Center for Women’s Business Research.
Greene thinks both university training and public policy should be recast in terms of the needs of small businesses. Rather than training lawyers and accountants largely to service big corporate clients -- and the occasional start-up -- Greene advocates that universities should first and foremost train professional service providers in how to help entrepreneurs.
The real-world example:
Big-business and small-business service needs differ in a number of ways, and those of small businesses are often poorly understood. If an accountant is singularly focused on tax minimization, for example, they may attempt to show that a business client made the lowest amount of profit possible on their yearly tax forms.
“But if that business then applies for a loan, it looks like they haven’t been making any money,” Greene explained, and that can be a major growth impediment. “How service providers are trained is just as important as how business owners are trained.”
Essentially, Congress needs a greater focus on how small companies would be impacted by various policies. (Greene points out that even the JOBS Act, a favorite among entrepreneurs, comes with its own paperwork requirements and other administrative drawbacks.)
“You can’t just layer an approach to small business on top of existing infrastructure,” she said. “It’s not just adding an office of ‘small whatever.’ We need to move them up the food chain.”