What to do about entrepreneurship.
A lot of people agree that entrepreneurs and the resulting startups that they foster are the heart and soul of future economic and innovative growth in the United States and the world.
Here are the current administration’s efforts to spur entrepreneurship. Recognizing that startups are the engines of job creation, the Obama presidency has started a Startup America initiative and has come out strongly in support of the Crowdfunding component of the JOBS act. And it has acknowledged that “it is the entrepreneurs in clean energy, medicine, advanced manufacturing, information technology, and other innovative fields who will build the new industries of the 21st century, and solve some of our toughest global challenges.”
In January 2011, President Obama called on both the federal government and the private sector to dramatically increase the prevalence and success of entrepreneurs across the country. In the year since launch, the Obama Administration rolled out a set of entrepreneur-focused policy initiatives in five areas:
Unlocking access to capital to fuel startup growth
Connecting mentors and education to entrepreneurs
Reducing barriers and making government work for entrepreneurs
Accelerating innovation from “lab to market” for breakthrough technologies
Unleashing market opportunities in industries like healthcare, clean energy, and education
Have we not heard all of this drivel before? Does this sound like a commercial for your government at work or what? And, not only does this “initiative” NOT HAVE ANY LEGISLATIVE SUPPORT IN CONGRESS, but it has been handed off to the Small Business Administration and the Veterans Administration, two agencies that have elevated the fine art of bureaucracy to the Masters level. Just ask anyone who has applied for an SBA loan, or a returning veteran simply trying to get the benefits we contractually owe him. There’s really nothing more to say about this.
How about this one:
Leaders in the private sector launched the Startup America Partnership in 2011, an independent alliance of entrepreneurs, corporations, universities, foundations, and other leaders, joining together to fuel innovative, high-growth U.S. startups. Within just one year, the Partnership has mobilized to make over $1 billion in business services available to a national network that will serve as many as 100,000 startups over the next three years. This sounds ominously close to my plan to end the great recession, doesn’t it?
Their intent is to support the growth of startups in five key areas:
Expertise: Connect startups with training, mentors, advisors and accelerators
Services: Provide startups with access to critical services at reduced costs
Talent: Assist startups in recruiting, training and retaining the people that can help them grow
Customers: Help startups through acquisition of new customers and expansion into new markets
Capital: Highlight sources of capital available to startups in various regions and sectors
In addition to the product and service focused offerings, Startup America firms gain access to Connection Programs which provide unique opportunities to connect with thought leaders, major corporations (as partners or customers), customers, and more.
This sounds really good, but then why does it feel like a giant bureaucracy? Because it is.
Their sponsors are American Express, Microsoft, Dell, Intuit, American Airlines and the New York Stock Exchange. Does this sound like fleet of foot, startup incubators ready to make split decisions based on squiggles on the back of a napkin, just like they did to get started years ago? NOT.
And wouldn’t it be more promising if their “team” wasn’t composed of a CEO of a national staffing firm who sits on the boards of Comerica and Kohl’s? Or Fred Smith, the CEO of FedEx? Or Magic Johnson, an NBA basketball player, or Tory Burch, a fashion designer for Ralph Lauren who leveraged her relationships in the fashion industry and personal financial strength to become a leader in global lifestyle brands?
To be fair, they have Reid Hoffman, Reed Hastings, Michael Dell, Steve Case, Lynn Jurich and Kevin Plank on their team as well, but I think all of these guys have pretty demanding day jobs. Who actually runs the joint?
I think the Canadians might have a more realistic view: Their view is that entrepreneurs and small businesses are the backbone of the Canadian economy. There are more than 1 million small businesses that employ 48% of Canada’s total workforce, account for 25% of total exports, and provide 30% of their total GDP. Of those small businesses, only 4.7% are classified as high-growth enterprises, yet are responsible for 45% of new job creation in Canada.
The Canadians recognize that entrepreneurship is a powerful force for driving job creation, innovation, economic growth, and for fueling healthy and sustainable communities. Governments around the world are responding to shifts in global markets by strengthening the domestic climate for entrepreneurs as a way to ensure economic growth and prosperity. The launch of Startup America, Startup Britain and similar private-public-civil society initiatives in 2011 has contributed to entrepreneurial growth in more than a dozen countries worldwide.
In Canada, the local movement has only just begun:
- The government of Canada declared 2011 as the ‘Year of the Entrepreneur’, recognizing the critical role of entrepreneurship in securing Canada’s ongoing economic recovery and prosperity;
- The ‘Review of Federal Support to Research and Development’ Expert Panel Report, spearheaded by Tom Jenkins, Chief Strategy Officer of Open Text Corporation, called for action to unleash the potential of Canadian entrepreneurs through innovation;
- Action Canada released ‘Fuelling Canada’s Economic Success: A National Strategy for High-Growth Entrepreneurship’, calling for the creation of a central enabling organization with the mandate to fuel high-growth entrepreneurship in Canada; and,
- The Coalition for Action, C100, Startup Visa and other organizations in the innovation and entrepreneurship community, put forth proposals and recommendations for action to strengthen innovation and entrepreneurship in Canada.
While Canadians like to think of themselves as great collaborators, the Canadian entrepreneurship community hasn’t come together yet around a shared vision or purpose. Canadian entrepreneurs are struggling to navigate a complex and highly fragmented enterprise ecosystem, which creates challenges for entrepreneurs to identify and access support, build and leverage national and global networks, and limits the capacity to share knowledge and best practices. An absence of adequate risk capital, combined with a shortage of management and business skills normally fostered through startup failures and second- or third-attempts, contributes to Canada’s overall deficiency in “entrepreneurial culture”.
What is needed most urgently, as recommended by Action Canada, is a national strategy to bring together the collaborative efforts of the entire entrepreneurship community to create more favorable conditions for entrepreneurs to flourish. Without a strategy, Canada will continue to trail international competition and risk economic recovery and long-term prosperity. And so will the United States.
The solution begins with a grassroots, entrepreneur-led movement to bring together Canada’s national entrepreneurship community to create a clear vision and strategy that leads to real change and action. And, that is a blueprint for the United States as well.
We don’t need a presidential initiative that is not supported by Congressional legislative action, nor do we need the outcomes to be administered by the SBA, or God-forbid, the VA.
What we need is money, a National Initiative supported by an ACT OF CONGRESS, and the full time attention of successful entrepreneurs and venture capitalists (often the same thing) to insure that a working infrastructure gets created to support several hundred thousand entrepreneurs in the pursuit of innovation.
This working infrastructure needs to be regional, and centered around Universities with proven track records in fostering innovation. VCs jokingly tell anyone who will listen that the reason 80% of the country’s Venture Capital firms are located on Sand Hill Road in Menlo Park is because it is an easy commute from Woodside, Portola Valley, Palo Alto, Los Altos Hills and Atherton. Location matters. This means Stanford, UT Austin, UW in Seattle, NYU in New York, MIT in Boston, Carnegie-Mellon, Berkeley, etc.
All of the functions that entrepreneurs need to operate need to be in place. Human Resources, Payroll, Accounting, Payables, Receivables, Legal, PR, Advertising, Sales and Marketing Leadership, Engineering and prototype Manufacturing. Let the founders focus on their big idea and let the staff do what they do to keep the lights on, while capitalizing on economies of scale to reduce costs.
All of this infrastructure, as well as the seed capital will be provided by the Federal Reserve. If there was ever a better justification for creating money out of thin air, I don’t know what it was. Certainly not the $9 Trillion gift to the 6 biggest investment banks in the US in 2010. Nor the $800 Billion TARP bailout in 2008. No. This will actually create jobs, jack the economy, reduce unemployment below 5%, fund Medicare and social security for a hundred years and probably solve 5 of the world’s most pressing problems within 5 years.
Imagine a modern “Manhattan Project”:
Cheap, sustainable and renewable, non-carbon energy
Practical synthetic biology at the cell level
Cures for all forms of cancer
Automobile battery technology that enables 1,000 miles between charges
Complete bio-robotic drug delivery systems
One model that will work is to rotate VCs in and out of the board governance and mentoring responsibilities. These guys should be willing to volunteer as a matter of public service and they should also be allowed to invest in subsequent rounds. VCs don’t need orientation. You’ve sat on one board, you’ve sat on them all.
But, the real key is Congress. They need the courage and strength to enact laws that allow a small group of people to navigate around existing agencies and government infrastructure to create an initiative like this and to drive it through to formation and execution.
And, if you care about this, you could help make it happen. Write your Congressperson. I know this sounds lame, but I know of no other way to start the sausage going. I have, and will continue to do so. The Crowdfunding bill got done the same way. Honest.