Last week I was part of a delegation of entrepreneurs from ten states gathered in Washington, D.C. to share ideas about how to promote start-up activity in their respective regions. The good news? The United States is in the midst of a start-up boom. But the rest of the world is too. The challenge we face is how to keep America at the forefront of this revolution.
It's easier than ever to start a company today. One of the many truths cited by panelists at last Tuesday's "State of Entrepreneurship Address" (hosted by the Kauffman Foundation at the National Press Club) is that today you can accomplish with $1 million what used to require $10 million just ten years ago. As a result, there are many, many more companies being formed today; and this is undoubtedly a good thing.
However, entrepreneurs are not always pursuing truly original ideas. Consumer-facing, peer-to-peer commerce start-ups are hot, but how many tie-sharing services does the country really need? (Yes, there is hot competition in this space.) Ideas like these are attractive because they are easy to act on quickly. But harder problems like truly innovative biotechnology and next-generation manufacturing cannot be incubated in a few weeks by Red Bull-drinking, Ramen-eating young programmers. We run the risk of creating the cult of the McStartup.
There are concrete things we can do at the federal level to improve the situation; but likewise, they're not easy. We need to reform our patent laws. Patent trolls (people who acquire and squat on patents with the sole intention of hassling people who innovate using those ideas) are a significant and growing problem for young companies. It's not reasonable that companies can exist solely for the purpose of shaking down firms who are doing the hard work of commercializing technology. While we heard that the U.S. Patent and Trademark Office is streamlining its application processes (a much needed improvement), this can't solve the patent troll problem.
Similarly, our immigration policies currently repel some of our most promising entrepreneurs. We need to make it easier for the world's best talent to come to America and start new companies, and we need to retain the people who come to the U.S. to obtain higher education. The future of the American economy rests with the formation of new companies. The proposed Startup Visa Act will enable entrepreneurs to get a two-year visa if they can show that an investor is willing to invest in their start-up venture. After two years, they must demonstrate that their venture has created at least three new jobs. The Startup Visa Act is vital to helping the U.S. remain at the forefront of research and entrepreneurship globally. But as important as that is, it is not enough.
Because as much as there is a start-up boom in the US, the rest of the world has been experiencing the same phenomenon. Since 2009 I've traveled the world with the Silicon Valley-based 500 Startups (as part of their "Geeks on a Plane" trips), and the same interest in entrepreneurship is blooming throughout Europe, South and Central America, and Asia. Beijing and Shanghai have a booming entrepreneurial culture. As Tom McDonnell of the Kauffman Foundation said on Tuesday, "The American Dream is alive and well, all around the world." We need to do what we can to ensure that the U.S. continues to be the best place to realize the American dream.
According to 2012 estimates, the U.S. is 16th in the world for broadband penetration, speed, and price. Our lax regulatory policy has led to a duopoly for broadband in most markets, with high prices and slow service compared to much of the rest of the world. South Korea boasts faster, cheaper broadband than the United States. And entrepreneurs there are starting businesses that take advantage of that abundance. While there are bright spots here (Chattanooga, Tenn., has created a formidable broadband network which is spurring entrepreneurship), our successes with broadband are in spite of our regulatory policy rather than because of it. We can do better.
One of the best drivers for entrepreneurship is population density. The U.S. East Coast corridor is one of the most densely populated places on the planet, but our transportation regulatory policy has led to laughably bad and expensive train service between D.C. and Boston. Lowering the friction for travel between these cities would create even more density, and lead to even more of a renaissance in idea sharing and collaboration. But heavy regulation of rail service makes it impossible to try an innovative idea like allowing qualified start-up entrepreneurs to use excess capacity on Amtrak and travel at the last minute inexpensively. Entrepreneurs in D.C. should be fully connected to the start-up scene in New York, but right now it's hard to make that happen. Again, we can do better.
The Federal SBIR (Small Business Innovation Research) program helps entrepreneurs commercialize technologies that are of interest to the Federal government, and provides a strong return on investment for the American people. But the application process is long and labyrinthine, and can take two or more years to navigate. Brilliant entrepreneurs on the cusp of real, commercial breakthroughs are held up waiting for bureaucracy. It's time we streamline the application process it and make it as efficient as possible.
But there are many bright spots. In its first six months, the White House Innovation Fellows program has already led to new innovative ideas like RFP EZ, an easy way for small companies to do business with the government. That model is already being copied by several states. A new batch of White House fellows has just embarked on a new set of challenges. This program can serve as a model for how we can fix many of the problems that ail us.
We're heading in the right direction. But our lawmakers need to know that the rest of the world is too. Berlin, Vancouver, Sydney, and Sao Paolo are emerging as hot cities for start-ups. Small shifts in regulation can ensure the United States will remain the global leader for innovation and new company formation. We just need the courage to lead the way.
This post is part of a series produced by The Huffington Post and Startup America, in recognition of the latter's two-year anniversary. Startup America's regional leaders met with White House officials on February 5th to discuss fostering startup ecosystems throughout the country. To read all the posts in the series, click here.
