December 18, 2011

5 Policy Changes to Start Up America

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I was excited and honored to be invited down to the White House last Thursday, along with about 18 other regional representatives from around the country, to discuss with President Obama and DC policymakers what is going on in the major startup clusters in the US, and what the US government can do to promote further growth of innovation and entrepreneurship in the United States.

The impetus for this meeting dates back to a stunning piece of new research from the US Census Bureau and the Kauffman Foundation that found that for the last quarter century ALL net new jobs in the United States have come from companies five years old and younger. Existing firms (that is, all those 6 years old and older) collectively lost jobs during the quarter-century analyzed (1980 to 2005) while the new firms created loads of jobs. For every job lost by existing firms, new firms generated three!

On the basis of this finding, the Administration and Congress began to focus national economic policy on spurring the creation of new companies. As part of this, the White House launched Startup America–a policy initiative intended to make it easier to create new firms in this country. They also spawned an effort led by AOL Founder Steve Case called the Startup America Partnership, a not-for-profit that works alongside the Administration to promote these goals.

The multiple gatherings in DC over the course of the day brought together the President, the CTO of the US (Aneesh Chopra), key policy makers at the White House focused on Science and Technology Policy (notably Tom Kalil and Doug Rand of OSTP), key individuals from the Small Business Administration and the Department Commerce (Sean Greene and Paul Corson, respectively), the Kauffman Foundation (Carl Schramm), regional delegates from around the country (the MA delegation included myself, Michael Gaiss of Highland Capital Partners, Cory Bolotsky of Mass Challenge, and local entrepreneur Claudia Espinola of Casa Couture), and the folks from the Startup America Partnership and their Board (Steve Case, Reid Hoffman from LinkedIn, Kevin Plank from UnderArmour, and other successful entrepreneurs). (Alas the regional delegates didn’t make it into the session with the President, but we met with all of the policy makers.)

In our presentation we called for 5 policy changes:

  1. Change visa laws to make it easier for those who come to the US to study to stay in the US and start companies
  2. Change laws to create an “on ramp” to being a public company, by reducing paperwork requirements for the first 5 years after an IPO.
  3. Change laws to permit crowd-funding of startups. The proposal is that startups should be able to raise up to $1M from any number of investors, without having to file for an IPO, so long as no single investor goes over $1K.
  4. Change laws to ban non-compete agreements in employment agreements.
  5. Focus the government’s workforce development programs on training the workforce needed by new companies. It makes no sense that we have both high unemployment and hundreds of thousands of unfilled job openings, particularly in tech fields, such as software developer jobs.

There are bills already in front of congress to address #1, #2, and #3 above (#3 was introduced in the Senate, by the way, by our Senator from MA, Scott Brown). We are hopeful that the administration will find some of these proposals to have merit, and that they will work to influence congress to enact them.

On #4, there is policy being debated in Massachusetts actively now around banning non-competes. I hope to see this issue also taken up federally (Sen. Brown?). For those unfamiliar with the non-compete agreement controversy, here is my view. Non-compete agreements are already banned in many states. In the states that still permit them, including Massachusetts, they gum up the system by blocking would-be entrepreneurs from leaving their existing jobs to pursue something new in their fields. Unfortunately, as we know well from innovation research, existing companies are very poor at innovating (due to the innovator’s dilemma). As a result, the innovation train often simply gets stopped in its tracks by these non-compete provisions. Since non-competes are in the private interest of existing companies, my colleagues and I running MA businesses are likely to continue to use them so long as our competitors can (who wants to unilaterally disarm?). But it would be better for the economy as a whole, and for our citizens, if they were banned.

It was a pleasure to join my colleagues to represent the Massachusetts innovation ecosystem in DC. If you have views on the above topics, I would love to hear them. Perhaps over a beer at Venture Cafe!

Tim Rowe
Founder/CEO
Cambridge Innovation Center

Comments (11)
  • Dylan Cashman

    I found this post inspiring. The people working around the CIC work so hard and take on so much responsibility, and its good to see that the result of that hard work is a stronger job market for the community.

    Dec 18 2011 at 11:22 PM
  • Jason

    Tim,

    It’s exciting to hear that entrepreneurs and leaders like you are getting the opportunity to be heard at a national level.

    One question regarding the suggestion of a national ban on non-competes; would it be constitutional? Is an employee interstate commerce? Perhaps that will be something that has to be fixed on a state by state basis.

    I hope when you guys were able to talk about the visa issue, you pushed for more than just visas based on fundraising at least $250k; there are plenty of great, smart, talented people that want to stay here and get a start and it would be a hindrance to not be able to get started without raising money first (and eliminate the ability to bootstrap as some of our best entrepreneurs have).

    Thanks,
    Jason

    Dec 18 2011 at 11:28 PM
  • Bill Warner

    Tim – Nice to see concrete proposals that could really make a difference, and to hear that some are really moving towards reality.

    [By the way, did Solve Media just force me to type "Reinvented 2012 Camry" in order to add my comment? I think they did. Am I on Candid Camera, or is this some form of monetization gone awry?]

    Dec 19 2011 at 1:18 AM
  • Ken Smith

    Tim, nice article and thank you on behalf of Massachusetts entrepreneurs for participating in that meeting. The Kauffman Foundation research clearly shows that Startup America and programs like it must receive more attention, dollars, support, etc. from all levels of government if the US jobs engine is to recover in the short-term and be maintained long-term.

    I agree with and support all 5 proposed policy changes. Perhaps an online poll circulated throughout the start-up community?

    Dec 19 2011 at 8:46 AM
  • Tim Rowe

    :) Solve Media is a Startup (with New Atlantic Ventures investment, e.g. mine). People don’t seem to like typing gobbldygook captchas to prove they are human. This is an alternative that simultaneously generates a revenue stream to support whatever site it is on. Customer feedback, I’m told, has been good, and people tend to remember advertiser’s messages much more than any other type of advertising.

    Dec 19 2011 at 10:15 AM
  • Tim Rowe

    The federal government could potentially make certain types of non-competes unenforceable across state lines, and that would probably force states to reassess them. On the Visa issue, and, in fact, on all of these issues, we were not prescriptive, saying how exactly we felt that these policies should be drafted. We’re not lawyers. But we’re hoping the policy folks in the White House can sort through the complexities, and come up with rational verbiage that moves the policies forward.

    Dec 19 2011 at 10:18 AM
  • Tim Rowe

    Thanks Dylan!

    Dec 19 2011 at 10:18 AM
  • Shahin

    Thanks for the update Tim. If you have any info about how to help make sure that non-compete policy discussions actually get translated into a Bill in MA, please post it. I’d like to get involved.

    Dec 19 2011 at 10:26 AM
  • Chris Hampson

    Concrete, achievable! Thanks for sharing!

    Dec 19 2011 at 11:59 AM
  • Eric Grunebaum

    What a great honor for you and by extension for all of the incredible people – and the energy they’re generating – at CIC!

    My only comment is that it would be worthwhile to talk with Elizabeth Warren too. If early polling is of any value, it indicates that Scott Brown could be out in 11 months. At a minimum it appears that it will be a tight race and if she does win, it would be good if she comes in with an agenda in sync with the above noted, excellent proposals.

    Eric

    Dec 19 2011 at 3:30 PM
  • Aki Balogh

    Tim,

    Congratulations for your work on this and thanks for sharing within the CIC.

    W.r.t. #5: In late 2009, I worked as a consultant for the Abu Dhabi Education Council (ADEC) to help develop the Emirate’s vocational education strategy. The Emirate plans to diversify from an oil and petrochemical economy and requires a significant buildup of qualified workforce in various industries. As a member of the ADEC team, I worked with Boston Consulting Group to model workforce skills and training needs.

    In short, there are a variety of players involved in determining skill needs and aligning education to follow suit. Even in Abu Dhabi, the effort required to align educational institutions with future skill needs is significant. (For example, for each field, the skills need to accurately be aligned with qualification frameworks.)

    In the short term, I imagine that private education companies and other content creators (e.g. Universities, individuals) will be much more effective in helping achieve #5 than the US Government.

    Aki

    Jan 03 2012 at 1:33 PM
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