I submitted the following remarks for the record during a roundtable discussion on entrepreneurship held by the Senate Committee on Small Business and Entrepreneurship on April 18, 2012.
Chairman Landrieu and members of the Senate Committee on Small Business and Entrepreneurship, on behalf of the Young Entrepreneur Council, an organization comprising many of our nation's most successful young entrepreneurs, and the #FixYoungAmerica movement, a solutions-based effort that aims to highlight proven solutions to youth unemployment, I'd like to thank you for inviting me to speak today about how to help our nation's young people create much-needed jobs for Americans through entrepreneurship.
In the past year and a half, the Young Entrepreneur Council has been working diligently to mentor, train and develop young American entrepreneurs -- because we strongly believe entrepreneurship is a viable, practical solution to youth un- and underemployment. I address you today on behalf of those young entrepreneurs, because they need your help in order to lead this country forward.
Our urgency is real: Youth employment is at a 60-year low. Student loan debt has surpassed $1 trillion. And default rates are rising quickly.
As a result, one in four young Americans moved back in with their parents after living on their own. Thirty-one percent postponed marriage or starting a family. And many would-be entrepreneurs are sidelined indefinitely due to student loan repayments and lack of cash flow.
Despite these harsh realities, youth entrepreneurship is ever-present, as demonstrated by the recent college graduate segment of the 2011 Young Entrepreneur Council/Buzz Marketing Group annual youth entrepreneurship survey -- which found that 29 percent of recent grads are self-employed, up from 20 percent in 2010. Thirty percent started a business in college, up from 19 percent in 2010. Fourteen percent started a business as a result of being unemployed, and 35 percent have started a side business to earn extra income.
We believe that the bipartisanship displayed during the recent passage of the JOBS Act in Congress sends a strong message to all Americans, but especially to our youth, that their elected officials believe in U.S. citizens' ability to empower themselves to improve their economic situation. These are exactly the kind of proactive reforms YEC has been fighting for.
But I believe our elected representatives must be even bolder -- in fact, I believe we owe it to our youngest entrepreneurs to be so bold. Millennials must be empowered to funnel their entrepreneurial energy into solving joblessness and economic malaise, or risk becoming a lost generation.
Members of the Committee, this is not an abstract endeavor. The YEC, along with partners like Junior Achievement, Babson College, Codecademy, Network for Teaching Entrepreneurship, National Association for Community College Entrepreneurship and Venture for America, have identified a handful of tried-and-true approaches that are already successfully fostering entrepreneurship education initiatives and youth business creation all over America.
Today, I want to address three specific areas that the YEC and our partners wish to call attention to: young veterans, young entrepreneurs in general, and the Startup Visa.
First, let's talk about our veterans. While overall unemployment is a little over 8 percent, 29.1 percent of male veterans and 36.1 percent of female veterans ages eighteen to twenty-four were unemployed in 2011 -- compared to 17.6 and 14.5 percent, respectively, of nonveteran young men and women of the same age.
Veterans are hard-working, passionate risk takers who put the mission before the man -- qualities that also describe successful entrepreneurs. Overall, they own about 2.4 million, or 9 percent, of all American businesses. When you count businesses in which they're at least half-owners, those numbers rise -- to 3.7 million businesses and 8.2 million employees. Given this, we must ask ourselves: Instead of only helping returning young vets seek jobs, why aren't we doing even more to help them create jobs?
To do exactly that, we ask the Committee to consider including provisions from two important bills in your efforts to support entrepreneurship through new legislation. The first is the Veterans Entrepreneurial Transition (VET) Act of 2011, a game-changing bill (that's gotten zero fanfare in the media) that would allow qualifying veterans to use GI Bill entitlements to start or purchase a business or franchise.
Then there's the Help Veterans Own Franchises Act, first introduced in 2009 and then again in 2011 as part of the American Growth, Recovery, Empowerment and Entrepreneurship (AGREE) Act. It establishes a tax credit for qualified returning veterans to offset startup costs equal to 25 percent of franchise fees, up to $100,000. Direct economic output in the franchise sector is projected to grow 5 percent in 2012, and employment, 2.1 percent -- and young Americans are clamoring to get on board.
Next, to address the needs of young entrepreneurs in general, my organization has co-authored the Youth Entrepreneurship Act (YEA) with Young Invincibles. YEA is a set of policy initiatives designed to support and foster young entrepreneurs, some of which were introduced by Rep. Cedric Richmond as part of the Microenterprise and Youth Entrepreneurship Act of 2011.
I'd like to highlight five of YEA's common-sense provisions -- provisions that we believe will accelerate the growing youth entrepreneurship movement:
- One, we'd like to see greater flexibility in the use of Title V "Well-Rounded" funds under the Elementary and Secondary Education Act (ESEA) so that local and state educators can better support entrepreneurship education programs. Within No Child Left Behind, Title V identifies certain federal programs (such as those for foreign languages, physical education and arts in education) as innovative assistance programs that educators can direct funding toward -- but as of yet, there is no checkbox that allows state and local education agencies to buy entrepreneurship-related materials. Reauthorizing ESEA is a low-to-no-cost way for the government to quickly expand young peoples' access to entrepreneurship education and resources.
- Two, the centerpiece of YEA is a common-sense federal student loan deferment, reduction and forgiveness program for young people who start growing businesses after college. This proposal leverages the existing Income-Based Repayment system (put into place by President George W. Bush and reformed recently by President Obama) and is modeled after the current Public Service Loan Forgiveness Program (PSLF), which forgives the federal student loans of borrowers who obtain government jobs or jobs in nonprofits. We're not reinventing the wheel -- we're just taking good, bipartisan programs one logical step further and applying them to job creators too. Requiring young entrepreneurs to meet certain qualifying benchmarks (and ongoing goals and 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 who are actively creating new jobs. Based on current rates of new business creation, we predict that the program could create between 25,000 and 125,000 new jobs in the first five years alone.
- Three, increasing access to capital is key to ensuring young people don't just start businesses, but grow and hire. The JOBS Act is a great start, but ramping up the SBA Microloan Program (rather than slowing it down) and targeting a significant percentage of those loans to young people is simply good thinking, given that the vast majority of their businesses will be technology-driven and service-based -- thereby costing only a few thousand dollars to start. While the federal government spent $33.686 million on its microlending program in 2010, fiscal year 2011 funding received was only $19.266 million, and the Small Business Administration only requested $16.378 million for 2012. Beyond expanding its size, we also need the SBA to ensure that young entrepreneurs whose business models are worthy of investment -- but who have limited credit history and collateral -- can still access microfinance through intermediaries, perhaps using metrics like co-signing, the assessment of a qualified local mentor, or by asking them to contribute a percentage of income to self-funding.
- Next, there are several existing government activities we can harness to support the growth of youth-owned businesses. The first area is procurement. Currently, the President establishes goals for procurement contracts awarded to small businesses; certain percentages of prime contracts and subcontracts must go to socially and economically disadvantaged businesses, including women-owned businesses, HubZone (historically underutilized) businesses, and service-disabled veteran-owned businesses. We seek to have young entrepreneurs added as a mandatory category.
- The second activity is the practice of running low-cost competitions for students to solve various public-private challenges. For example, the Department of Health and Human Services (HHS) ran a successful competition in which college students were called on to create the best mobile app to improve public health. Not only does this spur innovation and interest in the sciences -- an area where U.S. students typically fall short -- but many of these students go on to turn their products into businesses. The prizes cost the government almost nothing; they're often under1,000. We would like to see these competitions happen government-wide; we also would like to see increased government grants or funds reallocated from other underperforming programs used to support business competitions on the high school and collegiate levels with guidance from the SBA (or another government agency) to foster real-world entrepreneurship among students.
Finally, more resources for entrepreneurship education are needed in general -- in the 2011 YEC/Buzz Marketing Group survey, 88 percent of respondents said entrepreneurship education is vitally important given the new economy, but 74 percent of them had no access to entrepreneurship resources during their college years. When resources were available, most respondents felt they were inadequate. This is unacceptable; today, adaptability, creativity and financial literacy are core work skills in the new economy -- and we face a shortfall of science, technology, engineering, and mathematics (STEM) graduates.
This growing shortfall, combined with current immigration policy, has led to more and more foreign-born entrepreneurs taking their revenue-positive companies off of U.S. soil. The StartUp Visa Act of 2011 provides a solution that both creates jobs and helps increase U.S.competitiveness. Notably, the StartUp Visa doesn't just hand out visas -- it's conditional and employment-based. After two years, it requires visa-holders to have raised additional capital investment, demonstrate they are not a burden to taxpayers, and create new American jobs.
In doing so, the StartUp Visa accomplishes several things: it allows entrepreneurs to make key hires in instances where in-demand talent is otherwise lacking (enabling them to grow and hire faster), and it incentivizes immigrants who are educated and trained in the U.S. to stay, build businesses and create new jobs. One of our YEC members is an immigrant from Colombia who has built multiple businesses in the U.S., generating millions of dollars in revenue and creating several dozen American jobs. But if he had not married an American citizen, his contribution to our economy would have been impossible under current immigration law.
If we agree that small businesses truly are the engine of job creation in America -- as President Obama himself has said -- then it's imperative for us to spur youth entrepreneurship and to ensure the young employees of tomorrow are ready to compete in a global economy. The solutions we propose here represent the beginning of a much larger conversation about reform, but these areas represent some of the most challenging issues young entrepreneurs face right now.
Importantly, this is not about making life easier for Millennials, but rather about helping transition the young American workforce into a more entrepreneurial one capable of thriving in the new economy. We believe reforms like this are the key to initiating a paradigm shift away from the antiquated policies and mindset of yesteryear, so that when today's young people become the 30-, 40- and 50-something leaders of tomorrow, they will have the capacity and ability to lead America forward.
Today, the Young Entrepreneur Council, our partners, and the tens of thousands of young entrepreneurs we mentor are asking you to help us as we set out to do what's right: Fix Young America. And on their behalf, I thank you for giving me the opportunity to discuss these vital issues and offer you achievable, practical solutions to resolve them.