It’s no secret that entrepreneurs and small business owners — who, incidentally, vote in droves — are unhappy with Washington. We’re told small business is a priority, but partisan gridlock has sidelined the issues we hold most dear.
If President Obama and our Congressional leaders are really ready to work together to reboot the economy over the next four years, there’s some low-hanging fruit they can get to work on tomorrow.
While we certainly need the major macro issues dealt with — responsibly handling the debt ceiling and sequestration, continuing to remove burdensome regulations and red tape and revising the tax code — I believe the following six micro-steps would spur entrepreneurial growth in a variety of sectors, no partisan disputes required:
1. Pass one of the “entrepreneur visa” proposals on the table. I am encouraged that President Obama has stated he will make immigration one of the major pillars of his second term. Why common-sense proposals like the Startup Visa Act, Brains Act and Startup Act 2.0 have languished for so long is beyond me. Any one of these would help address the skills gap — the inability of willing employers to find workers with the right skills and qualifications — by enabling qualified, job-creating immigrant entrepreneurs to open more U.S. businesses.
The latest, Startup Act 2.0, is backed by both sides of the aisle (not to mention Silicon Valley). It would create a new visa category for U.S.-educated foreigners with a master’s or higher degree in a science, tech, engineering, or math (STEM) field. It would create an entrepreneurial visa for investors. It would also eliminate the per-country cap for employment-based visas.
This isn’t rocket science — we absolutely must enable qualified, funded entrepreneurs capable of employing U.S. citizens to set up shop here more easily. Do the math: More than 40% of Fortune 500 companies were founded by immigrants or their children. In Silicon Valley alone, 52% of all startups are immigrant-founded.
This isn’t about taking jobs away from Americans, it’s about utilizing key personnel and immigrant founders to speed up business creation and growth while America fixes its education system (a much larger issue for another day). This must not become an either/or debate, and anyone who turns it into such is vying for “pork” or pandering to folks who are afraid and unaware of what’s at stake.
2. Implement the JOBS Act. The president already signed the JOBS Act into law in mid-2012. It legalizes equity-based crowdfunding, helps companies go public faster by expanding “mini-IPOs,” and allows entrepreneurs to raise capital with less red tape.
But the SEC is still holding up the bill’s implementation, supposedly because of logistical concerns related to protecting unsophisticated investors — most of those who would invest through crowd funding platforms will not be traditionally accredited investors — while also ensuring entrepreneurs easier access to capital.
As the program grows, it must be measured and improved upon, as it was watered down during the negotiations. The U.S. Congress and the President can help increase its effectiveness by further easing securities regulations to enable startups and high-growth businesses to obtain capital.
This does not need to be at the expense of investors, but it need not treat such investors like babies either. Over time, we should look to increase the amounts people are able to invest and the accreditation status of the investors allowed to participate.
But before we can do any of this, we must force the SEC to stop sitting on their hands in the rule-making process. They are holding up game-changing legislation.
3. Mandate STEM education and incentivize more public/private mentorship partnerships. We must prepare our students to handle the realities of the new economy. Both employers and workers, 95% and 96% respectively, believe America’s workforce must be more entrepreneurial to succeed. Meanwhile, the skills gap is widening. Current estimates suggest the U.S. will have 1.2 million unfilled jobs in STEM fields by 2018.
At the federal level, the Department of Education can implement STEM as a requirement in America’s classrooms, and fund more initiatives like Race to the Top, a $4 billion dollar program that to incentivizes states to develop next-generation educational standards. Also, greater flexibility in the use of Title V “Well-Rounded” funds would allow state and local educators to better support entrepreneurship education.
Next, federal and state workforce development programs must progress into once “nontraditional” areas (such as coding) in cooperation with the private sector. Old-school government agencies and government-funded projects that mentor business owners must prove their worth, or be de-funded — so the money can go to the NGOs and nonprofits that have already found ways to combine scale, efficiency, and positive outcomes with cost reductions. We can achieve this faster by forming public/private partnerships on the local, regional, and national levels. For example, at the YEC (the organization I founded), we built a virtual mentorship program in partnership with Citi that existing nonprofits, business, and government organizations can use — not instead of, but in addition to their own offerings.
4. Create a common-sense student loan deferral, reduction, and forgiveness program for entrepreneurs. Expand the Income Based Repayment program (utilizing the current Public Service Loan Forgiveness Program as a template) to offer a path for college graduates to relieve their debt issues over time — provided they build businesses, demonstrate traction, and create jobs.
Requiring young entrepreneurs to meet certain qualifying benchmarks (and ongoing metrics, including revenue and job creation) is a smart, cost-effective way to extend PSLF benefits to the people who need it most: America’s young business leaders and would-be entrepreneurs. According to the YEC/Buzz Marketing Group annual youth entrepreneurship survey, 29% of recent grads are now self-employed, up from 20% in 2010. Thirty percent started a business in college, up from 19%.
These ambitious Americans are actively creating their own jobs already. Let’s help them, and spur economic growth in the process. Based on current rates of new business creation, we estimate that the program could create between 25,000 and 125,000 new jobs in the first five years alone.
5. Pass legislation to support veteran-founded businesses. Veterans in the private sector are 45% more likely to be self-employed than civilians with no active-duty experience. And yet Gulf War II-era vets still face higher unemployment rates than the general population — 15.5% for female vets, 9.2% for male vets. We already have programs to help returning vets further their educations, but a degree should not be their only route for self-improvement after returning home — after all, degrees don’t guarantee jobs anymore.
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While many private and nonprofit efforts have sprung up nationwide to mentor and support vets who want to start businesses, I have to ask: Why isn’t the federal government doing more? Proposals like those contained in the VET Act of 2011 and the bipartisan AGREE Act must be moved forward, so veterans can re-allocate GI Bill entitlements for seed capital or entrepreneurship training (vs. investing in a “traditional” education) or qualify for tax credits on their franchise fees. Let’s build on successes like the Operation Enduring Opportunity campaign, which in just one year resulted in an additional 4,314 veteran franchise owners in 2011 alone.
6. Clarify and update existing patent law. Patent lawsuits are stifling innovation at the highest levels (see: Apple, Google) all the way down to tiny, potentially high-growth software startups by forcing business owners, particularly in the technology space, to spend excessive sums of money to defend their products. Meanwhile, the Commerce Department found that IP-intensive industries support 40 million jobs and contribute more than $5 trillion to our GDP.
Steps to update and improve patent law have been taken by President Obama already, like the America Invents Act, which speeds up the patent process. But equal attention must be paid to making protections clearer. Patent lawsuits are quickly becoming one of the most expensive job killers and cost centers for many of the most innovative American businesses.
Scott Gerber is the founder of the Young Entrepreneur Council. In partnership with Citi, YEC fuels #StartupLab, a free virtual mentorship program. He is also a serial entrepreneur, internationally syndicated columnist, regular TV commentator and author of the book Never Get a “Real” Job.