Startup America Program Moving Too Slowly

Last winter, President Barack Obama, Treasury Secretary Timothy Geithner and a small posse of White House officials made a big show as they swept through Northeast Ohio to kick off their Startup America initiative that promised to help seed new ventures and create jobs. Eight months later, Ray Leach is still waiting.

Everything is moving too slowly, said Leach, chief executive of Cleveland-based JumpStart, a regional accelerator focused on business development. We need to make progress.

Any policy-making ideas spurred by the initiative, which subsequently visited eight cities to gather ideas from small business owners, are hamstrung by gridlock in Congress, said Leach. Meanwhile, the Startup America Partnership, an independent alliance designed to work with government by garnering support from the private sector, has been understaffed and slow to move, only in late August naming its full board, he said.

‘WE'RE TAKING ACTION'

The U.S. Small Business Administration, which runs the Startup America program, defends the progress to date. On September 6, the SBA unveiled a 15-page report (1.usa.gov/ogDks8) based on feedback from the roundtable discussions held between March and May. It identified obstacles and solutions around five consistent themes: workforce, access to capital, ideas, customers and more customer-focused government.

Critically important for us was not to just say here are some things we can do, but let's make sure we're getting out, listening to entrepreneurs to hear what barriers they're facing, and what the concrete ideas are to tackle them, said Sean Greene, the SBA's associate administrator for investment and special advisor for innovation, adding that goals were on track. We're taking action.

Greene, a former tech entrepreneur who founded and later sold travel startup Away.com to Orbitz, noted the high-level meetings generated more than 200 ideas, which have been turned over to the appropriate government agencies to pick up the torch. The nonprofit Startup America Partnership will endorse them on behalf of the private sector, said Greene. Several require Congressional action to implement, such as a call for the deferment of student loans for college graduates seeking to start companies and the loosening of visa restrictions to allow non-U.S. citizens to stay in the country for the purpose of creating businesses.

The government is moving ahead where it can, he said. It announced its first Impact Investment Fund in late July, a $130-million public-private deal for Michigan. The SBA pledged up to $80 million in loans, with the remainder of the money coming from investors such as Dow Chemical Co. The fund is part of the government's commitment of up to $2 billion in loans to high-growth companies through the SBIC over the next five years, aided by investment from the private sector.

Steve Case, former AOL co-founder and chair of the Startup America Partnership, was quick to point out the initiative's success requires careful collaboration between government and business. The partnership to date has announced some $730 million in private sector commitments to small companies in the form of products and services.

In addition to fresh commitments from Dell, Dun and Bradstreet and others, this week it launched an online platform where small companies can register to take advantage of these and other resources (here).

Obviously talk is cheap, action matters, Case said, noting bipartisan support will be critical when addressing entrepreneurs' suggestions about overcoming barriers in hot-button areas such as education and immigration.

STARTUP BARRIERS

While garnering praise for elevating the importance of entrepreneurship in a stagnant economy, Startup America has also been met by skepticism from those who study U.S. policy on entrepreneurship.

My big criticism is that it's unclear what the objectives are, said Daniel Isenberg, a professor of management practice at Babson College who has helped several countries create ecosystems to foster startups.

The U.S. program should be applauded for striking a balance between public and private sector roles and engaging high-level officials, he said, but it would be more effective if the focus were narrowed to ventures capable of generating jobs.

I don't think they're created equal, said Isenberg, adding that companies beyond the startup stage should also be given attention. What will have the impact will be the ambitious, high-growing ventures. You have to make those distinctions.

Meanwhile, business accelerators such as the one run by Josh Baer in Austin, Texas, are eager for any assistance the government can provide in identifying candidates for early-stage investment.

The way Startup America is going to help us is by bringing us more entrepreneurs, said Baer, who heads the tech-focused Capital Factory. We got hundreds this year. I need thousands.

Assisting small companies to connect to would-be investors as well as to other sources of capital remains a top barrier to entrepreneurship, Startup America's report said. It could be eliminated by moves as wide ranging as erasing capital gains taxes for small firms to encouraging a smaller-cap market for IPOs.

As President Obama tries to push his latest jobs bill through the Republican-led House of Representatives, Case said the coming months will prove critical for both Startup America and the economy.

The real question is: Will Washington join forces to really celebrate the work of entrepreneurs and enable them to build the companies that will help rebuild the economy and create the jobs we also desperately need?