I was honored and excited to have been able to testify this week before the Senate Small Business and Entrepreneurship Committee on how we can accelerate startup success in the US. Below you’ll find my written statement for the record, which is based on some ideas that I and others from Startup Massachusetts put together for the White House last month.
I have to say my expectations were limited of this whole process, yet it was one of the most fascinating moments in my career. I had the realization: “This is how we shape policy in our country,” and it was very cool to be part of it. I felt that there was real listening going on. Now we have to wait and see what comes out of the law-making effort to follow.
As always, I’m interested in your comments and suggestions.
[From Tim's aide Sarah] Hi guys, If anyone is interested in seeing what Tim said, here are the key moments in the video:
- 15:12: Session begins
- 23:25 – 31:00 Tim is introduced by Senator Scott Brown and fields questions on the importance of training talent and crowdfunding
- 64:40 – 74:40: Tim’s delivers his presentation on his five policy suggestions for Congress
- 128:55 – 130:14: Closing remarks
The Senate Committee on Small Business and Entrepreneurship
Developing and Strengthening High-Growth Entrepreneurship
Wednesday, February 1, 2012
Written comments for the record
Thank you for inviting me to speak today. As you know, I am the CEO and Founder of Cambridge Innovation Center. CIC houses approximately 450 startup companies in a 150,000 square foot office tower in Kendall Square, Cambridge. We are told that CIC has more startups under one roof than any other building on the planet. More than a billion dollars have been invested in these companies, and we have been a launch-pad for several well-known companies, most famously Google Android.
This past December I was asked by my peers in Massachusetts to speak for our state’s innovation community at the Startup America summit at the White House. The ideas abstracted here come from a broad group of Massachusetts startup leaders.
We believe startups are at the root of restoring the US to full economic health. As is now well known, US Census Bureau and the Kauffman Foundation published findings recently that say that over the last quarter century all net new jobs (and then some) in the United States have come from companies five years old and younger. Existing firms (that is, those 6 years old and older) collectively lost jobs during that same quarter-century period analyzed (1980 to 2005). For every job lost by existing firms, new firms generated three. It seems clear that supporting startups and entrepreneurship is the key to job creation.
How to do so is a legitimate question for debate. My colleagues and I, however, have settled on five concrete suggestions: ideas worth exploring. The policy changes that follow have the potential to make a difference:
- Reform visa laws: Many startups are led by bright young people who come here to study from overseas. Yet our laws force most such people to go home. Let’s change visa laws to make it easier for foreign-born students who earn degrees from US universities to stay and start companies in the US. They will not take American jobs, they will create American jobs.
- Streamline IPOs: Startups typically require investment to get going. To be willing to invest, investors need a way to get their money back, typically through a public stock offering (an IPO). Yet today’s laws make it very hard for smaller, new companies to go public. Let’s change laws to create an “on ramp” to being a public company, by reducing paperwork requirements for the first 5 years after an IPO.
- Enable crowdfunding of startups: Another way to help startups is to make it easier for everyday people to support would-be entrepreneurs. Yet today its illegal for a bunch of everyday people to pool funds to help someone get a startup going. In other countries, they call this micro-finance, and it is a major force for change. Let’s change laws to permit crowd-funding of startups in the US. Valid concerns about fraud must and can be addressed as we do this.
- Ban non-compete agreements: We all studied in school that “labor mobility” is key to a healthy economy. Yet the proliferation of the use of “non-compete agreements” has made it much harder to start new companies. And for some, such agreements amount to indentured servitude (e.g. I am forced to stay with my company, because I can’t take another job in my chosen field). Many states already ban these agreements. And those states that ban them have more startups. Let’s change laws to ban non-compete agreements in employment agreements. While this has traditionally been a state-by-state issue, there is a valid role for the federal government to fix this.
- Retrain US workforce to meet changing demands: We have thousands of unfilled jobs, despite today’s high unemployment. Insiders at community colleges admit that there is no tight link between what the market needs, and what they teach. Yet the shortage of qualified tech employees holds back the creation of more startups. This is a fixable problem, and other countries address it head on. Let’s focus the government’s workforce development programs on training the workforce needed for the new Millennium. We should not 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. We are hopeful that the Senate will find some of these proposals to have merit, and that they will work to influence congress to enact them.