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How is Startup America Coming Along?

Jonathan Ortmans, President, Public Forum Institute

On January 31st, 2011, the White House announced Startup America, a public/private initiative to rally efforts to accelerate high-growth entrepreneurship in the U.S. by expanding access to capital, creating a national network for entrepreneurship education, enhancing the commercialization of federally-funded innovations and getting rid of tax and paperwork barriers for startups. Given the importance of new firms to America’s economy and the national urgency to create jobs, I take a look this week at what Washington accomplished—leading up to the summer break—in response to the President’s call for action.

On the policy front, the Startup America Partnership set out to create the right policy environment for entrepreneurs to flourish, and 2011 has indeed seen a number of developments in Washington that seek to move America in this direction. First, the Department of Homeland Security (DHS) recently updated its FAQs to clarify that entrepreneurs may qualify for a National Interest Waiver under the EB-2 immigrant visa category if they can demonstrate that their business endeavors will be in the interest of the U.S. The document also clarifies that an H-1B beneficiary who is the sole owner of the petitioning company may establish a valid employer-employee relationship for the purposes of qualifying for an H-1B nonimmigrant visa. In May, DHS also expanded the number of science, technology, engineering and math (STEM) graduates of U.S. universities who can extend their work training in the country from 12 to 29 months. These represent important steps in the right direction, but as I will allude to later, to expand access to the nation's pool of talented high skilled graduates in the science and technology fields, we need real "entrepreneurs’ visas" and green cards for those with degrees in science, technology, engineering and math.

Second, another promise of the Startup America initiative was to use the tax code to boost private investment in the early-stage companies. Although again only a step in the right direction, the President’s budget did include a permanent, 100% exemption from capital gains taxes for investors in small businesses and—according to a post by Karen Mills, Administrator of the Small Business Administration, and Aneesh Chopra, U.S. Chief Technology Officer, summarizing the first 180 Days of Startup America—the Administration plans more in the area.

Third, on the innovation front, the National Science Foundation (NSF) launched its new Innovation Corps to get more taxpayer-funded research innovations from the lab to the marketplace. NSF also awarded a $10 million grant over five years to launch a national Science, Technology, Engineering and Mathematics Talent Expansion Program (STEP) office based at Stanford University. This STEP center, expected to open in September of this year, will teach innovation and entrepreneurship in engineering under the direction of the Stanford Technology Ventures Program (STVP) and the National Collegiate Inventors and Innovators Alliance (NCIIA).

To further harness resources, the White House also launched the Startup America Partnership on January 31st to bring together an alliance of major corporations, funders, service providers, mentors and advisors to work to dramatically increase the success of high-growth enterprises in the U.S. Initial funding and leadership for this partnership came from Carl Schramm at the Kauffman Foundation and AOL co-founder Steve Case and the Case Foundation. At its launch I attended six months ago, a room packed full of entrepreneurs ready to help other entrepreneurs succeed produced powerful testimonies. It is too early to talk about its impact in terms of startups, but in terms of rallying America, this independent private-sector alliance has already mobilized more than $400 million in private-sector commitments to provide products, services, mentorship and funding to scale and grow U.S. startups over the next three years. This sharing of resources could prove essential to accelerating innovative companies and growing our nation's economy. For this alone the Startup America Partnership is on the road to new territory – that of getting large companies to understand that their ability to remain dynamic in the future is dependent on their helping nurture new and young firms today. Watch this space next week for at least one household name CEO who will join this cause.

However, perhaps the most significant step so far during 2011 has been the release of ideas for a Startup Act that emerged out of years of research from the Kauffman Foundation. This effort lays out a clearly articulated road map for any policymaker wanting to stimulate startups and jobs. It focuses on:

  • Providing new firms with better access to early-stage financing, creating capital gains tax exemptions for long-held startup investments, providing tax incentives for startup operating capital, facilitating access to public markets, and allowing shareholders of companies with market cap below $1 billion to opt-in under the Sarbanes-Oxley Act;
  • Accelerating the formation and commercialization of new ideas by creating differential patent fees to reduce the patent backlog and providing licensing freedom for academic innovators, and;
  • Removing barriers to the formation and growth of businesses through the introduction of automatic 10-year sunsets for all major rules, establishing common-sense and cost-effective standards for regulations, and making assessments of state and local startup and business policies.

I urge you to check out the Startup Act video brief where economist Bob Litan walks through the details for America. If this Administration is sincere in its belief in startups and the likes of Steve Case continue to engage America’s largest firms in the fight for tomorrow’s new iconic brands and employers, the Startup Act offers even this divided Congress a politically feasible opportunity in support of America’s job creators.

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