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How Startup America Measures Up
Feb 1st
Image: Upstate NYer/Wikimedia
How can the government support entrepreneurship? There’s no easy answer to this question. People have written books on the topic for years, but it’s anyone’s guess as to who is right.
The Obama administration’s latest effort to foster an innovative economy is called Startup America. It aims to increase opportunities for entrepreneurs through increased availability of funds, mentorship, education, and support systems.
I wanted to review how effective the program might be in more depth, so I consulted the Global Entrepreneurship Monitor (GEM) Global Report’s 2010 survey. Researchers surveyed more than 175,000 people in 59 countries to reach the bolded conclusions below. I pitted those conclusions against Startup America to see how our program measures up:
“In the US and Western Europe, people become entrepreneurs because ‘they recognize
an opportunity that can improve or maintain their incomes or increase their independence.’”
In the US, we’re lucky in that we culturally revere entrepreneurs. So how, and through what organizations, can we encourage even more people to be entrepreneurs? I can’t see a public campaign by the government itself working that well–picturing cheesy pro-entrepreneurshup ads and pamphlets nobody reads–but extending more grants to non- and for-profits that do encourage entrepreneurship might help accomplish this task.
Startup America grade: C
The program doesn’t address such entrepreneur PR directly, but does put juice into programs geared at encouraging entrepreneurship.
“Nordic countries (Netherlands, Sweden, Denmark and Iceland) showed especially high proportions of opportunity motives. A…desire to improve incomes or increase independence…(plotted) against “rule of law” (extent people have confidence in, and abide by the rules of society) shows that th(e entrepreneurial) motive increases with greater rule of law.”
This doesn’t translate into the need for more law as much as people having faith in the rule of law. Translation: A transparent, non-corrupt government (or at least a government that is not perceived as being corrupt) make people feel better about entrepreneurship. In this sense, the government cleaning up its act will actually benefit entrepreneurship.
Startup America grade: F
Nobody in the program is addressing this connection.
“(T)here are more entrepreneurs in the 25–34 age group than any other age range.”
Encourage and teach entrepreneurship in schools.
Startup America grade: A
Startup America has at least five programs, some with nonprofits, some with companies, that will encourage grade school and college entrepreneurship. Many are regional in nature; it would be nice to see more far-reaching national programs.
“Financial issues (unprofitable businesses or problems obtaining financing) weigh most
heavily in business exits.”
Many business go sour because the market drives them out, but the government could play a part in making access to financing easier for viable businesses going through hard times.
Startup America grade: N/A (yet)
“The Treasury will host a conference March 2011 to explore access to capital for small and entrepreneurial businesses,” according to the Startup America fact sheet.
* The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 provides a 100-percent exclusion from tax for capital gains realized on the sale of certain small business stock held for more than five years.
It’s something, but the extent of this part of the program will be unclear until the Treasury releases more details.
“Entrepreneurship does not impact an economy simply through higher numbers of entrepreneurs. It is important to consider quality measures, like growth, innovation and internationalization.”
According to this blog post by Phil McKinney, small businesses file more patents per worker, and those patents are of higher quality than in large organizations.
Startup America grade: B
They’re making obtaining patents faster:
The U.S. Patent & Trademark Office is…(giving) innovators more control over the application processing and support a more efficient market for innovation. Under this initiative, applicants would be able to request prioritized examination (Track I), obtain processing under the current procedure (Track II), or request a delay lasting up to 30 months (Track III). Entrepreneurs who are seeking capital, or accelerated market penetration, may benefit from the prioritized examination offered by the Track I option. In contrast, those entrepreneurs working to commercialize more embryonic ideas may prefer the extended timeframe associated with Track III. Another benefit to entrepreneurs will be shorter overall examination queues.
But they don’t address patents for small businesses in particular.
“Economies need to enable people to start businesses when it is necessary, but they also need to encourage those attracted by opportunity to venture into entrepreneurship, even when they have other work options.”
Again, getting people more comfortable with the idea of entrepreneurship at a younger age, eg. through education, would help encourage new ventures. Teaching entrepreneurship at a continuing education level, making mentorship more accessible, and making other resources available for budding entrepreneurs would also help. One study found that “rates of entrepreneurship are higher in organizations where a greater number of coworkers are former entrepreneurs,” according to this Harvard Business Review article. Connecting former entrepreneurs with would-be entrepreneurs is key to promoting the discipline. This indicates that programs devoted to connecting entrepreneurs would foster an innovative culture.
Startup America grade: A-
Here’s the laundry list of mentorship-related programs, both public and through public-private initiatives:
* The SBA, Department of Energy and Advanced Research Projects Agency-Energy (ARPA-E) are funding four business accelerators that will “provide intensive mentorship from seasoned entrepreneurs to a selection of the most promising new companies previously funded by DOE and ARPA-E.
* The Department of Veterans Affairs (VA) will establish two of the first integrated business accelerators focused solely on helping our Veterans launch and sustain their own businesses.
* IBM will invest $150 million in coaching, mentoring, and educating entrepreneurs, especially software developers.
* HP is investing more than $4 million in 2011 in HP Learning Initiative for Entrepreneurs (HP LIFE), a global program launched in 2007 that uses educational and technology outreach aimed at helping entrepreneurs and small business owners create and grow commercial opportunities.
* As part of Facebook’s ongoing commitment to encourage entrepreneurs, the company will launch Startup Days, a new series of 12 to 15 events around the country designed to provide entrepreneurs with access to expertise, resources and engineers to help accelerate their businesses.
* TechStars, which invests in seed companies, is adding incubators in 20 cities.
The government is also soliciting feedback from existing entrepreneurs and holding roundtables and workgroups.
The program is on the right track, but something more aggressive might yield more dramatic results.
“Entrepreneurship needs both dynamism and stability. Dynamism occurs through the creation of new businesses and the exit of non-viable ones. Stability comes from providing new businesses with the best chance to test and reach their potential.”
How can a government foster that chance? With access to capital, resources and support.
Startup America grade: B
* The Small Business Administration is also launching a private sector investment matching program, in which they’ll match up to $2 billion of private capital with secured bonds. $1 billion will go to “funds that invest growth capital in companies located in underserved communities” and “emerging sectors” like clean energy. $1 billion will go to early stage seed funds.
* Intel will invest $200 million in new companies (it invests in new companies anyway through Intel Capital).
* The Treasury Department is discussing this issue, and will release more details in coming weeks.
“Entrepreneurship in a society should contain a variety of business phases and types, led by different types of entrepreneurs, including women and underrepresented age groups.”
Startup America grade: A-
The government is doing this with programs for veteran entrepreneurs, but not for other groups. Companies like Wal-Mart are also supporting the effort with programs for women and minority entrepreneurs. I think we’re on the right track in this category, but could use more effort.
“An entrepreneurial mindset is not just for entrepreneurs. It must include a variety of stakeholders that are willing to support and cooperate with these dynamic efforts. In addition, non-entrepreneurs with entrepreneurial mindsets may indirectly stimulate others to start businesses. This indicates the value of broader societal acceptance of entrepreneurship.”
Startup America grade: A
The program features interagency, public-private, and NGO partnerships. There’s lots of cooperation here.
Summary: Based on the global entrepreneurial policy standards put forth by the GEM, Startup America is right on track in many ways, and lacking in a few others. Like many government policies, it’s a mixed bag.
View full post on Business Pundit
Prosperity Index: America is World’s 10th Most Prosperous Nation
Oct 25th
We like to call ourselves the richest country in the world, but the 2010 Legatum Prosperity Index has different ideas. The Prosperity Index factors in both money and citizen wellbeing in its rankings. It “finds that the most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, and free citizens.”
Healthy? No wonder America’s at #10. Here are this years Prosperity Index Top 10, from Time:
1. Norway
2. Denmark
3. Finland
4. Australia
5. New Zealand
6. Sweden
7. Canada
8. Switzerland
9. Netherlands
10. United States
View full post on Business Pundit
Exposing Top Secret America
Aug 19th
This is a guest post by Wall St. Cheat Sheet Editor-in-Chief Damien Hoffman.
Last month, the Washington Post did some excellent journalism about the expanding new industry Top Secret America. This new industry is unprecedented in American history and raises some critical questions about who reigns over our nation’s security and deepest secrets.
Which services are too important to outsource? Which services are “inherently government functions“?
At the moment, there’s a bull market in the private contracting of national intelligence. Here are some of the basic stats:
View full post on Business Pundit
The Rise of Foot-Powered America
Aug 18th
As a lifelong fan of the bicycle, I couldn’t resist this infographic. If we keep this up, we might even be able to take a solid stab at the obesity epidemic.
Image: Good.is
View full post on Business Pundit
America is Losing its High Tech Entrepreneurial Edge
Aug 2nd
Observers have long pointed to the United States as a shining example of entrepreneurship and innovation. In 2006, the Economist magazine gushed, “No country has mastered innovation and entrepreneurship as effectively as America.”
Perhaps that was once true, but it’s not anymore.
In a speech introducing the President’s new National Advisory Council on Innovation and Entrepreneurship, Secretary of Commerce Gary Locke said, “America’s innovation engine is not as efficient or as effective as it needs to be, and we are not creating as many jobs as we should.”
Recent data suggests that Secretary Locke is right. A study by the Information Technology and Innovation Foundation looked at the progress at innovation that 40 countries made over the past decade. The U.S. came in dead last. That is, whether they were ahead or behind us at innovation in 1999, the 39 other countries examined gained ground on us over the past ten years.
Fortunately, we were doing pretty well at innovation in 1999 so we still came in sixth in 2009. But the trend doesn’t bode well for the future.
Other studies also show our less-than-stellar innovation performance. A recent report by the Organization for Economic Development and Cooperation (OECD) looked at the per capita rate at which inventors in 38 nations filed for triadic patents – patents for the same invention filed in the United States, Japan, and Europe. The data shows that, in this event, we’re out of medal contention in eighth place, well behind countries like Switzerland, Japan, and Sweden.
Of course, while American business overall may be lagging in its innovativeness, our entrepreneurs might still be top of the heap at innovation.
The OECD data suggest not.
Looking at two measures – the share of companies less than five years old that file patents and the share of patents that went to companies under the age of five – across 13 industrialized countries, the United States came in third, after Norway and Denmark. While a respectable showing, it’s not where we need or want to be.
Moreover, the numbers have been getting worse, not better. As I explained in an earlier post, data from the U.S. Patent and Trademark Office shows that in 2001, 25.9 percent of U.S. patents went to small entities. By 2009, that number had dropped to 19.9 percent.
We aren’t investing in high tech start-ups the way we used to. In an earlier post, I pointed out the unhealthy trends in the U.S. venture capital industry. The number of deals made, capital invested, and exits are all down from their levels back in the mid 1990s, before the Internet bubble hit.
Venture capital accounts for less of U.S. economic activity than that of many other countries. As the figure below shows, in 2008, the U.S. invested a smaller share of its gross domestic product in venture capital than ten OECD countries, and a larger share than only twelve of them.
While the U.S. still remains a solid player at high tech entrepreneurship, the trend over the past decade makes it difficult to say that “no country has mastered innovation and entrepreneurship as effectively as America.”
America is Losing its High Tech Entrepreneurial Edge
View full post on Small Business News, Tips, Advice – Small Business Trends
Hollowing Out the Middle; A Call to Duty to Save Small Town America
Jun 26th
I have moved around the United States over the past few years, and whenever I mention my hometown Gary, Indiana, two things come up no matter what: The Jackson family and the economic downturn of the steel industry of the 70s and 80s that also impacted the city of Gary. So imagine my feelings after hearing about Hollowing Out The Middle. Written by sociologists Patrick Carr and Maria Kefalas, the book examines how the plight of maintaining economic viability in small towns is too often overlooked. Given the economic uncertainty of the country, the book’s appearance is timely.
Who Stays Home, Who Goes Away
Hollowing Out The Middle focuses on the interviews of the young residents of “Ellis”, Iowa, a small town with a population of 2,000 and “eighty miles from the nearest Starbucks”. Carr and Kefalas moved to Iowa to understand the migration motives; they note that “only West Virginia loses a larger percentage of college graduates to out-migration.” The authors divided their interviewed subjects into four separate groups;
- Stayers, those who feel their lives are best served staying in their town
- Achievers, those who leave for large cities and educational opportunities
- Seekers, those who join the military, unable to afford college
- Returners or “Boomerangs”, those who leave for large cities and later return, rejecting the lifestyle selected for personal reasons
Carr and Kefalas believe that communities over-invest in perceived future Acheivers, yet Acheivers end up not contributing to a town’s future growth. Meanwhile, a town’s transition into its next generation hinges on the Stayers, who drive the local economy but typically have not kept up with training that can lead to higher paying jobs. Rural town families, educators, and the policies they set create these decisions in their youth. They are often unaware that the aftermath can diminish competitiveness and their ability to recruit new industry and increase the likelihood of negative social problems such as rural meth addiction.
Another surprise is how such investment can be linked to immigration. For example, Stayers can be economically pitted against immigrants through a region’s overreliance on one industry such as agribusiness; in which labor cost have been cut aggressively. Postville, Iowa, as an example, was the site of one of the largest raids on undocumented immigrants in US history, despite the fact that many were families that had been in the community for decades without incident. The book does mention Iowa programs of in-migration as an example of easing the economic inclusion of skilled-worker immigrants in planned and sociological ways.
Carr and Kefalas cover these topics well without overpoliticizing issues or excessive cynicism. They also do not stereotype small town life. Having spent time in Ellis while researching the book, the authors feel that the community has “its arms outstretched” with respect to embracing new residents, be it researchers or immigrants. The authors save their important alarm for the idea that America, as a whole, is overlooking an essential asset to its well being.
“The good news is that there are an abundance of ideas about how to fix rural America; The challenge is that too few Americans are aware we’re at a critical point….If, as a nation, we decide not to intervene, then we must accept a future with a myriad of social problems throughout the countryside, the spread of rural wastelands, and the unraveling of civic institutions such as churches and local schools.”
I really liked the book because it reminded me of past thoughts on preventing communal brain drain. In 1903 W.E.B. DuBois advocated the concept of the Talent Tenth, a Black American social class that seeks education, then contributes its gained knowledge to the economic well-being of a disenfranchised community. “Hollowing Out the Middle” offers an evolved version in suggesting that town educators adjust their methodology in supporting its youth in their educational and career decisions.
Expanding the Scope of Rural Economic Policy is Essential
The concluding segment “What Can Be Done to Save Small Towns” is short. This brevity, however, makes the message to support rural America more urgent and stinging, and there are thorough footnotes for more reading.
The suggestions do not elaborate on the involvement of small businesses or regional businesses. I find that curious given that the authors also recommend that towns should reconsider the “elephant hunt” – luring jobs through large business projects such as new plants, and focus on supporting small business growth. But given Ellis’ small size, business readers should give the omission a pass and look towards the examination of state policies for insight. There are reviews of campaigns, such as Iowa life/Changing and Michigan Cool Cities, and of economic strategies like free land programs.
Who Will Benefit from Reading “Hollowing Out the Middle”
If you are a business owner trying to raise community awareness and state-level policy reconsideration, this book is the right read for starting engagement. Many towns are working to relaunch their image to stay alive, and there have been few recent sociology books on rural America. I instantly recalled “Sundown Towns” by James Loewen, which focused on the segregation history of Midwest towns, and there’s also “Worlds Apart” by Cynthia Duncan, which examines rural poverty.
This book rang my bells, with a hopeful spirit. I think it will do the same will for others as well. It did for the Ellis school board (I’m not giving this away, read the book!). Hollowing Out The Middle is a good thinking person’s book, meticulous enough to provide supporting details while briefly getting its points across. Understanding the authors’ view of the Ellis young adults interviewed will make you think, if not take action, on the protection of your town’s future.
Hollowing Out the Middle; A Call to Duty to Save Small Town America
View full post on Small Business Trends
Virgin America Teams with Klout to Give Freebies to Social Media Stars | BNET Travel Blog
Jun 23rd
| Virgin America has usually been at the forefront of using social media for marketing and customer service purposes, and its latest effort is no differ |
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Market America enhances cash-back plan – The Business Journal of the Greater Triad Area
Jun 21st
| Greensboro-based Internet marketing and product brokerage company Market America is enhancing its paid-to-shop program by providing consumers… |
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View full post on Home Wealth Project Riot!
Market America moves up 12 spots; dubbed ‘Most Improved’ – The Business Journal of the Greater Triad Area
Jun 7th
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Greensboro-based Internet marketing company Market America has been named the most improved of the top 100 online retail sites for 2010… |
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Latin America: Internet Day Festivities Across Region
May 22nd
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In Mexico, there… of the industry during this time of economic crisis, through workshops about new internet companies and digital marketing for… |
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