A Quick Guide to Smart Entrepreneurship Policymaking
United States official data and analysis by the Kauffman Foundation has shown that startups are responsible for nearly all of the net new job creation in the economy. The latest Entrepreneurship Policy Digest from Kauffman, The Dos and Don'ts of Local Entrepreneurship Promotion, now offers certain principles of a new, evidence-based, entrepreneur-centred approach visible at the state and local level to put entrepreneurs at the center.
For those embarking on entrepreneurship policymaking, for instance, there are two commonly-cited tactics to avoid:
- Public Venture Funds: Intended to fill a market void, the public sector often lacks the expertise to evaluate and support entrepreneurs on its own. Even among private venture capital firms run by "pros", 80 percent of these funds do not yield market rate returns.
- Traditional Incubators: Studies show there is no evidence that incubator firms perform better than non-incubator firms.
For policymakers re-evaluating strategies to maximize chances of effectiveness, the Kauffman Foundation recommends considering the experiential and collaborative process that characterizes entrepreneurship.
- Cultivate Networks & Support Across Entrepreneurial Stages: Entrepreneurs need connections to mentors, networks for learning, and peer-support at all stages of the entrepreneurial process. Therefore, for new entrepreneurs, connect them with organizations and initiatives that bring together entrepreneurs to test ideas. For later later-stage startups, programs like Pipeline can foster relationships and provide mentoring needed to reach new levels of growth.
- Reinvent Investments: If there are public venture funds are already in place, instead of avoid awarding one large prize, distribute many smaller prizes among a cohort of entrepreneurs.
- Reinvent Incubators: Reorganize existing incubator to allow peer-learning. Incubators should be more than offices; they should provide a shared space where entrepreneurs interact continually and in which regularly hosted events catalyze collaboration.
At the same time, startup-savvy policymaking looks at ways to attract entrepreneurs to their locations. Here are some recommended strategies:
- Reexamine Professional & Occupational Licensing: Affecting nearly one-third of American workers, occupational licensing can act as a barrier to entrepreneurs seeking to bring new innovations and business models to market. Therefore, wherever possible, policymakers should revisit requirements for licensing.
- Welcome Immigrants: Because immigrants historically more likely as native-born Americans to start businesses. In 2012 alone, they were twice as likely. Thus, an entrepreneur friendly ecosystem should offer a welcome atmosphere for all immigrants to attract job-creating immigrant entrepreneurs.
Finally, to enhance chances of startup growth, governments need to let entrepreneurs compete.
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- Simplify Tax Codes and Payment Systems: “Taxes matter, but what entrepreneurs are most concerned about is tax complexity,” reads the policy digest.
- Rethink Non-Compete Agreements: Employee non-compete agreements can disrupt entrepreneurship given that most entrepreneurs have prior industry experience that they leverage to create a new company.