I recently had the opportunity to meet with leaders of Cincinnati's startup community, when I toured the Brandery -- a successful business accelerator. There, I heard directly from entrepreneurs about some of the challenges they faced when starting a business.
Not surprisingly, a few issues were mentioned again and again.
The benefits of entrepreneurship were never in question. Startups are responsible for all net job creation over the last three decades, and reams of other data demonstrate that robust entrepreneurship results in more vibrant, opportunistic, and prosperous communities.
But what can federal policymakers do to address some of the common challenges facing startups and, thereby, facilitate more entrepreneurship?
Access to Capital
The issue raised most frequently was a lack of capital, which is typically a challenge for any venture. The good news is that, with the advent of crowdfunding, startups will soon have a new tool in their belt to raise funds. Unfortunately, two years after Congress legalized equity crowdfunding, we are still waiting on the SEC to finalize the process. I recently joined a bipartisan group of lawmakers in urging completion of the rules for crowdfunding portals, which will provide an efficient way for investors to connect with entrepreneurs.
A number of other policies could address this challenge as well. For instance, Congress could reinstate the zero percent tax on capital gains for investments made into qualified small businesses, and expand the definition of a “qualified small business” so that more startups can benefit from it.
Another issue policymakers should confront is the prohibitively high cost of accessing the public markets. Many reporting requirements are unnecessary and overly burdensome for small companies. Congress should work to implement requirements of scale, so that smaller firms are not effectively locked out from this financing option.
I am also working to strengthen the Small Business Investment Company program, a public-private partnership that has proven to be a successful means of unleashing private capital.
Another consistent theme throughout my discussions was the difficulty of attracting and retaining the world’s top talent.
Far too often, an individual will receive a top-notch education at an American university, and then be forced to return to their country of origin, where they start businesses that end up competing against our own. Our immigration policies should work for us, not against us. As such, we should make sure that STEM graduates are able to stay in this country and create jobs with their new education.
Another idea is to increase the number of visas available to startup companies and reduce the cost of those visas for new firms. Many members of Congress have also supported creating a startup visa for someone that is moving to this country with plans to start a business.
Lastly, we should also do more to make entrepreneurship a viable option for millenials entering the workforce. One individual I spoke with in Cincinnati was the founder of Frameri, an innovative eyeglass company that produces low-cost, interchangeable lenses and frames. He explained that many more of his classmates may have chosen to start their own business, but were concerned with their student loans. Instead of setting out on their own, they chose to join businesses with structured programs to help pay down their debt. While there is nothing wrong with this career choice, it is a shame that student loans kept entrepreneurial options off the table.
One solution may be to provide graduates an entrepreneurial student loan deferment, while they are attempting to start a business. This deferment could then be extended if certain metrics were being met, such as jobs created or venture capital raised. Obviously, this solution only treats a symptom of rising student loan debt, but it could be a useful tool to help more graduates start new ventures.
We should also look for ways to leverage state and local efforts to transform communities into more entrepreneurial ecosystems. In Cincinnati, private-sector leaders organized a nonprofit entity to act as a regional fund-of-funds in order to attract outside venture capital. This fund, known as Cintrifuse, has made great strides in increasing the amount of financing available to local startups and is strengthening the community’s startup landscape.
These are just a few ideas to begin an honest discussion about how federal policies could clear the way for an entrepreneurial renaissance in America. I sincerely believe that if we focus our efforts on enabling entrepreneurship and expanding free enterprise, we can create vibrant communities with more opportunity, more innovation, and greater prosperity.
Congressman Steve Chabot represents Ohio’s First Congressional District and is a senior Member of the House Committee on Small Business, House Committee on the Judiciary, and House Committee on Foreign Affairs.
Keep Up to Speed with Policy Digests
PDE 2.0: Expanded Viewpoints and Coverage of State and Local Policy